Monday, 24 December 2018

Substituted Service and the Hague Service Convention

     Anyone who has had to serve process abroad more than a few times knows that sometimes locating and serving the defendant can be a big challenge, especially if the defendant has moved abroad partly to avoid someone.  That challenge may be bigger still insofar as substituted service is not available, at all, in cases governed by the Ontario Rules of Civil Procedure (“RCP”), if the country where service is to be done is a country that is a party to the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters, a.k.a. the Hague Service Convention (“HSC”).   See Khan Resources v Atomredmetzoloto [2013] O.J. No. 1453 (O.C.A.).    As well, service in many HSC countries must be done by the Central Authority, which can take a very long time.

     It appears now however that at least in certain situations in family law cases, substituted service on defendants in HSC countries is available.  In November 2018, the Ontario Superior Court of Justice in a family law case ordered substituted service on a defendant in India, which is a party to the HSC:  Tiwari v Tiwari  [2018] O.J. No. 5797 (Sanfilippo J.)   The applicant Sneha Tiwari needed to serve her Application for Divorce in India.  She submitted a request for service to the Central Authority in India, which request was acknowledged.   However, almost a year later and despite follow up, Sneha Tiwari had not received a certificate of service nor any letter indicating service cannot be effected.  She then moved for leave for substituted service via email and regular mail. 
The Court considered Article 15 of the HSC, which says that a court “may give judgment even if no certificate of service or delivery has been received”, provided that the document to be served was properly transmitted and at least six months have passed without any certificate of any kind.  The Court ruled that the power to give judgment includes the power to grant an order for substituted service, an order validating service and an order dispensing with service (para. 24).   The Court proceeded to order service by regular mail and email, and to the respondent’s lawyer in India.  Ironically, substituted service was unnecessary insofar as Article 15 allows a court to issue a judgment on the merits.

     Unfortunately, if the Central Authority is unable to effect personal service despite attempts, and sends back a certificate under Article 6 to that effect,   the Article 15 power to issue judgment does not apply.  This is because one of the prerequisites is that “no certificate of any kind has been received”.    In other words, substituted service in HSC countries remains unavailable in cases where the defendant cannot be found or is evading service, if the Central Authority issues a certificate saying it cannot serve the process.

     The Court in Tiwari interpreted Khan (and a more recent, Divisional Court ruling in Wang v Lin (2016) 132 O.R. (3d) 48*) to mean that one cannot resort to substituted service until after one has attempted service under the HSC (Tiwari, para. 8 and 17)  This is not correct. Unfortunately, Khan does not allow for substituted service even if one has made all reasonable efforts at service.  Khan was decided under the RCP; Rule 17.05 (3) says that “an originating process …  to be served outside Ontario in a contracting state shall be served … through the Central Authority in the contracting state….”  [emphasis added].  Khan held that the mandatory language of this rule means service must be effected only under the HSC and thus Rule 16.04 (substituted service or dispensing with service) is not available (para. 32). Because the HSC does not provide for substituted service, it is not available.  Khan also noted other court rulings elsewhere in Canada in abroad to the effect that the HSC is meant to be the sole means of service for HSC countries, and that the purpose of the HSC would be undermined if means of service outside the HSC were permitted.  

     Khan is arguably distinguishable from Tiwari, in that Khan Resources did not exhaust all its options under the HSC before it sought substituted service.  Khan Resources had attempted to serve process in Russia through the Central Authority, which refused to serve it on grounds of infringement of Russian sovereignty.   Khan did not pursue any appeal or review of that refusal in the Russian courts, nor did it pursue any relief under Article 14 of the HSC, which says that difficulties that arise shall be settled through diplomatic channels.  The Court admonished the plaintiff for not pursuing that relief.

     What can a plaintiff do if he has in fact exhausted all options under the HSC?    In Ziang v Jiang (2006) 82 O.R.(3d) 306, the plaintiffs were members of the Falun Gong spiritual movement who were suing senior officials of the Chinese Communist Party.  The Chinese Central Authority refused to serve the claim, and there was no means of appeal.  Master Glustein dispensed with service, in effect holding there is an access to justice exception to the rule that the HSC is exclusive.  

     Tiwari has nonetheless streamlined service under the HSC in another way.  The Court held that an Ontario lawyer can submit a request for service to a Central Authority abroad.  One does not have to rely on the Central Authority in Ontario to forward the request to the Central Authority in the receiving state.   The Court stated that a lawyer is a judicial officer competent … [to] forward to the Central Authority [of the receiving state] a request for service, under Article 3 of the HSC (para. 19 – 22).  

*The Court in Wang v Lin did not discuss the issue; it merely cited Khan.

