COURT FILE NO.: CV-19-79243
DATE: 2022/07/25
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: NANCY SALGUEIRO and MICAEL CARREIRA, Plaintiffs
AND:
INSTANT BRANDS INC., GD MIDEA CONSUMER ELECTRIC MANUFACTURING CO. LTD, and AMAZON.COM INC, Defendants
BEFORE: Regional Senior Justice Calum MacLeod
COUNSEL: Paulo D’Asti, for the plaintiff
Theresa Hartley for the defendants GD Midea and Instant Brands
HEARD: July 19, 2022
DECISION AND REASONS
[1] These motions concern the validity of service upon one of the defendants in a products liability action. The plaintiff purchased an “Instant Pot” pressure cooker on-line through Amazon.com and allegedly suffered severe burns because of a product malfunction. She has sued Amazon, Instant Brands and a company in China (“GD Midea”) which is alleged to be the manufacturer.
[2] There is no issue about service on Amazon or Instant Brands. The issue of service relates to GD Midea and whether, despite clear evidence that GD Midea and its insurers are aware of this litigation, it remains necessary to effect formal service on that defendant through the “Convention” pursuant to Rule 17.05.[^1] Ancillary to that question is whether service may be deemed effective under Rule 16.01 (2) or validated under Rule 16.08 (b) and if the time for effecting service under Rule 14.08 should be extended.
[3] For the reasons that follow, service on GD Midea cannot be deemed or validated simply because GD Midea is aware of the claim. Service must be effected in China through the Central Authority pursuant to the Convention. The fact that GD Midea and its insurer are aware of the claim is relevant to an order extending the time for service, however, and it is reasonable to provide an extension of 24 months for that purpose.
Summary of the Facts
[4] The following facts are undisputed. The product in question was purchased on Amazon.ca on November 14, 2016 and delivered on December 1, 2016. The injury apparently took place on February 11, 2017. The Statement of Claim was issued and this action commenced on February 7, 2019 just days before the ostensible expiry of the limitation period.[^2]
[5] The plaintiff sued Amazon.com Inc. (“Amazon”), Instant Brands Inc. (“Instant Brands”) and GD Midea Consumer Electric Manufacturing Co. Ltd. Instant Brands is a Canadian corporation with its head office in Ottawa. Amazon is an American corporation with its head office in Seattle, Washington. GD Midea is a Chinese corporation with its head office in Foshan City, Guangdong, China.
[6] The statement of claim was served without incident on Amazon and Instant Brands. Service was effected on those defendants on February 19 and 20, 2019. Service was not effected on GD Midea. Counsel for the plaintiff was aware that both Canada and China are signatories to the Convention and had made inquiries about effecting service pursuant to Rule 17.05 (3). Counsel had reviewed various cost estimates for translation of the documents and service through the Central Authority but had not taken any steps to initiate that process when on March 21, 2019, he was contacted by counsel retained by the insurer for GD Midea and advised that the matter was being investigated.
[7] In the letter of March 21, 2019, defence counsel also requested that no steps be taken to note the defendant in default without further notice. During the balance of 2019, plaintiff’s counsel received communication from counsel for each of the defendants and had agreed not to note any of the defendants in default while the matter was investigated and counsel obtained instructions.
[8] In January of 2020, counsel for GD Midea renewed the request not to note GD Midea in default. By April of 2020, the plaintiff was no longer prepared to grant indulgences and on April 20, 2020 counsel for the plaintiff advised all of the defendants that he required their statements of defence within 45 days. On June 8, 2020, counsel for GD Midea served what purported to be a defence and crossclaim. On July 8, 2020, both Amazon and Instant Brands served statements of defence. Neither Amazon nor Instant Brands crossclaimed against GD Midea.
[9] Almost immediately after serving the statement of defence, counsel for GD Midea became aware that his client may not have been served and on June 16, 2020, he wrote to plaintiff’s counsel requesting a copy of the affidavit of service. On July 9, 2020, plaintiff’s counsel confirmed that GD Midea had never been formally served in China.
