2012 QCCA 434, 2012 QCCA 434

Unofficial English Translation Federal Corporation c. Triangle Tires Inc. 2012 QCCA 434 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No.: 500-09-022002-117 (500-17-065270-111) DATE: MARCH 7, 2012 CORAM: THE HONOURABLE ANDRÉ FORGET, J.A. FRANCE THIBAULT, J.A. JACQUES R. FOURNIER, J.A. FEDERAL CORPORATION, APPELLANT - Defendant v. TRIANGLE TIRES INC., RESPONDENT - Defendant JUDGMENT [ 1 ] THE COURT; – On the appeal from judgments rendered on August 11 and 12, 2011, by the Superior Court, District of Montreal (the Honourable Mr.

Justice Gérard Dugré), which dismissed an objection to evidence and a motion for declinatory exception and also ruling on a motion to adduce fresh evidence brought by the appellant; [ 2 ] For the reasons of Forget, J.A., with which Thibault and Fournier, JJ.A. agree; [ 3 ] DISMISSES without costs the motion to adduce fresh evidence; [ 4 ] DISMISSES without costs the appeal from the trial judgment, which dismissed the objection to evidence; [ 5 ] ALLOWS the motion for declinatory exception, with costs, excluding those set out in

section 42 of the Tariff of judicial fees of advocates ; [ 6 ] DISMISSES the action brought by Triangle Tires on the grounds that the Superior Court of Quebec does not have jurisdiction, with costs, excluding those set out in

section 42 of the Tariff of judicial fees of advocates . ANDRÉ FORGET, J.A. FRANCE THIBAULT, J.A. JACQUES R. FOURNIER, J.A. Mtre Paul Déry-Goldberg SPIEGEL, SOHMER, INC. For the appellant Mtre Marc-Antoine St-Pierre SÉGUIN, RACINE, AVOCATS LTÉE For the respondent Date of hearing: February 3, 2012

REASONS OF FORGET, J.A. [ 7 ] The trial judgment concluded that the Superior Court of Quebec had jurisdiction to hear a dispute between Federal Corporation (Federal), whose head office is in Taiwan, and Triangle Tires Inc. (Triangle), whose head office is in Quebec. [ 8 ] Moreover, the trial judge concluded that neither the forum selection clause designating Taiwan nor the arbitration clause concerned the questions at issue in these proceedings. [ 9 ] With leave from a judge, Federal appeals from the judgment concluding that the parol evidence adduced by Triangle was admissible and from the judgment dismissing its motion for declinatory exception. [ 10 ] During the hearing, counsel for Federal brought a motion to adduce fresh evidence, which was reserved.

THE FACTS AND THE PROCEEDINGS [ 11 ] Federal manufactures and sells tires. It has no property or establishment in Quebec. Triangle is a business that was constituted in Quebec and whose main activity is to import and distribute car parts, including tires.

It also does business under the corporate name of Kebek Tires. [ 12 ] The business relationship between the parties began in November 2008. [ 13 ] On April 16, 2009, Triangle ordered 187,000 tires by means of a document designated “Pro forma Invoice”; the document originated from Federal and was signed by both parties. [ 14 ] The document bears the following words: VALIDITY: SUBJECT TO OUR FINAL CONFIRMATION FOB TAOYUAN / KEELLUNG [ 15 ] On April 27, 2009, the parties executed a memorandum of understanding (MOU), in force from the date of its execution until March 15, 2010. [ 16 ] The MOU designated Kebek Tires to represent Federal and to market and sell winter tires designed and manufactured by it in the territory of Ontario, Quebec, and the Maritimes on the following terms: 1.

PURPOSE, Federal is willing to appoints Kebek to be its agent and Kebek is willing accept this appointment to represent, marker and sell winter tires that are manufactured by Federal with its own molds and patterns in the Territory (“Products”). 2. TERRITORY. Federal agrees that Kebek to represent, market and sell Products within the provinces of Ontario, Quebec and all the Maritimes provinces in Canada for the period of mou (“Territory”), EXCEPT Federal existing customer in British Columbia, Uniwell-International that can also sell Products in the Territory.

