SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-11-9177-00CL

DATE: 20140120

RE: Xela Enterprises Ltd., Gabinvest S.A., Lisa S.A., Juan Arturo Gutierrez, Juan Guillermo Gutierrez, and 696096 Alberta Ltd.

and

Margarita Castillo, Roberto Ricardo Castillo, Juan Luis Bosch Gutierrez, Dionisio Gutierrez Mayorga, Juan Jose Gutierrez Mayorga, Felipe Antonio Bosch Gutierrez, Roberto Barillas Castillo, Isabel Gutierrez de Bosch, La Brana, S.A., Multi-Inversiones, S.A., Villamorey, S.A., and Avicola Villalobos S.A.

BEFORE: Justice J.A. Thorburn

COUNSEL: Joseph Groia, for the moving parties

Katherine Kay, for the responding parties

DATE HEARD: October 29, 2013

E N D O R S E M E N T

Request for Relief

[1] The Plaintiffs seek:

(a) a declaration that Juan Luis Bosch Gutierrez, Dionisio Gutierrez Mayorga, Juan Jose Gutierrez Mayorga, Felipe Antionio Bosch Gutierrez, Isabel Gutierrez de Bosch, La Brana, S.A., Multi-Inerversiones, S.A., Villamorey, S.A., and Avicola Villalobos S.A. (“these Defendants”) were properly served with the Fresh Statement of Claim in accordance with rules 17.02 and 17.05 of the Ontario Rules of Civil Procedure, R.R.O. 1990, Reg. 194, on March 15, 2013; or

(b) validation of personal service of the Fresh Statement of Claim on these Guatemalan Defendants effective March 22, 2013 (five business days after sending the Fresh Claim by Federal Express to the residence) pursuant to rule 16.08 of the Rules of Civil Procedure; or

(c) an order for substituted service pursuant to rule 16.04 of the Rules of Civil Procedure effective March 1, 2013.

[2] For the reasons that follow, I find that the wording of rule 17.05(2) of the Ontario Rules of Civil Procedure permits the Plaintiffs to serve these Defendants in Guatemala with their Fresh Statement of Claim in accordance with the Ontario Rules of Civil Procedure. These Defendants were served in accordance with those Rules. The motion is therefore granted.

The Facts

[3] The Statement of Claim was issued in Ontario on April 12, 2011. The Plaintiffs claim damages in the amount of $400 million on a joint and several basis. They claim these Defendants conspired to commit tortious acts, breached their fiduciary duties, committed fraud and abuse of process, and were thereby unjustly enriched in Ontario. They claim the damages were sustained in Ontario.

[4] The Plaintiffs (save for Lisa S.A. and Gabinvest S.A. that are Panamanian companies) are individuals that reside in Canada or are companies that carry on business in Canada. These Defendants are residents in Guatemala or are companies that carry on business in Guatemala.

[5] These Defendants have been represented in Ontario on related proceedings since 2009 and are represented by counsel on this motion. In December 2012, the Defendants’ Canadian counsel, Ms. Katherine Kay, was examined as a witness on an Application brought by the Defendants. Thereafter the Plaintiffs amended the Statement of Claim on February 28, 2013.

[6] The Plaintiffs made numerous attempts to serve the Fresh Statement of Claim on these Defendants in Guatemala in the following ways:

(a) emailing a copy of the Fresh Claim to the Defendants’ Canadian counsel, Ms. Kay, on March 1, 2013;

(b) sending a copy of the Fresh Statement of Claim by Federal Express to the Defendants’ U.S. counsel on March 1, 2013; and

(c) attempting to serve these Defendants at their residences and businesses on March 15, 2013 as follows:

i. In the case of Juan Luis Gutierrez, Dionisio Mayorga, Juan Jose Mayorga, La Brana, S.A., Multi-Inversiones, S.A., and Villamorey, S.A., the process server left copies of the Fresh Claim in a sealed envelope at the business address shared by these parties. The documents were accepted by a female who appeared to be in control of the business.

ii. In the case of Avicola Villalobos S.A., a process server delivered a copy of the Fresh Claim in a sealed envelope to Avicola’s principal place of business and gave them to an adult male at the reception desk.

iii. In the case of Juan Luis Bosch Gutierrez, a copy of the Fresh Claim was delivered to his residence. The process server was told that Mr. Gutierrez would not accept the documents. The process server fixed the sealed envelope containing the Fresh Claim to the security gate and delivered another copy of the Fresh Claim by Federal Express the same day.[^1]

iv. In the case of Dionisio Gutierrez Mayorga, a process server delivered a copy of the Fresh Claim to his residence. An adult male at the residence accepted delivery of the Fresh Claim and signed an acknowledgment of service. A second copy was sent by Federal Express to Mr. Mayorga’s work address that day.

