Court File and Parties

Court File No.: 13-57135 Date: 2017/01/09 Ontario Superior Court of Justice

Between: Construction Excedra Inc. Plaintiff/Responding Party – and – Kingdom of Saudi Arabia as represented by the Cultural Bureau of the Royal Embassy of Saudi Arabia Defendant/Moving Party

Counsel: Nadia J. Authier, for the Plaintiff John I.G. Melia, for the Defendant

Heard: June 10, 2016

Ruling on Motion for Summary Judgment

Corthorn J.

Introduction

[1] The defendant brings this motion for summary judgment, in particular for an order dismissing the plaintiff’s lien claim and discharging the lien registered against the title to the property of the defendant.

[2] In March 2010, the parties entered into a contract for the construction of a cultural centre on property owned by the defendant (“the Property”). Construction proceeded over a period of three years. Ultimately, the plaintiff sought payment from the defendant in the amount of $964,150. A dispute arose between the parties and the amount remained unpaid. The plaintiff caused a construction lien to be registered against the title to the Property.

[3] The plaintiff also commenced this action. The plaintiff seeks payment on the basis of the lien claim; in the alternative, damages on the basis of breach of contract; and, in the further alternative, damages on the basis of unjust enrichment.

[4] The defendant’s position is that the Property is diplomatic property, entitled to the cloak of diplomatic immunity, and therefore protected from attachment in the form of a lien. The plaintiff opposes the motion for summary judgment and submits that the Property is not immune from attachment.

The Evidence

[5] The defendant relies on the evidence of Brian E.J. McAsey (“McAsey”). He is the Senior Advisor and In-House Legal Counsel at the Cultural Section of the Royal Embassy of Saudi Arabia in Ottawa. Two affidavits sworn by McAsey are included in the record before me (“the Record”). [^1] McAsey was not cross-examined on either of his affidavits.

[6] The only evidence filed on behalf of the plaintiff is a four-paragraph affidavit sworn by James MacGillivray (“MacGillivray”). He is a partner in the law firm by which the plaintiff is represented. The sole purpose of the MacGillivray affidavit is to provide the Court with a copy of the contract entered into between the parties (“the Contract”). I note that a copy of the Contract is included as an exhibit to the 2015 McAsey Affidavit.

[7] The defendant’s motion for summary judgment was originally returnable on February 25, 2016. The 2016 McAsey Affidavit was sworn on February 23, 2016 and served on the plaintiff at most two days prior to the return of the motion. As a result, the motion was adjourned to allow the plaintiff an opportunity to (a) deliver a responding affidavit; and (b) cross-examine McAsey on his second affidavit. The plaintiff did neither.

[8] McAsey’s evidence is uncontradicted.

The Positions of the Parties

a) The Defendant

[9] In 2013 when the defendant first requested that the plaintiff take the steps necessary to discharge the lien et cetera, the position taken by the defendant was that (a) it is immune from the jurisdiction of the Canadian courts, in this instance pursuant to the State Immunity Act [^2]; and (b) pursuant to the Vienna Convention on Diplomatic Relations [^3] (“the VCDR”) the Property, as diplomatic premises, is immune from attachment of a lien. Article 22 of the VCDR provides that “the premises of the mission … shall be immune from search, requisition, attachment or execution.”

[10] For the purpose of the motion for summary judgment, the defendant relies on the latter position only. The defendant submits that the defence of state immunity, if maintained, is to be addressed at a subsequent stage of the action.

[11] In support of its position that the Property constitutes the premises of a diplomatic mission, as contemplated by Article 22(3) of the VCDR, the defendant relies on the contents of Certificates issued by DFA in 2015 and 2016 and Notes issued by DFA in 2005 and 2015.

b) The Plaintiff

[12] The plaintiff submits that the Certificates upon which the defendant relies do not grant diplomatic status retrospectively, as a result of which the Property is not immune from attachment. The plaintiff’s position is that the defendant’s motion is to be determined on the basis of state immunity and, based on the terms of the Contract, the defendant waived the state immunity to which it might otherwise have been entitled.

The Issues

[13] The defence of state immunity is distinct from the defence of diplomatic immunity. For the reasons discussed below, I am of the view that issues arising from the defence of state immunity, if maintained, are to be determined at another stage of the action.

