UniNet Technologies Inc. v. Communication Services Inc.

2005 BCCA 114 UniNet Technologies Inc. v. Communication Services Inc.

COURT OF APPEAL FOR BRITISH COLUMBIA Citation: UniNet Technologies Inc. v. Communication Services Inc., 2005 BCCA 114 Date: 20050302 Docket: CA031398 Between: UniNet Technologies Inc. and Poker.com, Inc. Respondents (Plaintiffs) And Communication Services Inc., also known as Communications Services Inc. Appellant (Defendant) Before: The Honourable Madam Justice Rowles The Honourable Madam Justice Newbury The Honourable Mr. Justice Hall B. Cramer and S.G. Cordell Counsel for the Appellant H.S. Silber Counsel for the Respondents Place and Date of Hearing: Vancouver, British Columbia January 13, 2005 Place and Date of Judgment: Vancouver, British Columbia March 2, 2005 Written Reasons by: The Honourable Madam Justice Newbury Concurred in by: The Honourable Madam Justice Rowles The Honourable Mr. Justice Hall Reasons for Judgment of the Honourable Madam Justice Newbury: [1] The sole question raised by this appeal -- whether British Columbia courts have jurisdiction simpliciter over this proceeding -- is a discrete one, but it arises out of complex facts. In a sense, this complexity was intentional, since the matter at issue is the right to use an Internet domain name (described by counsel as a "virtual signpost on the information highway") associated with on-line gambling, an activity that is illegal in some jurisdictions, including Canada. Apparently in order to overcome that

difficulty, a corporation ("ALA") incorporated in St. Vincent and the Grenadines granted the plaintiff "Unlined" a 99-year licence to use the domain name. They agreed that UniNet would then sublicense the name to a Florida company, the plaintiff Poker.com, Inc., and that another company, incorporated in Antigua, would operate an Internet "poker room". (There is evidence that in fact, the poker room was operated from Costa Rica.) UniNet is a British Columbia company, and both plaintiffs have offices in this province. [2] For its part, the defendant "CSI" was incorporated in Samoa. The plaintiffs allege that that jurisdiction was chosen in order to permit CSI and the directors and officers of CSI and ALA to take advantage of its strong "asset protection" laws. These laws are said to be designed to protect assets from foreign claims and foreign judgments, usually tax-based. UniNet alleges that ALA wrongfully terminated the licence agreement and then transferred the right to use the domain name to CSI, a creature of ALA or its principals. According to the plaintiffs, the actual registration of the name was also transferred from California to Australia, again in violation of their rights under the licence agreement. [3] In short, the circumstances of this case are a reflection of the globalization of the Internet-based economy and the ability of modern business entities to move

assets and information across borders as their interests may dictate. It is not surprising that these circumstances are difficult to fit into traditional legal concepts of jurisdiction and even into their modern touchstone, "real and substantial connection". Factual Background [4] The Reasons of the Chambers judge below, Mr. Justice Preston, are reported at (2003) 29 C.P.R. (4th) 477 and indexed as 2003 BCSC 1674. At paras. 3-15, he described the licence granted by ALA to UniNet to use the domain name "Poker.com" (and accompanying URL registration) for the development and operation of an "on-line Casino gambling licence". Under the agreement, UniNet was expressly permitted to grant sublicences to "any of its Affiliates or any third party". UniNet was also obliged to enter into a marketing arrangement with a public company (referred to as "Pubco" in the agreement), 32.4 per cent of the shares of which were to be issued to ALA. Pubco (which is the plaintiff Poker.com, Inc.) would pay a percentage of all revenues earned from the use of the domain name until a specified amount had been paid. Once that threshold was reached, para. 4.6 provided: Conversion to Ownership: The licence being granted herein, shall convert into a fully paid up asset of UniNet and the URL/Domain [Name] 'Poker.com' shall be transferred to UniNet at such time as [ALA] has sold shares of Pubco or earned

revenue from Pubco of a minimum of $1 million. In this event UniNet undertakes to transfer the URL/Domain to Pubco under the same terms. [Emphasis added.] [5] The licence agreement contained three clauses relevant to default and termination. First, para. 3.4 stated: 3.4 Default: Parties [sic] agree that in the event payments are not made by UniNet or any term of this agreement is in default by UniNet/Pubco, [ALA] shall demand that UniNet remedy the default within 90 days failing which this agreement shall terminate and the right, title and interest in the URL/Domain shall revert back to [ALA] who may sue UniNet for damages for breach of contract. Under para. 7.1, the parties also agreed that if UniNet caused ALA to be in violation of any law, "this agreement will terminate and the domain/URL Poker.com will revert back to [ALA] without compensation." They acknowledged, however, that the "Kyl bill" (a term not explained to us) was not "included as a violation" and that they would "deal with alternative means of conducting their business so that they are not in contravention of any laws that may shut down their business operation or result in substantial fines and/or penalties." The relationship of para. 7.1 with para. 7.3, which stated: 7.3 Termination for Material Default. This Agreement may be terminated by [ALA], on thirty (30) days prior written notice upon the material

