Attornment is a shield, not a sword: The Court of Appeal disallows plaintiff’s attempt to bypass service ex juris rule

On June 12, 2019, the Court of Appeal of Alberta released its decision in Acciona Infrastructure Canada Inc v Posco Daewoo Corporation, 2019 ABCA 241[1], determining issues surrounding the court’s jurisdiction to cure irregularities in service ex juris.

In this matter, two parties have a contractual agreement providing that: (1) any dispute arising from the contract will be heard in Calgary, Alberta, and (2) both parties attorn to the exclusive jurisdiction of the Province of Alberta to determine those issues. A dispute arose and the Plaintiff served its originating process document on the Defendant outside of Canada. The Defendant acknowledged receipt of those documents, but at a later date, resisted the jurisdiction of the Alberta Courts to decide the issue. These were the facts the Court of Appeal grappled with in this case.

The Plaintiff had not applied for an order for service ex juris and had not followed the procedure under Rule 11.25(2) of the Alberta Rules of Court (the “Rules”) to secure judicial permission for the service of a commencement document outside Canada. As a result, the Court of Appeal held that the importance of compliance with the Hague Convention and the significance of the deficiencies in service precluded retroactive correction in this case.

This case has important implications concerning the service of documents outside one’s jurisdiction. Failure to obtain an order for service ex juris is not a mere irregularity that courts will overlook. According to the Court of Appeal, attornment, by contractual agreement or conduct, to a particular jurisdiction does not override the service ex juris requirements set out in legislation, particularly in cases where the Defendant later challenges the court’s jurisdiction.

Background:

Acciona Infrastructure Canada Inc. and Mastec Canada Inc., operating as Acciona/Pacer Joint Venture (“APJV”), Canadian corporations, contracted with the City of Edmonton for the construction of a bridge. APJV subcontracted with Posco Daewoo (“Daewoo”), a Korean corporation, to secure the supply of structural steel required for the bridge. The parties agreed that all disputes would be referred to arbitration in, and resolved according to the laws of, Alberta.

A dispute arose and APJV served its Notice to Arbitrate on both Daewoo’s Canadian and Korean legal counsels. When it became apparent to APJV that Daewoo was purposely hindering the path to arbitration, APJV issued an Originating Application seeking the appointment of arbitrators under the International Commercial Arbitration Act, and served the Originating Application on Daewoo’s Korean and Canadian counsels. Daewoo’s counsels took the position that they were not authorized to accept service. Accordingly, APJV commenced the process for serving the Originating Application under the Hague Convention, but did not obtain an order for service ex juris under Rule 11.25(2)(b).

Of note, prior to receiving confirmation of actual service of the Originating Application on Daewoo in Korea under the Hague Convention, APJV applied for three orders that sought: (1) validation of service of the originating application; (2) the appointment of arbitrators; and (3) consolidation of the arbitrations. In light of Daewoo’s position (i.e., its absence and refusal to engage in the process), the applications proceeded ex parte and were granted. Once the originating application was actually served on Daewoo in Korea under the Hague Convention, Daewoo applied to the Alberta Court of Queen’s Bench (“ABQB”) to have the three orders set aside.

Motion Judge’s Decision:

Daewoo argued that the three orders should be set aside on jurisdictional grounds. Daewoo argued that the ABQB lacked jurisdiction over both the dispute and Daewoo because APJV’s service of the Originating Application did not comply with Rule 11.25(2) of the Rules. Rule 11.25(2) provides that “a commencement document may be served outside Canada only if a real and substantial connection exists between Alberta and the facts on which a claim in an action is based.”

