Superior Court of Justice - Ontario

CITATION: Oesterlund v. Pursglove, 2015 ONSC 5967

COURT FILE NO.: FS-14-393404

DATE: 20151002

RE: Applicant, Robert Simon Oesterlund

AND:

Respondent, Sarah Louise Pursglove

AND:

Added Respondents, RSOP Holdings, LLC; RSOP Holdings Delaware, LLC; Xacti, LLC; Sunshine Ally, LLC; Crawler, LLC; Crawler Group, LLC; Smartsavingscenter.com, LLC; Smart Savings Center, LLC; Integrated Mail Marketing Services, LLC; RSO Holdings, Ltd.; OP Property Investments, LLC; Valion Holdings, LLC; Omega Partners Limited; Omega Partners Finland, LLC; M/Y Déjà Vu Ltd.; Extreme Crafts, LLC; Extreme Crafts III, LLC; Extreme Crafts VI, LLC; Extreme Crafts VII, LLC; Extreme Crafts VIII, LLC; Global Jets Leasing, LLC; G7 Designs, Inc. (also known as Capital Investment Group); DV3, LLC; Xacti CZ, s.r.o.; Integrity North, Ltd.; Integrity Yachts, Ltd.; Midnight Sun Ventures, Ltd.; Omega Capital Properties Inc.; Capital Investment Holdings, LLC; Preferred Property Properties, LLC; Preferred Property Holdings Georgia, LLC; Inbox International, LLC; Omega Partners, OU; 4S Holdings Group, Inc.; the 2013 Paradise Investment Trust; the Forbes Hare Trust Company Limited; Valion Group, LLC; Omega Partners Finland II, LLC; 2013 Integrity Business Holdings Trust; Integrity Liquidity Holdings, LLC; Integrity Investment Holdings, LLC; and Paradise Investment Holdings LLC

BEFORE: CHIAPPETTA, J.

COUNSEL: P. Schmidt, G. Karahotzitis, for the Applicant D. Gelgoot, J. Lisus, J. Liew, for the Respondent G. Capern, Z. Paliare for the Added Respondents RSOP Holdings, Delaware, LLC; Xacti, LLC; Smartsavingscenter.com, LLC; Extreme Crafts VI, LLC; G7 Designs, Inc.; Xacti CZ, s.r.o.; Midnight Sun Ventures B. Zarnett, R. Burrows, for the Added Respondent Valion Holdings, LLC

HEARD: September 24, 2015

A M E N D E D ENDORSEMENT

Overview

[1] The parties were married on November 18, 1998 and separated on February 21, 2014. They have two children.

[2] On March 14, 2014, the Applicant commenced these proceedings seeking a divorce from the Respondent and other corollary relief. The Respondent commenced divorce proceedings in Florida, USA shortly thereafter. The divorce proceedings in Florida were dismissed on April 30, 2014 for lack of jurisdiction. Litigation between the parties continues in Florida, however, initiated by the Respondent, involving corporate and trust interests (“the Florida proceeding”). 34 of the 36 added Respondents are named in the Florida proceeding.

[3] The Respondent served a Notice of Motion dated August 26, 2015, claiming a number of heads of relief including an Order amending the Respondent’s Answer. The Respondent provided a draft Amended Answer to the solicitors for the Applicant on August 21, 2015. On September 11, 2015, the Applicant’s solicitors advised the Respondent’s solicitors that the Applicant was agreeable to the proposed amendments to the Respondent’s Answer and consented to the delivery of the Amended Answer on behalf of the Applicant.

[4] The narrow issue before me is the Respondent’s relief requested at paragraph 8 of the above noted Notice of Motion wherein she seeks an Order that service of her Answer and Amended Answer upon the Applicant be deemed to be service of these documents upon the added Respondents, nunc pro tunc, and that future service of documents upon the added Respondents be effected by service of them upon the Applicant. The Respondent submits that she is entitled to such relief as the Applicant is the alter ego of the added Respondents. In order to grant the relief, therefore, the court must find that the Respondent is the alter ego of the added Respondents.