default of the other party of any material provision of this Agreement if: the default is not cured within thirty (30) days after written notice thereof to the party in default, or if the default is of a type that cannot be cured within thirty (30) days. remains unexplored at present. [6] The licence agreement contained a choice of law and jurisdiction clause as follows: 1.2 Applicable Law. This Agreement shall be construed, interpreted and governed by the laws of the Province of British Columbia and the laws of Canada in force therein and the parties hereby irrevocably attorn to the jurisdiction of the courts of such province. Finally, UniNet and ALA agreed that any dispute "arising out of or in connection with" the agreement which could not be settled by mediation, would be resolved by arbitration under the British Columbia Commercial Arbitration Act, R.S.B.C. 1996, c. 55, to take place in Vancouver. [7] I believe it is common ground that Poker.com, Inc. (which I shall refer to as "Poker Inc.") was incorporated in Florida in accordance with these provisions, and that UniNet sublicensed the domain name to it in July 1999. Evidently, the business associated with the domain name went well, and by 2002, gross revenues in excess of $200,000 (U.S.) per month were being generated. However, the plaintiffs allege that in December of that year, ALA purported to terminate the licence

without notice to UniNet and in breach of the Agreement. As will be seen below, this termination is the subject of an arbitration proceeding commenced by UniNet in February 2003. UniNet also alleges, however, that immediately upon terminating the licence, ALA "wrongfully agreed" with the Samoan company, CSI, that "ALA would assign and transfer absolutely the Domain Name, or the use thereof, to [CSI] and without regard to the interest of the Plaintiffs therein." The plaintiffs say CSI then wrongfully transferred the registration of the name to a registrar in Australia, "thereby disrupting and interfering with the use of the same granted by the ALA-UniNet Licence Agreement." The transfer is said to have taken place without payment of value by CSI or alternatively, with its knowledge, actual or constructive, of the prior interests of UniNet and Poker Inc., and not bona fide. Thus the Chambers judge summarized the facts alleged by UniNet as follows: ALA, without notice to UniNet, purported to cancel the licence under the Licence Agreement and entered into a contract with Communications Services Inc. ("CSI"), a Samoan company, whereby CSI purchased the Domain Name on December 12, 2002. While that purchase was being negotiated, Ms. Bryce moved the Domain Name from its U.S. registrar to a domain name registrar in Australia, Fabulous.com Property Inc., and transferred the registration

of the Domain Name to CSI. CSI then entered into an agreement with an Australian company, Darkblue.com Pty Ltd. ("Darkblue"), whereby Darkblue purchased the rights to use the Domain Name, leaving CSI with no continuing involvement with the Domain Name other than to receive payments from Darkblue under their purchase and sale contract. [para. 14] [8] It is the alleged conspiracy between CSI, ALA and their directors and officers that is the focus of these (court) proceedings, although ALA is not a defendant. Paragraphs 17-19 of the Statement of Claim state that: 17. As a result of ALA's breaches of the ALA-UniNet Licence Agreement, UniNet and Poker have suffered interference with and irreparable harm to their rights, businesses and concerns, have been deprived of an opportunity of obtaining timely and effective interlocutory relief, and have suffered damages, loss and expense. The manner in which [CSI] carries out its business may further harm the Plaintiffs' future use of the Domain Name. 18. [CSI], together with its officers and/or directors, and/or the officers and directors of ALA, mala fide conspired to interfere with the rights conferred by ALA to UniNet under the ALA-UniNet Licence Agreement, particulars of which conspiracy are set out in paragraphs 11, 12 and 16 above.

