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Jayson Thomas, Loopstra Nixon LLP

Appeal Court upholds Ontario’s ‘jurisdiction simpliciter’ in action involving law firm in India

Thursday, October 28, 2021 @ 10:56 AM | By Amanda Jerome

The Ontario Court of Appeal has upheld a decision regarding the jurisdiction of the court in a multijurisdictional dispute involving a law firm in India. Counsel involved in the case said a takeaway the decision highlights is that “any lawyer advising on an international transaction has to take care to ensure that if there are limitations” on their opinion “they have to be clearly expressed to the clients.”

In Kyko Global Inc. v. M/S Crawford Bayley & Co., 2021 ONCA 736 the court heard that M/S Crawford Bayley & Co. and Sanjay Asher, the appellants, “are a law firm based in Mumbai, India, and a senior partner of that firm, respectively.”

According to court documents, the appellants unsuccessfully argued before a motion judge, Justice Michael Doi of the Superior Court of Justice, that Ontario lacked “jurisdiction over, and is not the convenient forum for, the respondent, Kyko Global Inc.’s action against them.”

The court explained that Kyko is an Ontario corporation that retained the appellants to “provide an opinion on the enforceability of a guarantee to be provided by Sical Logistics Limited,” which is a “publicly-traded company in India.”

The guarantee, the court noted, was “security for a trade finance facility provided by Kyko to another Indian company, West Coast Marine Private Limited.” In a letter to Kyko’s Ontario counsel, dated Sept. 9, 2010, the appellants “opined that the guarantee was enforceable in accordance with its terms” and the guarantee “had Ontario choice of law and forum provisions.”

“Unbeknownst to Kyko,” the court add, it was Asher’s cousin, Yogesh Asher, who “effectively brokered Kyko’s agreement to provide the trade facility to West Coast Marine Private Limited.”

According to court documents, the facility “went into default and Kyko obtained a default judgment in Ontario against Sical.” On the other hand, Sical obtained an “interim injunction from the High Court of Judicature at Madras, in India, to restrain enforcement of the default judgment by alleging that the guarantee was a forgery.”

Police in Madras launched a criminal investigation, the court noted, and “concluded that the signatures on the guarantee were forged.”

This led Kyko to bring action against the appellants for “negligent and fraudulent misrepresentation and breach of contract.”

When the motion was heard, the court explained, Sical’s injunction application “was still pending before the Madras High Court.” Justice Doi noted that “Kyko concedes that its claim against the appellants may only proceed if the guarantee is a forgery, and as a result depends on the outcome of the proceeding in the Madras High Court.”

Justice Doi applied the test in Club Resorts Ltd. v. Van Breda, 2012 SCC 17 and determined that “two presumptive connecting factors were present.”

First, Justice Doi concluded “there was a good arguable case that the tort (fraudulent or negligent misrepresentation) took place in Ontario: in particular, there was a good arguable case that the appellants’ legal opinion was first provided to Kyko in Ontario; arrangements were made in Ontario to advance the credit facility; and Kyko suffered damages in Ontario.”

Second, Justice Doi noted that there was “a good arguable case that the contract connected to the dispute was made in Ontario.”

Justice Doi found that the appellants had failed to “demonstrate that the presumptive connecting factors do not point to any real relationship between the subject matter of the litigation and the forum, or point to a weak relationship.” He therefore found that Ontario had “jurisdiction simpliciter over the action.”

The motion judge also determined that the appellants had not “discharged their burden to show that their proposed alternate forum, Mumbai,” was “clearly more appropriate.”

The appellants appealed, raising five issues.

The first issue was did Justice Doi “reverse the burden of proof on the test for jurisdiction simpliciter?”

On this issue, the appellants noted that “the original of the opinion was delivered to Kyko’s CEO, Mr. Kulkarni, in India” and argue that Justice Doi “erred in applying the test for jurisdiction simpliciter: he reversed the burden of proof by only considering whether that evidence rebutted the presumption of jurisdiction, and not in determining whether Kyko had discharged its onus of establishing that there was a good arguable case.”

Justice Alexandra Hoy, writing for the Ontario Court of Appeal, rejected this argument, noting that there was “no evidence about when the original opinion was delivered to Mr. Kulkarni.”

According to court documents, the appellants also argued that the Justice Doi’s conclusion that “there was a good arguable case that the receipt of their opinion in Ontario by Ms. Thomas completed the tort of misrepresentation was tainted by legal error.” The appellants claimed that the “document had to be received by a principal or ‘directing mind’ of Kyko, and that did not occur until the opinion was delivered to Mr. Kulkarni in Mumbai.”

