2008 BCSC 580 England v. Research Capital Corporation

Before: The Honourable Madam Justice Koenigsberg

Reasons for Judgment

(Chambers)

Counsel for the Plaintiffs:	Maryam Z. Sherkat
Counsel for the Defendants:	Ronald N. Pelletier
Date and Place of Hearing:	September 27, 2007
	Vancouver, B.C.

[1] This is an application by the defendants for a stay of proceedings pursuant to Rule 14(6)(b) of the Rules of Court, B.C. Reg. 221/90, on the ground this Court has no jurisdiction, or alternatively pursuant to Rule 14(6.1) on the basis that the Court ought to decline jurisdiction because Alberta is the appropriate forum.

[2] The statement of claim alleges the individual defendants Brian Strong and Jason Stefanuk mismanaged three investment accounts (“the accounts”) the plaintiffs held with the defendant Research Capital Corporation (“RCC”).

[3] More specifically, the statement of claim alleges negligence, breach of contract, unauthorized trading activity and breach of fiduciary duty against all of the defendants, as well as vicarious liability and breach of duty to supervise specifically against RCC.

[4] RCC is a full-service brokerage firm headquartered in Toronto with branches in several provinces, including British Columbia and Alberta.

[5] The plaintiffs, who at all material times lived in the lower mainland of British Columbia, applied to open the accounts in 1999 at the RCC branch in Calgary, where they met with Mr. Strong, who had been recommended to them. When Mr. Strong left RCC in 2004, Mr. Stefanuk assumed his role as the plaintiffs’ investment advisor for the accounts at RCC’s Calgary branch.

[6] Apart from the initial meeting with Mr. Strong, all of the plaintiffs’ communication with RCC, Mr. Strong, and Mr. Stefanuk respecting the accounts was by way of telephone calls and correspondence exchanged between the plaintiffs in British Columbia and the defendants, as well as account statements and other documents sent by RCC.

[7] Losses claimed by the plaintiffs resulted from what the plaintiffs allege were unauthorized purchases of shares of Wi-Lan Inc. between December 1999 and August 2001. The Wi-Lan shares were sold on June 14, 2002, at a loss of $63,825 in one account and a loss of $54,620 in a second account.

TERRITORIAL COMPETENCE

[8] Since RCC has branches in British Columbia, RCC concedes this Court has “territorial competence” over RCC pursuant to s. 3(d) of the Court Jurisdiction and Proceedings Transfer Act, S.B.C. 2003, c. 28 (“the CJPTA”) because it is “ordinarily resident” in British Columbia.

[9] Sections 3(d) and (e) of the CJPTA state:

Proceedings against a person

3. A court has territorial competence in a proceeding that is brought against a person only if

…

(d) that person is ordinarily resident in British Columbia at the time of the commencement of the proceeding, or

(e) there is a real and substantial connection between British Columbia and the facts on which the proceeding against that person is based.

[10] It is the defendants’ position that the since the individual defendants were not “ordinarily resident” in British Columbia, the plaintiffs must establish pursuant to s. 3(e) of the CJPTA a “real and substantial connection between British Columbia and the facts on which the proceeding” against Mr. Strong and Mr. Stefanuk is based.

[11] Section 10 of the CJPTA lists circumstances under which a real and substantial connection is established between British Columbia and the subject matter of a proceeding. The parts of s. 10 potentially germane to this application provide as follows:

R eal and substantial connection

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, or

(iii) the contract

(A) is for the purchase of property, services or both, for use other than in the course of the purchaser’s trade or profession, and

(B) resulted from a solicitation of business in British Columbia by or on behalf of the seller,

…

(g) concerns a tort committed in British Columbia,

(h) concerns a business carried on in British Columbia,

…

[12] The breach of contract alleged is unauthorized trading by the individual defendants. Pursuant to s. 10(e)(i), a real and substantial connection is presumed to exist if the contractual obligations in this case were, to a substantial extent, to be performed in British Columbia.

