IN THE SUPREME COURT OF BRITISH COLUMBIA
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Citation: |
Flying Frog Trading Co., Ltd. v. Amer Sports Canada Inc., |
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2017 BCSC 1885 |
Date: 20171020
Docket: S1611794
Registry: Vancouver
Between:
Flying Frog Trading Co., Ltd.
Plaintiff
And
Amer Sports Canada Inc. d.b.a. ARC’TERYX EQUIPMENT,
Amer Sports Shanghai Trading Ltd. and
Amer Sports OYJ a.k.a. Amer Sports Corporation
Defendants
Before: The Honourable Mr. Justice Skolrood
Reasons for Judgment
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Counsel for Plaintiff: |
J. Facchin |
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Counsel for Defendant Amer Sports OYJ aka Amer Sports Corporation: |
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Place and Date of Hearing: |
Vancouver, B.C. September 19, 2017 |
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Place and Date of Judgment: |
Vancouver, B.C. October 20, 2017 |
[1] This litigation involves claims by the plaintiff, Flying Frog Trading Co., Ltd., against three related companies. Generally speaking, the action arises out of the alleged termination of a distribution agreement pursuant to which the plaintiff distributed outdoor sports equipment and apparel marketed under the brand name ARC’TERYX in the People’s Republic of China.
[2] The current application is brought by one of the three named defendants, Amer Sports OYJ aka Amer Sports Corporation (“Amer Sports”). It seeks an order dismissing the action against it on the ground that this Court lacks jurisdiction.
[3] The plaintiff is incorporated under the laws of China and does business under the names Blue Ice and Blue Ice Adventures. Since approximately November 2000, the plaintiff, and its predecessor, Blue Ice Adventure Equipment Limited (“Blue Ice”), was the exclusive distributor of ARC’TERYX brand products in China. For ease of reference, I will refer to the plaintiff and Blue Ice collectively as “the plaintiff” or as “Flying Frog”.
[4] That arrangement was carried out under a series of distribution agreements between the plaintiff and the defendant Amer Sports Canada Inc. dba ARC’TERYX EQUIPMENT (“ARC’TERYX”). ARC’TERYX is a company incorporated under the laws of British Columbia. ARC’TERYX is a subsidiary of Amer Sports.
[5] The third named defendant is Amer Sports Shanghai Trading Ltd. (“Amer Shanghai”), which is also a subsidiary of Amer Sports.
[6] In May 2009, Flying Frog and ARC’TERYX renewed their longstanding distribution agreement for a further three years (the “2009 Distribution Agreement”). The 2009 Distribution Agreement had a stipulated end date of June 1, 2012.
[7] Flying Frog alleges that in April 2011, its representatives met with representatives of ARC’TERYX at ARC’TERYX’s head office in North Vancouver, and an oral agreement was reached for a three year extension of the 2009 Distribution Agreement, for a period of June 1, 2012 to June 1, 2015. That oral agreement was never reduced to writing. I will refer to the oral extension agreement as the “2011 Distribution Agreement”.
[8] Flying Frog alleges that in reliance on the 2011 Distribution Agreement, it incurred obligations and expenses, including hiring additional employees, renting office space and purchasing display racks.
[9] Flying Frog alleges further that in or about July 2011, ARC’TERYX advised it that Amer Sports would be taking over distribution of ARC’TERYX brand products in China and that Flying Frog would lose its exclusive distribution rights. The 2011 Distribution Agreement was ultimately terminated effective December 31, 2012.
[10] In September 2011, Amer Sports proposed entering into a sales agency agreement with Flying Frog in place of the exclusive distributorship. That agreement was executed in April 2012 (the “Sales Agency Agreement”). Flying Frog alleges that it agreed to the Sales Agency Agreement out of fear that it would lose all rights to sell ARC’TERYX products in China. Under the Sales Agency Agreement, Flying Frog was to be paid a commission on sales in China and retain some of its distribution rights.
[11] While it is not entirely clear from the materials, it appears that Amer Shanghai was incorporated to take over some of the servicing and sales to Chinese customers. Flying Frog alleges that Amer Shanghai usurped its sales agency role and ceased paying any commissions to Flying Frog in or about May 2015.
[12] In its notice of civil claim filed December 21, 2016, Flying Frog advances a number of claims against ARC’TERYX, the principal claim being that ARC’TERYX breached the 2011 Distribution Agreement by advising Flying Frog that Amer Sports was replacing it as the distributor of ARC’TERYX brand products in China. With respect to Amer Sports, Flying Frog alleges that it induced ARC’TERYX to breach the 2011 Distribution Agreement. The pertinent allegations are set out in paras. 20-22 of the notice of civil claim, as follows:
20. Amer Sports had knowledge of the [2011] Distribution Agreement through its ownership of ARC’TERYX and through Flying Frog’s protests.
21. Amer Sport intended to cause ARC’TERYX to breach the [2011] Distribution Agreement by having Amer Shanghai take over exclusive distribution of ARC’TERYX products in China.
