Syncrude Canada Ltd. v. Highland Consulting Group: A Reply to Ted Folkman

My blawging colleague, Ted Folkman over at Letters Blogatory has an informative post about Syncrude Canada Ltd. v. Highland Consulting Group, Inc. (D. Md. 2013) a recent Maryland District Court decision dealing with service of process under the Hague Service Convention [“Syncrude”].

In Syncrude, the Plaintiff, Syncrude Canada Ltd. (“Syncrude”  or “Plaintiff”) brought an action pursuant to the Maryland Uniform Foreign  Money-Judgment Recognition Act, Maryland  Code, Courts and Judicial Proceedings, §§ 10-701  et seq. (“the Recognition Act”) against  Defendants The Highland Consulting Group Inc. (“HCG”), High Energy Consultants, Inc. (“HEC”), and The Highland Group International GmbH (“HGI”) (collectively “the Highland Defendants”).

On July 26, 2011, Syncrude filed a breach of contract action against the Highland Defendants in the Court of Queen’s Bench of Alberta, Case Number 1103 1134 (“Canadian Litigation”).  The Highland Defendants were served via registered mail at their respective principal offices pursuant to the Alberta Rules of Court and the Alberta Business Corporation Act.   Bittner signed the return receipts acknowledging service for both Maryland Defendants on August 2, 2011. Raz Walter signed a return receipt on behalf of Highland Group International GmbH on August 3, 2011.

In his post, Ted Folkman observes,

Letters Blogatory readers will be familiar with the quirky split in American decisions on the meaning of Article 10(a) of the Hague Service Convention. Article 10(a) is plainly intended to permit service of process by postal channels unless the state of destination objects, and a majority of American courts have reached that result. But a minority of courts say that Article 10(a) permits only service of documents other than summonses via postal channels, because the English version of the Convention uses the word “send” instead of “serve.” The American cases generally have to do with the validity of service abroad in a US civil action. Today’s case asks about the validity of service in the US in a civil action abroad. Fortunately, the judge, after reviewing the split of authority, came down on the side of all that is good and just and held that Article 10(a) does permit service of process by mail.

In the US cases we’ve reviewed, the next question has been: granted that service by mail is permitted by the Convention, must it also be authorized by the law of the forum (namely, the Federal Rules of Civil Procedure or the state court analogue), and if so, is it authorized? Again, today’s case flips this around, asking whether the service by mail was authorized by the law of Alberta. It was. Rule 11.26(1)(a) of the Alberta Rules of Court permits service “by a method provided by these rules for service of the document in Alberta.” Under Rule 11.9(1)(b) service on a corporation is proper if sent “by recorded mail, addressed to the corporation, to the principal place of business or activity,” and under Rule 11.9(2)(b), the service is effected “on the date the acknowledgment of receipt is signed.” [my emphasis added]

Ted Folkman and I have “agreed to disagree” over the issue of whether the Hague Service Convention is mandatory or permissive with respect to Article 10(a). My own view is that it is mandatory, and the issue is determined by reference to Article 10(b) and whether the Contracting State has filed an objection for service by informal channels,  rather than requiring service via the designated Central Authority.

In a timely judgment, the Alberta Court of Appeal has weighed in on the issue of validity of service ex juris under the Hague Service Convention. In Metcalfe Estate v. Yamaha Motor Powered Products Co., Ltd., 2012 ABCA 240 (CanLII),  (per Constance Hunt, J.D. Bruce McDonald and Myra Bielby JJ.A.), rev’g 2011 ABQB 807 (CanLII), (2011 ABQB 807, Docket: 0901 05449) [“Metcalfe Estate”], the Alberta Court of Appeal held that the Hague Service Convention was mandatory, not permissive.

In Metcalfe Estate, the plaintiff, Stephanie Metcalfe was driving a Rhino side by side all terrain vehicle when it tipped over, injuring her and killing her daughter, Teah as a passenger.  The plaintiffs are part of an Ontario class action seeking damages against various defendants— including Yamaha Motor Powered Products Co., Ltd. and Yamaha Motor Co. Ltd., having their head offices in Japan (the Japan defendants) —for wrongful death and personal injury, alleging design and construction flaws in the manufacture of the vehicle. Due to jurisdictional issues, the present claim was commenced in Alberta to protect the plaintiffs’ rights in the event the class action did not proceed.

