Mar 21, 2014

Service of Alberta Process Outside of Canada Now More Complicated

Khan Resources Inc. v. Atomredmetzoloto JSC, 2013 ONCA 189 (CanLII)

The Ontario Court of Appeal has confirmed the proper reading of the latest Alberta Court of Appeal decision on service ex juris under Alberta law, which greatly complicates serving legal documents outside of Canada. In our August 2012 Bennett Jones Update, “Recent Alberta Court of Appeal Decision on Service Ex Juris and the Hague Convention,” we discussed the Alberta Court of Appeal’s decision in Metcalfe Estate v Yamaha Motor Powered Products Co Ltd, 2012 ABCA 240, noting important implications for the service of documents from Alberta into international jurisdictions that are signatories to the Hague Convention on the Service Abroad of Judicial and Extra-judicial Documents in Civil or Commercial Matters. In Metcalfe, the Court held that service under the Alberta Rules of Court in Hague Convention signatory states must comply with the requirements of the Hague Convention. In our August 2012 update, we noted that the rulingbrought Alberta in line with current Ontario law on this issue and made international service more complicated.

In a decision released on April 2, 2013, the Ontario Court of Appeal has now further confirmed this position, approving and adopting the Alberta ruling in Metcalfe. In Khan Resources Inc v Atomredmetzoloto JSC, 2013 ONCA 189, the plaintiffs attempted to serve Russian defendants in an Ontario action through the Russian Central Authority in accordance with the Hague Convention. The Russian Central Authority refused to serve the documents, relying on its right to do so under Article 13 of the Convention, on the grounds of sovereignty and national security. Instead of pursuing an appeal of this refusal in Russia, which was apparently available, the plaintiffs brought a motion before the Ontario courts to dispense with or validate service. After three hearings and two appeals before the Ontario courts, the Court of Appeal held that a court cannot substitute, dispense with or otherwise validate service under the Ontario Rules of Civil Procedure where Article 13 of the Convention has been invoked by a foreign signatory state. Effectively, the Russian defendants could not be sued in Ontario since they could not be served with the documents necessary to start the lawsuit.

The Ontario Court emphasized the broad, exclusive character of the Hague Convention as being part of Canada’s international treaty obligations. The Court held that in order to give full effect to the purposes of the Hague Convention in this regard, Rule 17.05(3) of the Ontario Rules must be read as a complete code for service in contracting states. On this point, the Court repeated and broadly adopted the recent ruling of the Alberta Court of Appeal in Metcalfe. The result is a consistent general rule for international service ex juris from Ontario or Alberta to Hague Convention signatory states: a plaintiff cannot circumvent the requirements of the Hague Convention, even if service by other means has given actual notice to the defendant.

Interestingly, the Ontario Court left open the question of whether access-to-justice concerns may justify an exception to service under the Hague Convention in extreme circumstances. As issues of proper service under the Hague Convention continue to arise in Canada, we can expect further developments. In the meantime, parties and their counsel should continue to consider the impact of the Hague Convention as a mandatory hurdle in international litigation.