In general, Kebek shall not sell Products out of Territory, but Kebek can sell Products out of Territory after obtaining prior written consents of Federal. In the period of MOU, Federal shall not seek any additional purchaser(

s) to sell Products in the Territory, but not including Kebek and Uniwell-International. [ 17 ] The agreement provides for forum selection in Taiwan if Triangle or Kebek is the plaintiff, and in Quebec if Federal is the plaintiff: 11. JURISDICTION AND APPLICABLE LAW.

Any dispute or claim arising out of or relating to this MOU, which cannot be settled amicably between the parties, shall be submitted to this jurisdiction of Quebec District Court and be governed by the laws and regulations of Canada WHEN Federal is a plaintiff, or shall be submitted to the jurisdiction of Taipei District Court and be governed by the laws and regulations of R.O.C. WHEN Kebek is plaintiff. [ 18 ] On June 10, 2009, the parties entered into an original equipment manufacturing (OEM) agreement, under which Federal undertook to manufacture tires designed by Kebek Tires and to deliver them to it.

The OEM provided an arbitration clause for disputes “arising out of or in connection with this agreement”. [ 19 ] On May 6, 2010, Triangle sent a notice of default to Federal, claiming from it more than $4 million, namely the loss of profit resulting from Federal’s failure to deliver to it 126,335 tires ordered on April 16, 2009, Federal having delivered only 60,665 tires. [ 20 ] On May 20, 2010, Federal informed Triangle that it refused to pay the amount claimed. [ 21 ] On February 23, 2011, Triangle sent a second notice of default to the same effect. [ 22 ] On May 4, 2011, Triangle brought a motion to introduce proceedings for contractual damages:

3. The Plaintiff is the authorized distributor of tires of the Defendant for Eastern Canada, more specifically for the provinces of Quebec, Ontario and the Maritimes, as it more fully appears form copy of the authorization letter signed by a duly authorized representative of the Defendant produced herewith as exhibit P-2; 4.

On or around April 16 th , 2009, the Plaintiff gave orders to the Defendant to produce 187,000 units of tires, which represent an amount totalling seven million nine hundred two thousand seven hundred ninety US dollars ($7,902,790 US) as it appears from copy of the pro forma invoices in a bundle produced herewith as exhibit P-3; 5. The said pro forma invoices, exhibit P-3, were signed by duly authorized representatives of the Plaintiff and the Defendant, in Montreal, province of Quebec; 6.

According to this sales agreement, the 187,000 units of tires ordered had to be shipped and delivered by the Defendant to the Plaintiff successively during the months of June, July and August 2009, as it appears from the pro forma invoices, exhibit P-3; … 8. From the month of June 2009 to the month of October 2009, the Plaintiff received from the Defendant a parcel order of tires, namely 60,665 units of tires in total, as it more fully appears from copy of the invoices produced herewith as exhibit P-4; … 10.

Subsequently, the Plaintiff tried to enforce the delivery of the remaining units of tires, namely 126,335 units of tires, from the Defendant and its representatives. As such, the Plaintiff requested an update of inventory and production

schedule as well as tracking information but was never provided with such, the whole which will be more fully demonstrated at trial; … 15.

Therefore, the Plaintiff has incurred loss of profits in the order of four million thirty-eight thousand six hundred thirty-five dollars and seventy two cents CA ($4,038,635,72 CA), representing the total value of the remaining 126,335 units of tires at their respective sale price, as it more fully appears from copy of the Plaintiff’s sales inventory produced herewith as exhibit P-6; … [ 23 ] In June 2011, Federal filed a motion for declinatory exception in which it alleged that the Quebec courts did not have jurisdiction, relying, among other things, on the MOU and the OEM. [ 24 ] On June 25 and July 5, 2011, Triangle informed Federal that it intended to have the company president, Mr.