The motion judge determined that one of the main purposes of Rule 11.25(2) was that the court, prior to service, could make a preliminary determination as to whether it could appropriately take jurisdiction over the proposed defendant and satisfy itself that there was a real and substantial connection. However, in this case, APJV did not require an order for service ex juris because the parties had already contractually attorned to the jurisdiction of Alberta, which rendered any “preliminary determination” as to whether Alberta should take jurisdiction over the dispute unnecessary.[2] As such, the motion judge held that APJV’s failure to comply with Rule 11.25(2) was not a reason to invalidate the three orders. Daewoo’s application was dismissed. Daewoo appealed the decision to the Court of Appeal (“ABCA”).

Court of Appeal Decision:

The ABCA overturned the motion judge’s decision, finding that the lower court erred in refusing to set aside the Orders on the basis that “attornment or consent to jurisdiction does not override Rule 11.25(2).”[3] In the ABCA’s view, although Daewoo contractually attorned to the jurisdiction of the Alberta courts, APJV still required an order for service ex juris because Daewoo was now resisting Alberta’s jurisdiction.

The ABCA’s ruling and reasoning turned on the distinction between “jurisdiction” and “service.” Any party may attorn to the jurisdiction of the Alberta courts, regardless of how the party was served. However, where that party resists the jurisdiction of the Alberta courts, “then proper service ex juris is the platform on which the court decides if it has and should exercise jurisdiction over the parties and the dispute.”[4] APJV’s assertion that the Alberta courts had jurisdiction over Daewoo could not justify non-compliance with the threshold requirements in the Rules on service ex juris. The ABCA held that APJV required an order for service ex juris, and because APJV did not obtain this order, the ABQB’s subsequent orders should not have been granted and cannot stand.[5] The ABCA also refused to retroactively correct and validate service because of “the importance of compliance with the Hague Convention and the significance of the deficiencies in service.” [6]

Implications for International Commercial Contracts:

This case has important implications concerning the service of documents outside of one’s jurisdiction, which is often the case in international commercial arbitrations. Most Canadian jurisdictions, including Alberta, have clear rules of civil procedure for service of commencement documents and other documents in arbitral proceedings.

The Court of Appeal in this case offered some guidance by stating that (1) parties are entitled to insist on proper service under the Rules and the Hague Convention, and (2) deficiencies in service can be substantive enough to preclude the court from exercising its discretion to retroactively correct deficiencies in service.

Of note, Wakeling J.A., in his concurring decision for the Court of Appeal noted that there are curative provisions in the Rules that specifically focus on non-compliance methods or manners of service. However, none applied in this case: (1) APJV had not attempted to serve Daewoo “in accordance with the law of the jurisdiction in which the party to be served is located”, in this case Korean Law, which would have been permitted under Rule 11.26(c) of the Rules;[7] (2) the parties had not included a mode-of-service term in their contract, and without such agreement on the mode of service, Rule 11.3(1) of the Rules, which allows parties to agree on the mode of service could not assist APJV;[8] and (3) Rule 11.27, the irregular service cure-all provision could not be used to short-circuit Rule 11.25(2)[9] and failure to comply with Rule 11.25(2) was a “substantive” irregularity that simply could not be remedied under Rule 11.27.

It is important for contracting parties to consider including provisions stipulating the mode of service, in addition to including provisions concerning attornment or consent to jurisdiction in international commercial contracts. Further, it is advisable that arbitration practitioners review all applicable rules concerning service from the onset and when considering commencing proceedings, to avoid having domestic courts dismiss their claim for failure to follow service rules.

[1]Acciona Infrastructure Canada Inc v Posco Daewoo Corporation, 2019 ABCA 241 at para 14 [Acciona ABCA].

[2]Acciona Infrastructure Canada Inc v Posco Daewoo Corporation, 2017 ABQB 707 at paras 14 and 19.

[3]Acciona ABCA, supra note 1 at para 15.

[4]Ibid at para 14.

[5]Ibid at paras 22 and 24.

[6]Ibid at para 23.

[7]Ibid at para 142.

[8]Ibid at para 134.

[9]Ibid at paras 22, 94, 144-172.

 

arbitration jurisdiction service ex juris international arbitration commercial arbitration commencement

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