19. Further, or in the alternative, [CSI] has itself, wilfully and maliciously and with full intent, directly or indirectly, induced the breaches of contract alleged or interfered with the contractual relations established by the ALA-UniNet Licence Agreement. The plaintiffs also raised subsidiary claims relating to a trade-mark application and alleged passing-off. [9] In their prayer for relief, the plaintiffs sought: a. A declaration that as the successor and assignee of ALA, [CSI] is a trustee of the Domain Name for the benefit of the Plaintiffs; b. An accounting for profits earned through the wrongful use of the Domain name; c. A declaration that as successor and assignee of ALA, [CSI] is bound by and has by its conduct committed a breach of the ALA-UniNet Licence Agreement; further, or in the alternative, that as successor and assignee of ALA, [CSI] shall be bound by the results of Arbitration as the privy of ALA; d. Further, or in the alternative, damages in tort or breach of contract; e. A declaration that UniNet and Poker are entitled, as against [CSI], to the exclusive use of the Domain Name; f. An interlocutory and/or permanent injunction restraining [CSI] from any further use of the Domain Name; and further, or in the alternative a mandatory interlocutory injunction requiring [CSI] to cancel its registration in Australia and restoring registration to Verisign; or, in

the further alternative, an injunction restraining [CSI] from further cancelling or transferring its registration in Australia; g. An Order that [CSI] provide discovery and/or evidence for the purposes of the Arbitration; h. Costs. [10] We were not informed of the present stage of UniNet's arbitration proceeding against ALA, but it bears emphasizing that since it was not a party to the agreement, CSI is not and cannot be a party to that proceeding. The Application Below [11] In Supreme Court, the plaintiffs claimed the right to serve their writ of summons and Statement of Claim on CSI outside British Columbia on the grounds that the action was in respect of a breach of a contract or a tort committed in British Columbia. Evidently, CSI was therefore served without an order of the Court under R. 13(3) of the Rules of Court. CSI then applied under R. 14(6) for an order setting the service aside and declaring that the Supreme Court of British Columbia was "without jurisdiction over the Plaintiffs' claims or should decline jurisdiction". (Here I quote from the order of the Chambers judge from which this appeal is taken, since no copy of the application was provided in the Appeal Record.) [12] Preston J. heard the application for three days in May 2003 and issued his judgment on November 3, 2003. He began his Reasons by setting out the factual and procedural background, and then

continued: [20] CSI is a Samoan company and has no connection with British Columbia. The actions that the plaintiffs allege led to the breach of contract took place between Ms. Laura Mouck of Antigua, Ms. Liz Bryce of England, and Mr. Malcolm Nickerson of Antigua. Ms. Mouck is the sole director of ND Holdings Ltd. which company is the sole director of ALA. Ms. Bryce manages ALA. Mr. Nickerson is the sole director of OCMS Ltd. which company is the sole director of CSI. Ms. Mouck and Mr. Nickerson are officers of Maritime International Ltd., a company in the "asset protection" business (the creation of corporate vehicles to put assets beyond the reach of government regulatory and taxation authorities). The plaintiff alleges that they cohabit in a marriage-like relationship. [21] In the circumstances, the plaintiffs cannot maintain the claim that there was a tort committed within British Columbia. The writ and statement of claim have not been properly served under the Rules of Court. However, the defendant does not contest the plaintiffs' application to have an order made nunc pro tunc validating service should I dismiss the defendant's application to declare that this court lacks jurisdiction or should decline jurisdiction. [22] Although the tort claims do not involve a tort committed within the jurisdiction, they are clearly related on the pleadings to the arbitration

proceedings between ALA and the plaintiffs in this jurisdiction. [Emphasis added.] As will be seen below, CSI argues that the underlined comments contradict, at least on their face, a later finding of the Chambers judge that the pleadings did raise claims of inducing the "breach of a contract made in British Columbia and damages suffered in British Columbia" that were sufficient to found jurisdiction simpliciter. [13] Before reaching the latter conclusion, however, the Chambers judge noted affidavit evidence filed by CSI to the effect that prior to the termination of the licence, Poker Inc. had been acting illegally by issuing UniNet cheques in Vancouver, transporting them across the American border and mailing them to users in the United States. In support of this allegation, CSI filed a legal opinion of a Texas attorney to the effect that this practice contravened the laws of that state and that ALA, by receiving proceeds of illegal gambling under the licence agreement, was guilty of a criminal offence as a "participant in the earnings of a gambling place." [14] Preston J. characterized the substantive issue raised by the plaintiffs' pleadings as "whether the Internet gambling operations were carried on illegally, exposing ALA to prosecution and whether the termination of the Licence Agreement in those circumstances was justified by its terms." (Para. 26.) In his