Tran, testify concerning the scope of the MOU and the OEM. [ 25 ] On August 11, 2011, namely the day of the hearing on the motion for declinatory exception, Federal objected to Mr. Tran’s evidence. JUDGMENT A QUO [ 26 ] On August 11, 2011, the trial judge dismissed Federal’s objection, taking the view that the interests of justice made it possible to admit parol evidence to oppose the motion for declinatory exception. [ 27 ] On August 12, 2011, the trial judge dismissed the appellant’s motion for declinatory exception, holding that the court had jurisdiction under

article 3148, para. 1(3) C.C.Q . because, according to the motion to introduce proceedings, the contractual fault was committed in Quebec, the damage was suffered there, and some of the obligations arising from the contract were to be fulfilled there. [ 28 ] Moreover, the trial judge held that the court must not decline jurisdiction because of

article 3148, para. 2 C.C.Q . because neither the forum selection clause provided in the MOU nor the arbitration clause provided in the OEM applied. QUESTIONS AT ISSUE [ 29 ] The appellant submits the following questions to the Court: 1. Did the trial judge err in concluding that the Superior Court had jurisdiction under

article 3148, para. 1 C.C.Q .? 2. Alternatively, did the trial judge err in concluding that the parties had not agreed to submit the dispute to an arbitrator or a foreign authority? ANALYSIS

Admissibility of the parol evidence [ 30 ] At trial, counsel for Federal objected to the evidence of Mr. Tran, the President of Triangle. He argued that parol evidence was not admissible at that stage of the proceedings. [ 31 ] This argument is devoid of merit. When the defendant opposes the court’s jurisdiction, the onus is on the plaintiff to establish the jurisdiction of the forum selected, other than that of the residence of the plaintiff. In Shamji. v.

Tajdin , [1] the Court wrote: [ translation ] When a court’s jurisdiction is called into question by a motion for declinatory exception and when the facts are in dispute, the onus of proving all the elements justifying the court’s jurisdiction is on the plaintiff, who must discharge it by adducing evidence in the context of the motion for declinatory exception. [ 32 ] Counsel for Federal argued that the motion to introduce proceedings made no mention of any linkage to the jurisdiction of the Quebec courts. [ 33 ] During the hearing, the trial judge raised the possibility of an amendment to the proceedings by Triangle; that was not done. [ 34 ] If counsel for Federal was taken by surprise, it was up to him to ask for an adjournment to marshal evidence to the contrary. [ 35 ] Accordingly, I would dismiss without costs the appeal from the judgment that dismissed his objection.

The jurisdiction of the Quebec courts [ 36 ]

Article 3148, para. 1(3) C.C.Q . provides that: 3148.

In personal actions of a patrimonial nature, a Québec authority has jurisdiction where … (3) a fault was committed in Québec, damage was suffered in Québec, an injurious act occurred in Québec or one of the obligations arising from a contract was to be performed in Québec; … [ 37 ] Under this paragraph, which applies in both extracontractual and contractual matters, [2] the Quebec courts have jurisdiction where a fault was committed in Quebec, damage was suffered in Quebec or an obligation arising from a contract was to be performed there. [ 38 ] The trial judge relied on this provision to recognize the jurisdiction of the Superior Court.

He concluded that the tires were to be delivered in Quebec, that payment was to be made there and that the damage was suffered there. [ 39 ] Counsel for Federal argued that no evidence made it possible to state that all the tires were to be delivered in Quebec or that payment was to be made there.

On the contrary, according to him the reference to “FOB” (free on [should read: board]) indicated that payment was to be made in Taiwan and that the cost of transportation was to be borne by the purchaser. [3] [ 40 ] Regardless, that is without importance for the purposes of the appeal because I am of the view that Triangle suffered damage in Quebec, despite Federal’s arguments to the contrary. [ 41 ] In Spar Aerospace Ltée v.

