Posts
The Ontario Court of Appeal ruled
this month that where a statement of claim is to be served in a country
to which the Hague Convention on the Service Abroad of Judicial and
Extra-judicial Documents in Civil or Commercial Matters (“the Convention”) applies,
the court has no power to order substituted service even if personal
service would be impractical, and has no power to validate or dispense with service,
even if the defendant has actual notice of the claim. Plaintiffs
are limited to the means of service set out in the Convention.
In Khan Resources Inc. et alv. Atomredmetzoloto JSC et al 2013ONCA 189, a Canadian
mining company sued its Russian joint venture partners, alleging the latter
sought to deprive them of their interest and substantial investment in a
certain mine in Mongolia. The Russian government owns 80% of the shares
of the Russian defendants. Pursuant to the Convention, the plaintiff
requested the Russian Central Authority to serve the claim. The Central Authority refused, giving no explanation other to simply cite
article 13 of the Convention, which says that a state may refuse service “if it
deems that [service] would infringe its sovereignty or security”.
Under Russian law an appeal lies from
that decision. However, there were indications that the result
may be driven by political considerations.
Also, the appeal could take a year and cost $100,000. Article
14 of the Convention provides that difficulties that arise “in connection with
the transmission of documents for service shall be settled through diplomatic
channels”. The plaintiffs chose neither
option; they opted instead to bring a motion before the Ontario Superior Court
of Justice for substituted service or an order validating service, on notice.
After all, lawyers for the Russian defendants had a copy of the claim. The Master granted an order validating
service. On appeal to a judge, Mr. Justice O’Marra, the decision was reversed, on the grounds that
there is no power to validate service or allow substituted service. The Ontario Court of Appeal dismissed the appeal.
The Court of Appeal ruled that
the Convention provides the only means by which service into a contracting
state under the Convention (a “Convention country”) may be effected; the
Convention ousts the domestic law provisions for substituted service or
validation of service, even if the defendant has actual notice of the claim. There are several reasons. One is that one of
the two stated purposes for the Convention is to establish a uniform procedure
in all contracting states; to open the door to the use of domestic powers to validate service or allow substituted
service would undermine that purpose.
Also, the origins and wording of the rule that implements the Convention
into Ontario law (R. 17.05 (3) indicate that for service to Convention
countries, use of the means provided in the Convention is mandatory. The Practical Handbook on the Operation of
the Hague Service Convention, published by the Hague Conference on Private International
Law, confirms that the Hague provisions are intended to the only means to
effect service in Convention countries. A 2012 ruling of the Alberta Court of Appeal – Metcalfe v Yamaha Motor Powered Products2012 ABCA 240, 536 A.R. 67 -- and a 1988
ruling from an American court say the same.
The Ontario Court of Appeal
discussed but did not rule on the question of whether the plaintiffs would be permitted
to move to validate or dispense with service if they had pursued all possible
remedies under the Convention and were still unable to effect service, as in Zhang v. Jiang (2006), 82 O.R. 306 (S.C. Master), a
case in which violation of basic human rights, torture and crimes against
humanity were alleged. The Court of Appeal hinted that there could be
an “access to justice” exception to the otherwise prevailing rule that the Convention
is exclusive.
Comment
The facts of Khan Resources would
indicate the plaintiffs there also lacked access to justice. Given the Russian government’s 80% interest
in the defendants, the prospects for an impartial ruling or a successful
outcome for diplomatic efforts seem very remote.
Also, arguably the Convention
need not apply. Article 1 of the Convention provides it applies “where there is
occasion to transmit a judicial … document for service abroad”. There would be no need to transmit anything abroad
if service on the Russians’ Canadian lawyers could be validated.