analysis: [27] CSI's involvement is at one remove from ALA. Only if the termination was a breach of the contract between ALA and UniNet does an issue arise with respect to CSI. Poker.com's interest as plaintiff stems from the trade-mark agreement executed on December 2, 2002. The resolution of the contractual issue between ALA and UniNet will probably determine the trade-mark agreement issue. [28] The contractual issue is the subject of an ongoing arbitration between ALA and UniNet pursuant to the terms of the Licence Agreement. [29] The potential basis for a finding that the court should accept jurisdiction is that the pleadings in this action (1) create a substantial connection with this jurisdiction and (2) raise an arguable case for relief. The proceedings in this jurisdiction that the plaintiffs seek to employ as their jurisdictional linchpin are arbitration proceedings - not proceedings in this court. It would not, in my view, be sound public policy to differentiate between a cause of action that was litigated in the courts and one that was, by contract between the parties, required to be arbitrated. The substantial connection test should apply equally to them. To differentiate between them would be to discourage arbitration in matters with an inter-jurisdictional component. [15] The Chambers judge turned to R. 14(6) of the Rules of Court, under which CSI had applied.

Rule 14(6) had been considered by this court in AG Armeno Mines & Minerals Inc. v. PT Pukuafu Indah (2000) 77 B.C.L.R. (3d) 1, where a Canadian company had obtained default judgment in British Columbia against an Indonesian company. It then added an American defendant to the action, claiming that it, the American company, had induced the breach of contract. The new defendant sought and obtained an order in Supreme Court that the courts of British Columbia had no jurisdiction. The order was upheld on appeal on the ground that the plaintiff had not made out a good arguable case; but on the question of jurisdiction, this court ruled that British Columbia had jurisdiction simpliciter because the plaintiff had been "substantially affected" in this province by the alleged tort of inducing breach of contract and the contract had been made in the province. Mackenzie J.A. stated for the Court: [17] The question then is whether the claim against Newmont is "founded on a tort committed in British Columbia" within Rule 13(1)(h). This Court summarized the essential elements of the tort of inducing breach of contract in Ichi Canada Ltd. v. Yamauchi Rubber Industry Co. (1983), 43 B.C.L.R. 215 (B.C.C.A.) as the act, the intent and the resulting damage. Notwithstanding that the act alleged to have induced the breach in that case occurred in Japan, it was held that the B.C. courts had

jurisdiction because the plaintiff's selling activities in British Columbia were damaged. The contract in Ichi had been made in Japan. [18] Armeno alleges induced breach of a British Columbia contract in addition to claiming damage suffered in British Columbia. The Supreme Court of Canada has cautioned in Moran v. Pyle National (Canada) Ltd. (1973), [1975] 1 S.C.R. 393 (S.C.C.) against a too arbitrary and inflexible application of rigid rules and favoured a broader test of whether the plaintiff is alleged to have been "substantially affected" within the jurisdiction. In my opinion, Armeno's claim passes that test on the pleadings. The jurisdictional facts pleaded are stronger than the facts in Ichi because, in addition to the claim of damage within the jurisdiction, the contract was made in British Columbia. [Emphasis added.] [16] Preston J. found the same reasoning to be applicable in the case at bar. He considered that the claims raised by the pleadings of "inducing breach of a contract made in British Columbia and damages suffered in British Columbia were sufficient to found jurisdiction simpliciter" (para. 32) and that the plaintiffs had shown an arguable case for relief. Accordingly, he dismissed CSI's application for a declaration that the Court was without jurisdiction, and granted an order validating the previous service ex juris of the defendant nunc pro tunc. On

Appeal [17] On appeal, CSI argues that the Chambers judge erred in two respects -- in treating the arbitration between UniNet and ALA as "a basis" for jurisdiction simpliciter in respect of the action brought by the plaintiffs against CSI; and further, or alternatively, in holding that the Statement of Claim demonstrated sufficient connection with British Columbia as to ground jurisdiction simpliciter. With respect to the first alleged error, Mr. Cramer submitted that the question of jurisdiction simpliciter was one of law, not one of "discretion", citing Jordan v. Schatz (2000) 77 B.C.L.R. (3d) 134, at para. 27 (B.C.C.A.). In his analysis, once Preston J. had concluded (at paras. 21 and 22, quoted above) that CSI's alleged tort of inducing breach of contract was not committed in British Columbia, "this should have been the end of the enquiry." Instead, the Chambers judge went on to consider the connections between the action and the province, including the relatedness of the proceeding to the arbitration between ALA and UniNet -- ignoring, CSI contends, the fact that it is not a party to the latter proceeding. [18] The submission that the Chambers judge's finding of no tort in British Columbia should determine the matter of jurisdiction does not sit comfortably with CSI's further submission that the subrules of R. 13(1) are only the "starting point" for the determination of