v. In the case of Juan Jose Gutierrez Mayorga, a copy of the Fresh Claim was delivered to his residence. The process server was told this was his address, but the two adult males who opened the door would not allow the process server to enter. They told him that they were not accepting any documents for Mr. Mayorga. The process server fixed the sealed envelope containing the Fresh Claim to the security gate and delivered another copy of the Fresh Claim by Federal Express the same day.

vi. In the case of Felipe Antonio Bosch Gutierrez, a copy of the Fresh Claim in a sealed envelope was delivered to his residence. A male answered and told the process server to leave the documents outside. The process server then affixed the sealed envelope to the gate outside the residence next to the door. A copy of the Fresh Claim was also delivered via Federal Express to Felipe Gutierrez the same day. Another copy was delivered by a process server to his place of work. An adult male at his office signed an acknowledgment of service and another copy was left in his work mailbox.

vii. In the case of Isabel Gutierrez de Bosch, a copy of the Fresh Claim in a sealed envelope was delivered to Ms. de Bosch’s address. An adult male at the residence accepted the Fresh Claim and a second copy was delivered by Federal Express to the residence that day. A process server also delivered a copy of the Fresh Claim to her place of business. As he attempted to put the envelope in her mailbox, the Fresh Claim was removed and returned to the process server by an adult male who refused to accept delivery. The process server then attached a copy of the Fresh Claim to the wall outside of her office.

[7] It is agreed that these Defendants were not served in accordance with the Rules of Service of Guatemala.

The Law

A. Which Rules of Service Apply?

[8] Rule 17.05(2) of the Ontario Rules of Civil Procedure provides as follows:

An originating process or other document to be served outside Ontario in a jurisdiction that is not a contracting state may be served in the manner provided by these rules for service in Ontario, or in the manner provided by the law of the jurisdiction where service is made, if service made in that manner could reasonably be expected to come to the notice of the person to be served. [Emphasis added.]

[9] Contracting state is defined as “a contracting state under the Convention” and “Convention” means the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters signed at The Hague on November 15, 1965.

[10] The parties were unable to find any Canadian cases where the issue to be determined was which rules of service apply when serving a party resident in a “non-contracting state” within the meaning of rule 17.05.

[11] However, in the UK Supreme Court decision of Abela and others v. Baadarani and another, [2013] UKSC 44, [2013] 1 W.L.R. 2043, the plaintiffs commenced proceedings against one of the defendants who resided in Lebanon.

[12] Lebanon was not signatory to any bilateral convention on the service of judicial documents to which the UK was a signatory.

[13] The plaintiffs were not able to serve the Lebanese defendant in Beirut at a given address or to effect personal service at the same address. However, the pleading came to the defendant’s attention as a set of untranslated documents were sent to a Lebanese lawyer who had acted for the defendant in another proceeding brought by the same claimants.

[14] Lord Clarke of the Supreme Court held that service was effected under the United Kingdom’s Civil Procedure Rules, SI 1998/3132, as amended, for the following reason, at para. 38:

[I]t was clear that the respondent, through his advisors was fully apprised of the nature of the claim being brought. …the respondent must have been fully aware of the contents of the claim form as a result of it and the other documents having been delivered to his lawyers on 22 October in Beirut and communicated to his London solicitors and to him.

[15] He went on to cite with approval the words of the judge of first instance, who said the following, at para. 38:

The purpose of service of proceedings, quite obviously, is to bring proceedings to the notice of a defendant. It is not about playing technical games. There is no doubt on the evidence that the defendant is fully aware of the proceedings which are sought to be brought against him, of the nature of the claims made against him and of the seriousness of the allegations.

[16] Service was deemed acceptable despite the fact that service did not conform to the Rules of Service in Lebanon.

B. How Can a Claim be Served in Accordance with the Rules of Civil Procedure in Ontario?

[17] Under rule 17.02, a party to a proceeding in Ontario may, without a court order, be served outside Ontario with an originating process where the proceeding against the party consists of a claim in respect of a tort committed in Ontario or damage sustained in Ontario. There need only be a “good arguable case” established on the face of the pleading: see VitaPharm Canada Ltd. v. F. Hoffman-La Roche Ltd. (2002), 20 C.P.C. (5th) 351 (Ont. S.C.), at para. 65.