Friday, 30 November 2018

Discovery of Non-resident non-parties – Divisional Court Ruling

     North American cross border litigators know that under s. 1782 of the U.S. Code, U.S. federal courts have power to issue a subpoena against a U.S. resident in aid of a foreign proceeding.    Can this be used to discover non-parties in the United States?  

     In Mancinelli v Royal Bank of Canada [2018] O.J. No. 2015, a class action, the Ontario Divisional Court* recently upheld an order by Perell J. requiring the plaintiffs, who had obtained from a U.S. Court a subpoena to examine a U.S. company non-party for discovery, not to pursue that discovery without first obtaining leave of the Ontario court.     

     The Court gave several reasons for this ruling.   One was that under Rule 31.10 of Ontario’s Rules of Civil Procedure, a party must obtain the court’s leave to examine a non-party for discovery.  Second, under Ontario law discovery in a class action is not permitted until the action has been certified (except for discovery on issues specific to certification).  This class action had not yet been certified, so no discovery on the merits is permitted yet.   Third, in their ex parte motion before the U.S. Court the plaintiffs had failed to disclose the foregoing.  In Re Application of Microsoft Corp., 428 F. Supp 2d 188 at 194 (SDNY 2006) the court stated that no U.S. court has ever granted an order under s. 1782 where the foreign court objected to such order.    

     The Court did not state or suggest that the fact the non-party is a non-resident would preclude discovery.  Had that been a barrier to discovery, one would expect Perell J’s’ one hundred and six paragraph long reasons, or the Divisional Court, to have mentioned it.

     The Divisional Court distinguished formal, compelled examinations for discovery from obtaining evidence in the form of voluntary disclosure.  One is free to do the latter without leave. 

      This case illustrates the tendency of courts to be protective of their own procedural powers in cross border cases.    The plaintiff had argued that the order the defendants sought – to bar the plaintiffs from using their subpoena without leave – was an injunction and thus the test for an injunction applies.  The Divisional Court upheld Perell J’s answer, that “the remedy for non-compliance was compliance, not an injunction” (para. 37).     This is consistent with the fact that choice of law is only for substantive law;  a court will always apply its own procedural rules.

*S.N. Lederman, F. P. Kiteley and A Doyle JJ.

Friday, 26 October 2018

New Development in Enforceability of Foreign Judgments in the PRC

Oct. 26, 2018

In my last post (Sept. 27, 2018) I described some recent developments regarding the enforcement of foreign judgments in the People’s Republic of China (“PRC”), and enforcement of PRC judgments in Canada, which suggest improved prospects for enforcement of foreign judgment in the PRC.

In that same vein, a new Memorandum of Guidance (“MOG”) between the Supreme People’s Court of the People’s Republic of China and the Supreme Court of Singapore should simplify the recognition and enforcement of Singapore judgments in the PRC, and vice versa.     The MOG, which was signed in August 2018, sets out the requirements for enforcement, which include requirements familiar to the common law such as that the judgment be final, that the court rendering it had jurisdiction over the case, and that the judgment not be enforcement of a penal or tax law.  There are also familiar defences, e.g. that the defendant did not get notice of the proceeding in which the judgment was rendered, or that the judgment was obtained by fraud, or that enforcement would be contrary to public policy.  The MOG also sets out procedures for an application to enforce the foreign judgment.  

The MOG applies only to monetary judgments (i.e. not injunctions) and only to judgments in commercial cases, excluding intellectual property and competition law.  

In general, judgments from many countries have not been enforceable in the PRC.   PRC courts will not enforce foreign judgments unless there is a treaty with the other country or unless there is reciprocity in enforcement, i.e. that the foreign court has enforced PRC judgments. 

Singapore and the PRC have recognized judgments from each other in the past.   In 2016 a court in Jiangsu Province in the PRC recognized a Singaporean judgment in the Kolmar Group case (discussed in my Sept. 27 post) on the basis that a Singaporean court had previously recognised a judgment from a court in Jiangsu Province.   The extent of the reciprocity remains unclear, however.  The Jiangsu court ruling did not say whether the Jiangsu, PRC court would have found reciprocity if that previously recognized judgment had been from a court somewhere else in the PRC.

On its face, this MOG appears to be intended to ease the enforcement of Singaporean judgments in the PRC and vice versa.  What else could be its purpose? Unfortunately, it is not clear how much of a change the MOG portends.   The MOG clearly states it is not a treaty, and does not have legal effect.   The MOG states that “in the absence of a relevant treaty, [a Singaporean judgment] may be enforced [by the PRC courts] on the basis of reciprocity according to the Civil Procedure Law [of the PRC]”.   The parties could have included in the MOG a declaration about reciprocity as between the two countries, but chose not to do so.

Nonetheless, the MOG is surely at least a small step toward liberalizing enforcement of foreign judgments.