[13] The plaintiffs’ accounts were administered in the Calgary branch office where Mr. Strong and Mr. Stefanuk operated, copies of the account records were kept in Calgary and supervision of the accounts was carried out primarily in Calgary. The original account records were kept and maintained in the Toronto office and overall supervision, although as a practical matter this was delegated in the absence of exceptional circumstances or specific requirements, was the responsibility of the head of compliance who was employed at the head office in Toronto.

[14] As well, RCC mails its clients copies of a confirmation statement for each trade in an account and a monthly statement for each month there is a transaction, or in any event a quarterly statement each year. The mailing of these statements is generated and carried out by a third party service provider in Toronto.

[15] The plaintiffs submit that s. 10(e)(i) does not distinguish between the obligations of the seller and the buyer, and as the plaintiffs’ obligations to pay for the services and provide instructions were performed in British Columbia, the British Columbia court has jurisdiction over the proceeding.

[16] However, it is incidental that these obligations were to be performed in British Columbia. The main substance of the contract and the activity to which the alleged breach of contract relates, was not performed in British Columbia.

[17] The British Columbia Court of Appeal recently considered s. 10(e)(i) of the CJPTA in Purple Echo Productions, Inc. v. KCTS Television, 2008 BCCA 85. The Court stated at para. 50:

The construction of the Agreement is a question of mixed fact and law (Petty v. Telus Corp., 2002 BCCA 135, 164 B.C.A.C. 152; Hayes Forest Services Limited v. Weyerhaeuser Company Limited, 2008 BCCA 31, [2008] B.C.J. No. 108 (QL)).

[18] The Court further stated at para. 50 that evidence “relevant to the factual matrix of the Agreement” and evidence that was likely “relevant to the business purpose of the Agreement” should be considered.

[19] Any such evidence in the present case does not support a finding that the contractual obligations were to be performed substantially in British Columbia.

[20] Thus, the contractual obligations were not, to a substantial extent, performed in British Columbia and a real and substantial connection is not presumed to exist pursuant to s. 10(e)(i).

[21] The plaintiffs further submit that a real and substantial connection may be presumed to exist pursuant to s. 10(e)(iii). The plaintiffs submit that the defendants “solicited business in British Columbia by virtue of registering as investment advisers with the British Columbia Securities Commission and registering extra-provincially in British Columbia”.

[22] Although RCC carried on business at branches in British Columbia, the plaintiffs do not allege they ever had any dealings with RCC at or through these branches. Mr. Stefanuk deposed that he never travelled to nor solicited business in British Columbia.

[23] Mr. Strong and Mr. Stefanuk were registered with the British Columbia Securities Commission as investment advisors. It was, counsel agreed, RCC’s standard practice to have its advisors registered under the applicable securities legislation in a number of provinces. These facts do not establish a real and substantial connection pursuant to s. 10(e)(iii) or (h).

[24] A real and substantial connection also cannot be presumed pursuant to s. 10(e)(ii). There was nothing in the contract language on the back of the New Client Application Form (“NCAF”) the plaintiffs signed when they applied to open the accounts in 1999 that stipulated what law governed the contract.

[25] In 2005, the plaintiffs signed the revised NCAFs, which provided that the “laws of the jurisdiction of the office of RCC from which the Account is administered” governed the contract and that the revised contract “applies to all transactions made in the accounts of the Client, including accounts currently open…” The plaintiffs’ accounts were administered in the Calgary office.

[26] The account contracts are, therefore, governed by the law of Alberta.

[27] Plaintiffs’ counsel argued that RCC could have stipulated that any dispute under the contract would be within the jurisdiction of the province where the contract was accepted by RCC, as was done by the brokerage in Scalas Fashions Ltd. v. Yorkton Securities Inc., 2003 BCCA 366, 17 B.C.L.R. (4th) 6.

[28] While such a term in RCC’s standard contract would have put the matter beyond doubt, the absence of such a term does not lead to the necessary inference that the court in the clients’ province of residence has territorial competence over a dispute.

[29] It is reasonable to infer that by applying to open accounts in Alberta and continuing to deal exclusively with the individual defendants at RCC’s Calgary branch once the accounts were open, the plaintiffs would have anticipated, had they considered the matter, that any legal recourse they might seek in respect of the contract would have to be pursued in Alberta where the individual defendants worked, since the plaintiffs had no contact with any RCC branch in British Columbia.

