Link: Case Summary Document
Citation:  ONSC 3101
Acknowledgement:The Pemsel Case Foundation thanks The Australian Centre for Philanthropy and Nonprofit Studies for its contribution in the drafting of this Case Note.
Whether a dispute over grant accounting should be heard in Ontario or Colombia.
1. CUSO and PADF are charitable organizations involved in international initiatives in Colombia. CUSO is based in Canada with its head office in Ottawa, Ontario. PADF is based in the United States with its head office in Washington, D.C. It also has an office in Columbia (FUPAD).
2. CUSO was funded by the Government of Canada to work with the Colombian Government and other NPOs to disburse foreign aid under funding agreements. CUSO signed a series of bilateral agreements and subcontracts with parties. Its contract with FUPAD made FUPAD responsible for implementing local training and employment initiatives for which FUPAD would receive funding and reimbursement from CUSO.
3. A dispute arose because CUSO had obligations only to fund certain types of expenses and had to account for the funds it disbursed. FUPAD had the same obligations to CUSO under the CUSO/FUPAD agreement. CUSO was not satisfied with the quality of documentation provided by FUPAD in relation to deliverables under the contract and declined to reimburse FUPAD for expenses it determined to be non-eligible.
4. The agreement between CUSO and FUPAD contained a choice of law and forum selection clause which designated the law of Ontario and the courts of Ontario as the forum of choice. FUPAD argued that this provision should not be enforced because the agreement was part of a network of agreements that were subject to Colombian jurisdiction in relation to obligations and events located entirely in Colombia. Apart from the agreement in question, the documents were drawn in Spanish. FUPAD asked a Colombian court to annul the forum selection clause.
5. CUSO commenced this action in Ontario. It sought a declaration that no funds were owing to FUPAD and that Ontario was the only appropriate forum for legal proceedings between the parties. Under Canadian law, there are two steps in a forum dispute. The first, “jurisdiction simpliciter”, is to determine if the court has jurisdiction at all. The second step, forum non conveniens, is to consider whether another court could also take jurisdiction and, in that case, whether it was in the interests of justice to halt the Canadian proceeding in favour of the other jurisdiction.
6. The parties did not dispute jurisdiction simpliciter as CUSO had its head office in Ontario, was administering funds pursuant to a program of the Government of Canada, and the contract was drafted in Ontario and executed by the plaintiff in Ottawa. It then fell to the defendant to persuade the court that there was “strong cause” not to assume jurisdiction. Once the parties had freely and clearly agreed to a forum by contract, the existence of the forum clause weighed heavily in forum conveniens analysis. The agreement made by the parties was to be given effect in all but “exceptional circumstances”.
7. FUPAD made a number of arguments to show exceptional circumstances, but the Court dismissed all these as (at ):
…a valiant effort to entangle the adjudication of this bilateral contract in a web of other contracts, to raise the spectre of legions of witnesses and to paint Colombia as the natural forum for this dispute. The objective is to overwhelm the forum selection clause. To my mind the argument is overstated.
8. The Court concluded (at ):
The parties to this litigation are both sophisticated, experienced North American charities. On the facts of this case which is, after all, a debt claim between an American based charity and an Ontario based charity, albeit concerning the funding of a project in Colombia, I am not persuaded that the defendant has met the onus of demonstrating that there is strong cause to defer to Colombia as the proper forum for the dispute and to override the choice of forum in the contract. I would add that the parties were very well aware that CUSO’s role in administering these funds is a stewardship role for funds raised by the Government of Canada from the taxpayers of Canada. There is nothing unnatural or peculiar about CUSO including a forum clause in the CUSO/FUPAD agreement and there is no evidence that the agreement or the forum clause would be voidable on ordinary principles of contract.
9. The Court declined to await the decision in Colombia and allowed the Ontario action to proceed.
Implications of the case:
The Court noted (at -):
But from the point of view of the administration of justice and the best interests of the parties, I am forced to observe how unfortunate it is that two charitable organizations with similar objectives are now locked in expensive litigation in two countries. I will not speculate on what steps the parties will take in response to this decision. Certainly, they could co-operate and agree to proceed in only one forum or for that matter they could agree on a dispute resolution process such as an audit or arbitration. I will simply observe that they ought to have a mutual interest in a speedy resolution on the merits rather than further procedural wrangling in a public forum.
The Court encouraged the parties to consider mediation as the best course (at ):
Mediation is often described as a search for win-win solutions. In this case, continued litigation seems probable to be a lose-lose proposition. This observation has played no role in my determination of the motion and I am sure it has already been part of the legal advice given to the parties. I would be remiss, however, in not underscoring it here. Lengthy complex litigation which may distract from or impede the charitable objectives and concerns of these organizations and their donors and sponsors is not in the public interest either here or in Colombia.
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