Ontario has jurisdiction over third-party claim in GM dealers action: SCC

The Supreme Court of Canada has thrown out the appeal of 32 Quebec law firms who claimed Ontario courts did not have jurisdiction over a third-party claim brought against them by Cassels Brock & Blackwell LLP.

In a six-to-one decision, the Supreme Court dismissed the group’s appeal, saying the third-party claims against the Quebec law firms should be heard along with those against 118 other firms from across the country.

“Allowing the Quebec third party claims to proceed in Ontario along with the 118 other law firms, would clearly by a more efficient and effective solution,” Supreme Court Justice Rosalie Abella wrote for the majority decision.

“Because third party claims involves a significant number of parties and require the mobilization of significant judicial resources, those resources should be allocated and expended with a view to make the litigation quicker, more economical and less complicated.”

The decision involved a class action lawsuit brought against Cassels Brock by former General Motors car dealers who alleged the firm provided them with negligent legal advice when it represented them after GM announced a restructuring in 2009.

The dealers claimed Cassels Brock had failed to disclose it was also acting for the federal government during the restructuring proceedings.

In that action, an Ontario Superior Court Justice ordered Cassels Brock to pay 181 former GM dealers $45 million for breach of fiduciary duty, breach of contract and professional negligence. Cassels Brock is now appealing the decision.

Cassels Brock added 150 law firms from across the country as third party defendants, 32 of which were from Quebec.

There were 83 non-Ontario firms in total who challenged the province’s jurisdiction, but the Quebec firms were the only ones that appealed, arguing that Ontario courts do not have jurisdiction over a dispute between a firm and client in Quebec.

Daniel Bach, a class action lawyer at Siskinds LLP, says the decision makes sense, as it will put all third party defendants in the same proceedings, limiting waste and avoiding inconsistent decisions.

“It does not strike me as anything other than extremely common-sensible to say that when there is a lot of litigation in one province, you can bring other related litigation in to that province,” he says.

“Making a system where our courts can deal with things once in a sensible fashion makes lots of sense,” he added.

In the SCC decision, Abella cited Club Resorts Ltd. v. Van Breda, 2012, which laid out four factors to establish requisite connection in tort claims.

The factor that Abella applied was whether the contract in the dispute was created in Ontario. Abella said that seeing as the contract connected to the dispute had been made in Ontario, the province’s courts have jurisdiction.

“It is sufficient that the dispute be connected to a contract for the wind-down agreement was made in the province or territory where jurisdiction is proposed to be assumed,” Abella wrote.

“This merely requires that a defendant’s conduct brings him or her within the scope of the contractual relationship and that the events that give rise to the claim flow from the relationship created by the contract.”

Abella added that when contracting parties are located in different jurisdictions, “the contract will be formed in the jurisdiction where the last essential act of contract formation, such as acceptance, took place.”

Justice Suzanne Côté, who was the lone dissenting voice in the decision, argued the wind-down agreements were not made in Ontario as acceptance of the contracts should be considered notified in the place they were received – Quebec.

“In this case, GM’s notice of final acceptance was transmitted to its Quebec dealers in Quebec,” she said.

“As such the relevant wind-down agreements in respect of the Quebec dealers would have been formed in Quebec.”

She added that the majority’s decision could have “negative repercussions on the practice of law itself.”

“The majority’s holding means that whenever a lawyer’s advice is required before his client can accept an offer, that lawyer may later be sued for professional negligence wherever the resulting contract is formed, regardless of where his services were provided,” she said.

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