[30] The plaintiffs submit, in the alternative, that if no real and substantial connection is presumed to exist on the basis of s. 10 of the CJPTA, the Court must consider whether a real and substantial connection, and thus territorial competence, exists on the basis of circumstances other than those enumerated in s. 10.

[31] In this regard, the plaintiffs submit that the contract was formed in British Columbia and that this establishes the necessary connection and jurisdiction over the personal defendants in relation to the claim in contract. The defendants submit that the contract was formed when the application was accepted in the Calgary office.

[32] Given that the circumstances discussed above, specifically the contractual obligations and the governing law, show the connection is more with Alberta, the circumstance of where the contract was formed is not sufficient to establish the necessary connection with British Columbia.

[33] A real and substantial connection between British Columbia and the contract claim is not established and this Court does not have territorial competence over the contract claim.

[34] The plaintiffs allege the defendants were negligent in performing their duties with respect to trading activity, in failing to employ an appropriate trading strategy, and in failing to notify the plaintiffs of trading activity in their accounts in a timely manner. The plaintiffs also allege the defendants breached their fiduciary duty in failing to advise the plaintiffs or execute the plaintiffs’ instructions fully, honestly, and in good faith.

[35] Pursuant to s. 10(g), a real and substantial connection between British Columbia and the facts on which a proceeding is based is presumed to exist if the proceeding “concerns a tort committed in British Columbia”.

[36] In this case, all trading activity in the accounts, whether it was contrary to the plaintiffs’ instructions as they allege or not, was initiated by Mr. Strong and Mr. Stefanuk in Calgary. Any failure to execute the plaintiffs’ instructions occurred in the Calgary office, and any failure to notify the plaintiffs or to advise the plaintiffs also occurred in Calgary, or possibly Ontario, from where mailing of confirmation and monthly statements was carried out. The alleged failure by RCC to supervise the accounts must have occurred at the Calgary branch or Toronto headquarters, not in British Columbia. Thus the acts alleged to constitute the negligence and breach of fiduciary duty took place in Alberta.

[37] In regards to the damage suffered, the defendants submit any losses were suffered in Alberta. The defendants submit that proceeds of the share purchases remained at the Calgary branch.

[38] The defendants refer to the case Pineridge Capital Group Inc. v. Anderson (1995), 16 B.C.L.R. (3d) 296 (S.C.), in their submissions for the proposition that “[i]n cases involving alleged losses to bank or investment accounts, it is the jurisdiction in which the account is located that is deemed to be where the losses occurred.”

[39] The plaintiffs submit that the damage in this case was suffered by the plaintiffs in British Columbia, and thus the British Columbia courts have jurisdiction. The plaintiffs say that “the loss was suffered in British Columbia because the amount of money that was transferred back to the Plaintiffs when their accounts were closed was received by them in British Columbia.” The plaintiffs also submit that the loss occurred when shares held in the names of the plaintiffs lost value and thus the loss occurred in British Columbia.

[40] The plaintiffs say that although some of the activity was performed in Alberta, it was common sense that if the activity was not properly performed the plaintiffs would suffer damage in British Columbia.

[41] The plaintiffs referred to the case Moran v. Pyle National (Canada) Ltd., [1975] 1 S.C.R. 393, where the Court stated at 408-409:

…it would not be inappropriate to regard a tort as having occurred in any country substantially affected by the defendant’s activities or its consequences and the law of which is likely to have been in the reasonable contemplation of the parties.

[42] The plaintiffs submit that therefore torts occur where they substantially affect people, that harm is a significant consideration, and that in determining jurisdiction a tort may have more than one place of occurrence. The plaintiffs submit there is jurisdiction over the tort where the damage occurs, referring to Furlan v. Shell Oil Co., 2000 BCCA 404 at paras. 21, 77.

[43] The plaintiffs submit that the case Pineridge is distinguishable.