22. Amer Sports caused or induced ARC’TERYX to breach the [2011] Distribution Agreement through its ownership of ARC’TERYX.
[13] In addition to the claims against Amer Sports and ARC’TERYX, Flying Frog advances claims against Amer Shanghai for breach of the duty of honest performance and unjust enrichment.
[14] ARC’TERYX has filed a response to civil claim and takes no issue with this court’s jurisdiction. I am told by counsel that Amer Shanghai has not yet been served, thus it takes no part in this application.
[15] Amer Sports brings its application pursuant to Rules 21-8(1)(a) and (b) of the Supreme Court Civil Rules, B.C. Reg. 168/2009, which provide:
(1) A party who has been served with an originating pleading or petition in a proceeding, whether that service was effected in or outside British Columbia, may, after filing a jurisdictional response in Form 108,
(a) apply to strike out the notice of civil claim, counterclaim, third party notice or petition or to dismiss or stay the proceeding on the ground that the notice of civil claim, counterclaim, third party notice or petition does not allege facts that, if true, would establish that the court has jurisdiction over that party in respect of the claim made against that party in the proceeding,
(b) apply to dismiss or stay the proceeding on the ground that the court does not have jurisdiction over that party in respect of the claim made against that party in the proceeding, …
[16] Both parties agree that the jurisdictional issues fall to be determined under the Court Jurisdiction and Proceedings Transfer Act, S.B.C. 2003, c. 28 (the “CJPTA”). Section 3(e) of that Act provides:
3 A court has territorial competence in a proceeding that is brought against a person only if
(e) there is a real and substantial connection between British Columbia and the facts on which the proceeding against that person is based.
[17] Section 10 of the CJPTA deals with the “real and substantial connection” test and identifies a number of circumstances in which such a connection will be presumed. The relevant provisions of s. 10 for the purposes of this application are as follows:
10 Without limiting the right of the plaintiff to prove other circumstances that constitute a real and substantial connection between British Columbia and the facts on which a proceeding is based, a real and substantial connection between British Columbia and those facts is presumed to exist if the proceeding
…
(e) concerns contractual obligations, and
(i) the contractual obligations, to a substantial extent, were to be performed in British Columbia,
(ii) by its express terms, the contract is governed by the law of British Columbia, …
(g) concerns a tort committed in British Columbia, …
[18] In Olney v. Rainville, 2009 BCCA 380 [Olney] at para. 26, the Court of Appeal held that the broad range of presumptive factors set out in s. 10 “indicates that in some circumstances, British Columbia courts will have territorial competence notwithstanding that the antecedent facts of a case are not closely connected with the province.” The Court also held, at para. 27, that the “real and substantial connection” test is to be “construed broadly” and that the central consideration is whether the assumption of jurisdiction is “consistent with order and fairness.”
[19] The plaintiff has the onus of establishing territorial competence; however, the threshold is relatively low. The plaintiff need only show “an arguable case” in favour of such territorial competence: see Purple Echo Productions, Inc. v. KCTS Television, 2008 BCCA 85 at para. 34. Where one of the presumptive factors favouring jurisdiction is established, it is for the party challenging jurisdiction to rebut the presumption. As stated in Club Resorts Ltd. v. Van Breda, 2012 SCC 17, [Van Breda] at para. 95:
That party must establish facts which demonstrate that the presumptive connecting factor does not point to any real relationship between the subject matter of the litigation and the forum or points only to a weak relationship between them.
[20] Amer Sports submits that there is no real and substantial connection between British Columbia and the facts on which Flying Frog’s claim against Amer Sports is based, and accordingly, this court lacks jurisdiction over it. Amer Sports points to the fact that it is not incorporated in British Columbia, it does not carry on business in British Columbia and it is not a party to the 2011 Distribution Agreement, which lies at the heart of Flying Frog’s claims. Amer Sports submits further that jurisdiction over it is not established simply by virtue of the fact that Flying Frog has brought its claim against ARC’TERYX, which is a British Columbia resident company, in this court.
[21] On this point, Amer Sports cites Williams v. TST Porter dba 6422217 Canada Inc., 2008 BCSC 1315, at para. 17, where Mr. Justice Hinkson, as he then was, said:
[17] I do not consider that the plaintiff can bootstrap his position vis-à-vis Mr. Moldowan only by the fact that he has commenced proceedings against the corporate defendant in British Columbia. The plaintiff must have more than the fact that it is the same claim that he has brought against a company registered in British Columbia to meet the requirements of s. 3(e) of the CJPTA in order to pursue the lawsuit which he wishes to pursue in British Columbia against Mr. Moldowan. The only other connection between the alleged tort and British Columbia is the plaintiff’s residence, and that, too, is insufficient.