[10] On July 20, 2020, counsel for GD Midea advised that GD Midea took the view that absence of service was fatal to jurisdiction. GD Midea also advised it would dispute jurisdiction and forum on other grounds and would not attorn to the Ontario courts. On the same date an amended Statement of Defence was served which specifically pleaded the absence of service and disputed jurisdiction. Neither the original statement of defence nor the amended statement of defence was filed with the court.
[11] It is not disputed that at some point in time a copy of the statement of claim had come into the possession of Allianz Global Risks US Insurance Company, which is GD Midea’s insurer. It is not disputed that Allianz retained McCague Borlack LLP in order to defend GD Midea. It is not disputed that McCague Borlack served the original statement of defence in the mistaken belief that service had been effected and the plaintiff was threatening to note GD Midea in default. Obviously GD Midea could not have been noted in default because the plaintiff would have been unable to furnish an affidavit of service to the court.
[12] It is clear from the evidence that GD Midea is now aware of this claim, has a copy of the claim, has insurance and has retained counsel. It is equally clear that the statement of claim has never been served as required by Rule 17.05 (3) or the Convention. It is undisputed that China does not permit service by process server, mail or other means that does not involve the Central Authority. A statement of defence has never been “delivered” by GD Midea since the definition of “delivered” under the Rules includes both serving and filing. But a statement of defence and amended statement of defence have been served on the plaintiff.
[13] Under Rule 14.08, a statement of claim is to be served within six months of the commencement of the proceeding. This time would have expired in August of 2019 and even at that point, had the plaintiff wished to serve GD Midea, an order would have been required to extend the time for service pursuant to Rule 3.02. While the court has discretion to extend any time provided by the Rules either before or after the time has expired, such discretion can only be exercised if it is just to do so and may be exercised on terms.
The Issue
[14] Canada and China are both signatories to the Convention and the Convention has been included in the domestic law of Ontario pursuant to amendments to the Rules of Civil Procedure. The Convention requires that service on a litigant resident in China be served through the “Central Authority” and it also requires that the documents to be served in that fashion be translated into Mandarin Chinese. Unlike some signatories to the convention such as Canada or the United States, China does not permit service on its citizens by mail, electronic delivery or private process server.[^3]
[15] The question is whether the formalities of service under the Convention are required when it is quite clear that the defendant knows the particulars of the claim, has insurance which would respond to the claim and where the insurer has instructed counsel in Ontario. Furthermore, in this case, counsel served a statement of defence on behalf of the defendant under the mistaken assumption that service had been effected.
[16] In relation to domestic parties, there is no doubt that the only purpose of formal service is to give notice to the defendant and to oblige that defendant to take the necessary steps if it wishes to mount a defence. A domestic defendant cannot hide behind the lack of formalities of service if it acknowledges that it has a copy of the statement of claim.[^4] A domestic defendant which delivers a defence will be deemed to have been served.[^5] The plaintiff argues that the same principles should apply in this case. Since it is clear that GD Midea and its insurer are aware of the claim and since the insurer caused a statement of defence to be served, the court should deem service to be effective or dispense with service.
[17] Alternatively, if the court determines that formal service is still required, the plaintiff argues that the court should extend the time for service to permit it to effect formal service. Without such an extension, the plaintiff cannot succeed against this defendant because the limitation period would have expired in 2019.
[18] The defendant also brought a motion to dismiss the action on the basis of jurisdiction simpliciter or forum non conveniens. That motion was not argued as the defendant agreed it is premature. The only questions were whether service can be dispensed with and, if not, whether the time should be extended.
Analysis
[19] The short answer to the first question is “no”. Although a foreign defendant may be served with an Ontario statement of claim without leave under the circumstances set out in Rule 17.02, where the state in which the foreign defendant resides is a signatory to the Convention, Rule 17.05 (3) applies. The Ontario Court of Appeal has conclusively determined that Rule 17.05 (3) is a complete code and where that rule applies, the court may not deem service to be effective under Rule 16. Khan Resources Inc. v. Atomredmetzolo JSC is binding authority on this point.[^6]
[20] As described in Khan, the Convention serves two purposes. One purpose is to ensure that foreign defendants are put on notice of claims, but the other is to provide a uniform procedure in all contracting states. For that reason, it is insufficient to simply bring the matter to the attention of a defendant or to demonstrate that the defendant is actually aware of the claim. The defendant must be served in the foreign state in the manner permitted by the Convention. As a practical matter as well, it is highly unlikely that a foreign state that is signatory to the Convention will enforce a judgment if the claim was not served in the manner required by the law of that state.