[44] In Pineridge, the plaintiff, a British Columbia company, brought claims for conspiracy, conversion and a declaration of trust against the defendant applicant BSI, a Swiss bank. The Court stated at para. 16, “[i]f there was a conspiracy involving BSI as alleged, its result was to wrest away Pineridge’s asset in Switzerland. The proceeds of the debenture never left BSI’s offices. They were transferred on paper through the Pineridge and HTB accounts held in the bank in Switzerland.”

[45] The Court considered the location of the tort and stated at para. 19:

In my opinion, the case alleged against BSI does not show a tort committed by it in British Columbia. Pineridge was present in Switzerland through its bank account there and it was there that it suffered a loss of the debenture proceeds. All that is shown at this stage is that BSI knew it was dealing with the funds of a British Columbia company when it permitted the debenture proceeds to be transferred from Pineridge to HTB…The true consequence of BSI’s actions was the loss of the Pineridge asset in Switzerland, not in British Columbia.

[46] The Court found that service on BSI could not be justified pursuant to Rule 13(1)(h) as it was at that time, which allowed service on a party outside British Columbia without an order if “the proceeding is founded on a tort committed in British Columbia”.

[47] Pineridge was referred to in Coast Spas Inc. v. California Acrylic Industries Inc., [1997] B.C.J. No. 1718 (QL) (S.C.). In this case, the plaintiffs had alleged a conspiracy against some of the defendants, and the defendants argued that the courts of California were the more appropriate forum to hear the dispute.

[48] The Court stated at para. 22, “[i]t is argued that the alleged tort of conspiracy occurred in British Columbia because the target of the conspiracy, being Mr. Elkington’s companies, suffered damage in terms of business losses here.” The Court went on to state at para. 25:

I do not accept that the alleged tort can be said to have been committed in British Columbia simply because Mr. Elkington’s companies suffered losses here. Indeed, that is the very kind of contention that appears to have been rejected in Pineridge, (paras. 17-19). In my view, on the pleadings and the affidavit evidence before me, it cannot be said with any certainty where the alleged tort of conspiracy would be found to have been committed. It may be shown to have occurred in different jurisdictions, but it does appear that the conduct of which Mr. Elkington complains occurred almost entirely in the United States and its effect was to prevent his doing business there. If so, that is where, in the main, the tort is alleged to have occurred. I do not consider there is any sound basis upon which it could be concluded now that what appears to be the essence of the claims made, particularly against the attorneys, would be governed by the law of this jurisdiction. Their conduct is not only to be governed by American law but is a matter of the professional standards of the California bar.

[emphasis added]

[49] In Pan-Afric Holdings Ltd. v. Ernst & Young LLP, 2007 BCSC 685, 73 B.C.L.R. (4^th) 355, the Court considered the issue of forum non conveniens pursuant to s. 11 of the CJPTA. The defendant conceded that British Columbia had territorial competence but sought an order that the State of Maryland was the more appropriate forum to hear the dispute. The plaintiff alleged breach of contract and negligence against the defendant.

[50] In addressing the question of the law to be applied to the issues in the proceedings, the Court stated at para. 33:

Pan-Afric seeks to recover general, aggravated, punitive, and special damages for breach of contract, and the tort of negligence. Although by reason of the fact that Pan-Afric is a British Columbia company any loss suffered would have occurred here, its claim rests on a contract entered into in Maryland, for work done there.

[51] And further at para. 36:

With respect to the negligence claim, I similarly hold that it is governed by the laws of Maryland. What is in issue here is the conduct of Maryland professionals whose competence should be judged according to the laws and professional standards applicable in that jurisdiction. If the alleged tort was committed, then it was committed there, not here: see Coast Spas Inc. v. California Acrylic Industries Inc., [1997] B.C.J. No. 1718 (QL)(S.C.) at para. 25 (per Lowry J., as he then was); Castel and Walker, Canadian Conflict of Laws, Vol. 2 §35.5.

[emphasis added]

[52] Although the statements in these cases were made in the context of a forum non conveniens analysis rather than the territorial competence analysis, and specifically s. 10(g) of the CJPTA, they indicate that financial loss suffered in British Columbia is not sufficient to find that the tort has been committed in British Columbia.