whether a real and substantial connection with the province, and therefore jurisdiction simpliciter, exists. (See Marren v. Echo Bay Mines Ltd. (2003) 13 B.C.L.R. (4th) 177, at para. 16 (B.C.C.A.) (lve. refused [2003] S.C.C.A. No. 364.) CSI goes on, however, to submit that the plaintiffs' pleadings should not be permitted to ground such a connection, since "[a]llegations are not paramount to findings." Alternatively, if the pleadings can provide a basis for jurisdiction simpliciter, counsel contends that the Chambers judge erred in his analysis of the Statement of Claim. In particular, Mr. Cramer argues that the domain name is not a res having a situs in British Columbia (a point conceded by the plaintiffs on the basis of Easthaven, Ltd. v. Nutrisystem.com Inc. (2001) 202 D.L.R. (4th) 560 (Ont. Sup. Ct. J.)) and that no damages are alleged to have been suffered by the plaintiffs in British Columbia. In this connection, he notes affidavit evidence filed by the plaintiffs to the effect that "no computer server capable of taking wagers was ever located within Canada" and that Canadian card players are "not even able to wager any money" in the Poker.com card room -- i.e., to generate revenue for either of the plaintiffs. [19] As will be seen, I cannot agree with the broad aspects of CSI's argument. First, it is clear from all the authorities that the court first looks to the

pleadings to determine whether the plaintiff has alleged "jurisdictional facts" sufficient to establish a real and substantial connection: see Roth v. Interlock Services Inc. (2004) 34 C.C.E.L. (3d) 171, 2004 BCCA 407, at para. 15, citing Furlan v. Shell Oil Co. (2000) 77 B.C.L.R. (3d) 35 (B.C.C.A.) (lve. refused [2000] S.C.C.A. No. 476), and Armeno, supra, at paras. 14 and 19. Smith J.A. for the Court in Roth set out the "protocol" that is to be followed: The first step is to examine the plaintiff's pleading to determine whether it alleges "jurisdictional" facts sufficient to establish a real and substantial connection to the defendant or to the cause of action. Affidavit evidence of facts relevant to jurisdiction simpliciter is admissible when the facts are not alleged in the plaintiff's pleading because they are not material facts, or when they are, are not particularized in the pleading in sufficient detail to enable determination of the issue. If those unpleaded jurisdictional facts are contentious, the plaintiff bears the burden of showing a good arguable case that they can be established. Affidavit evidence is also admissible for the purpose of demonstrating that the plaintiff's claim is tenuous and without merit. In that situation, the plaintiff must show a good arguable case. [para. 15] In the case at bar, Preston J. adopted this general approach, beginning with the

Statement of Claim and then considering evidence filed by the defendant to challenge the existence of jurisdiction simpliciter. In my view, it cannot be said he erred in doing so. [20] With respect to the significance of the Chambers judge's finding at para. 22 that the "tort claims [did] not involve a tort committed within the jurisdiction", there may be an understandable confusion regarding the interrelationship of R. 13(1), which lists the circumstances in which service ex juris made be effected without leave, and the concept of jurisdiction simpliciter. Certainly on a reading of R. 13(1), one might be forgiven for assuming that if a particular fact situation falls within any of the subrules thereof, so that the defendant may be served without leave, the Supreme Court of British Columbia must have jurisdiction. But this is no longer the case, if it ever was. Since the enunciation and evolution of the "real and substantial connection" principle by the Supreme Court of Canada in the seminal cases of (inter alia) Moran v. Pyle National (Canada) Ltd. [1975] 1 S.C.R. 393, Morguard Investments Ltd. v. De Savoye [1990] 3 S.C.R. 1077, and Tolofson v. Jensen [1994] 3 S.C.R. 1022, the only test for jurisdiction simpliciter is, to quote this court in Marren v. Echo Bay, supra, "whether the plaintiff has established there is a 'real and substantial connection between the court and

