COURT FILE NO: CV-11-419288
DATE: 20130823
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Ewart F. Brown and Derrick v. Burgess
Plaintiffs
- and -
Sam Spagnuolo and Lawrence Brady
Defendants
Charles F. Scott & Christine Muir,
for the Plaintiffs (Responding Parties)
Jameel Madhany,
for the Defendant Spagnuolo
Aaron Dantowitz,
for the Defendant Lawrence Brady (Moving Party)
HEARD: May 31, 2013
Reasons for Decision
FIRESTONE J.:
[1] The defendant, Lawrence Brady (“Brady”), brings this motion pursuant to rules 21.01(3)(a) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, and section 106 of the Courts of Justice Act, R.S.O. 1990, c. C.43, for an order dismissing or, in the alternative, staying the action against him on the following grounds:
(a) The State Immunity Act, R.S.C. 1985, c. S-18, provides him with immunity as an employee of the Government of Bermuda acting in the course of employment.
(b) This court lacks jurisdiction simpliciter, or, in the alternative, is not the convenient forum (forum non conveniens) for this action to proceed.
The Parties
[2] The plaintiff, Ewart Brown (“Brown”), was at all material times a resident and the Premier of Bermuda. The plaintiff, Derrick Burgess (“Burgess”), was at all material times a resident and the Minister of Works and Engineering of Bermuda. Together, Brown and Burgess are the responding parties on this motion.
[3] The defendant, Brady, was at all material times a resident and chief architect of the Ministry of Works and Engineering of Bermuda. He brings this motion for a dismissal or stay of the action against him.
[4] The defendant, Sam Spagnuolo (“Spagnuolo”), is a resident of Toronto, Ontario. At all material times he was an architect with the architecture firm Carruthers Shaw & Partners (“CS&P”) in Toronto. Spagnuolo filed a statement of defence and takes no position on this motion.
The Action
[5] The plaintiffs, Brown and Burgess, bring a claim of conspiracy against Brady and Spagnuolo. They seek general damages as well as aggravated and/or punitive damages. The main action centers around a construction project for a new courthouse in Hamilton, Bermuda.
[6] The plaintiffs allege Brady and Spagnuolo conspired to “plant” two false cheques in Government of Bermuda files to defame them. These cheques were allegedly altered by naming the plaintiffs in their individual capacity as payees to implicate the plaintiffs in a “kickback” scheme.
[7] In 2007, tenders were called for developing and building a new courthouse in Hamilton, Bermuda. The original architect for this project was CS&P with whom Spagnuolo was employed.
[8] The original construction company on this project was Landmark Lisgar Construction (“LLC”), a Bermudian-Canadian joint venture. During the course of construction, the Canadian partner ceased participating in the project. The construction contract was taken over by the newly formed LLC Bermuda Ltd. (“LLC Bermuda”), the remaining Bermudian partner.
[9] CS&P administered the construction contract for the project. In this administrative capacity, CS&P approved and reimbursed payments that LLC, and later LLC Bermuda, made to its sub-contractors. The payment approval process required LLC to provide CS&P with draw-down packages (“draw-downs”). Each draw-down contained supporting documentation for the payments submitted, including copies of cheques paid to sub-contractors.
[10] In 2008, CS&P was terminated from the construction project by the Government of Bermuda after it began refusing payment approvals submitted by LLC, and later LLC Bermuda.
[11] In late 2008 and early 2009, copies of two cheques made payable to Brown and Burgess, respectively, were discovered in the construction project files of the Ministry of Works and Engineering (“Ministry”). The plaintiffs plead that these cheques were altered copies of legitimate cheques that were drawn on the bank account of LLC for payment to its sub-contractors regarding the construction project.
[12] The plaintiffs allege the altered copies of the cheques were falsely manipulated, apparently digitally, such that the payees on the cheques appeared as Brown for the amount of $14,780.00 and Burgess for the amount of $10,000.00, respectively.
