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Forum Selection Clause Not Upheld
Published in the February 2010 issue of Transportation Notes - View Article
A recent decision from the Ontario Superior Court of Justice allowed an action involving a helicopter crash in Canada to proceed, notwithstanding a forum selection clause that granted exclusive jurisdiction to the Arizona courts. Given the Canadian courts’ propensity to uphold forum selection clauses, this decision is of particular interest.
The plaintiff, Expedition Helicopters, is an Ontario corporation that operates helicopter charters for mining, forestry, exploration and government agencies, in various Canadian provinces — mainly in Ontario. The defendant, Honeywell, is a global provider of avionics, engines and other systems, including helicopter engines. Expedition brought the Ontario action against Honeywell as a result of a helicopter crash that involved a helicopter engine leased from Honeywell. Honeywell brought a motion to stay the action on the basis that the Ontario court does not have jurisdiction over the matter. The motion was dismissed.
The subject helicopter engine was manufactured in Pennsylvania and converted to specific configurations at Honeywell’s facility in North Carolina in 2007. In early June 2007, Expedition arranged to lease the subject engine, which was installed in an Expedition helicopter in Saskatchewan, Canada on June 17, 2007. After installation, on June 23, 2007, a bailment agreement (“the Agreement”) was emailed from Honeywell in South Carolina to the Director of Maintenance at Expedition. The Director signed the agreement and faxed it back to Honeywell. The Agreement contained a forum selection clause that provided that the agreement shall be governed by the law of Arizona and that Arizona courts have exclusive jurisdiction over any action arising out of or in connection with the Agreement.
The subject accident took place on July 1, 2007, when an Expedition helicopter crashed into a lake in Saskatchewan, killing both the pilot and passenger. The Transportation Safety Board of Canada (“TSB”) investigated the matter and determined that the helicopter crashed as a result of a catastrophic failure of the number 3 turbine shaft bearing of the leased Honeywell engine. The TSB also concluded that the number 2 and number 3 bearings suffered corrosion damage as a result of Honeywell not preserving the engine properly.
Expedition issued the subject statement of claim on June 24, 2009 for financial losses from the loss of its helicopter, which was served on Honeywell at its office in New Jersey. Honeywell’s Ontario counsel filed a notice of intent to defend and upon learning of the Agreement, brought the motion for a stay.
There were several concurrent proceedings in the United States: these included an action brought in South Carolina by the widow of the helicopter passenger against Honeywell, and a separate action brought in South Carolina by the sister of the deceased pilot against Honeywell. Expedition had also filed a complaint and an action in Arizona against Honeywell in order to preserve its claims within the two year limitation period applicable in Arizona in the event that jurisdiction in the Ontario Superior Court was declined.
Honeywell argued that the forum selection clause should be upheld on the basis that it conducted business worldwide and that the parties had agreed to exclusively attorn to the jurisdiction of Arizona, the location of its headquarters. It argued that such business agreements should be upheld as they create certainty and security in contract. Expedition argued that the fact that the engine was shipped and installed before the Agreement was signed, showed that neither party gave any consideration to the forum selection clause. Furthermore, Expedition relied on the fact that virtually all the evidence relating to liability and damages is in Canada.
The starting point for the Court’s analysis was the Supreme Court’s holding in Z.I. Pompey Industrie v. ECU-Line N.V., [2003] 1 S.C.R. 450, that the courts should give full weight to the desirability of holding contracting parties to their agreements and that the forum selection clause will be upheld unless the plaintiff shows a “strong cause” for not enforcing the clause. The onus is on the plaintiff to show that, in all the circumstances, a stay would be unreasonable or unjust. In applying the “strong cause” test and its factors, the court concluded that Expedition had discharged its onus of showing a strong cause for not enforcing the forum selection clause. The Court determined that virtually all the evidence is in Canada, not in Arizona. The crash occurred in Canada, the crash investigation and related reports were done in Canada and the technical and service records were located in Canada. As well, the Court noted that Honeywell alleged fault on the part of Expedition in maintenance, repairs and inspection as well as incompetence or negligence on the part of the Expedition pilot. It argued that that such evidence is located in Canada. The Court also noted that all of the evidence relating to Expedition’s damages claim is in Canada and that Expedition itself had no connection to Arizona.
The Court noted that Honeywell had no connection to Ontario; however that factor was overridden by the many other factors that mitigated in favour of permitting the action to proceed in that jurisdiction. The Court held that that there would be several procedural disadvantages to Expedition proceeding in Arizona, such as the procedural requirement for “timely filing” in Arizona and the difficulty in compelling Canadian witnesses to appear in Arizona.
Further, the court found that Honeywell was trying to obtain a procedural advantage by proceeding in Arizona, rather than exhibiting a genuine desire for a trial in Arizona. A particularly compelling point supporting jurisdiction in Canada and one which indicated Honeywell’s attempt to seek procedural advantage in enforcing the clause, was the fact that Honeywell itself stated that Canada was a more appropriate forum in pleadings filed in the wrongful death actions brought against it in South Carolina.
Expedition Helicopters Inc. v. Honeywell Inc.,
2010 ONSC 732 (CanLII)