ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CV-13-113027

DATE: 20140409

BETWEEN:

RYAN KLEIN

Plaintiff

– and –

HANDRA TRAVEL SERVICES LTD. carrying on business under the firm name and style HANDA TRAVEL GROUP, AIR CANADA VACATIONS and OCCIDENTAL HOTELS & RESORTS

Defendants

B. Greenberg, for the Plaintiff

R. Clayton, for the Defendant Occidental Hotel and Resorts

HEARD: March 20, 2014

HEALEY, J.

Nature of the Motion

[1] At issue in these motions is the validity of service of the Statement of Claim on the defendant named in the claim as Occidental Hotels & Resorts (“Occidental”). Occidental seeks an order setting aside the plaintiff’s purported service, arguing that it is not valid service authorized by the Rules of Civil Procedure. The plaintiff, by cross-motion, seeks an order declaring that Occidental was properly served or, in the alternative, an order validating service of the claim.

The Facts

[2] The claim seeks damages from Occidental as a result of an accident occurring to the plaintiff at the Occidental Grand Flamenco Punta Cana Hotel, located in the Dominican Republic. The claim was issued on January 31, 2013. It was purportedly served on Occidental on June 10, 2013 by leaving a true copy with the receptionist at the location of 2 Bloor Street West, Suite 2601 in Toronto, Ontario. The plaintiff asserts that this is the address of Occidental’s place of business.

[3] Occidental argues that the location at which the claim was “served” is the business address of Vox International Inc./Vox Travel Management (“Vox”), a corporation which it says is not Occidental’s agent. Vox, it is argued, is an Ontario-based corporation that merely provides Occidental with marketing services in Ontario. Occidental is a foreign corporation headquartered in Spain, and its counsel argues that it does not have offices in Ontario, nor does it carry on business in Ontario. The receptionist with whom the claim was left is employed by Vox, not Occidental.

[4] The corporate structure is Occidental is complex. The corporation named Occidental Group, which has its headquarters in Spain, is a conglomerate of separately incorporated entities that facilitates the managing and marketing of resort properties. It was submitted by Occidental’s counsel that, even at the time of argument of this motion, her client did not know the ownership structure of the hotel named in the claim, as Occidental Group has different ownership arrangements with hotels worldwide.

[5] On January 1, 2005 Vox and a member of the Occidental Group, Allegro Resorts Marketing Corporation, entered into a sales and marketing agreement (the “marketing agreement”). That agreement is still in effect. Gerlinde Perara, who is vice-president of client services at Vox, provided evidence that Vox’s sole role as Occidental Group’s advertising contractor in Ontario is to help to execute the marketing agreements entered into between Occidental Group and the Ontario tour operators, by promoting and educating the Ontario travel trade on Occidental Group’s hotels. She also deposed that Vox at no time has been an officer, director, agent or partner of Occidental, and at no time did it have the authority to enter into binding contracts on behalf of Occidental.

[6] An affidavit for this motion was not forthcoming from any officer or director of Occidental. Its primary evidence comes through Gerlinde Perara, who claims that Vox is not the agent of Occidental. For a company purportedly only involved with Occidental to the extent of promoting and educating tour operators and travel agents for the purpose of persuading them to buy Occidental’s hotel rooms, Ms. Perara has within her direct knowledge a significant amount of information about Occidental. This knowledge is apparently all as a result, as she deposes, of Vox being a party to the marketing agreement. According to her affidavit, she had direct knowledge:

1. Of the corporate structure of Occidental Group, and its various members, and the fact that those member corporations are incorporated in various jurisdictions worldwide;

2. That the entity referred to in the claim as Occidental Hotels & Resorts is not a legal entity;

3. That Occidental Group has different ownership arrangements with hotels worldwide;

4. That Occidental Group does not have a business presence in Ontario;

5. That Occidental Group offers hotel accommodation to Ontario residents through its website; and

6. That Occidental Group sells its hotel rooms in bulk to various tour operators worldwide.

[7] Again, this a significant amount of information about a corporation with which Vox is said to have a very narrow marketing relationship.

[8] In addition to that evidence, which accords with the plaintiff’s submission that Vox does represent the business presence of Occidental in Ontario, is the following:

i) By news release dated August 31, 2002, Occidental announced the opening of its Canadian sales and marketing office, which office was responsible for “all sales and marketing efforts including trade and consumer show participation, tour operator liaison and negotiation, group and incentive sales, general administration and all related trade and consumer public relation activities for Occidental Allegro Hotels & Resorts”;

ii) The news release stated that Vox had responsibilities for management of Occidental’s business affairs in Canada;

iii) On January 17, 2012, Occidental’s website indicated that its Canadian office was located at 2 Bloor Street West, Suite 2601, Toronto, Ontario;

iv) The plaintiff’s lawyer forwarded numerous correspondence to Occidental at its Canadian office at the address indicated above during the period May 9, 2011 to November 14, 2012, none of which was returned by Canada Post;

v) An internet search conducted by the plaintiff’s lawyers on February 10, 2014 indicated that Occidental was then located at 2 Bloor Street West, Toronto, Ontario and maintained a phone number for its Toronto office, which was the phone number indicated in the press release dated August 31, 2002; and

vi) A telephone call placed to Occidental’s telephone number as indicated in the internet search conducted on February 10, 2014 resulted in an automated answer, identifying the number as that of the sales and marketing offices of Occidental Hotels & Resorts.

