Renvoi: Lex Situs Conflictus

Canadian Conflict of Laws Blawg by Seva Batkin

The Right – Left Hand Dichotomy and Economic Tort’s Lex Loci Delicti

Posted by Seva on May 27, 2008

Does territorial competence over a one branch of a company necessarily allow an action over employees of other branches? Does it matter, for the purpose of lex loci delicti, the type of damage was suffered by the plaintiff? Both of these rather novel questions are dealt with in the decision of Madam Justice Koenigsberg in England v. Research Capital Corporation, 2008 BCSC 580. As she explains, the jurisdiction over the right hand does not always translate into jurisdiction over the left hand, particularly in cases of purely economic loss.

The plaintiffs sued three Calgary brokers and their parent corporation (RCC) for unauthorized trading. RCC was a national corporation with offices in a number of provinces, including B.C. However, the defendant brokers were all employed at the Calgary office and none of the trading or administrative activities associated with the plaintiffs’ accounts were performed in B.C. The defendants applied to stay the action for lack of jurisdiction simpliciter and forum non conveniens. Specifically, while they conceded that B.C. courts had jurisdiction over RCC as a corporation because it was ordinarily resident in B.C. under s. 3(d) and (e) of the CJPTA, they argued that there was no real and substantial connection and thus jurisdiction simplicter over the individual defendants employed at the Calgary office.

Dealing with this right/left hand dichotomy, Koenigsberg J. explained that there was no inherent conflict between finding jurisdiction over the parent company, but not over the personal defendants and the action itself. The key was that the liability of the parent company, over which jurisdiction was conceded, would have never arisen but for the alleged malfeasance by the personal defendants, over who jurisdiction was disputed. In other words, where the right hand did not commit an independent wrong, a wrong committed by the left hand may not be sufficient to establish jurisdiction against the former.

Dealing with first with the contract claim, Koenigsberg J. found that none of the real and substantial connection circumstances suggested by the plaintiffs (s. 10(e) and (h) of the CJPTA  and common law) were applicable in this case. Specifically, as none of the activities associated with the accounts were performed in B.C., and the contract was governed by Alberta law, the facts that the defendants were registered with the B.C. Securities Commission as investment advisors and that the contract may have been entered into in B.C. were not sufficient to find RaSC.

Koenigsberg J. then turned to the tort claim. As she immediately noted that “the acts alleged to constitute the [torts] took place in Alberta”, the only RaSC ground was s. 10(g) of the CJPTA: the action “concerns a tort committed in B.C.” as the jurisdiction where the plaintiffs suffered their damages. The plaintiffs relied on Moran v. Pyle National (Canada) Ltd and Furlan v. Shell Oil Co. for the proposition that “torts occur where they substantially affect people”, which in this case was B.C. The defendants, however, relied primarily on Pineridge Capital Group Inc. v. Anderson, where BCSC held that “[i]n cases involving alleged losses to bank or investment accounts, it is the jurisdiction in which the account is located that is deemed to be where the losses occurred.”

On its face, the court of appeal in Furlan appeared to be quite unequivocal in its conclusion that “there is jurisdiction over the tort where the damage occurs” despite the fact that “the negligent act or omission happened elsewhere”. However, considering Pineridge as well as Coast Spas Inc. v. California Acrylic Industries Inc., [1997] B.C.J. No. 1718 (S.C.) (referring to it) and Pan-Afric Holdings Ltd. v. Ernst & Young LLP, Koenigsberg J. concluded that this principle does not apply to economic torts, as “financial loss suffered in British Columbia is not sufficient to find that the tort has been committed in British Columbia”.

In terms of future application, two things can be noted about this conclusion. First, both Pineridge and Coast Spas were decided before Furlan, and the comments in Pan-Afric were likely in obiter in the context of a forum non conveniens rather than jurisdiction simpliciter discussion. Second, no distinction between economic and other losses is evident in other recent Court of Appeal decisions that considered s. 10(g). For example, in British Columbia v. Imperial Tobacco Canada, where the province was trying to recover financial health care costs it expanded on treating smokers’ illnesses, the court simply talked about “the harm is suffered here”. Similarly, in VitaPharm Canada Ltd. v. F. Hoffmann-La Roche Ltd. (2002), 20 C.P.C. (5th) 351 (Ont. S.C.J.), which was approved in Imperial Tobacco, also dealt with purely financial losses, namely, illegally inflated prices. Thus, the breadth of impact of this decision is uncertain: ranging from application to all economic torts, to application solely to torts concerning funds in extra-provincial bank accounts, to not being applicable at all as contrary to established authorities.

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