Rawaaj Inc. v. Royal Embassy of Saudi Arabia et al., 2014 ONSC 1473

Rawaaj Inc. v. Royal Embassy of Saudi Arabia et al.

[Indexed as: Rawaaj Inc. v. Royal Embassy of Saudi Arabia]

Ontario Reports

Ontario Superior Court of Justice,

R. Smith J.

March 6, 2014

119 O.R. (3d) 193 | 2014 ONSC 1473

Case Summary

Actions — Bars — State immunity — Plaintiff suing Cultural Bureau of Saudi Arabian embassy for damages for breach of employment contract — Motion judge allowing action to proceed on basis that it fell within commercial activity exception under the State Immunity Act — Leave to appeal granted — Conflicting decisions existing on applicability of commercial exception in employment context — Grant of leave desirable because of importance of principle of state immunity to labour relations in Canada.

The plaintiff sued the defendants for damages for breach of an employment contract. The defendants brought a motion to dismiss the claim on the basis that it was barred by the doctrine of state immunity. The motion judge allowed [page194] the action to proceed, holding that it fell within the commercial activity exception under the State Immunity Act, R.S.C. 1985, c. S-18. The defendants applied for leave to appeal.

Held, the application should be allowed.

There are conflicting decisions on the applicability of the commercial exception in the Act in the employment context. Moreover, because of the importance of the principle of state immunity to labour relations in Canada, it was desirable that leave to appeal be granted.

Canada Labour Code (Re), 1992 54 (SCC), [1992] 2 S.C.R. 50, [1992] S.C.J. No. 49, 91 D.L.R. (4th) 449, 137 N.R. 81, J.E. 92-919, 92 CLLC Â14,025 at 12137, 33 A.C.W.S. (3d) 1132; Greco v. Holy See (State of the Vatican City), [2000] O.J. No. 5293 (S.C.J.)

Statutes referred to

State Immunity Act, R.S.C. 1985, c. S-18 [as am.], ss. 2, 3(1), (2), 5

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 1.04 [as am.], 62.02(2), (4)(a), (b)

APPLICATION for leave to appeal a decision dismissing a motion to dismiss an action.

Sayf Alansr, for plaintiff.

Noëlle Caloren, for defendants.

R. SMITH J.: —

Overview

1The defendants, the Royal Embassy of Saudi Arabia, Saudi Arabian Cultural Bureau and Faisal Mohammad Al-Mohanna Abaalkhail (herein after collectively referred to as the "Cultural Bureau"), have brought a motion seeking leave to appeal the decision of Kershman J. dated December 20, 2013. In his decision, the motion judge allowed the action against the defendants to proceed and rejected the defendants' motion to dismiss his claim on the grounds that the defendants enjoyed diplomatic immunity.

2The defendants argue that leave to appeal should be granted because the motion judge's decision conflicts with other decisions in Ontario relating to state immunity in situations involving claims of alleged breach of contract in the context of employment relationships and labour proceedings. The defendants also submit that it is desirable that leave be granted.

3The defendants further submit that there is good reason to doubt the correctness of the motion judge's decision and, in particular, on the basis that he erred in his application of the test elaborated by the Supreme Court of Canada in Canada Labour Code (Re), 1992 54 (SCC), [1992] 2 S.C.R. 50, [1992] S.C.J. No. 49 [page195] when he held that the commercial activity exception under the State Immunity Act, R.S.C. 1985, c. S-18 (the "SIA") applied. The defendants also state that the matters raised in this appeal are of great importance to the development of the law pertaining to a scope of state of immunity relating to contracts of employment and contacts for services with foreign states in Canada, which interest transcend the interest of the parties.

4The defendants also seek an order extending the time to file a statement of defence to a date no earlier than 20 days from the date of final disposition of the appeal, and that the notice of motion be served substitutionally on the plaintiff by mail and by e-mail to the plaintiff's representative and principle Mr. Sayf Alnasr at rawaajcorp.bell.net.

