In Re: Essar Steel Algoma Inc. et al, 2016 ONSC 595, an Ontario steel company, Essar, entered into a plan under Canada’s Companies’ Creditors Arrangement Act (“CCAA”, a Canadian corporate bankruptcy proceeding). As part of its restructuring, Essar entered into a contract with a U.S. supplier, Cliffs. A dispute arose between Essar and Cliffs regarding the contact. Essar brought a motion in the CCAA proceedings seeking, among other things, a declaration that Cliffs had to continue supplying under the contract. In response, Cliffs brought a motion seeking to dismiss Essar’s motion on the basis that the Ontario did not have jurisdiction or that Ontario was not a convenient forum.
The Ontario Court applied “real and substantial connection” test set out by the Supreme Court of Canada in Van Breda, and considered i) whether the contract was made in Ontario and ii) whether Cliffs carried on business on Ontario. With respect to i), the Court applied the general rule of contract law is that a contract is made in the location where the offeror receives notification of the offeree’s acceptance. The contract stated that “concurrently with the execution and delivery of this Agreement [the parties] are entering into that Purchase and Sale Agreement.” The Court interpreted that language to mean that the parties expected delivery of the contract to the other to be required for it to be binding. The Court found that Essar signed the contract and amendments first, then sent them to Cliffs in the U.S. who then signed them and then sent them back to Essar in Ontario. Therefore, the Court concluded that the contract was formed in Ontario, when Essar received notice from Cliffs in Ontario of the acceptance of its offer. Further, the Court found that the contract was connected to Ontario because it had arisen from the Ontario CCAA proceedings and had required the Ontario Court’s approval.
With respect to ii), whether Cliffs was carrying on business in Ontario, Cliffs argued that it did not carry on any business in Canada and had no presence in Canada. However, the Essar argued that Cliffs’ representatives had visited the Ontario over 20 times in connection with the contract. Cliffs had also previously appeared in the Ontario Courts in response to an earlier proceeding commenced by Essar, without challenging the Ontario Court’s jurisdiction. The Court found that Cliffs’ activities in Ontario were sufficient to conclude that Cliffs carried on business in Ontario.The Court dismissed Cliffs’ motion to stay Essar’s motion in the CCAA proceedings.
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