American Mobile Satellite Corp. , the Supreme Court established a broad basis for the jurisdiction of the Quebec courts in respect of damage: In the case at bar, I agree with the motions judge that the respondent made a prima facie case that it suffered damage in Quebec. Although the respondent’s head office is in Ontario, the evidence provided by Gerald Bush (Vice-President and General Manager of Spar) demonstrates that the operation in Ste-Anne-de-Bellevue had established its own reputation independently of the national reputation the respondent enjoyed (A.R., at pp. 99-100).

More support for the respondent’s position is found in its evidence that the Quebec facility suffered injuries as a result of the withholding of the incentive payments, even though these were to be made to the corporate headquarters in Toronto (see Mr. Bush’s testimony, A.R., at p. 114). [4] [ 42 ] In some judgments of this Court, it was decided that the fact that a monetary loss would be recorded in Quebec does not constitute damage. [5] Indeed, if any reduction of the plaintiff’s estate constituted damage within the meaning of the third paragraph of

article 3148, para. 1(3) C.C.Q ., [ translation ] “the jurisdiction of the Quebec courts would be automatic if the plaintiff is a resident of Quebec, and the other heads of power covered by

article 3148 C.C.Q . would be unnecessary”. [6] [ 43 ] In the instant case, the loss of profits caused by the impossibility of selling the undelivered tires took place in Quebec. To quote Rochon, J.A. in Sterling Combustion Inc. v. Roco Industrie Inc. , [ translation ] “to the extent that the respondent’s right of action is taken for granted, I cannot imagine that the damage can be suffered anywhere except Quebec.” [7] [ 44 ] I am of the view that, on the basis of the damage test, the trial judge was right to hold that the Quebec courts have jurisdiction.

Forum selection clause [ 45 ] Even though the jurisdiction of the Quebec authorities is established under

article 3148, para. 1 C.C.Q ., the court must decline jurisdiction when an arbitration or forum selection clause exists: 3148, para. 2. However, a Québec authority has no jurisdiction where the parties, by agreement have chosen to submit all existing or future disputes between themselves relating to specified legal relationship to a foreign authority or to an arbitrator, unless the defendant submits to the jurisdiction of the Québec authority. [ 46 ] In GreCon Dimter Inc. v. J.R. Normand Inc. , LeBel, J. discusses

article 3148 C.C.Q . in the following terms:

Article 3148 establishes the general framework that delineates the jurisdiction of a Quebec authority in relation to contracts in proceedings based on personal actions of a patrimonial nature....

Article 3148 also recognizes the primacy of the autonomy of the parties: although the legislature did confer jurisdiction on the Quebec authority on the basis of the criteria of jurisdictional connection, such as domicile, fault, the damage or the injurious act, it was careful to give the parties the ability to choose to oust the authority’s jurisdiction when they wish to entrust current or future disputes between them that arise out of a specific legal relationship to a foreign authority or an arbitrator. [8] [ 47 ] The trial judge decided that the forum selection clause was not applicable in this case.

He set forth his reasoning in three paragraphs: [ translation ] [36] As a result of the terms “arising out of or relating to this MOU ”, this clause is inapplicable in this case because the specified legal relationship on which Triangle’s action is based is Agreement P-3 of April 16, 2009, and not Agreement R-1, entitled Memorandum of Understanding . [37] It is clear that the purpose of Agreement R-1 is not the same as that of Agreement P-3 on which Triangle’s action relies in this matter. Moreover,

section 1 of Agreement R-1 confirms it. [38] Accordingly, the forum selection clause in Agreement R-1 does not cause the Court to lose jurisdiction in this case. [ 48 ] The trial judge relied on the evidence of Mr.

Tran, who relied on a previous oral agreement that allegedly gave him a distribution contract for Quebec on April 16, 2009, before granting him another for the territory consisting of Quebec, Ontario, and the Maritimes on April 27. [ 49 ] Counsel for Federal argued that this version of the facts was implausible and contrary to the current written agreements. [ 50 ] Counsel for Triangle pointed out that the trial judge believed Mr.