[13] The plaintiffs plead that on or about December 12, 2008, before the discovery of such altered cheques, Brady received an electronic copy of the construction company’s draw-downs from Spagnuolo. The altered copies of the construction company’s cheques were included in this electronic file amongst other supporting documentation for reimbursements.
[14] The plaintiffs allege the electronic file sent by Spagnuolo to Brady differed from the hardcopy that was in possession of the Ministry. The hardcopy contained copies of the original, unaltered, legitimate cheques payable to sub-contractors. The Ministry’s construction project file, therefore, contained both the legitimate original copies and altered copies of these cheques.
[15] The plaintiffs claim that altered copies of the cheques payable to Brown and Burgess, respectively, began circulating around the Ministry when an audit manager with the office of the Auditor General of Bermuda attended at Brady’s office the same day Spagnuolo electronically sent the false cheques to Brady.
[16] According to the plaintiffs, Spagnuolo or someone directed by Spagnuolo “tipped off” the Auditor General regarding the cheques. Thereafter, other members of the Bermudian government learned of and saw the altered cheques.
[17] The plaintiffs allege that Brady and Spagnuolo agreed on a coordinated plan, the predominant purpose of which was to injure the plaintiffs by creating and disseminating cheques made payable to the plaintiffs to make it appear as though the plaintiffs were involved in a “kickback” scheme. They allege Spagnuolo created the false cheques and Brady disseminated the false cheques by placing them in the files of the Ministry and providing them to the office of the Auditor General.
[18] The plaintiffs further allege that in mid-January 2009, a Bermudian newspaper published an article suggesting two Cabinet Ministers had received cheques from construction executives involved in the courthouse construction project.
Position of the Parties
[19] Brady argues that this court does not have jurisdiction over the claim against him because it relates to alleged acts undertaken in the course of his employment with the government of a foreign state, namely Bermuda. He relies on the provisions of the State Immunity Act and argues the “commercial activity” exception in the Act does not apply.
[20] He further argues that the action against him has no real and substantial connection to Ontario since the plaintiffs have not satisfied the onus of establishing that one of the presumptive connecting factors set forth in Club Resorts Ltd. v. Van Breda, 2012 SCC 17, [2012] 1 S.C.R. 572, at para. 90, exists.
[21] Even if this court determines it has jurisdiction over the claim as against Brady, the court should, he argues, nevertheless decline to exercise its jurisdiction because Bermuda is clearly a more convenient forum.
[22] The responding parties argue that Brady’s conduct is not immune from suit under the Act. They argue the Act is inapplicable given that the issues in this action concern a private dispute between private citizens.
[23] To enjoy the benefit of sovereign immunity, according to the respondents, a foreign official must be acting pursuant to and in the scope of their official duties. In this case, the conduct alleged against Brady is not public in nature or a public act of a foreign state. They argue that while Brady’s employment with the government as chief architect provided him with the opportunity to damage the reputation of Bermudian government officials, this should not be confused with the private nature of the acts alleged against him that fall outside the scope of his duties.
[24] In the alternative, the responding parties argue that the “commercial activity” exception in the Act applies in this case. The nature of the underlying state activity is the commercial interaction between a state official and a Canadian contractor. There was a contract between the Bermudian government and a Canadian architecture firm for the firm’s design and construction project-related services.
[25] The responding parties further argue that Brady has attorned to the court’s jurisdiction.
[26] The responding parties submit that at least one of the presumptive connecting factors has been pleaded, namely, “the tort was committed in the province.” The plaintiffs plead that the tort of conspiracy was committed in the province of Ontario.
[27] Finally, they submit that Ontario is the convenient forum for this action. Bermuda is not in a better position to dispose of the dispute fairly and efficiently.
The [State Immunity Act](https://www.canlii.org/en/ca/laws/stat/rsc-1985-c-s-18/latest/rsc-1985-c-s-18.html)
[28] Section 3 of the Act states:
State Immunity
3.(1) Except as provided by this Act, a foreign state is immune from the jurisdiction of any court in Canada.
Court to give effect to immunity
(2) In any proceedings before a court, the court shall give effect to the immunity conferred on a foreign state by subsection (1) notwithstanding that the state has failed to take any step in the proceedings.
