Forum selection clauses are commonplace in commercial contracts. They provide parties with the confidence that a dispute will be resolved in the jurisdiction of their choosing. That confidence in turn impacts consumers’ bottom line as, in the context of multi-national corporations, for example, companies price into their product litigation costs in the jurisdiction most familiar to them. Generally speaking, courts are loath to interfere in contractual relations, and do so only in limited circumstances. Indeed, as was recently affirmed by the B.C. Court of Appeal in Schuppener v Pioneer Steel, 2020 BCCA 19 [Schuppener], forum selection clauses are not ipso facto unenforceable and are most likely enforceable when they are set out in plain language, in plain sight, and in contracts where the parties have negotiated terms.
Schuppener v Pioneer Steel
In Schuppener v Pioneer Steel, 2020 BCCA 19 [Schuppener], the respondent, a B.C. resident, contracted for the purchase of a steel storage building with the appellant, Pioneer Steel Manufacturers (“PSM”). Sometime after purchase, the building fell on the respondent causing injury. The respondent sued in negligence and claimed breach of contract. The chambers judge refused to stay or transfer the respondent’s action to Ontario pursuant to a forum selection clause on the grounds that there was strong cause not to enforce it. PSM successfully appealed.
Writing for a unanimous court, Madam Justice Fenlon found the chambers judge erred in principle by characterizing “ordinary considerations as matters of public policy compelling enough to justify overriding the forum selection clause” (para 12). The decision touches on cornerstones of commercial agreements – freedom of contract, equality of bargaining power, and certainty of terms – and is thus of some moment to parties involved in domestic and international negotiations and contracts.
Forum selection clauses – which specify that contractual disputes will be resolved in a specific forum – are commonplace in commercial instruments including standard form contracts. In Schuppener the clause provided:
The parties agree that this contract and any dispute, cause of action, and any and all claims, whatsoever (hereinafter “Claims”) with respect to the supply of the steel building shall be interpreted in accordance with the laws of Ontario, Canada. Any claims with respect to the supply of the steel building shall be resolved in the city of Mississauga, Province of Ontario. Any proceedings, which may be commenced pursuant to the Claims, shall be commenced in the City of Brampton, Province of Ontario, Canada.
The test for enforceability of forum selection clauses was settled in Z.I. Pompey Industrie v ECU-Line N.V., 2003 SCC 27, and includes:
(1) whether the forum selection clause is enforceable and applies to the circumstances; and,
(2) whether there are strong reasons not to give effect to an otherwise enforceable forum selection clause.
In Schuppener, Fenlon, JA. observed that the judge applied the public policy concerns set out in Douez v Facebook, Inc., 2017 SCC 33 [Douez] incorrectly. The Supreme Court of Canada refused to uphold a forum selection clause because there was strong cause for not doing so (namely, an essentially non-negotiable contract between an individual and a large corporation, and a statutory cause of action that engaged quasi-constitutional privacy rights in B.C.).)
The inclusion of a forum selection clause in non-negotiable standard form consumer contracts does not always raise public policy concerns sufficient to offset the public policy interest in holding parties to the terms of their bargain (para 14). Such clauses do not ipso facto raise public policy interests and, generally speaking, courts uphold standard form consumer contracts absent legislative intervention. In fact, opined Fenlon, JA., forum selection clauses can be beneficial in the commercial context because they do away with the uncertainty as to where suits are to be brought and defended, and may benefit the consumer with reduced prices (by limiting jurisdictions where a seller can be sued, for example) (para 14). It is often the only basis upon which national or international businesses will do business.
Distinguishing Douez, Fenlon, JA. noted that the contract in Schuppener was the product of a series of drafts and discussions that transpired over a number of months. The forum selection clause was set out in plain terms, available in plain site to read, was not complicated, the transaction was not minor, and the respondent had alternatives (paras 16-18). Additionally, the case did not engage laws unique to B.C. – there was nothing unique about the product’s failure in B.C. to trigger public policy concerns.
Commenting on circumstances when a court may intervene and refuse to uphold a forum selection clause, citing Tercon v Contractors Ltd. v British Columbia (Transportation and Highways), 2010 SCC 4, Fenlon, JA. commented “the courts do not have discretion to refuse to enforce valid contracts unless there is some paramount consideration of public policy” and should do so only “in clear cases in which the harm to the public is substantially incontestable and does not depend upon the idiosyncratic inferences of a few judicial minds” (Tercon at para 82 and 117). In the court’s view, the judge could not have reasonably concluded that the respondent established strong cause for overriding the forum selection clause (para 26).