[21] The Convention not only requires service through the Central Authority, but also requires the document to be translated into the official language of the foreign jurisdiction. The Court of Appeal specifically approved of the decision by this court in Campeau v. Campeau,[^7] in which the court held that service on an English speaking litigant in Austria that had not been effected pursuant to the Convention was not valid. In Khan, the court also applied decisions in Ontario and other provinces which had reached the same conclusion.[^8]
[22] The Court of Appeal did leave open the possibility that there might be circumstances in which a party had exhausted all of the remedies open to it under the Convention and had been unable to effect service. This was the case in Zhiang v. Jiang in which Master Glustein (as he then was) made an order dispensing with service in a situation where China had refused to effect service.[^9] In Khan, the Court of Appeal specifically declined to rule on whether or not Zhiang was correctly decided and thus left open the possibility that such an argument can be advanced under particular circumstances. That is not the case here.[^10] The plaintiff has made no effort to comply with the Convention. There is no evidence that the Central Authority would refuse to effect service or is acting in bad faith.
[23] I have no doubt that a foreign defendant could choose to waive compliance with the Convention, could serve a defence and could voluntarily attorn to the jurisdiction.[^11] This is not what happened here. The evidence is clear that the insurer for the defendant simply assumed that service had been effected on all of the defendants and served a defence in the face of a threat to note all of the defendants in default. The error was almost immediately detected and an amended defence was served which relies upon the absence of service and also rejects the jurisdiction of the Ontario courts on other grounds.
[24] Since service was not effected in accordance with the Convention, the defendant has not waived the requirement and it is not open to the court to deem service effective under Rule 16.01 (2) or 16.08, the remaining question is whether the time to serve the statement of claim should be extended to permit proper service to occur.
[25] The evidence before the court is that it may take up to 18 months to attempt service under the Convention. The defendant argues that it would be improper and unjust to make such an order because the plaintiff has made no effort to comply with the Convention to date and the limitation period would have expired almost three years ago.
[26] I do not accept that it would be unjust to make the requested order. The plaintiff originally had reason to believe that the defendant was prepared to defend the proceeding without insisting on formal service. He believed this because the insurer was involved and a statement of defence was eventually served.
[27] It is true that the defendant made its position clear in June of 2019 and this motion was not heard until 2022. Certainly, the plaintiff could have launched this motion with greater alacrity although some portion of the delay may be excused because of the COVID-19 pandemic and the suspension of time limits that applied during the provincial state of emergency. The most important consideration, however, is the lack of prejudice to the defendant. The prejudice must be prejudice resulting from the delay in serving the claim and not the passage of time since the events giving rise to the action itself.[^12]
[28] In some cases, a defendant might be in a position to complain about a three year delay in bringing this motion and could ask the court to presume prejudice. Here, however, there are co-defendants. Nothing has yet transpired that puts the foreign defendant in a difficult position with respect to the preservation of evidence or any of the other factors raised in the defendant’s factum. It might be different if the foreign defendant was the only defendant, but that is not the case. Furthermore, the same counsel now represents MG Midea (at least for purposes of this motion) as represents Instant Pot. Most importantly, the insurer for MG Midea has been aware of this claim since March of 2019 and in concert with the other defendants has had time to investigate the claim and to preserve any necessary evidence.
[29] In my view, while the Convention requires formal service, it is not irrelevant that the insurer and the defendant have had actual notice of the claim since at least March of 2019. In these circumstances I agree with the defendant that formal service is still required, but I disagree that there is any injustice in extending the time. Formal service is a necessary technicality, but the defendant has known about the action since the outset and is not taken by surprize by this motion. On the other hand, it would be extremely prejudicial not to extend the time because the plaintiff is barred from starting a fresh action by the expiry of the limitation period. Rule 3.02 permits the court to extend any time under the Rules either before or after the time has expired. The question is always whether it is just to do so and on what terms?[^13]
[30] The evidence is it may take up to 18 months to effect service through the Central Authority. I will extend the time for completing service for 24 months providing the plaintiff initiates the process within six months.