Alter – Ego

[5] The evidentiary record on this motion for service is not sufficient for the court to fairly and justly adjudicate the issue of whether the Applicant and the added Respondents are one in the same. Such a finding requires a detailed and contextual analysis of the assets, policies and practices of the added Respondents specifically as they relate to the Applicant’s use and control of the respective assets and its impact on third parties (Wildman v Wildman, 2006 33540 (ON CA), [2006] O.J. No. 3966 (Ont. C.A.), paras. 43-45). A significant issue in this proceeding as pleaded is whether the Applicant is using the added Respondents to frustrate his present and to be determined family law obligations. This court will be vigilant to ensure that the Applicant’s corporate arrangements do not work an injustice in the realm of his family law obligations (Wildman, para. 49). It is this vigilance that directs an evidentiary analysis more substantive than that of the affidavit of the Respondent sworn September 18, 2015 and the exhibits thereto, filed in support of a motion for service.

Service – within Ontario

[6] G7 Designs, Inc. is the only added Respondent that is incorporated under the laws of Ontario. Mr. Capern and Ms. Paliare attended the motion as counsel on behalf of G7 Designs, Inc. Mr. Capern advised the court of his instructions to accept service of the Respondent’s Answer and Amended Answer on its behalf, without prejudice to its position on jurisdiction and defective service. The Respondent’s Answer and Amended Answer have clearly come to the attention of G7 Designs, Inc. I have concluded that service shall therefore be validated in accordance with Rule 6 (18) (a) of the Family Law Rules, O. Reg. 140/15 (“Family Law Rules”). During the motion, the Applicant’s counsel advised the court of the Applicant’s consent to such an order.

Service – Outside Ontario

[7] The remaining added Respondents are corporate or trust entities outside of Ontario. The Family Law Rules do not specifically provide for service outside Ontario. In accordance with Rule 1(7) of the Family Law Rules reference is therefore to be made to the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (“the Rules”).The manner of service outside Ontario is governed by Rule 17.05 of the Rules. Rule 17.05 draws a distinction for the manner of service between a convention state, meaning a 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 (“Convention”) and a non-convention state.

Service – Non Convention State

[8] The organizational chart found at Exhibit WWWW to the affidavit of the Respondent sworn August 26, 2015, reflects that the added Respondents in a jurisdiction that is not a contracting state are Integrity Investment Holdings, LLC and Paradise Investment Holdings LLC. The court recognizes that the stated Exhibit may not be complete in its description and directs that the following findings and resultant order shall apply to all added Respondents in a jurisdiction that is not a contracting state.

[9] Wherein an originating process or other document is to be served outside Ontario in a jurisdiction that is not a contracting state, Rule 17.05(2) directs that service may be made in a manner provided by the Rules, or in a 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. The language of 17.05(2) is discretionary; service “may be made.” In my view, the discretionary language permits the court’s use of Rule 16.08 of the Rules to validate service outside Ontario in a jurisdiction that is not a contracting state where the court is satisfied that the document came to the notice of the person to be served, notwithstanding that the document was not served in accordance with the Rules nor in accordance with the law of the jurisdiction where service is made.

[10] There is good reason for this. The Rules of service are designed in part to ensure that the person to be served has notice of the document. Non-compliance with the Rules of service may therefore be properly excused when their purpose is demonstrated by actual notice. This does not negate the significance of the Rules of service or disrespect the expectation of their compliance. Rather, it recognizes that a strict adherence may in some circumstances be a futile expenditure of resources. If the party to be served has notice of the document, depending on the circumstances, it may be appropriate to validate the service and press forward with the pending conflict.

[11] On July 31, 2015, counsel to the Respondent provided Kaplan Zeena LLP in Florida with her Answer and Amended Answer, along with volumes 1 to 10 of the continuing record and all Orders and Endorsements to that date. Kaplan Zeena LLP represents the 2013 Paradise Investment Trust and the 2013 Integrity Business Holdings Trust and the corporate entities owned by those trusts named in the Florida proceeding. Integrity Investment Holdings, LLC and Paradise Investment Holdings LLC are not named as parties in the Florida proceeding. On August 11, 2015, counsel to the Respondent received a letter from Mr. Kaplan wherein he acknowledged receipt of the July 31, 2015 documents, advised that the firm was not authorized to accept service and as such service on their firm does not constitute proper service on any of the entities they represent in the Florida proceedings.