[18] Rule 16.01 of the Ontario Rules of Civil Procedure provides as follows,

An originating process shall be served personally as provided in rule 16.02 or by an alternative to personal service as provided in rule 16.03.

[19] Where a document is to be served personally, rule 16.02(1) provides that service shall be made

(a) on an individual, other than a person under disability, by leaving a copy of the document with the individual

(b) on a corporation, 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

[20] Rule 16.03(5) provides the following:

Where an attempt is made to effect personal service at a person’s place of residence and for any reason personal service cannot be effected, the document may be served by,

(a) leaving a copy, in a sealed envelope addressed to the person, at the place of residence with anyone who appears to be an adult member of the same household; and

(b) on the same day or the following day mailing another copy of the document to the person at the place of residence,

and service in this manner is effective on the fifth day after the document is mailed.

[21] Rule 16.06 also provides that service of a document by mail is effective on the fifth day after the document is mailed.

[22] Where it appears to the court that it is impractical for any reason to effect prompt service of an originating process, rule 16.04 provides that the court may make an order for substituted service or, where necessary in the interest of justice, may dispense with service. Rule 16.08 provides that where a document has been served in a manner other than one authorized by the Rules or an order, the court may make an order validating service where the court is satisfied that

(a) the document came to the notice of the person to be served; or

(b) the document was served in such a manner that it would have come to the notice of the person to be served, except for the person’s own attempts to evade service.

[23] Rule 1 provides that the Rules are to be “liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.”

Analysis and Conclusion

A. Which Rules for Service Apply?

[24] These Defendants are in Guatemala and Guatemala is not a “contracting state” under the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters signed at The Hague on November 15, 1965. If Guatemala were signatory to the Convention, specific rules for service under rule 17.05(3) of the Rules of Civil Procedure would have to be adhered to.

[25] Rule 17.05(2) of the Rules of Civil Procedure provides that in the case of persons or companies from a non-contracting state such as Guatemala, the Plaintiffs may choose to serve these Defendants either in the manner provided for in the Rules of Service in Ontario or in the manner provided by the law of Guatemala.

[26] The Plaintiffs chose to serve these Defendants in accordance with the Rules of Service in the Ontario Rules of Civil Procedure.

B. Effecting Service

[27] Rule 17.02 of the Ontario Rules of Civil Procedure provides that leave is not required to serve these Defendants outside of Ontario as the claim is “in respect of a tort committed in Ontario” and “in respect of damage sustained in Ontario arising from a tort, breach of contract, breach of fiduciary duty or breach of confidence wherever committed.”

[28] The corporate defendants, La Brana, S.A., Multi-Inversiones, S.A., Villamorey, S.A., and Avicola Villalobos S.A., were personally served in accordance with rule 16.02 by leaving a copy of the Fresh Claim with a person who appeared to be in control or management of the place of business on March 15, 2013. Service on them is therefore effective March 15, 2013.

[29] Attempts were made to personally serve Juan Luis Bosch Gutierrez, Dionisio Gutierrez Mayorga, Juan Jose Gutierrez Mayorga, Felipe Antonio Bosch Gutierrez, and Isabel Gutierrez de Bosch by attending at their residence to serve them personally. Efforts were also made to ensure the Fresh Claim was drawn to their attention. In some cases a copy of the Fresh Claim was left with an adult at the residence and another copy was sent to the residence by Federal Express the same day, and in other cases (where no adult would take a copy of the Claim), a copy of the Fresh Claim in a sealed envelope would be affixed to the main entrance gate of the residence and another copy sent to the residence by Federal Express the same day.

[30] It is appropriate in this case to validate service on these five individual defendants in accordance with rule 16.08 for the following reasons:

(a) personal service was attempted;

(b) although personal service was not successful, a copy of the pleading was left at the residence of each individual, a second copy was sent the same day to the address by Federal Express, and a copy was sent to their Canadian counsel who has attended on this motion; and

(c) it is agreed that the Fresh Claim thereby came to the notice of these five individual defendants.

[31] The purpose of service is to ensure that a party has received a copy of the claim to which they must respond. That purpose has been served as these Defendants received a copy of the Fresh Claim. Service on them is effective March 22, 2013, which is five business days after the document was mailed.