[14] As a result, the sole issue to be determined on the motion for summary judgment is whether the Property is immune from attachment such that the lien claim is to be dismissed and the Lien is to be discharged from the title to the Property.

Motion for Summary Judgment

[15] The framework for determination of motions for summary judgment has evolved because of recent amendments to the Rules of Civil Procedure, including to Rule 20. In addition, the Supreme Court of Canada in Hryniak v. Mauldin [^4] established key principles to be followed in the context of a cultural shift mandated by the decision. The cultural shift to be made is the recognition by parties, lawyers, and judges alike “that a process can be fair and just, without the expense and delay of a trial, and that alternative models of adjudication are no less legitimate than the conventional trial.” [^5]

[16] The parties are in agreement that the issue of diplomatic immunity may be determined on the basis of a motion for summary judgment.

Disposition

[17] In October 2005, the Minister extended to the Property the status of premises of a diplomatic mission, including the privileges and immunities to which such premises are entitled under the FMIOA. The status, privileges, and immunities so extended continue as evidenced by the Certificates issued by DFA in 2015 and 2016. The immunities to which the Property remains entitled include that of immunity from attachment, as provided by Article 22 of the VCDR.

[18] The plaintiff’s lien claim shall be dismissed and the Lien shall be discharged from the title to the Property.

Analysis

a) Findings of Fact

[19] Based on the uncontradicted evidence of McAsey, I make the following findings of fact:

a) The Cultural Bureau of the Royal Embassy of Saudi Arabia (the “SACB”) is a section of the Royal Embassy of Saudi Arabia (“the Embassy”) and a Department of the Saudi Arabian Government. The SACB is part of the Ministry of Higher Education, which is responsible for the post-secondary education of Saudi citizens.

b) The Ministry of Higher Education has a number of diplomatic responsibilities related to education and culture. These responsibilities include the authority for post-secondary educational affairs and acting as the representative of the Saudi Arabian government abroad in all educational and cultural affairs. The latter work is done through cultural offices, such as the SACB.

c) The SACB administers programs that are fundamental to the diplomatic functions and goals of the Ministry of Higher Education.

d) As a result of the increase in over time of the number of Saudi students studying in Canada, the SACB decided to expand its premises. The expansion was intended to assist the SACB in providing institutional services to Saudi students.

e) To facilitate the expansion, the Embassy purchased the Property, located at 2101 Thurston Drive in the City of Ottawa.

f) When the Property was purchased, the Embassy sought authority from DFA to acquire and develop the Property. The authority was granted, as evidenced by Note No. XDC-2503 dated October 11, 2005 issued by DFA (“the 2005 Note”). The substantive contents of the 2005 Note are discussed in the Analysis section of this Ruling.

g) In March 2010, the parties entered into the Contract − for design and construction services for the Property.

h) On February 11, 2013, the plaintiff caused a construction lien in the amount of $964,150 to be registered against the title to the Property (“the Lien”).

i) On March 25, 2013 the plaintiff issued the statement of claim in this action and registered a certification of action on the title to the Property.

[20] Commencing in 2013 and continuing into 2015, the defendant made requests of the plaintiff to have the Lien discharged from the title to the Property; consent to an order dismissing the lien claim; and obtain leave to amend the statement of claim to reflect the diplomatic immunity to which the SACB claims to be entitled with respect to the Property. The plaintiff did not accede to those requests. In 2015, the defendant initiated the motion for summary judgment.

b) The Notes and Certificates

[21] The status of the Property was addressed by DFA in the 2005 Note, when the defendant purchased the Property. The note states as follows:

The Department of Foreign Affairs presents its compliments to the Royal Embassy of Saudi Arabia and has the honour to refer to its Note No. 502/93/81/747 dated September 16, 2005, seeking Canada’s approval for the acquisition (by purchase) and development of a property located at 2101 Thurston Drive, Ottawa, Ontario, to be eventually used as the exclusive premises of the Cultural Section forming part of the Embassy.

The Department, having noted that no portion of this property will be used for commercial activities, is pleased to authorize its acquisition and development, subject to applicable laws.

