SCC Ruling Establishes Favourable Precedent for Canadian Businesses

The Supreme Court of Canada rendered a unanimous decision on May 25, 2007 in favour of Transat Tours Canada Inc., a subsidiary of the Transat A.T. Inc. group. This precedent, in Impulsora Turistica de Occidente, S.A. de C.V. v. Transat Tours Canada Inc., 2007 SCC 20, is of crucial importance for Canadian firms carrying on business abroad.

In 2004, Tescor, S.A. de C.V., a Mexican corporation, signed an exclusivity contract with Transat Tours Canada Inc. for the sale, in Canada, of rooms at the Qualton hotel in Puerto Vallarta. The contract contained a choice of forum clause that conferred exclusive jurisdiction on the courts of Quebec.

In 2005, Transat learned that its competitor, MyTravel Canada Holidays Inc., was offering its clients rooms at the same Mexican hotel. MyTravel defended itself by maintaining that it had entered into a contract with another company, which then controlled the hotel. Transat replied that on the basis of the close links existing between Tescor and the other Mexican corporations involved, including the one that allegedly contracted with MyTravel, these corporations could not hide behind their separate corporate identities to avoid compliance with the contract entered into with Transat.

In order to enforce its exclusivity contract, Transat filed a motion for a permanent injunction and a motion for an interim injunction against Tescor, as well as the other Mexican corporations related to Tescor.

The Supreme Court of Canada clearly confirmed that a court having jurisdiction has all the powers necessary for the exercise of its jurisdiction, including the power to issue injunctive orders, even those having extraterritorial effects. It also confirmed that the fact that a superior court may have difficulty imposing punishment for any failure to comply with its orders does not affect its power to issue such an injunctive order. In this case the injunction was not granted in first instance and this issue was not appealed. To date, no injunction has been granted against Tescor or against any of the defendants.

If the position of the Mexican corporations and MyTravel had been endorsed, it would no longer have been possible to apply to the Superior Court to demand the specific performance of and compliance with any contract entered into with a foreign party having neither assets nor activities in Quebec, even though such party had voluntarily agreed to the jurisdiction of the Quebec courts in a choice of forum clause.

In the context of market globalization, it would have been inappropriate to restrict the rights of the parties to a commercial contract containing a choice of forum clause only to an action in damages where specific performance is the remedy that appears to be the most appropriate to the party who wishes to claim it.

This decision also has a positive impact for any Canadian business developing its markets abroad. By taking care to insert a choice of forum clause granting jurisdiction to Canadian courts in their contracts, Canadian firms will be able to seek injunctive orders from Canadian courts in order to enforce their rights.

The solicitors for the respondent Transat Tours Canada Inc. were Richard Hinse, Élise Poisson and Bruno Verdon of Lavery, de Billy LLP.

For the appellant MyTravel, the solicitors were Karim Renno and Dominic Dupoy of Osler, Hoskin & Harcourt LLP. For Tescor, S.A. de C.V., the solicitor was Stéphane Pitre of Borden Ladner Gervais LLP. For Turistica de Occidente, S.A. de C.V., Vision Corporativa y Fiscal, S.A. de C.V. and Hotelera Qualton, S.A. de C.V., the solicitor was Donald Kattan of Péloquin, Kattan.