“Facebook, an American corporation headquartered in California, operates one of the world’s leading social networks and generates most of its revenues from advertising. D is a resident of British Columbia and has been a member of Facebook since 2007. In 2011, Facebook created a new advertising product called “Sponsored Stories”, which used the name and picture of Facebook members to advertise companies and products to other members. D brought an action in British Columbia against Facebook alleging that it used her name and likeness without consent for the purposes of advertising, in contravention to s. 3(2) of British Columbia’s Privacy Act. D also seeks certification of her action as a class proceeding under the Class Proceedings Act. The proposed class includes all British Columbia residents who had their name or picture used in Sponsored Stories. The estimated size of the class is 1.8 million people.
Under s. 4 of the Privacy Act, actions under the Act must be heard in the British Columbia Supreme Court. However, as part of the registration process, all potential users of Facebook must agree to its terms of use which include a forum selection and choice of law clause requiring that disputes be resolved in California according to California law.
Facebook brought a preliminary motion to stay the action on the basis of this forum selection clause. The chambers judge declined to enforce the clause and certified the class action. The British Columbia Court of Appeal reversed the stay decision of the chambers judge on the basis that Facebook’s forum selection clause was enforceable and that D failed to show strong cause not to enforce it. This rendered the certification issue moot and the court declined to address it.”
The S.C.C. held (3 joint reasons for judgement, one separate reason concurring in the result, three joint dissenting reasons) that the appeal is allowed. The forum selection clause is unenforceable. The chambers judge’s order dismissing Facebook’s application to have the Supreme Court of British Columbia decline jurisdiction is restored.
Justices Karakatsanis, Wagner and Gascon wrote as follows (at paras. 1, 4, 17, 27-29, 38, 76):
“Forum selection clauses purport to oust the jurisdiction of otherwise competent courts in favour of a foreign jurisdiction. To balance contractual freedom with the public good in having local courts adjudicate certain claims, courts have developed a test to determine whether such clauses should be enforced. This test has mostly been applied in commercial contexts, where forum selection clauses are generally enforced to hold sophisticated parties to their bargain, absent exceptional circumstances. This appeal requires the Court to apply this test in a consumer context.
…In our view, while s. 4 of the Privacy Act does not override forum selection clauses, Ms. Douez has established strong reasons not to enforce the clause at issue here. The grossly uneven bargaining power between the parties and the importance of adjudicating quasi-constitutional privacy rights in the province are reasons of public policy that are compelling, and when considered together, are decisive in this case. In addition, the interests of justice, and the comparative convenience and expense of litigating in California, all support a finding of strong cause in the present case.
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As we shall explain, the forum non conveniens test adopted in the CJPTA was not intended to replace the common law test for forum selection clauses. In our view, this case should be resolved under the strong cause analysis established by this Court in Z.I. Pompey Industrie v. ECU-Line N.V., 2003 SCC 27, [2003] 1 S.C.R. 450.
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Of course, parties are generally held to their bargain and are bound by the enforceable terms of their contract. However, because forum selection clauses encroach on the public sphere of adjudication, Canadian courts do not simply enforce them like any other clause. In common law provinces, a forum selection clause cannot bind a court or interfere with a court’s jurisdiction. As the English Court of Appeal recognized long ago, “no one by his private stipulation can oust these courts of their jurisdiction in a matter that properly belongs to them” (The Fehmarn, [1958] 1 All E.R. 333, at p. 335).
Instead, where no legislation overrides the clause, courts apply a two-step approach to determine whether to enforce a forum selection clause and stay an action brought contrary to it (Pompey, at para. 39). At the first step, the party seeking a stay based on the forum selection clause must establish that the clause is “valid, clear and enforceable and that it applies to the cause of action before the court” (Preymann v. Ayus Technology Corp., 2012 BCCA 30, 32 B.C.L.R. (5th) 391, at para. 43; see also Hudye Farms, at para. 12 and Pompey, at para. 39). At this step of the analysis, the court applies the principles of contract law to determine the validity of the forum selection clause. As with any contract claim, the plaintiff may resist the enforceability of the contract by raising defences such as, for example, unconscionability, undue influence, and fraud.
Once the party seeking the stay establishes the validity of the forum selection clause, the onus shifts to the plaintiff. At this second step of the test, the plaintiff must show strong reasons why the court should not enforce the forum selection clause and stay the action. In Pompey, this Court adopted the “strong cause” test from the English court’s decision in The “Eleftheria”, [1969] 1 Lloyd’s Rep. 237 (Adm. Div.). In exercising its discretion at this step of the analysis, a court must consider “all the circumstances”, including the “convenience of the parties, fairness between the parties and the interests of justice” (Pompey, at paras. 19, 30 and 31). Public policy may also be a relevant factor at this step (Holt Cargo Systems Inc. v. ABC Containerline N.V. (Trustees of), 2001 SCC 90, [2001] 3 S.C.R. 907, at para. 91, referred to in Pompey, at para. 39; Frey, at para. 115).
…we would modify the Pompey strong cause factors in the consumer context. When considering whether it is reasonable and just to enforce an otherwise binding forum selection clause in a consumer contract, courts should take account of all the circumstances of the particular case, including public policy considerations relating to the gross inequality of bargaining power between the parties and the nature of the rights at stake. The burden remains on the party wishing to avoid the clause to establish strong cause.
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We would allow the appeal with costs to the appellant. Ms. Douez provided strong reasons to resist the enforcement of the clause: most importantly, the gross inequality of bargaining power between her and Facebook and the quasi-constitutional privacy rights engaged by her claim. The forum selection clause is unenforceable.”