“Foreign state” is defined in section 2 of the Act as follows:
“foreign state” includes
(a) any sovereign or other head of the foreign state or of any political subdivision of the foreign state while acting as such in a public capacity,
(b) any government of the foreign state or of any political subdivision of the foreign state, including any of its departments, and any agency of the foreign state, and
(c) any political subdivision of the foreign state
[29] In Jaffe v. Miller (1993), 1993 CanLII 8468 (ON CA), 13 O.R. (3d) 745 (C.A.), the Court of Appeal discusses the impact and effect of the Act on the common law doctrine of sovereign immunity.
[30] The court highlights the principle that sovereign immunity at common law was not absolute and has been modified over time resulting in four exceptions to such immunity. One of these exceptions was “commercial transactions entered into with a trader in the host state”: see Jaffe, at p. 752, citing Thai-Europe Tapioca Service Ltd. v. Government of Pakistan, [1975] 3 All E.R. 961 (C.A.), at pp. 965-66.
[31] In Jaffe, at p. 752, the court confirms the notion that sovereign immunity is not absolute is of recent origin. At common law there has been a shift from this notion to what is referred to as the “restrictive principle of sovereign immunity.”
[32] In Re Canada Labour Code, 1992 CanLII 54 (SCC), [1992] 2 S.C.R. 50, at p. 71, the Supreme Court of Canada refers to the decision of I Congreso del Partido, [1983] 1 A.C. 244 (H.L.), where the new approach to sovereign immunity is set forth as follows:
The relevant exception, or limitation, which has been engrafted upon the principle of immunity of states, under the so called “restrictive theory,” arises from the willingness of states to enter into commercial or other private law, transactions with individuals. It appears to have two main foundations: (a) It is necessary in the interest of justice to individuals having such transactions with states to allow them to bring such transactions before the courts. (b) To require a state to answer a claim based upon such transactions does not involve a challenge to or inquiry into any act of sovereignty or governmental act of that state. It is, in accepted phrases, neither a threat to the dignity of that state, nor any interference with its sovereign functions.
[33] Jaffe confirms that the Act adopts such a restrictive approach. At p. 755, the court states in part as follows:
The State Immunity Act thus continues the fundamental extension of immunity to a foreign sovereign at the same time as acknowledging such immunity, in particular contexts, is to be recognized in a restricted rather than absolute fashion.
[34] When functionaries are acting within the scope of their official duties they come within the definition of “foreign state.” The issue in this case is whether the alleged acts of Brady were within the scope of his duties as a functionary of Bermuda. If so, he is entitled to state immunity subject to the commercial activity exception. In my view, Brady’s alleged acts were within the scope of his duties as a functionary of Bermuda.
[35] The plaintiffs plead that Brady disseminated false cheques by placing them in files of the Ministry and providing them to the office of the Auditor General. These alleged actions, if true, were within the scope of his duties as a functionary of the government of Bermuda. In Jaffe, the conduct complained of by the plaintiff was illegal and malicious, in clear excess of the functionaries’ authority. The conduct did, however, relate to the functionaries’ normal duties and could not have been committed if they had not been functionaries. The same reasoning applies in this case.
[36] I agree with Brady’s position that his acts forming the basis of the plaintiffs’ claim were associated with his official duties. Brady points out the specific alleged acts involving him include the following:
In his capacity as chief architect of the Ministry, Brady received electronic copies of LLC’s draw-downs from Spagnuolo. The draw-downs included altered copies of two LLC cheques.
An audit manager from the office of the Auditor General of Bermuda attended at Brady’s office at the Ministry and downloaded copies of LLC’s draw-downs.
Brady informed the permanent secretary about the cheques and brought him a file containing copies of them.
Brady placed the cheques into the files of the Ministry and ensured their provision to the office of the Auditor General. He “tipped off” the Auditor General about the existence of the cheques to ensure the cheques were discovered in a public manner and their existence entered the public discourse.