Justice Hoy also rejected this argument, stressing that the “opinion was addressed to Ms. Thomas” and that “there is clearly a good arguable case that receipt of the opinion by Ms. Thomas was receipt by Kyko.”

The second issue was described as, “[I]n his jurisdiction simpliciter analysis, did the motion judge err by accepting allegations in the statement of claim as true despite evidence to the contrary?”

On this point, the appellants argued that Justice Doi’s conclusion was “tainted by palpable and overriding error.” They claim that Kyko’s pleading was “in fact contradicted by Mr. Kulkarni’s evidence on cross-examination” and Justice Doi erred in “relying on the pleaded facts, and there was not a good arguable case that the contract connected to the dispute was made in Ontario.”

“Further, the court noted, the appellants argued that Justice Doi erred in law in “permitting Kyko to rely on its pleading that the contract was made in Ontario: that was a legal conclusion, not an allegation of fact. Moreover, it was a bald conclusory statement and was not sufficiently particularized.”

Justice Hoy was not persuaded by these arguments, noting that on the motion “there was no dispute that the appellants delivered the opinion and that they had been retained to do so.”

She explained that Asher’s evidence was that Kyko “required that Crawford Bayley provide a legal opinion concerning the guarantee and that Crawford Bayley did not have written agreements with all its clients.”

“The appellants did not argue below that there was no contract. The only issue was where the contract was made. In context, including that the opinion was addressed to Kyko’s Ontario legal counsel, Mr. Kulkarni’s evidence does not contradict Kyko’s pleading that the contract was made in Ontario. The appellants should not now be permitted to assert that there was no contract,” she stressed.

Issue three was did Justice Doi “discount the appellants’ evidence on the location of their witnesses in his forum non conveniens analysis as a result of a misreading of the applicable jurisprudence?”

Justice Hoy noted that while Justice Doi “erred in citing to the overruled passage in Goldhar,” she was not persuaded that this warrants interference by this court.”

“The motion judge acknowledged that the appellants had provided information about what some of their witnesses (Mr. Asher and Ms. Batra) will say. Unlike Haaretz in Goldhar, however, Mr. Asher could not say what, if any relevant evidence the other witnesses might be able to provide. The motion judge in this case, therefore, unlike the motion judge in Goldhar, did not misapprehend the evidence and his conclusion was reasonable,” she added.

Justice Hoy determined that the motion judge’s error in “citing to Goldhar did not lead him to conclude that the factor of comparative inconvenience to witnesses was ‘largely neutral.’ ”

“Further,” she noted that while she appreciates that there is a “9½-hour time difference between Ontario and Mumbai, the appellants have not demonstrated any error in principle concerning the motion judge’s observation that videoconferencing technology may offer a fair, convenient and cost-effective way to obtain testimony from witnesses abroad at trial in Ontario.”

“It is open to an Ontario court to modify its usual sitting hours to better accommodate an out-of-country witness. Even before the COVID-19 pandemic made videoconferencing software ubiquitous, Canadian courts have considered the possibility of proceeding electronically as part of the forum non conveniens analysis,” she stressed, adding that Justice Doi “did not fall into the error in Goldhar.”

Issue four was: “[D]id the motion judge fail to consider relevant factors in his forum non conveniens analysis?”

On this issue the appellants argued that Justice Doi “erred in principle in his forum non conveniens analysis because he failed to consider the jurisdiction where the factual matters arose and the location of the evidence.”

Again, Justice Hoy was not persuaded. She noted that “[I]n the context of this case, the factors that the appellants argue the motion judge should have considered are minor, and are largely subsumed by the motion judge’s analysis of the comparative convenience and expense to the parties and witnesses in litigating in Ontario or Mumbai.”

Issue five, “[I]s the motion judge’s decision that the appellants had not discharged their burden to show that Mumbai was a clearly more appropriate forum unreasonable?” was also dismissed.

According to court documents, the appellants argued that “at its core, this action is about whether an Indian lawyer met the expected standard of care of an Indian lawyer in providing the opinion and that is a matter of Indian law.”

They argued that Justice Doi’s conclusion that “both Indian and Ontario law are implicated in this case, and the second factor — applicable law — was therefore a neutral factor, was unreasonable.”

Justice Hoy noted that Justice Doi “specifically considered that Indian law was implicated because of this standard of care issue.”

