Choice of Law: When your Actions Revoke your Choice
In my previous article, Here, There or Anywhere: Where to Sue and be Sued, I discussed factors the Courts in BC consider when determining whether or not to adjudicate on matters where the matters could be determined in more than one legal jurisdiction. In this article, I will discuss a recent case, Naturex Inc. v. United Naturals Inc., 2016 BCSC 1500 (CanLII) in which the Supreme Court had occasion to discuss choice of law, choice of forum and attornment.
A choice of law clause is an agreement whereby the parties to a contract agree in advance that any legal dispute under a specific contract should be resolved in accordance with the laws of a particular jurisdiction. For example, British Columbia. A choice of forum clause in an agreement to actually resolve a dispute in a certain place. Generally both the choice of law and choice of forum clauses will specify the same jurisdiction.
Attornment is when a party’s acts or actions are deemed to be an acceptance of the authority of a court in a certain jurisdiction. As stated in my previous article, any number of acts a party takes may inadvertently and, more importantly, irrevocably determine the jurisdiction in which the case is heard and such a determination can materially affect the remedies and rights available to a party.
In Naturex Inc., the Defendant was being sued for goods supplied under a written agreement. The agreement provided that disputes under the agreement were to be resolved outside of BC; however, the claim was commenced in BC and the Defendant filed a response to civil claim in defence of the claim in BC in which it did not dispute the British Columbia Supreme Court’s jurisdiction.
It was only three weeks after it first filed a response that the Defendant then amended its response to civil claim to plead that the parties contracted to have the agreement determined outside of BC.
The Court held at para. 7 that “By filing a response to civil claim… the defendant asked this Court to resolve the dispute between the parties. Its pleading said nothing about jurisdiction.” The Court went on to observe that the Supreme Court Civil Rules provide a way to respond without losing the right to dispute jurisdiction, but that the Defendant had failed to avail itself of this option.
The Court summarized its views in para. 10 when it stated: “A defendant must first challenge jurisdiction in the manner contemplated by [the Rules] before it defends the action on the merits. It cannot first invoke this Court’s jurisdiction by engaging the court in the merits of the case and later dispute that very jurisdiction.”
Ultimately the Court rejected arguments about a more appropriate forum on the basis that the dispute about forum was motivated by a desire to delay trial rather than to ensure trial proceeded in a more appropriate forum (para. 20).
The lesson from Naturex Inc. is clear. Even where the parties contract to have their agreement dealt with in a certain jurisdiction, their actions can abrogate any right they have to demand that a dispute arising out of that agreement be resolved in the jurisdiction of choice. For this reason, it is always crucial to obtain proper legal advice about both the drafting of choice of law and choice of forum clauses and in commencing any claim or defence in which jurisdiction, choice of law clauses or choice of forum clauses are in issue.