[12] By email communication on September 14, 2015, Ms. Rebecca Burrows of Goodmans LLP in Toronto, ON advised counsel to the Applicant and the Respondent that she and Mr. Zarnett had been consulted with respect to this proceeding by the corporate trust Respondents, 2013 Integrity Business Holdings Trust and the 2013 Paradise Investment Trust and while the trusts had yet to be served with any material in this proceeding, she anticipated that they would be represented by Goodmans LLP should the need arise. Ms. Burrows attended on the day of the motion and advised the court that Goodmans LLP was retained to represent the interests of only one of the corporate entities owned by the 2013 Paradise Investment Trust, Valion Holdings, LLC. On behalf of her client, she accepted service of the Respondent’s Answer and Amended Answer, without prejudice to its position on jurisdiction and defective service. Valion Holdings, LLC is incorporated in a jurisdiction of a contracting state and is directly owned by Paradise Investment Holdings LLC, which is directly owned by the 2013 Paradise Investment Trust.

[13] Delivery of the above noted documents on Kaplan Zeena LLP in Florida does not constitute service in accordance with Rule 17.05(2) of the Rules. It is therefore a manner of service not authorized by the Rules. Goodmans LLP in Ontario was consulted by the corporate trust Respondents. Integrity Investment Holdings, LLC and Paradise Investment Holdings LLC are corporate entities owned by the trusts. I am satisfied therefore, that the documents delivered to Kaplan Zeena LLP came to the notice of Integrity Investment Holdings, LLC and Paradise Investment Holdings LLC. It would be an unnecessary and duplicative use of resources if the Respondent was now ordered to serve the 3 named added Respondents in accordance with Rule 17.05(2). This does not excuse the Respondent’s non- compliance with Rule 17.05(2) of the Rules. Rather, it recognizes that the parties to be served have actual notice, appear to have contacted counsel in Ontario and should now move forward to address the substantive issues as identified in the documents that have come to their attention.

I have concluded that service of the Respondent’s Answer and Amended Answer on Integrity Investment Holdings, LLC and Paradise Investment Holdings LLC shall therefore be validated in accordance with Rule 16.08 (a) of the Rules. The Respondent did not seek relief on this motion pursuant to Rule 16.08 of the Rules. I cannot ignore that the parties to be served have actual notice, the purpose of Rule 17.02(2) has been well served and it is in the interest of all parties and administration of justice to move forward and litigate the substance of the stated conflict.

Service – Convention State

[14] The organizational structural chart found at Exhibit WWWW to the affidavit of the Respondent sworn August 26, 2015, reflects that the remaining added Respondents (other than Integrity Investment Holdings, LLC, Paradise Investment Holdings LLC and G7 Designs, Inc.) are in a jurisdiction that is a contracting state (“the remaining Respondents”).

[15] On July 31, 2015, the documents noted above at paragraph 11, were delivered to the 4 different law firms representing 33 of the 36 added Respondents in the Florida proceeding. Kaplan Zeena LP acknowledged receipt of the documents but denied service. As noted, in the Florida proceeding Kaplan Zeena LP represents the 2 trust entities and the corporate entities owned by those trusts as named in the Florida proceeding. The 3 other law firms provided with the documents in Florida did not acknowledge receipt. On his above noted attendance in court, however, Mr. Capern advised that he represented the interests of a further 6 of the remaining Respondents, represented in the Florida proceeding by the law firm of Squire Patton Boggs LLP. The evidentiary record demonstrates that despite the failure of the other 3 law firms in Florida to acknowledge receipt, in all probability the remaining Respondents were advised of the documents delivered on July 31, 2015 and have received notice of the Respondent’s Answer and Amended Answer.

[16] Service of documents in a contracting state is governed by Rule 17.05(3) of the Rules. The rule is mandatory, directing that service “shall be served” through the central authority in the contracting state or in a manner that it permitted by the Convention and that would be permitted by the Rules if the document were being served in Ontario. Rule 17.05(3) leaves the court without the discretion of Rule 17.05(2) and is to be “regarded as a complete code for service in contracting states,” “where service must be effected though the Convention” and “a plaintiff cannot circumvent this requirement even if the defendant has actual notice of service” (Khan Resources Inc. v. Atomredmetzoloto JSC, 2013 ONCA 189, 2013 CarswellOnt 3539 (C.A.), at para. 49). Service of documents in a contracting state in family law matters is no exception; they too must be effected in accordance with Rule 17.05(3) (Rule 1(7) of the Family Law Rules; Pitman v. Mol, 2014 ONSC 2551, 2014 CarswellOnt 5282 (Sup. Ct.), at paras. 4 and 30).