[32] Contrary to the assertion made on behalf of these Defendants, the decision in Khan Resources Inc. v. Atomredmetzoloto JSC, 2013 ONCA 189, 115 O.R. (3d) 1, is consistent with the understanding that, in the case of a non-contracting state like Guatemala, service can be effected in the manner set out in the Ontario Rules of Civil Procedure. In that case, the court held the following, at para. 32:

The mandatory language of rule 17.05(3) regarding contracting states stands in contrast to the permissive language of rule 17.05(2) regarding non-contracting states. Further, the old rule 17.05(1), which permitted service outside Ontario in the manner provided by the Ontario rules or by the rules of the other jurisdiction, stands in contrast to the current rule 17.05(2), which permits such service only in jurisdictions that are not contracting states under the Convention.

[33] Moreover, I do not accept these Defendants’ contention that a failure to apply Guatemala’s internal rules for service amounts to an absence of comity. The Supreme Court of Canada in Spencer v. R., 1985 4 (SCC), [1985] 2 S.C.R. 278, stated as follows, at 283:

‘Comity’ in the legal sense, is neither a matter of absolute obligation, on the one hand, nor of mere courtesy and good, will upon the other. But it is the recognition which one nation allows within its territory to the legislative, executive or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens or of other persons who are under the protection of its laws.

[34] These Defendants rely on the decision in Ferrarini S.p.A. and Others v. Magnol Shipping Co. Inc., [1988] 1 Lloyd’s Rep. 238 (C.A.), in support of their argument that the principles of comity require that service of the Fresh Claim must be in accordance with the Rules of Service of Guatemala. In Ferrarini, at pp. 240-241, the court held that no service should be effected in another country “which is contrary to the law of that country.” Ferrarini does not assist in deciding this case for the following reasons:

(a) the Ferrarini decision has been superceded by the United Kingdom Supreme Court’s decision in Abela. In Abela, a party was permitted to serve another party from a non-contracting state in accordance with English Rules of Service rather than the Rules of Service of the non-contracting state;

(b) in Abela, Lord Sumption held as follows, at para. 53:

The characterization of the service of process abroad as an assertion of sovereignty may have been superficially plausible under the old form of writ (“We command you…”). But it is, and probably always was, in reality no more than notice of the commencement of proceedings which was necessary to enable the Defendant to decide whether and if so how to respond in his own interest. … The decision is generally a pragmatic one in the interests of the efficient conduct of litigation in an appropriate forum;

and

(c) service in the manner effected in the Ferrarini case was in clear breach of a Swiss law (Switzerland was the country in which the plaintiff in Ferrarini had served the writ). In David McClean, International Co-operation in Civil and Criminal Matters, 3rd ed. (UK: Oxford University Press, 2012), the author notes that in Switzerland, “service on behalf of the plaintiff of foreign process without permission of the Swiss authorities appears to be an offence punishable by imprisonment (and even, theoretically, solitary confinement and hard labour.)”

[35] For the following reasons, the Fresh Claim need not be served in accordance with the laws of Guatemala in order to recognize the principles of comity:

(a) Comity does not mean that service must always be effected in accordance with local law. The Supreme Court of Canada in Spencer recognized that comity involves a consideration of both international duty and convenience on the one hand, and the rights of Canada’s own citizens or those under the protection of its laws on the other.

(b) Guatemalan law prescribes a process to be followed when serving a party in Guatemala. It does not specifically prohibit a party outside the jurisdiction from serving a party in Guatemala in a way permitted by Ontario’s domestic law or create an offence for so doing.

(c) These Defendants’ position that only the Guatemalan rules for service are effective would go further than recognizing the rights of persons resident in Guatemala: it would remove the choice offered to the Plaintiffs in Ontario law by requiring them to follow the Rules of Service of Guatemala. This would contravene the principles of comity that recognize both international duty and convenience, and the rights of Canadian citizens or those under the protection of its laws.

(d) Moreover, by changing a clear provision in a Canadian regulation (by removing the choice clearly provided for), the effect would be to negate Ontario law.

(e) Service abroad provides these Defendants with notice of the Fresh Claim. Although the objective of this service is to subject these Defendants to the power of the court of Ontario, these Defendants retain their right to address the issues of attornment to the jurisdiction and whether Ontario is the most convenient forum.

[36] These Defendants were properly served in Guatemala in accordance with the Ontario Rules of Civil Procedure. Personal service was effected on the four corporate defendants. Service of the Fresh Claim on the five individual defendants is validated as the document did come to their attention and personal service of the Fresh Claim was attempted.

[37] For these reasons the motion is granted. Service on these corporate defendants is effective March 15, 2013 and service on these individual defendants is effective March 22, 2013.

[38] If the parties are unable to agree on costs, they may provide me with brief written submissions and an outline of costs within 15 days.

Thorburn J.

DATE: January 20, 2014

[^1]: Paragraphs 15-21 of the Moving Party’s factum.