Facts

5A number of the background facts are taken from the factum of the defendants. The Royal Embassy of Saudi Arabia is established in Canada by the sovereign state of Saudia Arabia to perform embassy and consulate services. The Cultural Bureau is a section of the Royal Embassy of Saudia Arabia, and a department of the Saudia Arabian Government's Ministry of Higher Education. The individual defendant, Faisal Mohamed Al-Mohanna Abaalkhail, is a senior diplomat at the Kingdom of Saudia Arabia and was at all material times the cultural attaché of the Royal Embassy of Saudia Arabia.

6Mr. Sayf Alnasr is the sole shareholder and director of the plaintiff, who the defendants submit was hired by the Cultural Bureau in August of 2011, to perform work of an academic advisor on a personal basis. The plaintiff alleges that Mr. Alnasr was hired to provide services through Rawaaj Inc. and that he provided such services as an independent contractor.

7Two months after it hired Mr. Alnasr, the Cultural Bureau determined that Mr. Alnasr did not have the skills or attitude required to adequately perform the role of academic advisor and terminated his employment. Following the termination, Rawaaj Inc. commenced an action against the defendants for breach of contract on November 30, 2011.

8On December 20, 2013, Kershman J. dismissed the motion brought by the defendants seeking a dismissal of the claim against them, ruling that the role of an academic advisor, whether carried on by the plaintiff's corporation or Mr. Alnasr personally, did not touch on the sovereign affairs of the State of Saudia Arabia. The motion judge held that the dispute between the [page196] parties related to a commercial activity thereby constituting an exception allowed under s. 5 of the SIA.

Plaintiff's Submission of Invalid Service of Motion for Leave to Appeal

9The plaintiff has raised two issues in response to the defendants' motion for leave to appeal the decision of Kershman J. The plaintiff objects to the granting of an extension of time for filing the statement of claim of defence to 20 days from the date of the final disposition of the appeal and also objects to validating the service of the defendants' notice of motion for leave to appeal by ordinary mail and by e-mail on January 3, 2014.

10Kershman J.'s decision was released on December 20, 2013. The plaintiff submits that he was in his office between December 21, 2013 and January 3, 2014 on a daily basis until 5:35 p.m. each day. He submits that the defendants made no attempt to contact him to arrange personal service of the motion for leave to appeal. The plaintiff argues that, because of the Christmas holidays, the seven-day time period for serving the motion for leave to appeal was extended to almost 14 days to effect the service on him. The plaintiff further argues that the defendants' motion for leave to appeal is frivolous.

11The plaintiff seeks an order dismissing the defendants' motion for leave and seeks an order declaring that the defendants' service of the motion for leave to appeal was invalid for delay because they did not respect the seven-day time period and failed to try to make contact to arrange for personal service with the plaintiff. He further seeks an order dismissing the defendants' request to extend the time for service of their statement of defence.

12The motion judge's decision was delivered to the defendants' counsel by e-mail after business hours on December 20, 2013 and received on December 23, 2013. Due to the intervening Christmas holidays and the seven-day period for service of notice for leave to appeal under rule 62.02(2) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, the defendants were unable to serve the plaintiff in accordance with the Rules within the stipulated timeline.

13The affidavit of Claire Desjardins states that the Kilrea bailiff process server was unable to serve the materials upon the plaintiff at its corporate address, being 56061-407 Laurier Avenue West, which is the address contained on the plaintiff's corporation's letterhead. The process server stated that the address refers to a post office box rather than a physical place of business which can be attended at, to drop off and serve documents personally. [page197] Ms. Desjardins further stated that she had communicated on a number of occasions with the plaintiff's principal, Mr. Sayf Alansr, using the e-mail address rawaajcorp@bell.net.