The plaintiffs brought a motion for service ex juris on the Japan defendants. The motion was granted, and the plaintiffs obtained an order which granted, inter alia, leave to serve ex juris originating process upon the Japan defendants pursuant to the Articles of the Hague Convention on the Service Abroad Judicial and Extra-judicial Documents in Civil or Commercial Matters (the Hague Service Convention). Service by registered mail on the Japan defendants’ corporate head office, was not a form of service ex juris recognized in the articles of the Hague Convention. The Japan defendants refused to accept service.

The Japan defendants brought a motion for an order invalidating the service ex juris as non-compliant, and the plaintiffs brought a motion for an order validating service. The motions judge held that the terms of the service ex juris order were permissive in nature and did not mandate strict compliance with the Hague Service Convention, and further that the Alberta Rules of Court permitted validation of such service even given non-compliance. The Japan defendants’ motion was dismissed, the plaintiffs’ motion granted and the service on the Japan defendants was validated. The Japan defendants appealed.

J.D. Bruce McDonald J.A. (Myra Bielby J.A. concurring; Constance Hunt J.A. concurring in the result) held that the motions judge had committed reversible error. The plaintiffs obtained their own order for service ex juris, an extraordinary remedy, and were required to strictly comply with the terms of the order sought and obtained. The order for service ex juris was “permissive”, only insofar as requiring the plaintiffs to effect service on the Japan defendants at all. The Alberta Court of Appeal held that the phrase “[t]he Plaintiffs are given leave” was not an imprimatur for the plaintiffs to disregard or fail to comply with the essential terms of the order, which on its own terms, required service in accordance with the articles of the Hague Service Convention, which was not done.  Accordingly, the purported service was held to be ineffective.

When the applications for validating service ex juris were heard in March 2011, the new Rules of CourtAR 124/2010, were in force. Rule 11.26 for service ex juris states:

11.26(1) Unless the Court otherwise orders, if a document may be served outside Alberta under these rules, the document must be served

(a) by a method provided by these rules for service of the document in Alberta,

(b) in accordance with a method of service of documents under the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters that is allowed by the jurisdiction in which the document is to be served, if the Convention applies, or

(c) in accordance with the law of the jurisdiction in which the person to be served is located.

(2) Service is effected under this rule,

(a) if the document is served by a method of service provided for service of documents in Alberta, on the date specified by these rules for when service is effected,

(b) if the document is served under the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters, on the date service is effected under the Convention, or

(c) in accordance with the law of the jurisdiction in which the person is served. [my emphasis added]

Article 10 of the Hague Service Convention states:

… provided the state of destination does not object, the present convention should [shall] not interfere with ‑

(a)       the freedom to send judicial documents, by postal channels, directly to persons abroad,

(b)       the freedom of judicial officers, officials or other competent persons of the state of origin to effect service of judicial documents directly through the judicial officers, officials or other competent persons of the state of destination, or [sic]

(c)       the freedom of any person interested in a judicial proceeding to effect the service of judicial documents directly through the judicial officers, officials or other competent persons of the state of destination. [my emphasis added]

Article 11 further provides that:

The present convention shall not prevent two or more Contracting States from agreeing to permit, for the purpose of service of judicial documents, channels of transmission other than those provided for in the preceding Articles and, in particular, direct communication between their respective authorities.

The chambers judge noted that rule 11.27(1) of the Alberta Rules of Court gives the court discretion to validate service outside of Alberta even where service was not effected in accordance with the Rules. Rule 11.27 states:

(1) On application, the Court may make an order validating the service of a document served inside or outside Alberta in a manner that is not specified by these rules if the Court is satisfied that the method of service used brought or was likely to have brought the document to the attention of the person to be served.

(2) On application, the Court may make an order validating the service of a document served inside or outside Alberta if the Court is satisfied that the document would have been served on the person or would have come to the attention of the person if the person had not evaded service.

(3) If service is validated by the Court under this rule, service is effected on the date specified in the order.