[9] The marketing agreement, in which Vox is referred as the “Marketer”, offers further evidence. Article 19 of the marketing agreement provides:

In the performance of its duties under this Agreement, Marketer shall act solely as an independent contractor. Nothing herein shall constitute or be construed to be or create a partnership or joint venture between Occidental and Marketer, or be construed to appoint or constitute Marketer as an agent of Occidental for any purpose, except as otherwise provided herein. It is expressly covenanted that this agreement is no more than an agreement for the rendering of services by Marketer in the marketing and promotion of the Hotels in the Territory. [Emphasis added]

[10] The required activities of Vox are outlined throughout the marketing agreement. However, certain of the articles address the form of representation to be carried out by Vox. These include Article 1, which requires that the Marketer “diligently represent and market Occidental and the Hotels, and promote the sale of packages for stays at the Hotels to all key segments of the travel industry…”. In Article 4.1, entitled “Services”, under a subheading “Representation at Exhibition and Travel Trade Shows” can be found the following:

Marketer will represent Occidental at all such trade shows, events and promotions in which it participates… and will represent Occidental at such tour operator shows, events and promotions which Occidental and Marketer mutually determine to be beneficial to the Hotels.

Finally, under Article 8.2, entitled “Non-Competition”, the following is stated:

Marketer will not act as agent or representative within the Territory on behalf of any other hotel or hotel chain operating in the all-inclusive or leisure segment within any one of Occidental’s destinations without prior written approval of Occidental.

[11] There is no dispute that the claim has come to the attention to Occidental through its counsel.

Issues

[12] The issues to be decided on this motion are:

i. Does the plaintiff’s service of the Statement of Claim on Vox constitute effective service on Occidental?;

ii. If service was not effected on Occidental in accordance with the Rules, should the service nonetheless be validated.

The Law

[13] As an originating process, the Statement of Claim was to be served personally in accordance with Rule 16.01. In the case of a corporation such as Occidental, the claim is to be served in accordance with Rule 16.02(1), by leaving a copy of the document with an officer, director or agent of the corporation, or with a person at any place of business of the corporation who appears to be in control or management of the place of business. Pursuant to Rule 16.01(2)(e), a document shall be personally served on a person outside Ontario who carries on business in Ontario by leaving a copy of the document with anyone carrying on business in Ontario for the person.

[14] The question to be determined is whether the services performed by Vox for Occidental constitutes the carrying on of any Occidental’s business in Ontario.

[15] Canada Life Assurance Co. v. Canadian Imperial Bank of Commerce [“Canada Life”] (1974), CarswellOnt 887 (Ont. C.A.) established a three-part test to determine whether a corporation is carrying on business in the province of Ontario. The elements of the test are:

a. has the corporation carried on business in the jurisdiction for a sufficiently substantial period of time;

b. has the corporation’s acts in carrying on business been done at a fixed place of business; and

c. is the corporation present in the jurisdiction by a person who carries on business for the corporation in the jurisdiction.

[16] The evidence shows that Occidental made an announcement in 2002, through Vox, that it was opening a Canadian sales and marketing office. The evidence is that this office exists at 2 Bloor Street, as shown on Occidental’s own website, an address from which mail has not been returned or redirected, and at which Occidental maintains a telephone number. Accordingly, I find that the first two parts of the test have been established.

[17] The crucial question is whether Occidental is present in Ontario as a result of agency relationship with Vox. Occidental relies on Central Trust Co. of China et al. v. Dolphin Steamship Co. Ltd. [“Dolphin Steamship”], 1950 225 (BC CA), [1951] 1 D.L.R. 19 (B.C.C.A.) and Canada Life as examples of factual situations where the courts have concluded that the relationship between the local agent and the foreign corporation did not demonstrate a sufficient link to allow service to be effected on the local entity. In Dolphin Steamship, the defendant had its head office in Quebec and operated a steamship. The defendant appointed a Vancouver company as its agent. While it docked in Vancouver the agent provided various services, including taking part in negotiations for the conversion of the ship from coal to oil-burning, guaranteeing the defendant’s accounts for coal, arranging for crew members and officers, making arrangements with customs authorities and disbursing funds and paying bills on behalf of the defendant, to mention some of the services. The court held that these acts did not constitute sufficient proof that the defendant was carrying on business in Canada. At paragraph 45 of the decision, Sidney Smith, J.A., indicated that the agent did not carry on the defendant’s business, but merely made it possible for the defendant to carry on its own business. He continued at paragraph 46 as follows:

The case of Droeske v. Champlain Coach Lines Inc., 1939 104 (ON CA), [1939], 4 D.L.R. 210, O.R. 560, 50 C.R.T.C. 248, is a case where the Rule is properly applied. There the defendant was a foreign bus company and the agent who was served was employed to sell tickets to customers. These the agent naturally sold without reference back to the principal, on its own responsibility. That was held to show that the agent was carrying on the business of the defendant in Ontario. I respectfully agree with this test. On the same reasoning, where the agent within the Province cannot make the decisions, but must refer them to the principal outside, then it seems to me equally clear that the mind of the corporation is outside, and the corporation is in no sense within the Province. The agent in no proper sense “transacts or carries on any of the business of or any business for” the corporate principal.