either the defendant or the subject-matter of the litigation'". (Para. 10.) Indeed it was held in Marren that the application of one or more of the subrules of R. 13(1) does not even give rise to a rebuttable presumption of jurisdiction simpliciter. Huddart J.A. stated for the Court: As I noted at para. 24 in Teja v. Rai (2002), 97 B.C.L.R. (3d) 44, 2002 BCCA 16 (B.C.C.A.), the real and substantial connection test can be seen as including the traditional elements as relevant connecting factors, but the traditional tests are no longer determinative of jurisdiction simpliciter. They are, as La Forest J. observed at 325-6 in Hunt [v. T & N plc [1993] 4 S.C.R. 289], "a good place to start." The same can be said of the provisions of Rule 13(1). The real and substantial connection test can also be seen as lowering the threshold in some circumstances for the taking of jurisdiction. As La Forest J. commented in Tolofson, supra, at 1048-9, a court may take jurisdiction when a matter originates in another state and more than one court may take jurisdiction where the transaction at issue has ties with several jurisdictions. In the end, however, the assumption of jurisdiction, like the discretion to decline jurisdiction, must be governed by the three principles of comity, order and fairness, as the Supreme Court of Canada recently affirmed in Spar Aerospace Ltd. v. American Mobile Satellite Corp., [[2002] 4 S.C.R. 205], [2002] S.C.J. No. 51, 2002 SCC 78, at para.

21. The appellant submits this case has enunciated a different approach to the use of the Supreme Court Rules for the taking of jurisdiction in multi-jurisdiction cases than that adopted by this Court and the Ontario Court of Appeal in Muscutt v. Courcelles (2002), 213 D.L.R. (4th) 577 (Ont. C.A.) as a result of the Supreme Court of Canada cases to which I have referred. I do not agree. At para. 51 of Spar Aerospace, supra, LeBel J. affirmed those cases had established that "it is a constitutional imperative that Canadian courts can assume jurisdiction only where a 'real and substantial connection' exists...." What the Supreme Court of Canada did in Spar Aerospace, supra, was to limit the reach of that imperative to interprovincial jurisdictional disputes, and to suggest that the real and substantial connection was subsumed under the provisions of art. 3148(3) because each of the grounds listed seemed to be an example of a "real and substantial connection" between the province of Quebec and the action. At para. 64, LeBel J. noted the result would not change if the appeal were to be decided under a pure "real and substantial connection test," without any reference to the Civil Code of Québec, S.Q. 1991, c.

64. In this case, both elements of Rule 13(1)(m) were established, but that is the starting point of the enquiry into whether they have established a real and substantial connection sufficient to ground jurisdiction simpliciter. [paras. 13-16; emphasis added.] [21] In Teja v. Rai, this court again noted a passage from Morguard that "suggests that the real and substantial [connection] test is to replace the traditional tests (power over the defendant, situs of the tort, place of performance of the contract)." (Para. 20.) On this understanding of the new rule, Huddart J.A. said, the court might refuse jurisdiction simpliciter where traditionally it would have accepted it. However, Morguard was not seen as requiring the court to ignore the "traditional factors" in favour of a test based on the situs of the tort, for example. Instead, the "new test" was seen as "including" the traditional elements as relevant connecting factors, including the presence of the defendant within the territory of the court and the situs of a tort. The Court also emphasized that Morguard had "set out no hard and fast rules for the proper taking of jurisdiction.". [22] On this basis, it is clear that Preston J.'s finding that the tort alleged in this case had not been committed in British Columbia was not "the end of the enquiry." He was obliged to go on, and he did go on, to consider the question of

whether a real and substantial connection had been shown. For the same reason, he was not contradicting himself in finding at para. 21 that a tort had not been committed within the jurisdiction and that therefore the defendant had not been properly served ex juris, and in finding, implicitly, at para. 37 that a real and substantial connection had been shown with British Columbia and that jurisdiction simpliciter was established. The real question for us on appeal is whether the latter conclusion was correct. [23] Mr. Silber on behalf of the plaintiffs argued that a finding of jurisdiction simpliciter may be based on one of two grounds -- a real and substantial connection between the defendant and the province (none is alleged here, as CSI has no connection with British Columbia), or a connection between the subject-matter of the claim -- as opposed (the plaintiffs contend) to the cause of action -- and the province. In the plaintiffs' submission, the subject-matter of the claim at bar is not the domain name itself but the right to use it and the right (by virtue of para. 4.6 of the licence agreement) to acquire it upon meeting the specified conditions. (This right was subject, of course, to UniNet's undertaking then to transfer the name to Poker Inc. "under the same terms".) [24] I am not persuaded that a great deal of significance should be ascribed to a distinction between