Tran and that the Court’s duty of deference did not allow it to interfere. [ 51 ] It should be pointed out that the trial judge committed an error of law or, if one prefers, a palpable and overriding error on a question of mixed fact and law, when he concluded that the pro forma invoice constituted a contract.

The document expressly includes the following words: VALIDITY: SUBJECT TO OUR FINAL CONFIRMATION [ 52 ] One cannot speak of a contract in the absence of mutual consent between persons having capacity to contract (art. 1385 C.C.Q .). [ 53 ] Confronted by this matter during the hearing, counsel for Triangle argued that Federal’s consent manifested itself through the delivery of the tires. But such delivery began in the month of June 2009, or in other words, a very long time after the MOU was executed. [ 54 ] Mr. Tran acknowledged in his testimony that the MOU was binding on the parties from April 27.

Because Federal accepted the order after April 27, the terms and conditions of the MOU applied incontestably. [ 55 ] Moreover, Mr. Tran’s version even contradicted the allegations in Triangle’s motion to introduce proceedings. In paragraph 3, Triangle states that it is the authorized distributor for Quebec, Ontario, and the Maritime Provinces and, in paragraph 4, it states that it placed an order on April 16.

The only logical reading of the two paragraphs leads to the conclusion that the order was placed under the MOU and not after an alleged previous oral agreement that gave Triangle a distribution contract for Quebec only according to the version given by Mr. Tran at trial. [ 56 ] In my opinion, the trial judge was wrong to conclude that the forum selection clause did not apply. Motion to adduce fresh evidence [ 57 ] Federal appended to its schedules the correspondence between Mr. Tran and Mr.

Tazyeh, Federal’s representative, between April 20 and 24, 2009, which confirms that the order was indeed placed under the MOU. [ 58 ] Counsel for Triangle objected to the filing of the correspondence, which had not been adduced as evidence during the trial.

[ 59 ] Counsel for Federal brought an oral motion to adduce fresh evidence. [ 60 ] This motion becomes irrelevant given my conclusion on the application of the forum selection clause. In any event, the motion should have been dismissed because the evidence was not fresh but was known at the time of the trial. [ 61 ] I would dismiss without costs the motion to adduce fresh evidence. Additional fees [ 62 ] Counsel for Federal stated during the hearing that his client waived the fee of 1% provided in

section 42 of the Tariff of judicial fees of advocates , [9] whose application would give him a fee of almost $40,000 if the motion for declinatory exception were allowed with costs and the action dismissed with costs. [ 63 ] In any event, additional fees may be granted only to the extent that the judgment brings the proceedings to a final conclusion and resolves the dispute between the parties: [ translation ] The most recent decisions of this Court, which disregarded

section 42 of the Tariff when the judgment rendered did not dispose of the matter on the merits, must lead us to a similar conclusion when the common law courts decide that they do not have jurisdiction and that the dispute must continue before a court in another province or another country, or before an arbitrator or a quasi-judicial body. [10] CONCLUSION [ 64 ] For these reasons I would: [ 65 ] DISMISS without costs the motion to adduce fresh evidence; [ 66 ] DISMISS without costs the appeal from the judgment of the first instance, which dismissed the objection to evidence. [ 67 ] ALLOW the motion for declinatory exception with costs, excluding those set out in

section 42 of the Tariff of judicial fees of advocates ; [ 68 ] DISMISS the action brought by Triangle Tires on the ground that the Superior Court of Quebec does not have jurisdiction, with costs, excluding those set out in

section 42 of the Tariff of judicial fees of advocates . ANDRÉ FORGET, J.A. A mercantile-contract term allocating the rights and duties of the buyer and the seller of goods with respect to delivery, payment, and risk of loss, whereby the seller must clear the goods for export, and the buyer must arrange for transportation. • The seller’s delivery is complete (and the risk of loss passes to the buyer) when the goods pass the transporter’s rail. The buyer is responsible for all costs of carriage.