The Alberta Court of Appeal held that the Hague Service Convention was mandatory, not permissive, noting:

[26]           I disagree with the chambers judge’s conclusion that the order did not require service be carried out in accordance with the Hague Convention because it stated “are given leave to serve ex juris”, not that the respondents “shall serve” in accordance with the Hague ConventionMetcalfe v Yamaha Motor Canada Ltd2011 ABQB 807 (CanLII), 2011 ABQB 807 at para 17.

[27]           The order is not ambiguous. The only sense in which the order is permissive, rather than mandatory, is that it grants leave to serve the statement of claim and a copy of the order upon the appellants. It does not require the documents to be served. But if the respondents chose to serve the documents, the order clearly required them to do so in accordance with the Hague Convention.

[30]           The order obtained by the respondents required compliance with the Hague Convention for service ex juris. The respondents conceded that the service upon the appellants did not comply with the Hague Convention. Since the respondents did not comply with the terms of the Macleod Order, they did not validly serve the appellants.

[31]           The Hague Convention prescribes service through one of several specified methods. It does not allow service by any method other than the options identified within the Hague Convention itself. It affords flexibility only to the extent that one of the permitted options is to serve through any alternate method agreed upon between the Province of Alberta and Japan but there was no evidence that any such agreement existed or, if it existed, would authorize the service method attempted here. Therefore, domestic service law does not apply once the Hague Convention is engaged by the terms of a service order. [my emphasis added]

Justice MacDonald provides a trenchant overview of the mandatory and exclusive nature of the Hague Service Convention as follows:

 [34]           The United States Supreme Court held that the domestic forum determines the first question, but as for the second question, the word “shall” required that, when the Hague Convention applies, the contracting states must comply with its provisions for transmittal: Volkswagenwerk Aktiengesellschaft v Schlunk, 486 US 694 (1988).

[35]           After the Schlunk decision and the decision of the Supreme Court of the Netherlands in Segers and Rufa BV v Mabanaft GmbH, HR 27 June 1986, NJ 1987, p 764, RvdW 1986, p 144, two concepts have developed to explain the nature of service under the Hague Convention: mandatory and exclusive.

[36]           The Permanent Bureau of the Hague Conference on Private International Law, Practical Handbook on the Operation of the Hague Service Convention, 3d ed (Montreal: Wilson & Lafleur, 2006) (Handbook), defines the concepts of the “mandatory” character and the “exclusive” character of theHague Convention.

[37]           The mandatory character refers to whether the Hague Convention determines a document has to be transmitted abroad for service. The conclusion is theHague Convention is non-mandatory (Handbook at 14 and 16). The law of the forum state determines whether or not a document has to be transmitted abroad. As noted by Strekaf J in Venture Helicopters Ltd v European Aeronautic Defence & Space Co Eads NV2010 ABQB 633 (CanLII), 2010 ABQB 633, 497 AR 308 at para 17, service ex juris “involves a decision by the court that there is sufficient reason pursuant to the applicable statute and rules to extend its jurisdictional arm beyond its own territory to reach a foreign party who would otherwise be outside the court’s authority.”

The Alberta Court of Appeal notes that Article 10 of the Hague Service Convention “recognizes the possibility that means other than service through a Central Authority may be used if the destination jurisdiction permits alternative means of service”, however:

[41]           The notion of the exclusive character of the Hague Convention means that when the law of the forum determines a document is to be transmitted abroad for service under the Hague Convention, the Hague Convention alone provides the relevant channels of transmission for such service. The Handbook states that the exclusive character of the Hague Convention was never really “disputed” (at pp 22-23). The conclusion on the exclusivity of the Hague Convention was confirmed in 2003 by the Special Commission of the Permanent Bureau of the Hague Conference in its report, Conclusions and Recommendations adopted by the Special Commission on the Practical Operation of the Hague Apostille, Evidence and Service Conventions.[3] All member states, including Canada, approved the report’s conclusions.

[42]           Through enacting the provisions of Rule 11.26(1)(b), the Province of Alberta accepted the application of the provisions of the Hague Convention relating to service of legal process where triggered. It was open to Alberta to pass a law or rule that defers to the Hague Convention; see Castillo v. Go,2005 SCC 83 (CanLII), [2005] 3 SCR 870. This is a not a question of an international treaty being foisted on the province by the federal government. The issue of the constitutionality of the application of the Hague Convention’s principles in this province is not engaged.