[22] The plaintiff submits that the acquisition and, most importantly, the development of the Property amount to commercial activities. The Contract was entered into as part of those commercial activities. The plaintiff’s position is that the determination of whether the Property enjoys diplomatic immunity is governed by the activities of the defendant when the 2005 Note was issued. The use made of the Property following completion of its development is not the activity upon which diplomatic status and immunity are to be determined.

[23] The defendant’s position is that the status of the Property is to be determined on the basis of the use to which the Property ultimately has been put. That use being cultural, the Property at all times enjoyed and continues to enjoy status as (a) premises of a “diplomatic mission” within the meaning of section 11 of the FMIOA; and (b) “premises of the mission” within the meaning of Article 22(3) of the VCDR. On that basis, the Property is immune from attachment.

[24] In support of its claim of diplomatic immunity for the Property, the defendant relies upon two certificates (“the Certificates”) issued by DFA. A copy of the 2015 Certificate is included as an exhibit to McAsey Affidavit No. 1. A copy of the 2016 Certificate was simply filed with the Court.

[25] The 2015 Certificate, in its entirety, reads as follows:

In accordance with the powers which have been delegated to me by virtue of Section 11 of the Foreign Missions and International Organizations Act, I hereby certify under the authority of the Minister of Foreign Affairs that the property located at 2101 Thurston Drive, Ottawa, Ontario constitutes diplomatic premises of the Royal Embassy of Saudi Arabia in Ottawa and has privileges and immunities under this Act.

[26] The 2015 Certificate is included under cover of Note No. XDC-4323 and described in the latter document as relating to “the diplomatic status of the [Property]”.

[27] The 2016 Certificate was filed with the Court, under cover of a letter from DFA, subsequent to the original return date of the motion. The 2016 Certificate is titled “Amended Certificate”. Its contents include in its contents all or a portion of Articles 22, 23, 24 and 27 of the VCDR. In addition, the 2016 Certificate refers to Article 1(i) of the Vienna Convention on Diplomatic Relations and concludes with the following statement: “As such, [the Property] enjoys the privileges and immunities of diplomatic premises.”

c) Statutory Provisions

[28] Pursuant to section 4(1) of the FMIOA, the Minister of Foreign Affairs (“the Minister”) has certain powers with respect to the diplomatic privileges and immunities accorded by the FMIOA to a country’s diplomatic and consular posts, the diplomatic personnel assigned to each, and to any other diplomatic property:

For the purpose of according to the diplomatic mission and consular posts of any foreign state, and persons connected therewith, treatment that is comparable to the treatment accorded to the Canadian diplomatic mission and Canadian consular posts in that foreign state, and persons connected therewith, the Minister of Foreign Affairs may, by order, with respect to that state’s diplomatic mission and any of its consular posts, and any person connected therewith,

(a) Extend any of the privileges and immunities accorded thereto under section 3, other than duty and tax relief privileges;

(b) Grant thereto any of the benefits set out in the regulations;

(c) Withdraw any of the privileges, immunities and benefits accorded or granted thereto; and

(d) Restore any privilege, immunity or benefit withdrawn pursuant to paragraph (c).

[29] Section 3 of the FMIOA includes an extensive list of Articles in the VCDR (including Article 22) and the Vienna Convention on Consular Relations. Section 3 provides that the Articles listed therein, “have the force of law in Canada in respect of all foreign states, regardless of whether those states are parties to those Conventions.”

[30] Article 22 of the VCDR addresses diplomatic immunity, and provides as follows:

1 The premises of the mission shall be inviolable. The agents of the receiving State may not enter them, except with the consent of the head of the mission.

2 The receiving State is under a special duty to take all appropriate steps to protect the premises of the mission against any intrusion or damage and to prevent any disturbance of the peace of the mission or impairment of its dignity.

3 The premises of the mission, their furnishing and other property thereon and the means of transport of the mission shall be immune from search, requisition, attachment or execution.

