The Ontario Court of Appeal recently addressed an interprovincial commercial dispute in which contractual choices of law and forum played a central role, overturning the decision of the Superior Court and granting the appellant relief.
Ref: Quickie Convenience Stores Corp. v. Parkland Fuel Corporation, 2020 ONCA 453
Facts: Quickie operated a chain of convenience stores in Ontario and Quebec, many of which also operated as gas stations. Parkland supplied fuel to these locations, and in many cases also had credit card agreements in place with Quickie. At issue were 15 of these stores, which Quickie wished to sell.
The contracts for supply and credit in these fifteen cases were not identical. For example, all but one included a clause requiring Parkland’s written consent to assignment of rights under the agreements; only one of the clauses specifically stipulated that this consent would not be unreasonably withheld. Additionally, 11 of the 15 leases contained forum selection clauses favouring Ontario, while two contained clauses in favour of Quebec and two contained no stipulation as to law or jurisdiction.
Quickie advise Parkland of its intent to sell and assign the contracts to the purchaser. Parkland was initially co-operative, but then demanded an extension of five years to the existing terms as a condition for its consent to assignment. Quickie was not willing to extend the terms, and Parkland refused its consent to the assignment. Quickie sued in the Ontario Superior Court for a declaration that Parkland had unreasonably withheld its consent and compelling Parkland to consent to the proposed assignment.
Trial decision: The trial judge agreed with Quickie that Parklands refusal to consent was unreasonable. However, the Court was also persuaded that some of the contracts contained forum provisions favouring Quebec, and that Quickie had not discharged its onus to show “strong cause” to overturn those provisions. Accordingly, the Court determined it could not grant relief in respect of the Quebec contracts, and was reluctant to provide relief in respect of those contracts without a forum selection clause. In spite of the fact that this apparently left 11 of 15 contracts subject to Ontario law and the jurisdiction of the Court, the application was dismissed in its entirety.
Appeal – Forum Selection: The Court of Appeal found that the trial judge had erred in failing to grant partial relief in respect of those contracts subject to Ontario law and those contracts without a forum selection clause, leaving only two of fifteen contracts that clearly selected Montreal as the forum for litigation.
With respect to those two contracts, the Court of Appeal also found that the trial judge had erred in his reasoning and decision. The trial judge had placed the burden on Quickie to show that Quebec law was the same as Ontario law on the substantive issue of reasonable consent, whereas the burden should have been placed on Parkland to show that the “foreign” law they sought to benefit from was different on that point. In the absence of this evidence, the judge should have proceeded on the assumption that Quebec law was the same as Ontario law (ref: Uber Technologies Inc. v. Heller, 2020 SCC 16).
Further, the trial judge had incorrectly applied the “strong” test for overturning a contractual forum selection clause. Here, there was not one but 15 contracts, only two of which contained forum selection clauses favoring Montreal, and a contemplated transaction involving all of them collectively. Commercial reality as well as the rule against a multiplicity of proceedings both favour hearing the dispute in respect of all of those contracts in a single proceeding. There was no evidence of any difference in the substantive law, nor any juridical advantage to litigating in Montreal that Parkland would lose if forced to litigate all fifteen contracts in Ontario. Both parties were closely connected with Ontario, and there was no genuine desire on Parkland’s part to have the issues determined in Montreal.
Taking all these factors into account, the Court found that these formed the kind of exceptional circumstances that demonstrate a strong reason for departing from the contractually selected forum clauses (ref: Expedition Helicopters Inc. v. Honeywell Inc., 2010 ONCA 351).
Appeal – Good Faith: A further issue on appeal was the question of whether Parkland was entitled to unreasonably withhold its consent to assignment of the credit card agreements (the lease agreements having such a term implied as a matter of law under landlord-tenant legislation).
The Court found that the withholding of consent in the circumstance was unreasonable, and that the principles of good faith bargaining mean that where one party’s consent is required under an agreement it is an implied term that such consent will not be unreasonably withheld.
“The first step is to recognize that there is an organizing principle of good faith that underlies and manifests itself in various more specific doctrines governing contractual performance. That organizing principle is simply that parties generally must perform their contractual duties honestly and reasonably and not capriciously or arbitrarily.” (Bhasin v. Hrynew, 2014 SCC 71 at 63 per Cromwell CJ.)