Further, MacDonald J.A. held that Rule 11.27 cannot validate service ex post facto, when an order granted pursuant to rule 11.26(1)(b) permitted service in accordance with the Hague Convention, but the service otherwise failed to comply:

[45]           Rule 11.27 permits validation of service when the manner was not specified in the Rules. As provided in the rule, the test for validation is whether the service used “brought or was likely to have brought the document to the attention of the person to be served.” The rule applies to service both inside and outside Alberta and thus may potentially apply to any of the rules in Part 11, Divisions 1 through 5 (including rule 11.26 which is part of Division 5).

[46]           However, rule 11.26 must be differentiated from the other rules regarding service generally, because service ex juris imports additional considerations. Granting service outside Alberta is not solely concerned with the test of whether a document was brought or likely to be brought to the attention of a foreign defendant. As already noted, service ex juris is founded upon a decision to extend the court’s jurisdiction beyond its own territory. In addition, any interpretation must take into consideration the presumption of compliance with international obligations because rule 11.26(1)(b) adopts and employs the Hague Convention, an international treaty, to which Canada is a signatory.

 [48]           In order to conform to international law, rule 11.27 should not be interpreted so as to  circumvent the methods of service provided in the Hague Convention unless done so in clear and unequivocal language. Such clear and unequivocal language does not appear in rule 11.27.

[49]           The purposes of the Hague Convention – as stated in the preamble – are firstly “to create appropriate means to ensure that judicial and extrajudicial documents to be served abroad shall be brought to the notice of the addressee in sufficient time,” and secondly “to improve the organisation of mutual judicial assistance for that purpose by simplifying and expediting the procedure”. For the second purpose, the Hague Convention sets an international standard for service which eliminates the need to determine the service process for any particular dispute.

[50]           Allowing courts to validate service which fails to comply with the international standard would undermine that purpose, as the Hague Convention would no longer be a comprehensive authority for service abroad involving the signatories to that Hague Convention. Canadian law is presumed to comply with that purpose. Therefore, rule 11.27 should not be used to avoid the international standard created by the Hague Convention. There are many other nations that are not signatories to the Hague Convention and rule 11.27 undoubtedly applies to service situations within those nations.

Finally, MacDonald J.A. cited with approval three Ontario decisions, all of which declined to validate service ex juris under the Hague Service Convention: Khan Resources Inc v Atomredmetzoloto JSC2012 ONSC 1522 (CanLII), 2012 ONSC 1522, Dofasco Inc v Ucar Carbon Canada Inc (1999) 27 CPC (4th) 342, 79 OTC 377 (Ont Gen Div), and Samina North America Inc v H3,2004 Can LII 65382; aff’d, [2005] OJ No 4644 (CA). The learned justice concludes:

[65]           I conclude that rule 11.27 cannot be used to validate service when the respondents failed to effect service pursuant to the Hague Convention as required by the terms of the applicable order for service ex juris. It must be reiterated that the only authority given to the respondents to effect service ex juris upon the appellants was by virtue of the explicit provisions of the Macleod Order. That order did not purport to invoke either rule 11.26(i)(a) or (c) – only rule 11.26(i)(b). Indeed, given that Japan is a signatory to the Hague Convention, the Macleod Order could not have properly invoked either of those sub-rules. As a result, I need not consider the third ground of appeal, namely, whether the chambers judge properly exercised his discretion under rule 11.27.

In concurring reasons, Constance Hunt J.A. held that the order obtained, on the plaintiffs’ own motion, authorized service on the Japan defendants only in accordance with the Hague Service Convention. The plaintiffs’ failure to comply with the terms of their own order for service ex juris rendered service ineffective. The Hague Convention would be undermined if R. 11.27(1) of the Alberta Rules of Court permitted validation of such non-compliance, so the appeal was properly allowed and service invalidated.

