CHOICE OF FORUM/GOVERNING LAW CLAUSE WILL PREVAIL UNLESS “STRONG CAUSE” SHOWN

Momentous.ca Corp. v. Canadian American Association of Professional Baseball Ltd. 2012 SCC 9

The Supreme Court of Canada upheld the Court of Appeal for Ontario’s decision and dismissed an Ontario action on the basis of a governing law clause. Delivering a statement of defence in Ontario does not consitute as “strong cause” and will not displace previously agreed choice of forum clauses.

Drafters should ensure that a governing law clause is properly negotiated at the outset of the contract. It would require a “strong cause” to displace the agreed forum in favour of another jurisidiction in the event that a dispute arises. Otherwise, Canadian courts will likely give deference to agreements between parties.

In Momentous.ca Corp. v. Canadian American Association of Professional Baseball Ltd. (2012 SCC), the appellants, Momentous.ca Corporation et al., sought to move proceedings to Ontario. The respondents, Canadian American Association of Professional Baseball Ltd., argued that the court should dismiss the claim on the ground that Ontario courts had no jurisdiction because the appellants had signed agreements providing that disputes would be arbitrated or litigated in North Carolina. The SCC held in favour of the respondents and dismissed the case. The Court, in citing a previous SCC decision, stated that in the absence of specific legislation, the proper test in determining whether to enforce a forum selection clause depends on whether there is a “strong cause” as to why a domestic court should exercise jurisdiction over a forum that was previously agreed upon. In this case, the appellants did not argue that there was any reason, apart from the delivery of a statement of defence, for the court to determine that there was “strong cause” for Ontario to displace the forum that the parties have previously agreed to resolve their disputes.

To read the full case on CanLII, click here.