[53] In the present case, the activity giving rise to the alleged tort claims occurred in Alberta, and possibly Ontario, and it was only the alleged financial loss that was suffered in British Columbia. Further, it is the law of Alberta that has been found to govern in this case.

[54] It cannot be said for the purposes of s. 10(g) that the tort was committed in British Columbia. Thus a real and substantial connection between British Columbia and the tort claim is not established.

[55] It is the plaintiffs’ submission that because the Court has territorial competence in a proceeding against RCC because RCC is “ordinarily resident” in British Columbia, the Court also has territorial competence over the individual defendants as necessary parties, because RCC is vicariously liable for the individual defendants’ alleged mismanagement of the accounts.

[56] It seems to me that this submission puts the cart before the horse. But for the alleged mismanagement of the accounts by the individual defendants, the plaintiffs would have no basis for alleging RCC is liable, vicariously or otherwise. The “facts on which the proceeding is based” are the individual defendants’ alleged acts of negligence, breach of contract or breach of fiduciary duty.

[57] The fact that the plaintiffs and RCC are resident in British Columbia is only incidentally related to the facts that are the basis of the proceeding, and irrelevant to the causes of action alleged. The fact of residence, which is the only one linking the proceeding to British Columbia, is therefore insufficient to establish territorial competence over the individual defendants, whose negligence, breach of contract or breach of fiduciary duty while carrying out their jobs in Alberta are the only bases for RCC’s vicarious liability. I am therefore unable to accept the plaintiffs’ submission on this point.

APPROPRIATE FORUM

[58] If I am wrong in concluding that the Court does not have territorial competence in respect of the proceeding against the individual defendants, I would nevertheless decline jurisdiction in respect of all three defendants for the following reasons.

[59] Although conceding territorial competence in respect of RCC, the three defendants ask the Court to decline jurisdiction in respect of all of them on the basis that an Alberta court is the more appropriate forum to hear the proceeding.

[60] Section 11 of the CJPTA provides as follows:

Discretion as to the exercise of territorial competence

11 (1) After considering the interests of the parties to a proceeding and the ends of justice, a court may decline to exercise its territorial competence in the proceeding on the ground that a court of another state is a more appropriate forum in which to hear the proceeding.

(2) A court, in deciding the question of whether it or a court outside British Columbia is the more appropriate forum in which to hear a proceeding, must consider the circumstances relevant to the proceeding, including

(a) the comparative convenience and expense for the parties to the proceeding and for their witnesses, in litigating in the court or in any alternative forum,

(b) the law to be applied to issues in the proceeding,

(d) the desirability of avoiding conflicting decisions in different courts,

(e) the enforcement of an eventual judgment, and

(f) the fair and efficient working of the Canadian legal system as a whole.

[61] In Purple Echo, supra, the Court stated at para. 59 that “[t]he weight given to these factors is a matter for the discretion of the Chambers judge” but emphasized that the interests of the parties, specifically the prima facie entitlement of the plaintiff to its choice of forum, must be considered. The Court quoted the statement from Amchem Products Inc. v. British Columbia (Workers’ Compensation Board), [1993] 1 S.C.R. 897 at 921 that “the existence of a more appropriate forum must be clearly established to displace the forum selected by the plaintiff” [emphasis in original].

[62] The interest of the parties in this case would not be served by proceedings against RCC in British Columbia and proceedings against the individual defendants in Alberta, which could be the result of my conclusion that this Court has no territorial competence in respect of the latter. No proceeding has yet been commenced in Alberta.

[63] Comparative convenience and expense are not factors of great significance in this case in light of the relevant ease of transport and communication between Vancouver and Calgary.

[64] The law to be applied is that of Alberta, which militates in favour of this Court exercising its discretion to decline jurisdiction in favour of the Alberta court. The potential inconvenience and added expense that this may cause the plaintiffs must be balanced against the convenience of the defendants, whose five potential witnesses are all in Alberta. There will be a cost saving to the parties of not having to prove Alberta law in British Columbia.

[65] The fair and efficient working of the legal system in Canada is better served if the action is tried by an Alberta court, the law of which applies to this dispute.