[22] That case involved an action commenced in British Columbia in connection with a motor vehicle accident that occurred in Alberta when the plaintiff’s vehicle collided with a truck owned by the corporate defendant, which had a registered office in British Columbia, and driven by Mr. Moldowan, who was a resident of Alberta. The plaintiff was resident in British Columbia and brought his action here. The corporate defendant conceded that this court had jurisdiction over it but Mr. Moldowan argued that it lacked jurisdiction over him. Justice Hinkson agreed with Mr. Moldowan on the basis that there was no real and substantial connection between British Columbia and the facts on which the claim against him were based. Justice Hinkson went on to find that although the court had jurisdiction in respect of the claim against the corporate defendant, he stayed the British Columbia action on the basis that Alberta was a more convenient forum.
[23] Flying Frog submits that there is a real and substantial connection between the facts on which its claim against Amer Sports in based and British Columbia because (1) the dispute involves the 2011 Distribution Agreement, which was made in British Columbia and which is expressly governed by British Columbia laws, and (2) the claim involves a tort – inducing a breach of contract – which concerns a contract entered into in British Columbia.
[24] Flying Frog cites the Supreme Court of Canada decisions in Van Breda and Lapointe Rosenstein Marchand Melançon LLP v. Cassels Brock & Blackwell LLP, 2016 SCC 30, for the proposition that territorial competence will be established where, in a tort claim, a contract connected with the dispute was made in the province.
[25] I am satisfied that in the circumstances of this case, this Court has jurisdiction in respect of Flying Frog’s claim against Amer Sports. I reach this conclusion for the following reasons.
[26] Flying Frog’s claim in tort against Amer Sports is for inducing breach of contract, specifically, the 2011 Distribution Agreement. I pause here to note that I have some question about whether that tort is properly or adequately pleaded in the notice of civil claim, however, as is also the case on an application to strike, the cause of action must be considered as pleaded or as it could be pleaded, therefore any defect in the pleadings at this stage is not itself a bar to the court assuming jurisdiction: Hunt v. Carey Canada Inc. [1990] 2 S.C.R. 959, at para. 33.
[27] The 2011 Distribution Agreement was reached at a meeting held in North Vancouver, thus it was formed in British Columbia (see Lapointe at para. 40). Moreover, the alleged effect of the 2011 Distribution Agreement was to extend the 2009 Distribution Agreement. That Agreement includes, at clause 17, a provision that arguably gives the British Columbia courts jurisdiction over any disputes arising under the agreement and further provides that the laws of British Columbia and/or Canada will apply. I say “arguably” because the clause is far from a model of clear drafting.
[28] Nonetheless, it is apparent that at the heart of the dispute is a contract that has a close tie to British Columbia. The question then becomes whether the facts underlying Flying Frog’s claim against Amer Sports are sufficiently connected to that contract to support a finding that the court has jurisdiction over Amer Sports. On this point, the Supreme Court said in Lapointe at para. 44:
[44] … Nor does Van Breda limit this factor to situations where the defendant’s liability flows immediately from his or her contractual obligations, or require that the defendant be a party to the contract… It is sufficient that the dispute be “connected” to a contract made in the province or territory where jurisdiction is proposed to be assumed… 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…
[29] Amer Sports submits that in certain cases relied on by Flying Frog, the party over which the court assumed jurisdiction, although not party to the contract in issue, nonetheless was clearly referenced in the contract and thus the connection to the contract was more direct and obvious than is the case here: see for example Van Breda and Toews v. First Choice Canada Inc. (Signature Vacations and Selloffvacations.com), 2014 ABQB 784 aff’d 2016 ABQB 130 and further aff’d 2016 ABCA 408.
[30] I agree that the contracts in issue in those cases are of a different nature than the 2011 Distribution Agreement, in that Amer Sports is not referred to nor does it purport to assume any obligations under that Agreement.
[31] However, the test for finding jurisdiction is not whether the party in question is referred to in a contract but rather whether there is a connection between the facts or the matters in dispute that connects the parties to a contract executed in that jurisdiction or, as stated in Lapointe at para. 44, whether the party’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…”
[32] Here, the alleged conduct of Amer Sports is directly concerned with the contractual relationship created by the 2011 Distribution Agreement. Again, Flying Frog alleges that Amer Sports interfered with that relationship by causing or inducing ARC’TERYX to breach its contractual obligations owing to Flying Frog.
[33] I am satisfied that this constitutes a sufficient connection as to give rise to a presumption of jurisdiction on the part of the British Columbia courts. In order to rebut that presumption, Amer Sports must show that, in fact, “the presumptive connecting factor does not point to any real relationship between the subject matter of the litigation and the forum or points only to a weak relationship between them” (Van Breda, at para. 95). Amer Sports has failed to meet this burden.
[34] Ultimately, as held in Olney, determination of the jurisdictional issue turns on the question of whether the assumption of jurisdiction is consistent with “order and fairness” (at para. 27). Given the interconnected nature of the claims advanced by Flying Frog against Amer Sports and ARC’TERYX, all of which flow out of or are related to the 2011 Distribution Agreement, order and fairness dictate that this Court exercise jurisdiction over all of those claims.
[35] Amer Sports’ application is therefore dismissed. Costs will be in the cause.
“Skolrood J.”