In his Letters Blogatory Syncrude post, Ted Folkman concludes,

The only sour note in the decision comes in the judge’s remarks about a requirement that the service comport with Maryland law. It seems to me that Maryland law is irrelevant to the decision. Leaving aside questions of due process and compliance with the Convention, the validity of the service should be determined under the law of the forum. [my emphasis added]

At pp. 3-4 of the Syncrude decision, Bennett J. of the U.S. District Court (D. Md.) notes,

“The Highland Defendants were served by registered mail at their respective principal offices according to the Alberta Rules of Court and the Alberta Business Corporation Act.   Id. ¶¶ 9-13;  see also Affs. of Serv., Court of Queen’s Bench of Alberta Record at 8-16.  Mr. Bittner signed the return receipts acknowledging service for both Maryland Defendants on August 2, 2011.  Id. at 10, 13.  Raz Walter signed a return receipt on behalf of Highland Group International GmbH on August 3, 2011.  Id. at 16.  At no time relevant to this action was Mr. Bittner specifically listed as a resident agent, president, secretary or treasurer for the Maryland Defendants.  Kerridge Aff. ¶ 2, ECF No. 8-2.  According to the Maryland State Department of Assessments and Taxation, James G. Kerridge was the listed Resident Agent for both Maryland Defendants. Id. ¶ 3.  Despite this notice, none of the Defendants filed responsive or opposition pleadings in the Canadian Litigation.  Default Judgment, Court of Queen’s Bench of Alberta Record at 18.  Accordingly, on October 18, 2011, the Court of Queen’s Bench of Alberta entered a default judgment (“Canadian Judgment”) in favor of Syncrude against all three HighlandDefendants in the amount of $1,343,871.34.  Alberta Court of Queen’s Bench, Record at 1, 18.  Subsequently, in an effort to enforce the Canadian Judgment against the Highland Defendants, Syncrude filed the present action before this Court pursuant to the Maryland Uniform Foreign Money-Judgment Recognition Act, Maryland Code, Courts and Judicial Proceedings, §§ 10-701 et seq. (“the Recognition Act”).   [my emphasis added]

Cf. service on corporations under Rule 11.9 of the Alberta Rules of Court, which states:

Service on corporations

11.9(1)  A commencement document may be served on a corporation

                                 (a)    by being left

                                           (i)    with an officer of the corporation who appears to have management or control responsibilities with respect to the corporation, or

                                          (ii)    with an individual who appears to have management or control responsibilities with respect to the corporation at its principal place of business or activity in Alberta, or at the corporation’s place of business or activity in Alberta where the claim arose,

                                     or

                                 (b)    by being sent by recorded mail, addressed to the corporation, to the principal place of business or activity in Alberta of the corporation.

(2)  Service is effected under this rule,

                                 (a)    if the document is left with an individual in accordance with subrule (1)(a), on the date it is left, or

                                 (b)    if the document is sent by recorded mail, on the date acknowledgment of receipt is signed.

According to Judge Bennett in Syncrude, Todd Bittner is the defendants’ “Corporate Comptroller” and executed the Contract on behalf of the corporate defendants. Arguably, he had direct or ostensible authority to accept service on behalf of the defendants in his capacity as a representative “who appears to have management or control responsibilities with respect to the corporation” used in sub-rules 11.9(1)(a) and (b). The fact that service by recorded mail (registered mail) is permitted, does not obviate the requirement that the person signing the acknowledgement receipt has direct or ostensible authority to admit service on behalf of the corporation by registered mail.

However, the issue is not whether service was effected in accordance with the Alberta Rules of Court; rather, it is whether service was made in compliance with the Hague Service Convention, if it applies. If the Maryland rules allow for service ex juris by registered mail, then this is sufficient.

On this point, respectfully, my colleague Ted Folkman puts the proverbial domestic horse before the international cart. Under the Alberta Rules of Court, if the plaintiff chooses to serve the claim on a foreign defendant, and the Hague Service Convention applies,  then Article 10(a) is mandatory, not permissive. Since the US has not filed a Declaration of objection under Article 10(b), then service by registered mail is permissible in accordance with the domestic court’s rules of service.

A sour note, perhaps, but pitch perfect.