[37] In Jaffe, the court holds that state immunity applies even where the allegations in the preceding involve illegal conduct as is the case here. Brady’s alleged illegal and malicious acts are not, in my view, sufficient to remove them from the scope of immunity under the Act.
The Commercial Activity Exception
[38] Section 5 of the Act states:
- A foreign state is not immune from the jurisdiction of a court in any proceedings that relate to any commercial activity of the foreign state.
[39] “Commercial activity” is defined in section 2 of the Act as follows:
“commercial activity” means any particular transaction, act or conduct or any regular course of conduct that by reason of its nature is of a commercial character
[40] I find that in this case the commercial activity exception applies and Brady is not immune from suit.
[41] The Supreme Court of Canada in Re Canada Labour Code confirms that in determining whether the commercial activity exception applies a two-stage analysis is undertaken. First, the court determines whether the activity in question is a “commercial activity.” It does this by looking primarily at the nature of the activity; the purpose of the activity is also relevant. If the activity is found to be a commercial activity, the court then determines whether the proceedings are “related” to that commercial activity. While any activity engaged in by a state can be said to have a sovereign aspect, the court’s job at this second stage is to determine whether the proceedings impact on the commercial aspect, rather than the sovereign aspect of the activity.
[42] I agree with the respondents’ position that the nature of the impugned acts are commercial in nature relating to a construction project and, as such, fall within the section 5 exception. The activity in question is Brady’s dissemination of allegedly altered cheques in the context of a payment approval process directly related to the courthouse construction project in Bermuda.
[43] As stated in Bouzari v. Islamic Republic of Iran (2004), 2004 CanLII 871 (ON CA), 71 O.R. (3d) 675 (C.A.), at para. 51, section 5 of the Act requires the acts to which the proceedings relate be commercial in nature. It is not enough that the proceedings relate to acts which, in turn, relate to commercial activity of the foreign state.
[44] In the matter before me, the acts to which these proceedings relate are the creation and dissemination of the false cheques. These acts occurred in the context of commercial activity, namely, a payment approval process related to a construction project.
[45] Brady’s alleged acts for which relief is sought are of a “commercial character” given he was carrying out a task related to a commercial activity of his government office. Alleged acts that may be illegal or malicious do not change the commercial nature of those acts. The plaintiffs’ tortious allegations relate directly to commercial activity.
Has Brady Attorned to the Jurisdiction?
[46] The respondents assert that Brady attorned to the jurisdiction of this court by engaging on the merits. I disagree.
[47] The Ontario Court of Appeal in Wolfe v. Wyeth, 2011 ONCA 347, 332 D.L.R. (4th) 157, at para. 44, states as follows:
I agree with the British Colombia Court of Appeal in Mid-Ohio Imported Car Co. v. Tri K Investments Ltd. (1995), 1995 CanLII 2084 (BC CA), 129 D.L.R. (4th) 181, that when a party to an action appears in court and goes beyond challenging the jurisdiction of the court based on jurisdiction simpliciter and forum non conveniens, the party will be regarded as appearing voluntarily, thus giving the court consent-based jurisdiction.
[48] The totality of the evidence in this case is that Brady has not gone beyond challenging the jurisdiction of this court and, therefore, has not attorned to the jurisdiction.
[49] At the cross-examination on his affidavit, sworn June 8, 2011, in support of this motion, Brady’s counsel stated:
I haven’t objected so far, but I just want to remind you this is not an examination for discovery, we’re here on a motion regarding the jurisdiction of the Ontario Court and your questions seem to me to be tending towards the merits of the action. I’m going to allow Mr. Brady to answer that last question but just be advised that it’s subject to our position as I’ve stated that this motion is limited to the issues of jurisdiction.
[50] Counsel made his intentions known that the cross-examination related to the jurisdiction motion only and not the merits of the action.
[51] Brady’s challenge of the plaintiffs’ allegations in the context of a jurisdiction motion does not constitute attornment to the jurisdiction. A defendant who challenges jurisdiction may put allegations of fact in issue: see Ontario v. Rothmans et. al., 2012 ONSC 22, 28 C.P.C. (7th) 68, at para. 36. That is what has occurred here.