[17] Despite a finding that in all probability the documents delivered on July 31, 2015 have come to the notice of the remaining Respondents, I am nonetheless without discretion to validate service on the remaining Respondents pursuant to Rule 16.08 of the Rules. Rather, as the remaining Respondents are in a jurisdiction that is a contracting state, service must be effected in strict accordance with Rule 17.05(3).

[18] There is good reason for this. As set out by Justice Tulloch, in Khan at para. 47, quoting Justice McDonald in Metcalfe Estate v. Yamaha Motor Canada Ltd., 2012 ABCA 240, 536 A.R. 67 (Alta. C.A.), at para. 50 wherein he reflects on the dual purposes of the Convention and especially the goal of establishing an international standard for service:

Allowing courts to validate service which fails to comply with the international standards would undermine that purpose, as the Hague Convention would no longer be a comprehensive authority for service abroad involving he 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.

[19] The Respondent argues that in Khan, Justice Tulloch carved out an “access to justice” exception to the mandatory adherence to service on parties in contracting states in accordance Rule 17.05(3). At para. 58 his Justice Tulloch writes:

We do not have to decide whether Zhang is correctly decided, and even if it is correctly decided, in my view is distinguishable from the case at bar in two respects. First, the plaintiffs in that case had exhausted all avenues available under the Convention before seeking alternative methods of service. Second, their claim sought to vindicate the basic human rights of the Falun Gong and to expose torture and other crimes against humanity allegedly perpetrated by the defendants. In these circumstances, the Master in Zhang essentially recognized an “access to justice” exception to the otherwise prevailing rule that the Convention is exclusive.

[20] The Respondent submits that the “access to justice” exception to the otherwise prevailing rule that the Convention is exclusive applies in this case. She relies in part on the endorsement of Justice Greer dated May 1, 2014, wherein her Honour enforced an injunction against the Applicant and various corporate and trust entities controlled by him. Justice Greer commented that “the husband has in various emails and other communications with the wife made statements about her and her Florida lawyer which her Toronto counsel says shows that the Husband promises to take ‘a scorched earth policy.’ The Court cannot allow such an abuse of its process.”

[21] Justice Tulloch specifically writes in Khan that the Appeal court does not have to decide if Zhang was correctly decided as even if it were, the facts therein were distinguished from Khan; as they are herein. First, there is no evidence of any efforts by the Respondent to serve the contracting state added Respondents under the Convention, let alone evidence that “all avenues available under the Convention” were “exhausted”. Second, while the Respondent’s claim if proven would be contrary to the objectives and spirit of family law legislation, it cannot be described as a crime against humanity.

[22] Access to justice was identified by the Supreme Court as the greatest challenge to the rule of law in Canada as trials have become unaffordable (Hryniak v. Mauldin, 2014 SCC 7, at para. 1). The Court directed a culture shift to promote timely and affordable access to the civil justice system, including simplifying pre-trial procedures and moving from a conventional trial in favour of more proportional procedure, considering the needs of the specific case (Hryniak, para. 2). The Respondent provided the court with no evidence to suggest that, if ordered, she would be unable to effect service on the remaining Respondents in accordance with Canada’s treaty obligations or that effecting service in accordance with the Convention would result in her financial hardship or denied access to a judicial analysis of her allegations as pleaded. As noted, there is no evidence of any attempt by the Respondent to comply with Rule 17.05(3) of the Rules.

[23] For these reasons, I have concluded that service of documents on the added Respondents in a jurisdiction that is a contracting state shall be made in accordance with rule 17.05(3) of the Rules.

Costs

[24] As agreed with counsel, costs of this motion shall be reserved to me on a next scheduled attendance date, as agreed by counsel.

Order to go:

1. The Respondent’s motion seeking relief under paragraph 8 of the Respondent’s Notice of Motion dated August 25, 2015 is dismissed.

2. Service of the Respondent’s Answer and Amended Answer on the added Respondent G7 Designs, Inc. is validated in accordance with Rule 6 (18) (a) of the Family Law Rules, O. Reg. 140/15.

3. Service of the Respondent’s Answer and Amended Answer on the added Respondents in jurisdictions that are a non-contracting state, including Integrity Investment Holdings, LLC and Paradise Investment Holdings LLC, is validated in accordance with Rule 16.08(a) of the Rules of Civil Procedure, R.R.O. 1990, Reg.194.

CHIAPPETTA J.

Date: October 2, 2015