We previously discussed the basic considerations for business owners when it comes to multijurisdictional transaction and disputes.

Because the British Columbia legislation on the courts’ jurisdiction is made pursuant to previous Supreme Court of Canada judgments, this interesting case VM Agritech Limited v. Smith (released on October 22, 2024) provided clarity to a number of areas in which we often see confusions, it will have wide applications, not only BC  but may be of important reference in the other provinces as well.

The court’s jurisdiction is found in the factual, real and substantial connection with BC. If the defendant responds in litigation with the sole purpose of contesting the BC court’s jurisdiction, the defendant does not attorn (or submit) to that court’s jurisdiction.

Introduction

In today’s interconnected business landscape, it is not uncommon for companies to engage in commercial transactions across borders. When disagreements occur, and legal action becomes necessary, the question of which jurisdiction has the authority to hear the dispute can be complex.

In British Columbia, the legal framework for determining territorial jurisdiction over a commercial dispute involving contracts is primarily governed by the Court Jurisdiction and Proceedings Transfer Act (CJPTA). This legislation provides specific criteria for establishing whether a BC court has the authority to hear a case involving parties or events located outside the province.

Understanding these criteria is crucial for businesses involved in cross-border transactions, as it can significantly impact your legal strategies and potential outcomes.

Understanding the “Real and Substantial Connection” Test

The cornerstone of jurisdictional challenges in BC courts is the concept of a “real and substantial connection” between the dispute and the province. This test, enshrined in Section 3(e) of the CJPTA, requires the plaintiff (the party initiating the lawsuit) to demonstrate a significant link between the facts of the case and BC.

Section 10 of the CJPTA further elaborates on this test by providing specific factors that create a presumption of a real and substantial connection for contractual disputes. These include:

• The contractual obligations were, to a substantial extent, to be performed in BC.
• The contract, by its express terms, is governed by the law of BC.
• The contract is for the purchase of property or services for use other than in the purchaser’s trade or profession and resulted from a solicitation of business in BC by or on behalf of the seller.

If the plaintiff can establish any of these factors, the burden shifts to the defendant (the party being sued) to prove that the connection is weak or non-existent.

Brief Summary of VM Agritech Limited v. Smith

In the recent case of VM Agritech Limited v. Smith, the BC Court of Appeal addressed the issue of territorial jurisdiction in a contractual dispute involving a BC resident and a UK-based company.

The plaintiff, a BC resident, sued the UK-based defendant for breach of contract. The contract was for the purchase of shares in a company that was to be “re-domesticated” from Nevada to BC as a condition of the transaction. The legal services that gave rise to the alleged debt were performed by the Vancouver office of a law firm, and the debt was assigned to the plaintiff in BC. The defendant argued that the BC court lacked jurisdiction because the defendants were based in the UK, and the contract was not specifically governed by BC law.

The BC Supreme Court initially found that it had jurisdiction based on several connecting factors, including the Share Exchange Agreement and its replacement concerned an exchange of the shares of a company “based in” (although not incorporated in) the province; as a condition of the share exchange, the target company was to be ‘re-domesticated’, or continued, from Nevada to British Columbia; the legal services that gave rise to the alleged debt were performed by the Vancouver office of a (national) firm and presumably concerned the law of British Columbia; and the assignment of the debt was made by the law firm in favour of the plaintiff, a resident of the province. These ‘connecting factors’ were substantial enough to meet the plaintiff’s burden at this stage.

What is Attornment?

Attornment occurs when a party takes actions that imply acceptance of the court’s jurisdiction, even if they initially contested it. This can inadvertently grant the court the authority to hear the case, even if it would not have had jurisdiction otherwise.

Why the BC Court of Appeal Confirmed No Attornment

On appeal, the defendant also argued that by applying to have the claim struck out, they had not attorned (submitted to the jurisdiction of) the BC court. The defendant contended that the BC Supreme Court judge made an error in finding that the defendant “accidentally” attorned to the BC courts’ jurisdiction.

On attornment, the Court of Appeal agreed with the defendant, stating that the defendant’s actions were solely to challenge jurisdiction and did not imply acceptance of the BC court’s authority.

The Court of Appeal confirmed that the lower court judge had made an error in finding that the defendant had attorned to the jurisdiction of the BC court. The Court clarified that the defendant’s actions, including filing a jurisdictional response and seeking an extension of time to serve their application, were procedural steps aimed at challenging jurisdiction and did not signify an acceptance of the BC court’s authority.

Finding the Most Appropriate Jurisdiction to Resolve a Dispute

The VM Agritech Limited v. Smith decision provides clarity for businesses involved in cross-border transactions.

For a dispute, the reasoning in this case highlights the importance of carefully considering the jurisdictional criteria outlined in the CJPTA before initiating legal action in BC. It also underscores the need for defendants to take timely and mandatory steps to challenge jurisdiction if they believe the BC court lacks the authority to hear the dispute.

By understanding the legal framework for determining territorial jurisdiction and the concept of attornment, businesses can make informed decisions about where to pursue or defend their cross-border contractual disputes. This knowledge can help mitigate legal risks and ensure that disputes are resolved in the most appropriate forum.

Roland Luo: Providing Top-Tier Advice on Multijurisdictional Disputes in Vancouver

For the past two decades, our firm developed experience in multijurisdictional disputes. Should you encounter such a dispute, contact Roland Luo. We have experience in assisting clients by using both alternative remedies e.g., arbitration, mediation, or through litigation in BC, Ontario and New York.

Located in downtown Vancouver, Roland Luo proudly represents clients throughout British Columbia, as well as clients across Canada and the United States. To schedule a confidential consultation, contact us online (the more efficient way) or by phone at 604-800-4628.