Décision

JS 1319

[1]           Is a trustee in bankruptcy bound by the choice of forum clause contained in the bankrupt's contract giving rise to the accounts receivable which the trustee seeks to collect?

FACTS

[2]           Lawrence Home Fashions Inc. (the "Bankrupt") filed a voluntary assignment in bankruptcy on May 28, 2012 in the hands of Le Groupe Fuller Landau Inc. (the "Trustee").  The latter acts as trustee and as receiver named under Section 243 of The Bankruptcy Insolvency Act [1] ("B.I.A.") by judgment of the Registrar dated May 30, 2012.

[3]           The Trustee has initiated proceedings before this Court sitting in bankruptcy matters in Montréal, Québec, claiming from Sears Canada Inc. ("Sears") $371,129.00 representing goods sold and delivered by the Bankrupt to Sears.

[4]           Sears has filed a motion invoking Section 187(7) B.I.A. for the transfer of the proceedings to the Ontario Superior Court of Justice sitting in Toronto, Ontario, and having jurisdiction in bankruptcy matters.  Section 187(7) B.I.A. reads as follows:

"The court, on satisfactory proof that the affairs of the bankrupt can be more economically administered within another bankruptcy district or division, or for other sufficient cause, may by order transfer any proceedings under this Act that are pending before it to another bankruptcy district or division."

[5]           Sears pleads that the "sufficient cause" to transfer the proceedings to Ontario is contained in clause 17.6 of the Supply Contract (the "Contract") between it and the Bankrupt.

"Submission to Jurisdiction.  Supplier and Sears hereby consent to attorn to the jurisdiction of the courts of the Province of Ontario and agree that the proper and exclusive venue for any dispute concerning this UTC, Related Agreement and any Purchase Order shall be in such courts.  All objections to such jurisdiction or venue are hereby waived."

[6]           According to Sears, since the Trustee steps into the shoes of the Bankrupt, the Trustee is bound by this clause to litigate in Ontario.

[7]           Moreover, Sears pleads that the Bankrupt and Sears contracted that Ontario law would apply to any dispute.  Sears intends to invoke the doctrine of equitable set-off as a defence.  While there exists the concept of set-off in Québec law, called "compensation", equitable set-off does not exist. [2]  Thus, Sears concludes that it would be prejudiced if forced to defend the case in Montréal and prove through expert testimony, the Ontario law relating to equitable set-off.

[8]           Sears adds that it will also suffer prejudice because it will be obligated to bring to Montréal witnesses from Toronto.

DISCUSSION

[9]           In Azco Mining Inc. vs. Sam Lévy and Associates Inc. [3] the Supreme Court of Canada, on appeal from the Québec Court of Appeal, in a bankruptcy matter, held that the B.I.A. establishes as a principle the "single control" doctrine for all proceedings related to a given bankruptcy.  This is a matter of public policy to allow for the efficient administration of bankruptcy estates [4].

[10]        Thus, in principle, where the trustee seeks to recover assets (including money) of the bankrupt, proceedings are properly brought before the court in the place where the bankruptcy has been filed which will generally correspond to the court having jurisdiction under Section 183 B.I.A. in the "locality of the debtor" (as defined in Section 2 B.I.A.).  In the present case, such court is the Superior Court of Québec, sitting in bankruptcy matters in the District of Montréal.  Any judgment obtained, by a court having jurisdiction in bankruptcy matters, is enforceable throughout Canada (Section 187(6) B.I.A.).

[11]        Section 187(7) B.I.A. provides, by way of exception, that a proceeding may be transferred, as Sears has requested.  As an exception, it is Sears' burden to demonstrate that a transfer is appropriate. [5]

[12]        In the unanimous judgment in the Azco Mining case, Binnie, J., stated clearly that under Section 187(7) B.I.A., a motions judge is to take a choice of forum clause into "careful consideration" [6] in determining whether "sufficient cause" pursuant to Section 187(7) B.I.A. exists to transfer a proceeding.  Binnie, J., added that 187(7) B.I.A. stands on its own and the Court should not consider Articles  3148 and 3135  of the Civil Code of Québec ("C.C.Q.") dealing with jurisdiction and choice of law. [7]  A contractual choice of law clause is not a controlling factor under Section 187(7) B.I.A. as would be the case in a purely private matter under the C.C.Q. [8]

[13]        Binnie, J. while setting down the analytical framework was not required to :

" […] undertake the exercise of considering whether in this case, there is any conflict between private choice and public interest and, if so, how "choice of forum" considerations should be balanced […] ". [9]

because he found that no choice of forum clause existed in the contract in the Azco Mining case.

[14]        In the case at bar, there is clearly a contractual choice of forum in favour of Ontario.  The Trustee did not allege the contract and sought to avoid the choice of forum clause on such basis.  That is clearly incorrect.  The goods sold and delivered by the Bankrupt to Sears for which the Trustee claims payment appear clearly to be governed by the contract and thus, the choice of forum clause.

[15]        However, Sears' arguments that in this case the private interest of the choice of law prevail over the public interest of the single control doctrine are not convincing.

[16]        The Motion supported by affidavit evidence filed by Sears states merely that Sears is :

"[…] currently in the process of assessing its rights with respect to possible claims based on the rules of set-off."

Thus, there is no clear assertion that the defence based on set-off, equitable or otherwise, will be pleaded.

[17]        Moreover, clause 15 of the Contract referring to Sears' right of set-off, on its face, could give rise to a set-off other than equitable set-off - i.e. a set-off reconcilable with the Québec doctrine of compensation foreseen by Articles  1672 and following C.C.Q.

[18]        In any event, should equitable set-off under Ontario law become relevant to the case, Québec judges sitting in such matters, on the presentation of the appropriate evidence, are readily capable of dealing with foreign law issues. [10]  Indeed, this is a frequent occurrence particularly in insolvency matters. [11]

[19]        With regard to the availability of witnesses, the Court notes from the affidavit evidence that Sears' employees who signed the Contract and dealt with the account remain in its employ.  Travel from Toronto to Montréal is not seen by the undersigned as an undue hardship.  On the other hand, should the Trustee require former employees of the Bankrupt to testify, it is reasonable to imagine that such individuals will have to be summoned by subpoena and in all likelihood reside in closer proximity to Montréal than to Toronto.

[20]        Consequently, the undersigned has not been convinced by Sears that there exists in this case, by reason of the choice of law clause in the Contract, or otherwise, "sufficient cause" within the meaning of Section 187(7) B.I.A. to transfer the Trustee's proceedings to recover sums from Sears to the Ontario Superior Court.

FOR ALL OF THE ABOVE REASONS, THE COURT:

[21]        DISMISSES the Motion of Sears Canada Inc. for the transfer of proceedings, dated May 30, 2013, plumitif no 51;

[22]        THE WHOLE with costs.