Conclusion and Costs
[31] In conclusion, I have determined that notwithstanding the fact that the defendant has actual notice of this claim through its insurers, Rule 17.05 (3) requires that GD Midea be served in China in accordance with the Convention. Unless the defendant purposefully and intentionally waives that requirement, or perhaps if there is evidence that compliance with the Convention is impossible, the court has no power to validate service ex juris in these circumstances. On the other hand, it is not unjust to extend the time for service to permit the formalities to be completed. The defendant is aware of the claim and is represented by the same counsel as one of the other defendants.
[32] The time for effecting service pursuant to Rule 17.05 (3) is extended to July 25, 2024, provided the plaintiff initiates the process no later than January 25, 2023.
[33] I did not hear argument on costs. If any party is asking for costs, and if counsel cannot resolve the issue between themselves, I will entertain a request for costs if it is made to my office prior to August 19, 2022.
Regional Senior Justice C. MacLeod
Date: July 25, 2022
COURT FILE NO.: CV-19-79243
DATE: 2022/07/25
ONTARIO
SUPERIOR COURT OF JUSTICE
RE: NANCY SALGUEIRO and MICAEL CARREIRA, Plaintiffs
AND:
INSTANT BRANDS INC., GD MIDEA CONSUMER ELECTRIC MANUFACTURING CO. LTD, and AMAZON.COM INC, Defendants
BEFORE: Regional Senior Justice Calum MacLeod
COUNSEL: Paulo D’Asti, for the plaintiff
Theresa Hartley for the defendants GD Midea and Instant Brands
Decision and reasons
Regional Senior Justice C. MacLeod
Released: July 25, 2022
[^1]: Rule 17.05, Ontario Rules of Civil Procedure, RRO 1990, Reg. 194 as amended. The “Convention” is the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters signed at The Hague on November 15, 1965.
[^2]: Limitations Act, 2002, S.O. 2002, c. 24, Sched. B (as amended to July 20, 2022), s. 4
[^3]: See Capone v. Fotak, 2022 ONCA 430 with respect to postal or courier service in the United States. Neither Canada nor the United States oppose service pursuant to Article 10 of the Convention but China does. See: HCCH | Declaration/reservation/notification
[^4]: Rule 16.08
[^5]: Rule 16.01 (2)
[^6]: 2013 ONCA 189; 115 O.R. (3d) 1; 33 C.P.C. (7th) 375; 361 D.L.R. (4th) 446 (Ont.CA)
[^7]: 2004 CarswellOnt 4866 (eCarswell); [2004] O.J. No. 4788 (Quicklaw) (SCJ) – see Khan, supra @ para. 53
[^8]: See para 41 citing Metcalfe v. Yamaha Motor Powered Products Co., [2012] A.J. No. 919, 2012 ABCA 240, 536 A.R. 67 (Alta. CA), and para 51 citing Samina North America Inc. v. H3 Environmental II LLC, [2004] O.J. No. 6229, 2004 CanLII 65382 (S.C.J.), affd on other grounds [2005] O.J. No. 4644 (C.A.)
[^9]: (2006) 2006 CanLII 24131 (ON SC), 35 C.P.C. (6th) 312: 82 O.R. (3d) 306 (SCJ – Master)
[^10]: Post Khan, Master Glustein was faced with a situation in which there were no such circumstances and held that a document served personally in Barbados was invalid because it did not comply with the Convention. See Mitchison v. Zerona International Inc., 2014 ONSC 4738 (Ont. Master)
[^11]: It is unclear if the case of Innvest Master Properties GP X Ltd. v. 1271519 Ontario Limited, 2017 ONSC 5961 (Ont. Master) dealt with a foreign defendant but the case did deal with a situation in which the defendant had clearly instructed counsel to accept service.
[^12]: McGroarty v. CIBC Mellon Trust Company, 2012 ONCA 241
[^13]: See Rule 3.02