the right to use the domain name and the name itself, at least in the present context. Moreover, the distinction in more general terms between the cause of action and the subject-matter of a claim seems artificial and without substance. Many of the authorities binding on us have used the two phrases almost interchangeably, although "cause of action" will be used more frequently where a tort is concerned, and "subject-matter" is likely to be used where a particular asset, especially real property, is at issue. La Forest J., for example, wrote as follows in Morguard at 1103: . . . the taking of jurisdiction by a court in one province and its recognition in another must be viewed as correlatives, and . . . recognition in other provinces should be dependent on the fact that the court giving judgment "properly" or "appropriately" exercised jurisdiction. It may meet the demands of order and fairness to recognize a judgment given in a jurisdiction that had the greatest or at least significant contacts with the subject-matter of the action. But it hardly accords with principles of order and fairness to permit a person to sue another in any jurisdiction, without regard to the contacts that jurisdiction may have to the defendant or the subject-matter of the suit. . . . [Emphasis added.] and at 1108: . . . the approach of permitting suit where there is a real and substantial connection

with the action provides a reasonable balance between the rights of the parties. It affords some protection against being pursued in jurisdictions having little or no connection with the transaction or the parties. [Emphasis added.] In Beals v. Saldanha [2003] 3 S.C.R. 416, a case concerning the recognition of a foreign judgment, Major J. stated for the majority: The "real and substantial connection" test requires that a significant connection exist between the cause of action and the foreign court. Furthermore, a defendant can reasonably be brought within the embrace of a foreign jurisdiction's law where he or she has participated in something of significance or was actively involved in that foreign jurisdiction. A fleeting or relatively unimportant connection will not be enough to give a foreign court jurisdiction. The connection to the foreign jurisdiction must be a substantial one. [para. 32; emphasis added.] He then stated: The "real and substantial connection" test is made out for all of the appellants. There exists both a real and substantial connection between the Florida jurisdiction, the subject matter of the action and the defendants. [para. 34; emphasis added.] (See also Stephen Pitel, Enforcement of Foreign Judgments: Where Morguard Stands After Beals, (2004) 40 B.L.J. 189, at 192-95.) [25] On the other hand, Smith J.A. stated at para. 19 of Roth that there must be

a substantial connection "between the cause of action and British Columbia in order to justify bringing the foreign respondents within the jurisdiction. . . ." (My emphasis.) In that case, it had been conceded by the defendants that if the contract in question had been breached, the breaches had occurred in the province. In addition, the main corporate defendant carried on business and had been registered extra-provincially in British Columbia; the relevant agreements had been negotiated and executed in the province; and the Court found that "the damages that flowed from the alleged breaches occurred here." (Para. 20.) The Court applied Jordan v. Schatz, supra, to find that these "jurisdictional facts" established jurisdiction simpliciter. [26] In any event, the "real and substantial connection" test is in my view broad enough to encompass both factors to the extent they may be different. As the Supreme Court of Canada stated in another context in Unifund Assurance Co. v. Insurance Corp. of British Columbia [2003] 2 S.C.R. 63, at para. 65, different degrees of connection to the province may be required according to the subject-matter of the dispute. There is no single test aside from the principle that there must be a real and substantial connection made out between the province and the action (a phrase that in my view includes the "subject-matter of the action", as pleaded).

One of the lessons of Beals is that the connection must not be minor or ephemeral, but real and substantial. [27] I return, then, to the question of whether such a connection has been shown in this case. Mr. Silber for the plaintiffs points to four connecting factors between this case and the province of British Columbia: the fact that the licence agreement under which UniNet claims the right to use and eventually to own the domain name is governed by the law of the province; the fact that the right to use and eventually to own the domain name is currently being adjudicated in arbitration proceedings in the province; the fact that the licence agreement was entered into in British Columbia; and the fact that, in the plaintiffs' submission, the contract "was to be performed, at least in part, in British Columbia." One might also add that British Columbia law was chosen by the parties to the licence agreement and must therefore be taken to have been in ALA's contemplation when it purported to terminate the licence without notice and transfer the domain name to CSI. [28] Each of these factors, of course, focuses on the original licence agreement between UniNet and ALA. Again, Mr. Cramer for CSI naturally emphasized in response that his client was not a party to that agreement, nor to the arbitration; that the domain name cannot be said to be located in British Columbia (and indeed

likely does not have a situs); and that although the Statement of Claim seeks a constructive trust in respect of the domain name for the benefit of the plaintiffs, a constructive trust is "simply a discretionary remedy, not a cause of action". [29] Again, I do not find Mr. Cramer's arguments persuasive. Although it is of course true that CSI is not a party to the licence agreement, the gist of the plaintiffs' court action is the allegation that CSI received the domain name from ALA in breach of the latter's obligations under the agreement, and that CSI did not purchase the domain name bona fide but received it as a sham corporation with full knowledge (through its principals) of the (alleged) breach on ALA's part. If these allegations are true (as to which I express no opinion) the litigation is almost a natural continuation of the arbitration proceedings in British Columbia. In this regard, I note that R. 13(1)(j) carries the implication that if UniNet's claim against ALA were not required to be arbitrated but were being tried in a court of law, CSI would be added as a defendant as a matter of course. [30] Earlier in these Reasons, reference was made to the Court's statement in Morguard to the effect that courts should not take a mechanical or inflexible approach to determining the situs of a tort. In this regard, La Forest J. referred at 1106 to the judgment of Dickson J. (as