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2 Responses to “Syncrude Canada Ltd. v. Highland Consulting Group: A Reply to Ted Folkman”

  1. Syncrude v. Highland: A Reply to Ted Folkman | Letters Blogatory Says:

    […] Cross-posted at The Trial Warrior. […]

  2. Ted Folkman Says:

    My learned friend Antonin Pribetic has argued that Metcalfe Estate v. Yamaha Motor Powered Products Co., 2012 ABCA 240, bears on my discussion of the Syncrude Canada case. I’m not really sure I see his point. In Metcalfe, a Canadian plaintiff sought and obtained leave from the Alberta court to serve process ex juris on Yamaha, a Japanese company, pursuant to the Hague Service Convention.[ref]”Service ex juris, for American readers who, like me, had to look it up, simply means service outside of the court’s territorial jurisdiction.[/ref] After receiving leave, the plaintiff arranged for an attorney in Tokyo to send the papers to Yamaha by registered mail. The papers were accompanied by a letter stating that the plaintiff “intended to serve the[] documents pursuant to the procedures outlined” in the Convention, but that because “the Japanese Central Authority, which is responsible for effecting service under the Convention, will take approximately 4 months to effect service,” the plaintiff’s lawyer “is requesting your cooperation in expediting matters, and asks that you kindly accept service at this time so that they can dispense with the formality of serving these documents upon you via the Central Authority.” Yamaha did not accept service, but the plaintiff, who had received the return receipt indicating that the registered mail had been delivered, asserted that service had been effected.

    Everyone—including me and, I think, Antonin—is in agreement on the fact that because Alberta law required the documents to be served on Yamaha in Japan, the service had to comport with the Convention, because the Convention is, as they say, exclusive. This is the rule of Volkswagen v. Schlunk.

    The court held, however, that the service did not comport with the Convention. It’s not clear precisely what the court meant. Perhaps it meant that the service did not comport with the Convention because, although Article 10(a) of the Convention permits service by postal channels, the law of Alberta did not affirmatively authorize service by mail. This is a solid position that take seriously the wording of Article 10(a): “Provided the State of destination does not object, the present Convention shall not interfere with—the freedom to send judicial documents, by postal channels, directly to persons abroad.” Some though not all US courts read Article 10(a) this way. On this view, it’s not enough that the Convention permits service by mail; the law of the forum must also permit it. The judge in Syncrude thought that Alberta law authorized service by mail, but maybe that’s wrong, and I certainly will defer to the expertise of Canadian lawyers on that question. (I note, though, that in Syncrude, the Canadian plaintiff obtained a default judgment against the US defendants, which suggests to me that the Alberta court also thought that service by mail was sufficient under Alberta law).

    But I’m not sure this is what the Alberta appellate court meant at all. Mr. Justice McDonald refers to Article 11 of the Convention in a way that suggests he thought it relevant. Article 11 provides:

    The present Convention shall not prevent two or more Contracting States from agreeing to permit, for the purpose of service of judicial documents, channels of transmission other than those provided for in the preceding Articles and, in particular, direct communication between their respective authorities.

    If the suggestion is that service by postal channels is permitted only if the two states in question have made an agreement to permit it, then I think the court is pretty plainly misreading Article 11. Article 11, on its face, provides for methods of service in addition to those in the preceding articles, including the methods in Article 10. The reference to “direct communication between their respective authorities” points to what the article has in mind: the United States and Canada, for example, could make an agreement permitting a US court to transmit papers to a Canadian court directly for service of process rather than making use of the central authority mechanism of Article 5.

    In short: if Antonin is citing Metcalfe to show that Alberta law does not authorize service of process by mail, then he may be right, and I happen to agree with the view that Article 10(a) itself does not permit service of mail where the law of the forum does not authorize service by mail. But if Antonin is citing Metcalfe to show that service by mail was improper under the Convention regardless whether Alberta law authorized service by mail, then I think either he or the judges in Metcalfe are just misreading the Convention.

    In any event, I think the outcome of Metcalfe was correct, even if the reasoning was incorrect. It is apparent from the correspondence between the plaintiffs’ Tokyo attorney and Yamaha that the plaintiffs themselves were not purporting to serve process by mail, but rather to avoid the need for formal service of process. In the circumstances, Yamaha would at least have a strong argument that, to use American terminology, a holding that it had been effectively served would violate its due process rights, and likely Yamaha would also be able to argue persuasively that the service was not effective under the law of the forum. But to be clear: if the law of the forum authorizes service of process, and if the defendant is in a Convention state that, like Japan, has not objected to service of process by postal channels, then service of process by mail is proper under the Convention.

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