Contract jurisdiction must be spelled out, court rules

Two contractual parties living in different provinces come to terms, agreeing that the contract should be governed by the laws of one of those provinces — Ontario let’s say.

A dispute arises, and the Ontario party points to the clearly worded choice-of-law provision, demanding that the case be heard in Ontario. Solid assumption, right?

Not so fast. In a ruling that adheres closely to the Supreme Court of Canada’s jurisdiction test in Van Breda, Ontario’s Superior Court of Justice has ruled that “choice of law” is not equivalent to “choice of jurisdiction.”

The case in question, Christmas v. Fort McKay First Nation, involves the alleged wrongful dismissal of Bernd Christmas, a prominent Aboriginal lawyer in Toronto, by his former employer in Alberta.

Christmas argued the choice-of-law provision in his employment contract presumed a choice of jurisdiction, but Judge Victoria Chiappetta ruled otherwise, explicitly distinguishing the concepts of law and jurisdiction:

“In this case, the Defendant agreed with the Plaintiff that Ontario law would apply to any dispute under the contract. Imposing jurisdiction on the Defendant solely as a result of its agreement on choice of law would unfairly broaden the scope of its contractual agreement to choice of forum in addition to choice of law. The parties themselves limited their agreement to choice of law.”

That means the Alberta court tasked to hear this case will be required to apply Ontario law — a burden that, in any other case, might have been grounds to rule out Alberta as forum non conveniens. In this case, however, there’s not much of a burden since Ontario and Alberta’s employment laws are fairly similar.

The court’s decision abides by well-established jurisprudence that deems contracts between parties in differing jurisdiction to have been executed at the location of acceptance by the offeror (in this case, Alberta).

In a twist, however, Christmas presented a novel argument — he suggested that, because the employment contract was revised before being returned via email, a new contract was created in which he became the offeror.

Again, Judge Chiappetta shot down the argument: “In this case, acceptance was received in Alberta. Whether the Plaintiff’s acceptance was to that of a counter-offer or a revised offer is not relevant in these circumstances.”

Christmas was represented by Mark Ellis, a litigator at Baker & McKenzie LLP in Toronto. Ellis says he’s satisfied by the court’s decision and that it underscores just how carefully these contracts have to be drafted.

“The contract read, ‘The laws of the province of Ontario will apply,’” says Ellis. “If it had included the usual phrase ‘the laws of Ontario and the courts therein’ then I don’t think there would be terribly much debated about this case. That’s exclusively the reason the matter went before the Ontario court.”

Ellis says the nature of instantaneous electronic communication presents a complicating factor that’s bound to resurface in jurisdictional disputes.

“It gives rise to great debate about where the contract is entered into,” he says. “Once the revised contract gets back to the employer and is signed, there is either a contract upon the employer agreeing to the revised terms — therefore, in Alberta — or it’s when the employee, in Ontario, understands that the contract has been entered into by the employer.”

On the face of it, however, Ellis believes the motion judge’s ruling is sound. No appeal is forthcoming, and the suit will likely proceed in Alberta, governed by Ontario law.

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