[31] In accordance with its prerogative powers in respect of matters of foreign affairs, the Minister may certify which of a State’s property and personnel are afforded diplomatic protection. Certificates, of the kind upon which the defendant relies, may be issued by the Minister pursuant to section 11 of FMIOA:

A certificate purporting to be issued by or under the authority of the Minister of Foreign Affairs and containing any statement of fact relevant to any of the following questions shall be received in evidence in any action or proceeding as proof of the fact stated in the certificate without proof of the signature or official character of the person appearing to have signed the certificate:

(a) whether a diplomatic mission, a consular post or an office of a political subdivision of a foreign state has been established with the consent of the Government of Canada;

(b) whether an organization or conference is the subject of an order under section 5;

(c) whether a mission is accredited to an international organization;

(d) whether any premises or archives are the premises or archives of an office of a political subdivision of a foreign state; or

(e) whether any person, diplomatic mission, consular post, office of a political subdivision of a foreign state, international organization or accredited mission has privileges, immunities or benefits under this Act.

d) The Certificates as ‘Evidence’

[32] There is no dispute that the Certificates upon which the defendant relies were issued pursuant to section 11 of FMIOA. The parties disagree as to the effect of the Certificates from an evidentiary perspective.

[33] The defendant submits that the Certificates are conclusive proof of the facts stated therein, as they have existed and continue to exist as of the date of each Certificate – namely that the Property enjoys diplomatic immunity and is not subject to attachment or enforcement.

[34] The plaintiff agrees that the Certificates are proof of the facts stated therein, but differs from the defendant as to the period of time covered by each Certificate. The plaintiff submits that the Certificates are evidence of the facts stated therein only as of the date of the Certificate; the Certificates do not provide retrospective evidence. Therefore, the Certificates issued in 2015 and 2016 are not evidence of diplomatic status of the Property as of 2013 (i.e., when the Lien was registered against the title to the Property and the statement of claim was issued).

[35] For the reasons which follow, I agree with the defendant – the Certificates are conclusive proof of a state of facts as they have existed and continue to exist as of the date of each Certificate.

[36] First, the Certificates upon which the defendant relies are to be read in conjunction with the 2005 Note. Based on sections 3 and 4 of the FMIOA and Article 22 of the VCDR, when read together, I interpret the 2005 Note as the Minister “extending” to the Property the privileges and immunities accorded a “diplomatic mission” and “premises of a mission”. [^6]

[37] Second, I interpret “whether any … diplomatic mission … has privileges, immunities, or benefits under [FMIOA]”, as that phrase appears in section 11(e) of the FMIOA, as having a retrospective meaning. The Certificates, issued subsequent to the date of the 2005 Note, are proof of the diplomatic status of the Property as extended in 2005 and which continued to and including the date of each the Certificate.

[38] It is understandable that a State may from time-to-time be required to obtain from the Minister a certificate in response to matters ranging, for example, from an inquiry as to diplomatic status to a purported intrusion of diplomatic status. In my view, minimal practical purpose would be served if certificates issued pursuant to section 11 of the FMIOA are evidence of a fact only as of the date of the certificate (i.e., on a prospective basis).

[39] Third, I agree with the defendant that the diplomatic status and immunity of premises are based on the activity ultimately carried out at the premises. The significance of the ultimate use made of the premises is demonstrated by the different outcomes in two cases arising from the construction of national pavilions at Expo 67 (“the Expo 67 Cases”).

[40] In Congo (Republic) v. Venne [^7] a dispute arose between the plaintiff architect and the Republic of Congo (“Congo”) with respect to fees for professional services rendered in preparing plans for the Congolese pavilion at Expo 67. The Supreme Court of Canada held that the subject contract was made by Congo for the construction of a national pavilion, for the sole purpose of being represented at Expo 67. Congo did not plan to carry out any commercial operation at its pavilion. There was no evidence of a commercial venture and no basis upon which to impose on Congo the negative burden of establishing that no commercial undertakings would form part of its participation in Expo 67.

[41] In its decision in Congo (Republic) v. Venne, the Supreme Court of Canada contrasted the intent and purpose of Congo in the construction of its pavilion with that of Venezuela in the construction and operation of its pavilion at Expo 67. The latter was considered by the Quebec Superior Court of Justice in Allan Construction v. Venezuela. [^8] It was the intention of Venezuela to incorporate in its pavilion a restaurant in which both alcohol and products from Venezuela would be sold. The trial judge in Allan Construction concluded that the contract entered into by Venezuela was a commercial one specifically because of the commercial activities to be carried out upon completion of the pavilion.