“However, he accepted that Ontario law was also implicated because of Kyko’s position that the place of the tort is Ontario, where it received and acted on the allegedly negligent and fraudulent representation in the opinion, and that Kyko’s contract claim pleads a breach of contract made in Ontario. The motion judge did not accept that, at its core, this action is about professional negligence,” she explained, noting in her analysis that Justice Doi “concluded that overall fairness considerations favoured Ontario.”

Justice Hoy determined that conclusion was reasonable.

“Whether or not Mr. Asher specialized in international business law, the appellants are one of India’s oldest law firms and a senior partner at that firm. As the motion judge found, they are sophisticated legal professionals who advised an Ontario corporation, and there was a good arguable case that the opinion was first provided to Kyko in Ontario and relied upon there. The motion judge’s analysis was rigorous and much more than an instinctive favouring of his own jurisdiction,” she wrote, in a decision released Oct. 20.

Jayson Thomas, Loopstra Nixon LLP

The appeal was dismissed, with Justices Paul Rouleau and Julie Thorburn in agreement, with costs to Kyko in the “all-inclusive amount of $20,000.”

Jayson Thomas, a partner at Loopstra Nixon LLP and counsel for the respondent with Laura Chiu, legal counsel to Kyko Global Inc., said one of the key takeaways any lawyer can learn from this case is “when you’re presented with a transaction involving international elements you’ve got to be clear on what laws apply.”

“I think any lawyer advising on an international transaction has to take care to ensure that if there are limitations on her opinion they have to be clearly expressed to the clients and clearly conveyed to the client. The lawyer also has to be aware, obviously, of what laws apply to the transaction in order to identify the appropriate limitations on his or her opinion,” he explained.

Another key takeaway and “one of the main reasons why Ontario courts in this case assumed jurisdiction,” Thomas noted, is “that the lawyers in this case made representations that they knew would be relied on in Ontario to advance a loan.”

Thomas stressed that as a lawyer, when you know or should know “where your advice is being relied on in a foreign jurisdiction, you should also know that you may be called on to account for that advice if it’s negligent or fraudulent, as it was alleged in this case in the foreign forum.”

Laura Chiu, Kyko Global Inc.

Chiu agreed with Thomas and stressed that a key takeaway is lawyers’ “duties to fully inform the client on the nature of any sort of arrangement that they provide and that the client clearly understands any sort of scope or limitations of services that the lawyer is providing.”

“We are pleading fraudulent and negligent misrepresentation and breach of contract, but any sort of assumptions that the opinion is based on, particularly when circumstances do not ask for an exhaustive investigation, that should be known to the client and sufficient details should be expressed in any opinion that also include whether or not there are any sort of qualification there,” she explained.

Thomas noted that “one of the concerns raised by the defendants in this case, both on the motion and on appeal, was the fairness of being called to account a world away from where the advice was given.”

“I think the courts below and the Court of Appeal got it right when they said if you’re going to make misrepresentations in another forum, if you knowingly make them in a forum where you know or should know that they will be received and relied on, you’re going to be held to account for your conduct in that forum. I think that’s really a key takeaway,” he said, stressing that lawyers “should really be on alert any time they’re dealing with an international client.”

“First and foremost, be clear on the advice you’re giving; you’re giving advice under Canadian law,” he added, noting that to the extent that there’s any dispute about the advice being given, “that dispute should be resolved in accordance with Ontario law in this forum.”

Anisah Hassan, Tyr LLP

Anisah Hassan, a partner at Tyr LLP and counsel for the appellants with James Bunting, said a takeaway for litigators is that a “forum non conveniens decision like this being discretionary presents a real uphill battle on appeal even if there are some legal errors in the decision below.”

“Here, the Court of Appeal agreed on some legal errors being found in the motion judge’s decision but held that they didn’t warrant intervention and talked about the discretionary nature of that decision,” she explained

Another potential takeaway Hassan noted is for “counsel figuring out how to navigate actions in an increasingly globalized and electronic world,” videoconferencing and electronic evidence has “accelerated” since the COVID-19 pandemic.

“I think whether that is temporary or whether that’s part of the new normal, and how that would intersect with the preferable forum for litigation, is something that counsel and courts alike are trying to figure out right now,” she said.

“The Court of Appeal recently announced that it’s resuming in-person hearings soon and, here you also have the Court of Appeal saying that the COVID-19 pandemic has made videoconferencing software ubiquitous and pointing to the availability of tools like videoconferencing software as a way to deal with witnesses being located in India,” she added, noting that those witnesses “would then be testifying through a nine-and-a-half-hour time difference.”

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