he then was) in Moran v. Pyle, supra, as follows: At the end of the day, he rejected any rigid or mechanical theory for determining the situs of the tort. Rather, he adopted "a more flexible, qualitative and quantitative test", posing the question, as had some English cases there cited, in terms of whether it was "inherently reasonable" for the action to be brought in a particular jurisdiction, or whether, to adopt another expression, there was a "real and substantial connection" between the jurisdiction and the wrongdoing. Dickson J. thus summarized his view, at pp. 408-9: "Generally speaking, in determining where a tort has been committed, it is unnecessary, and unwise, to have resort to any arbitrary set of rules. The place of acting and the place of harm theories are too arbitrary and inflexible to be recognized in contemporary jurisprudence. In the Distillers' case [Distillers Co. (Biochemicals) Ltd. v. Thompson [1971] A.C. 458] and again in the Cordova case [Cordova Land Co. Ltd. v. Victor Bros. Inc. [1966] 1 W.L.R. 793 (Q.B.)] a real and substantial connection test was hinted at. Cheshire, 8th ed., 1970, p. 281, has suggested a test very similar to this; the author says that it would not be inappropriate to regard a tort as having occurred in any country substantially affected by the defendant's activities or its consequences and the law of which is likely to have been

in the reasonable contemplation of the parties. . . ." These comments were informed by policy considerations discussed at length in Moran v. Pyle, including the need to adapt the law to modern conditions, the exigencies of a federal state, the reasonable expectations of plaintiffs and defendants, and the overarching values of comity, order and fairness. (See also Society of Composers, Authors and Music Publishers of Canada v. Canadian Assn. of Internet Providers [2004] 2 S.C.R. 427, at para. 60.) Those values also support the notion that valid arbitration rulings should, like judgments of courts of law having jurisdiction, be respected by domestic and foreign courts and enforced when necessary. [31] In my view, the cumulative weight of the connecting factors in this case between the province and the circumstances giving rise to the cause of action as pleaded is sufficient to support the conclusion that British Columbia courts have jurisdiction simpliciter, and that whether or not the case falls within any of the subrules of R. 13(1), jurisdiction should be recognized and leave granted nunc pro tunc under R. 13(3). It would not be consistent with the flexibility advocated by the Supreme Court of Canada to treat the matters being arbitrated between UniNet and ALA as existing in a water-tight compartment separate from the matters the plaintiffs seek to have adjudicated by the

Supreme Court of British Columbia. Indeed, they are inextricably linked to the extent that, as Mr. Silber argues, if it were open to the defendant in the present proceeding to place the asset -- the right to use the domain name -- that lies at the heart of the arbitration proceeding beyond the reach of the plaintiffs, the arbitration in British Columbia would be "practically futile". I agree that in a sense this may be regarded as "damage" suffered in British Columbia, at least by UniNet. Moreover, if it is proven at trial that CSI was a sham or a corporate vehicle used simply to circumvent ALA's obligations to UniNet, order and fairness would require that British Columbia courts be in a position to take appropriate enforcement measures against both ALA and CSI. On the other hand, if UniNet fails to prove its case in the arbitration proceeding, it seems likely the court proceeding will also fail -- again a reflection of the interrelatedness of the arbitration and court proceedings. [32] Equally important, ALA and UniNet, the main protagonists in the overall fact situation, agreed that British Columbia law should apply to any dispute they might have, and attorned to this jurisdiction. If the plaintiffs' allegations are true, the use of a sham corporation in a far-away jurisdiction by the alleged conspirators should not preclude UniNet from such remedy as may be appropriate under

the laws of this province. [33] In all the circumstances, I find that the Chambers judge did not err in ruling that the Supreme Court of British Columbia had jurisdiction simpliciter and thus in refusing to declare that the Court was without jurisdiction over the plaintiffs' claims. I would dismiss the appeal. [34] I make no comment on the issue of forum conveniens as that issue was not raised in this court nor, I believe, in the court below. [35] I would order costs in favour of the plaintiffs. "The Honourable Madam Justice Newbury" I Agree: "The Honourable Madam Justice Rowles" I Agree: "The Honourable Mr. Justice Hall"