[52] In Sauer v. Canada (Attorney General) (2006), 2006 CanLII 74 (ON SC), 79 O.R. (3d) 19 (S.C.), at para. 88, Winkler J. states that “a foreign defendant is precluded from contemporaneously disputing jurisdiction while at the same time engaging jurisdiction by seeking a ruling in its favour on the merits.”
[53] In M.J. Jones Inc. v. Kingsway General Insurance Co. (2004), 2004 CanLII 6211 (ON CA), 72 O.R. (3d) 68 (C.A.), at para. 20, the Court of Appeal states that “[a] foreign defendant is also precluded from contemporaneously disputing jurisdiction simpliciter and defending on the merits.”
[54] In order to engage in the merits, the defendant must do more than simply mention a fact in his or her favour or make a general statement that the case against him or her is “without merit.” Brady has not sought a ruling in his favor. Brady’s Notice of Motion specifically states that his challenge is “without waiver of or attornment to” the jurisdiction of Ontario.
Jurisdictional Analysis
[55] In Van Breda, the Supreme Court of Canada outlines the approach to determine whether a domestic court should assume jurisdiction over a foreign defendant. The court reaffirmed that a two-part test applies: (1) jurisdiction simpliciter and (2) forum non conveniens. Jurisdiction is a legal issue. Forum non conveniens is discretionary.
[56] The approach to be taken is as follows:
(a) The court is to inquire whether presumptive connecting factors exist between the litigation and the forum. The plaintiff bears the onus of establishing that one or more presumptive connecting factor exist;
(b) The court must decide whether the presumption of jurisdiction resulting from the connecting factors can be rebutted. The defendant bears the onus of rebutting any presumptive connecting factor;
(c) If a presumptive connecting factor exists and has not been rebutted, the court is to assume jurisdiction subject to the application of forum non conveniens; and
(d) If a presumptive connecting factor does not exist or where it has been rebutted, the court shall stay or dismiss the action.
Jurisdiction Simpliciter - The “Real and Substantial Connection” Test
[57] I must first determine whether any one of the four presumptive connecting factors exists between the action against Brady and the forum. This would prima facie entitle this court to assume jurisdiction over the dispute. The factors, set out in Van Breda, at para. 90, are as follows:
(a) the defendant is domiciled or resident in the province;
(b) the defendant carries on business in the province;
(c) the tort was committed in the province; and
(d) a contract connected with the dispute was made in the province.
Was the Tort Committed in the Province?
[58] The plaintiffs plead only one connecting factor, namely the tort was committed in the province of Ontario. I will, therefore, address this connecting factor first.
[59] The plaintiffs argue that Spagnuolo and Brady conspired to create and disseminate false cheques and that significant elements of such conspiracy took place in Toronto.
[60] The plaintiff relies on Brady’s cross-examination evidence where he testified that he had a relationship with Spagnuolo, traveled to Toronto to meet with Spagnuolo about the construction project, and made phone calls to him in Toronto respecting the construction project.
[61] A conspiracy is committed where the harm flowing from the conspiracy is suffered. In Ontario (Attorney General) v. Rothmans Inc., 2013 ONCA 353, the court, at para. 37, states in part as follows:
It is a breach of a common law duty or obligation to engage in a civil conspiracy that causes harm to others. Moreover, it is well established that a conspiracy occurs in the jurisdiction where the harm is suffered regardless of where the wrongful conduct occurred: British Columbia v. Imperial Tobacco Canada Ltd., 2006 BCCA 398, 56 B.C.L.R. (4th) 263 at para. 43; Vitapharm Canada Ltd. v. F. Hoffman-La Roche Ltd. (2002), 20 C.P.C. (5th) 351 (Ont. S.C.).
[62] The tort of defamation occurs where a defamatory statement is published by a third party. In Breeden v. Black, 2012 SCC 19, [2012] 1 S.C.R. 666, the court, at para. 20, states in part as follows:
It is well established in Canadian law that the tort of defamation occurs upon publication of a defamatory statement to a third-party. In this case, publication occurred when the impugned statements were read, downloaded and republished in Ontario by three newspapers.