[18] In Canada Life, at para. 33, the judgment of Sidney Smith, J.A. in Dolphin Steamship was affirmed as being correct. Gale, C.J.O. writing for the court, stated at para. 34 that:

…the cases generally suggest that this greater breath [sic] is more apparent than real, for, with the exception of the Ingersoll case, they are unanimous in the view that “agent” means, as in England, “[one] who transacts or carries on here…some part of the business which the corporation profess[es] to do…”. Further, as noted above, it seems clear that the “business” carried on by the agent must be an “integral part” of the corporation’s business:

Droeske et al. v. Champlain Coach Lines Inc., supra; it will not suffice if it is something merely “incidental” to a business carried on and transacted elsewhere: Appel v. Anchor Ins. & Investment Corp. Ltd., supra. Finally, the person served should be one “notice to whom would be notice to the corporation, or whose duties would cast it upon him to bring it to their notice”: Murphy v. Phoenix Bridge Co., supra, at p. 500.

[19] Occidental also relies on Haufler (Litigation Guardian of) v. Hotel Riu Palace Cabo San Lucas, 2013 ONSC 6044 (S.C.J.). Quigley, J. was faced with a different issue in that case, which was whether to stay an action on the basis that the court lacked jurisdiction. In the case before this court, Occidental has not, to date, challenged the jurisdiction of the Ontario court, although its counsel indicates that it intends to do so. However, Haufler is useful in that it addresses one of the four factors outlined by the Supreme Court of Canada in Club Resorts Limited v. Van Breda, 2012 SCC 17, 2012 S.C.C. 17, [2012] 1 S.C.R. 572 that are required to be established before a Canadian court may assume jurisdiction over a foreign defendant. That single factor is whether the foreign defendant carries on business in the jurisdiction of the court, which is the same issue raised by the present motion.

[20] At paragraph 33 of Haufler, Quigley, J. referenced the comment of Justice Label in Van Breda, that “[t]he 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”. In the case before me, Occidental has advertised to the public that it has an address in Ontario, being where service occurred, and that that office is staffed by its agent in the form of Vox.

[21] It is clear from Van Breda that advertising in the local jurisdiction cannot alone constitute the carrying on of business sufficient to establish the “carrying on business” test. But Occidental does not just advertise here; it has a contract with an Ontario-based corporation for the purpose of having Vox promote what is at the core of Occidental’s business – the sale of hotel and resort accommodation.

[22] I am satisfied on the evidence that the business carried on by Vox is integral to Occidental’s business, and that it has represented Occidental’s business interests in Ontario for a lengthy period of time. In this respect, it is distinguishable from the form of relationship between foreign corporation and agent described in both Dolphin Steamship and Canada Life. The case is more akin to Droeske, referred to in the passage from Dolphin Steamship cited above, because Vox is transacting business for Occidental that occurs in Ontario. The description of the services provided by Vox on behalf of Occidental in the marketing agreement is extensive, and includes that “Marketer will be responsible of (sic) the last-minute sales for the Territory through both tour-operators and direct sales channels”.

[23] Additionally, the wording of marketing agreement strongly suggests that, although Vox is referred to as an independent contractor, it acts as Occidental’s agent at all trade shows etc. by being authorized to represent Occidental’s interests.

[24] Accordingly, I find that Occidental does carry on business in Ontario and that the claim was validly served at the business address in question, both because that is the address at which Occidental carries on business in Ontario, and because it is the corporate address of Occidental’s agent in Ontario.

[25] In the event that that conclusion is in error, I would nonetheless validate service of the Statement of Claim in accordance with Rule 16.08 of the Rules of Civil Procedure. In making that determination, it is appropriate for the court to consider whether a party has actually been prejudiced, misled or substantially injured as a result of failure to strictly observe the provisions of the rules: King v. Kokut (1980), CarswellOnt 434 (H.C.J.). There is no doubt that the claim has come to the knowledge of Occidental and that no prejudice will occur if service is validated.

[26] Accordingly, this court orders and declares:

1. Occidental’s motion dated October 31, 2013 is dismissed;

2. Occidental Hotels & Resorts was properly served with the Statement of Claim on or about June 10, 2013; and

3. The time permitted for Occidental to serve its Statement of Defence is extended to 30 days from today.

[27] Having received the Costs Outline of both parties and having considered the factors set out in Rule 57.01(1), and evaluating what is just and fair in all of the circumstances, this court further orders that Occidental shall pay costs of these motion to the plaintiff fixed in the amount of $5,000 on a partial indemnity basis inclusive of fees, disbursements, and HST, payable in 30 days.

HEALEY J.

Released: April 9, 2014