14Claire Desjardins filed an affidavit of service stating that on January 3, 2014, she served the plaintiff with the notice of motion, seeking leave to appeal by sending a copy by regular mail to 56061-407 Laurier Avenue West, Ottawa, ON, K1R 7Z1 and by e-mailing a copy of same to the plaintiff's representative and principal Mr. Sayf Alansr at rawaajcorp@bell.net.

15The motion judge's decision was only received on December 23, 2014 and, given that the motion for leave to appeal was served by e-mail on January 3, 2014, I take judicial notice that law firms and staff are often on holidays during the Christmas period. Therefore, I dismiss the plaintiff's cross-motion for an order dismissing the motion for leave to appeal on the grounds of delay and invalid service of the motion for leave to appeal.

16Further, I grant the motion of the defendants and order that the notice of motion for leave to appeal could be served substitutionally on the plaintiff by mailing a copy to Rawaaj Inc., the plaintiff's corporation, at 56061-407 Laurier Avenue West, Ottawa, ON, K1R 7Z1 by ordinary mail; and by e-mailing a copy to the plaintiff, representative and principal Mr. Sayf Alansr at rawaaj.corp@bell.net. I order that service of the motion for leave to appeal was effective on the date which the notice of motion was e-mailed to Mr. Sayf Alansr at the above e-mail address and that acceptance of service by return mail is not required. To be clear, I grant the defendants' motion validating the service of the notice of motion for leave to appeal as effected by ordinary mail and by e-mail on January 3, 2014.

Adjournment

17In his submissions, the plaintiff argued that if I ruled against his argument on invalid service he sought an adjournment of the motion for leave to appeal to a later date to give him a further opportunity to argue this motion. The plaintiff received the notice of motion for leave to appeal, the supporting materials and sought a dismissal of the leave motion on a technical basis of not being properly served in accordance with the Rules.

18I find that the plaintiff had received actual notice of the motion for leave to appeal and filed substantial material in response including a factum; however, chose to only defend on the inadequacy of service of the motion for leave to appeal. The plaintiff decided not to respond to the defendants' motion for leave to appeal, even though he had received the materials and had time to respond. He should have responded to the merits of [page198] the motion as well as making his objection to the validity of service to ensure a just, expeditious and least expensive determination of the motion as required by rule 1.04.

Disposition of the Plaintiff's Adjournment Request

19I deny the plaintiff's request for an adjournment, which was made at the end of a lengthy motion, because I find he had an opportunity to respond and did not have a valid reason for failing to respond to the merits of the motion for leave to appeal and because granting an adjournment at the end of the motion in these circumstances would not be in accordance with rule 1.04 and would cause necessary expense and delay.

Should Leave to Appeal be Granted?

20Rule 62.02(4)(a) and (b) of the Rules of Civil Procedure states as follows:

Grounds on Which Leave May Be Granted

62.02(4) Leave to appeal shall not be granted unless,

(a) there is a conflicting decision by another judge or court in Ontario or elsewhere on the matter involved in the proposed appeal and it is, in the opinion of the judge hearing the motion, desirable that leave to appeal be granted; or

(b) there appears to the judge hearing the motion good reason to doubt the correctness of the order in question and the proposed appeal involves matters of such importance that, in his or her opinion, leave to appeal should be granted.

21The SIA has three relevant sections in defining the agency of a foreign state, a foreign state and commercial activity. Section 2 of the SIA reads as follows:

In this Act,

"agency of a foreign state" means any legal entity that is an organ of the foreign state but that is separate from the foreign state;

"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;

"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.

22Section 3(1) and (2) of the SIA states as follows:

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.

23Section 5 reads as follows:

5. 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.

Conflicting Decision

24The defendants submit that the court must look for principles that guided the judge's exercise of his discretion to determine whether there are conflicting decisions. An exercise of discretion that leads to a different result because of different circumstances does not meet the requirement of a conflicting decision. Rather, a conflicting decision exists if the motion judge used different principles than those properly applicable to guide the exercise of his or her discretion. In the decision of Canada Labour Code (Re), at para. 22, La Forest J. discussed the applicability of s. 5 of the SIA, which states that "[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."