[63] The evidence before me is that the alleged publication of the altered cheques took place in Bermuda. As well, the harm suffered by the plaintiffs took place in Bermuda. I, therefore, reject the submission that this court should assume jurisdiction over the dispute on the basis of a tort committed within the province.
Does Brady Carry on Business in the Province?
[64] The plaintiffs argue that Brady’s cross-examination establishes he regularly traveled to Toronto to meet with Spagnuolo regarding the construction project. More specifically, the cross-examination shows Brady accompanied the permanent secretary to Ontario on approximately two occasions related to the construction project in 2007 and in 2008.
[65] The following comment by the Supreme Court of Canada in Van Breda, at para. 87, is instructive:
Carrying on business in the jurisdiction may also be considered an appropriate connecting factor. But considering it to be one may raise more difficult issues. Resolving those issues may require some caution in order to avoid creating what would amount to forms of universal jurisdiction in respect of tort claims arising out of certain categories of business or commercial activity. Active advertising in the jurisdiction or, for example, the fact that a Web site can be accessed from the jurisdiction would not suffice to establish that the defendant is carrying on business there. The notion of carrying on business requires some form of actual, not only virtual, presence in the jurisdiction, such as maintaining an office there or regularly visiting the territory of the particular jurisdiction. [Emphasis added.]
Based on the evidence before me it cannot be said that Brady regularly visited Ontario for the construction project in the manner contemplated by the Supreme Court of Canada in Van Breda. His business regarding the construction project was mainly conducted in Bermuda.
[66] I, therefore, reject that this court should assume jurisdiction over the dispute on the basis of Brady carrying on business in the province.
Is Brady Domiciled in Ontario?
[67] Brady is domiciled in Bermuda, not Ontario.
Was a Contract Connected with the Dispute made in the Province?
[68] There is no evidence before me that a contract connected with this dispute was made in Ontario.
Presence of the co-defendant in Ontario
[69] The residency of the co-defendant, Spagnuolo, in Ontario is not on its own a presumptive connecting factor sufficient to establish a real and substantial connection with Ontario, and the residency of Spagnuolo is not a reliable indicator of jurisdiction at this first stage of the jurisdictional analysis.
[70] In Van Breda, the court does not expressly give presumptive effect to the factor set out in rule 17.02(o) “Necessary or Proper Party.” Rather, the court summarizes the Ontario Court of Appeal’s comments regarding rule 17.02(o) in the context of jurisdiction simpliciter at para. 55:
Sharpe J.A. declined to give presumptive effect to the factors set out in rules 17.02(h) (damage sustained in Ontario) and 17.02(o) (necessary or proper party). Neither of these factors is included in the CJPTA. Nor have they gained broad acceptance as reliable indicators of jurisdiction.
Although a foreign defendant may be a “necessary or proper party” to a proceeding, that does not mean there is a real and substantial connection over that defendant.
Conclusion
[71] After considering all of the presumptive connecting factors for taking jurisdiction in this dispute and the residency of the co-defendant, I find the respondents have not established presumptive jurisdiction in Ontario. Having therefore found the action against Brady lacks a real and substantial connection with Ontario and, in turn, Ontario lacks jurisdiction simpliciter regarding the action against Brady, I need not address forum non conveniens.
Disposition
[72] For the reasons set forth above, the action as against the defendant, Brady, is dismissed.
[73] I wish to thank counsel for their written and oral submissions, which were exceptional and of great assistance to the court.
[74] If the parties cannot agree on costs, written submissions with a costs outline totaling no more than three pages may be submitted by the defendant, Brady, within 15 days, and submitted by the plaintiffs, 10 days thereafter.
FIRESTONE, J.
DATE: August 23, 2013
COURT FILE NO: CV-11-419288
DATE: 20130823
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Ewart F. Brown and Derrick v. Burgess
Plaintiffs
- and -
Sam Spagnuolo and Lawrence Brady
Defendants
JUDGMENT
FIRESTONE J.
Released: August 23, 2013