[42] The defence raised in each of the Expo 67 Cases was one of sovereign (or state) immunity. Although, for the purpose of the motion before me, the defendant relies solely on diplomatic immunity, the Expo 67 Cases are relevant. In those cases, the activity ultimately carried out at each pavilion, once constructed, was the basis upon which the nature of the activity on the property of the foreign states was determined.

[43] Fourth, I rely on the decision of Hainey J. in Tracy v. Iran. [^9] It is the second of two recent decisions of this Court in which the evidentiary effect of the type of certificates upon which the defendant relies was considered. The first decision was Canadian Planning v. State of Libya. [^10]

[44] The decision in Tracy was released the day prior to the date on which the defendant’s summary judgment motion was argued before me. Hainey J. concluded that the evidence of the Minister, in the form of a certificate delivered to a court in a legal proceeding, “is the most reliable evidence of the Minister’s view of the diplomatic status of property [and] it should be regarded as conclusive by the court.” [^11]

[45] In Tracy a number of individuals who had obtained judgment in the United States against the Islamic Republic of Iran (“Iran”) commenced proceedings in Canada to enforce their respective judgments. The Canadian proceedings were commenced after the Canadian government made legislative changes in 2012 to facilitate claims by terrorist victims (the Justice for Victims of Terrorism Act [^12]). The judgment creditors from the United States were the victims or the family members of victims from eight different terrorist incidents. Each of the judgment creditors obtained relief in the form of recognition by a Canadian court of their respective U.S. judgments.

[46] The issue, in the context of enforcement of the judgments, was whether certain bank accounts held by Iran in Canada were entitled to immunity from the jurisdiction of Canadian courts. A number of certificates were issued to Iran by the Minister. The certificates identified Iran’s diplomatic property as including a number of real properties located in Ottawa and two bank accounts (one at the Royal Bank of Canada and another at Scotiabank). The certificates did not mention certain other bank accounts, referred to in the decision as “Iran’s Exigible Property”.

[47] Iran argued that the Minister’s Certificates were not conclusive evidence of the property that enjoys diplomatic immunity in Canada. Iran relied on the decision of Braid J. in Canadian Planning. Hainey J. said that he was not bound by the decision in Canadian Planning and declined to follow it. In summary, he concluded that:

• It is entirely the responsibility of the Minister, through his or her prerogative powers and the powers under the FMIOA, to determine whether the property of a foreign state has diplomatic immunity;
• The court was required to accept the Minister’s Certificates as dispositive of which of Iran’s property enjoyed diplomatic immunity; and
• On that basis, Iran’s Exigible Property does not enjoy diplomatic status and Iran is therefore not entitled to claim diplomatic immunity from enforcement against that property under either domestic or international law.

[48] In my view, the decision of Hainey J. is based in large part on the deference he concluded is to be given to the Minister in conducting foreign relations on a state-to-state basis. Hainey J. described the Minister’s role, and the importance of that role, as follows:

In Canada, the Minister exercises the prerogative power to negotiate with sending states the functions that a foreign mission will be permitted to undertake within Canada and to recognize the diplomatic status of a sending state’s mission, its property, and its agents within the agreed-upon parameters of that diplomatic relationship.

Diplomacy and diplomatic relations are at the very core of foreign affairs. Decisions relating to the institution of, and the severance of, diplomatic relations and the maintenance of and the means of conducting international relations are all matters that fall squarely within the prerogative power of the Minister to make discretionary decisions on behalf of Canada in matters of international policy.

[I]t is essential for states establishing mutual relations and engaging in diplomacy to be able to negotiate and agree upon what property, premises, and agents each state will recognize as enjoying diplomatic status.

The Minister gives effect to Canada’s international obligations through the exercise of the Minister’s prerogative powers and the powers under the FMIOA. [^13]

[49] In Canadian Planning, Braid J. did not give the same level of deference to certificates issued by the Minister. The issue in Canadian Planning was whether a private debtor had the right to recover judgment against the State of Libya (“Libya”) by way of garnishment of bank accounts held by Libya in Canada. Certificates issued by DFA stated that several named bank accounts were the “diplomatic property of Libya” and that the accounts “continue to enjoy privileges and immunities under the [FMIOA]”. [^14]

[50] Braid J. highlighted that neither section 11 of FMIOA nor Article 22(3) of the VCDR specifically mentions bank accounts. She concluded that the certificates issued did not provide conclusive proof of diplomatic immunity. She also noted that there were no Canadian cases in which FMIOA and the immunity of bank accounts had been considered. Braid J. carried out an analysis of FMIOA and international law, the latter as relates generally to immunity of bank accounts.