25In [the] Canada Labour Code (Re) case, the Public Service Alliance of Canada sought certification as bargaining agent for Canadian civilian trades people working for the U.S. Navy at a U.S. base established in Newfoundland, Canada as part of a World War II lease agreement. The Supreme Court held that it was regrettable that sovereign immunity deprived employees of their right to protection of labour relations laws in this case. However, he held that it was a necessary consequence of Canada's commitment to the policy of international comity and reciprocity, and to its commitments under the lease.

26In Canada Labour Code (Re), La Forest J. wrote the decision for the majority and, at para. 22, stated as follows:

This is the provision by which the Board seeks to assert jurisdiction over labour relations at the base. The section, in combination with the definition of "commercial activity" in s. 2, raises two basic questions. First, what is the "nature" of the activity in question -- i.e., does employment at the base constitute commercial activity? Second, are the proceedings in this case -- a union certification application -- "related" to that activity? The two questions are, of course, interrelated, and neither can be answered in absolute terms. [page200] Certain aspects of employment at the base are commercial, but in other respects the employment relationship is infused with sovereign attributes. Accordingly, the certification proceeding affects both the commercial and sovereign aspects of employment at the base . . . In my view, a nexus exists only between the certification proceedings and the sovereign attributes of labour relations at the base. The effect on commercial activity is merely incidental and cannot trigger the application of s. 5 of the State Immunity Act.

(Emphasis added)

27The motion judge relied on the physical location from which the academic advisors of the Cultural Bureau performed their activities as being a relevant factor to decide the issue of state immunity, notwithstanding that their activities were performed at the request of and for and under the authority of the Cultural Bureau. The motion judge also gave minimal effect to the second part of the test set out in Canada Labour Code (Re) and as a result it is difficult to determine the basis on which the motion judge concluded that the reasons for terminating the plaintiff's employment as an academic advisor to the Cultural Bureau did not amount to an interference with the autonomy and sovereignty of the state.

28In Greco v. Holy See (State of the Vatican City), [2000] O.J. No. 5293 (S.C.J.), at para. 6, Charbonneau J. held that:

Underlying this claim is the allegation that the plaintiff was dismissed "without just [cause]". This will necessarily entail an examination of the reasons and the circumstances for the dismissal. It will necessarily have an impact on the right of the defendant state to decide how it manages and deals with its personnel as its consulate. There are sovereign aspects of this activity which are clearly relevant to the proceedings. This is particularly so in the context of the entire allegations in the statement of claim which paints a picture of great unrest and conflict amongst the various members of the consulate staff. The proceeding will therefore have a substantial impact on the sovereign aspect of the employment contract. It will relate to the management of the personnel of the consulate including issues relating to harassment between co-workers, creation and implementation of an anti-harassment policy by the employer, discipline of employees, control and surveillance of employees and generally rules and regulations regulating the work environment and the employees . . . As such, these proceedings would have a significant impact on the sovereign right of the defendant state to control and regulate his own workforce. The case would be in the words of Laforest J. "an unacceptable interference with . . . sovereignty".

(Emphasis added)

Disposition of this Issue

29On the above basis, I am satisfied that the Canada Labour Code (Re) and the Greco decisions constitute conflicting decisions. I further find that because of the importance of the principle of state immunity to labour relations in Canada, it is desirable that leave to appeal be granted. [page201]

Disposition

30Given my findings, there is no need to consider the applicability of the second ground set out in rule 62.02(4)(b) and, for the above reasons, leave to appeal of the decision of Kershman J. dated December 20, 2013 is granted.

Extending Time to File Statement of Defence

31Given that I have granted leave to appeal of the decision of Kershman J., I grant the order extending the time for the defendants to file a statement of defence to a date no later than 20 days following the date of the final disposition of the appeal of the decision of Kershman J. dated December 20, 2013.