[66] Existing common law is also applicable to the forum non conveniens analysis: Purple Echo, supra at para. 59. A consideration of these additional factors also indicates that Alberta is the more appropriate forum to hear the proceeding.

[67] The defendants’ application for a stay is granted with costs.

[68] The plaintiffs’ counsel asked that if the stay were granted the action be transferred to Alberta under Part 3 of the CJPTA.

[69] Part 3 of the CJTPA is titled “Transfer of a Proceeding” and includes ss. 13-24. Section 13 states in part:

General provisions applicable to transfers

13 (1) The Supreme Court, in accordance with this Part, may

(a) transfer a proceeding to a court outside British Columbia

…

(2) A power given under this Part to the Supreme Court to transfer a proceeding to a court outside British Columbia includes the power to transfer part of the proceeding to that court.

…

(5) If anything relating to a transfer of a proceeding is done or ought to be done in a court outside British Columbia, the Supreme Court, despite any differences between this Part and the rules applicable in the court outside British Columbia, may transfer or accept a transfer of the proceeding if the Supreme Court considers that the differences do not

(a) impair the effectiveness of the transfer, or

(b) inhibit the fair and proper conduct of the proceeding.

[70] Section 14 states:

Grounds for an order transferring a proceeding

14 (1) The Supreme Court by order may request a court outside British Columbia to accept a transfer of a proceeding in which the Supreme Court has both territorial and subject matter competence if the Supreme Court is satisfied that

(a) the receiving court has subject matter competence in the proceeding, and

(b) under section 11, the receiving court is a more appropriate forum for the proceeding than the Supreme Court.

(2) The Supreme Court by order may request a court outside British Columbia to accept a transfer of a proceeding, in which the Supreme Court lacks territorial or subject matter competence if the Supreme Court is satisfied that the receiving court has both territorial and subject mater competence in the proceeding.

(3) In deciding whether a court outside British Columbia has territorial or subject matter competence in a proceeding, the Supreme Court must apply the laws of the state in which the court outside British Columbia is established.

[71] Section 15(1) states:

Provisions relating to the transfer order

15 (1) In an order requesting a court outside British Columbia to accept a transfer of a proceeding, the Supreme Court must state the reasons for the request.

[72] In Iskander and Sons, Inc. v. Haghighat, 2007 BCCA 416, the Court stated at paras. 11-12:

A decision to request a transfer of proceedings is in my view a discretionary matter having regard to the permissive language used in s. 14 of the Act…A full consideration of when and in what circumstances a request for a transfer order ought to be made should await another day when the issue is more squarely raised than is the situation in these proceedings.

Having regard to the circumstances that in this case proceedings were ongoing in the other jurisdiction, a request for a transfer order would appear on its face to have less efficacy than might be the case in circumstances where the only action extant was a proceeding commenced in British Columbia.

[73] The Court declined to make a transfer order stating that it would be likely to cause unnecessary delay and be generally inappropriate.

[74] In the present case, the only action is this proceeding commenced in the British Columbia court. The Alberta courts have both territorial and subject matter competence in this proceeding.

[75] Given the finding that the British Columbia courts do not have territorial competence, or in any event that Alberta is the more appropriate forum to hear the dispute, this is an appropriate case in which to exercise the discretion to request a transfer of proceedings.

[76] Pursuant to s. 15(1) of the CJPTA, my reason for requesting transfer of this proceeding to the Alberta Court of Queen’s Bench is that I have found this Court does not have territorial competence over the proceeding against two of three defendants on the basis that there is no substantial connection between British Columbia and the facts on which the proceeding against them is based. I have found that those facts establish a substantial connection between what is alleged against the defendants and Alberta, which is therefore the state with territorial competence over the individual defendants and the Alberta Court of Queen’s Bench is the more appropriate forum.

[77] Neither counsel requested any terms or conditions be included in the order requesting transfer, nor any provision for return of the proceeding to British Columbia. If any such terms or conditions are agreed by counsel, they may include them in the formal order submitted for entry, which should be accompanied by a brief note of explanation to my attention.

_____________________________________

“The Honourable Madam Justice Koenigsberg”

Citation:	*England v. Research Capital Corporation,*
	2008 BCSC 580