[51] Braid J. concluded that “[c]ustomary international law provides that diplomatic bank accounts are generally immune from execution and attachment.” [^15] She allowed the parties to file further evidence, following which she determined that Canadian Planning had not rebutted the presumption of immunity over the subject bank accounts. The notices of garnishment were quashed and the judgment creditors were prohibited from issuing any further notices of garnishment with respect to the subject bank accounts. [^16]

[52] The issue before me is the diplomatic status of real property, which is specifically addressed in both section 11 of the FMIOA and Article 22 of the VCDR. There is no requirement for me to carry out an analysis, of the kind carried out in Canadian Planning. In any event, I agree with the decision of Hainey J. in Tracy. I find that the Certificates are conclusive evidence of the diplomatic status of the Property and the immunity accorded to it pursuant to the FMIOA and the VCDR.

State Immunity

[53] State immunity is distinct from diplomatic immunity and they are to be applied separately. [^17] On the basis of state immunity the jurisdiction of domestic courts over foreign countries is limited. Diplomatic immunity provides protection to diplomatic personnel and property (“premises of a mission”) from the reach of Canadian law and courts.

[54] My Ruling addresses only the issue of diplomatic immunity. It does not address whether the defendant is immune from the jurisdiction of this Court or has waived the defence of state immunity. Those issues remain to be addressed at a later stage of the action assuming the defence of state immunity is maintained by the defendant.

Summary

[55] I order as follows:

1. The plaintiff’s lien claim shall be dismissed.
2. The Lien shall be discharged from the title to the Property.
3. The discharge of the Lien from the title to the Property shall be completed within 60 days of the date of the release of this Ruling.

Costs

[56] In the event the parties are unable to agree upon costs of the motion for summary judgment, they may make written submissions as follows:

a) The submissions shall be limited to a maximum of four pages, exclusive of a bill of costs;

b) Written submissions shall comply with Rule 4 of the Rules of Civil Procedure;

c) Hard copies of any case law or other authorities shall be provided with the submissions and shall comply with Rule 4 of the Rules of Civil Procedure with respect to font size;

d) The submissions, the documents referred to therein, case law, and other authorities, shall be on single-sided pages;

e) Written submissions shall be delivered by 5:00 p.m. on the tenth business day following the date on which this Ruling is released; and

f) In the event any party wishes to deliver a reply to the costs submissions of the opposing party, the reply submissions shall be delivered by 5:00 p.m. on the fifteenth business day following the date on which this Ruling is released. Reply submissions shall comply with paragraphs (a) to (d) above.

Footnotes

[^1]: The affidavits are referred to as “the 2015 McAsey Affidavit” and “the 2016 McAsey Affidavit”. [^2]: R.S.C. 1985, c. S-18. [^3]: Foreign Missions and International Organizations Act (“FMIOA”), S.C. 1991, c. 41, Schedule B. [^4]: 2014 SCC 7, [2014] 1 S.C.R. 87. [^5]: Hryniak, at para. 27. [^6]: The terms in quotations marks are as they appear in the FMIOA and the VCDR, respectively. [^7]: 1971 SCC 145, [1971] S.C.R. 997, 1971 CarswellQue 41. [^8]: [1968] Que. S.C. 523. [^9]: 2016 ONSC 3759. [^10]: 2015 ONSC 1638 (“Canadian Planning No. 1”) and 2015 ONSC 3541 (“Canadian Planning No. 4”). These decisions are two rulings of Justice Braid in a series of rulings which she made in the matter. [^11]: Tracy, at para. 151. [^12]: S.C. 2012, c. 1. [^13]: Tracy, at paras. 142, 145, 146 and 148. [^14]: Canadian Planning No. 1, at para. 6. [^15]: Canadian Planning No. 1, at para. 44. [^16]: Canadian Planning No. 4. [^17]: Canadian Planning No. 1, at para. 16.

Madam Justice Sylvia Corthorn Released: January 9, 2017