Superior Court of Quebec invalidates service of class action against foreign company

On November 23, 2017, in the matter of Bountounis, the Superior Court of Quebec reversed the clerk’s decision granting an application for special mode of service and dismissed the application to declare that the defendants were validly served according to international service provisions of the Code of Civil Procedure  (“CCP”). This decision confirms the integration of the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters, entered into at The Hague on  November 15, 1965 (“The Hague Convention”) into Quebec law and the service of class actions on foreign defendants.

Background

The Plaintiff filed an application for authorization to institute a class action against an alleged “cartel of German car manufacturers”. The Superior Court of Quebec decision only refers to the three German Defendants concerned in this case, which are Daimler AG, Bayerische Motoren Werke AG (BMW) and Volkswagen AG, even if six others companies are the object of the proposed class action.

The Defendants sought to invalidate the service of the application, since it was made by mail and entirely written in English. They argued that international service must comply with The Hague Convention.

A clerk had granted the Plaintiff leave to serve the application by mail. During the hearing, Plaintiff’s lawyer acknowledged that The Hague Convention does not authorize service by mail in Germany.

International Service of Proceedings

Service of proceedings is governed by the Quebec CCP . Prior to 2016, Articles 138 and 140 governed the special notification and the service of proceedings by mail. Since the new CCP entered into force in 2016, Article 494 deals specifically with international notification, and provides that any notification to a foreign company, which has no head office in Québec, must be made in accordance with The Hague Convention in States party to The Hague Convention.

The Hague Convention states, among other things, that each signatory State must name a Central Authority in the State, which may require the document to be written in or translated into the official language or one of the official languages of the State addressed (Article 5). In addition, provided the State of destination does not object, the Convention shall not interfere with the freedom to send judicial documents by mail (Article 10 (a)). Each State has the flexibility to indicate its particularities with regard to international service, which other states must respect.

Germany allows formal service of international proceedings in its State if the documents to be served and any attachments thereto have been prepared in German or have otherwise been translated into German. Germany also objects to the service by mail, which is otherwise permitted in other States under Article 10 (a).

Reasons and conclusions

In the present case, the Superior Court of Quebec examined the application of The Hague Convention in Quebec law. Referring to the Court of Appeal decision in Louis Dreyfus v. Holding Tusculum B.V., the Court states that prior to the coming into force of the new CCP, The Hague Convention had not been formally incorporated into Quebec or Canadian legislation. The Court then  analyzes the common law rulings in this regard (Metcalfe Estate v. Yamaha Motor Powered Products Co., Ltd., Khan Resources Inc. v. Atom Redmetzoloto).

The Superior Court of Quebec concluded that pursuant to  Article 494 CCP, service on foreign defendants had to be made in accordance with The Hague Convention. The Court dismissed the Plaintiff's arguments that the Defendants had already obtained legal notification through their Quebec attorneys mandated to protect their interests in this class action.

The Superior Court of Quebec concluded to that Plaintiff’s lawyer had acted in bad faith as he had contacted a clerk rather than the coordinating judge. Since 2016, Article 572 CCP makes it clear that all class action cases are to be managed by the designated coordinating judge, and that the clerks cannot render a decision in this type of case.

The Plaintiff also attempted to serve the German Defendants by e-mail. The Court held that Articles 494 to 496 CCP govern international notification, and that the other provisions governing notification within Quebec do not apply. This question had been recently discussed in Gagnon v. Audi Canada Inc., where an application for authorization of a special mode of service had been requested and dismissed in order to comply with The Hague Convention.

In conclusion, the Superior Court of Quebec dismissed the Application for special mode of service, granted the Application for review of a decision of the special clerk for Daimler AG, and dismissed the Application to declare that defendants had received a valid and legal service.

Commentary

The application of Article 494 CCP as to international service remains ambiguous. Only a few judgments have addressed the issue since it came into force in 2016. Even if the Superior Court of Quebec applied procedural rules with respect to service on foreign defendants similarly to this present case in Gagnon v. Audi Canada Inc., other judgments seem to apply Article 494 CCP differently.

In 7847866 Canada Inc. v. Gree Electric Appliances Inc. of Zhuhai, the Superior Court of Quebec declared valid the service on foreign defendant's lawyers at their offices in Montreal because the evidence showed that the law firm was the representative of the company in Quebec. The Court therefore disregarded Article 494 CCP, applying the general rule of Article 125, which states that service on legal person is made by handing the document to its head office, or to one of its representatives if its head office is not in Quebec.

In Média Graph Dépôt inc. v. MTEX Solutions, the Superior Court of Quebec did not apply Article 494 CCP. The Court submitted that the Superior Court of Quebec had already authorized the application for special mode of service for the same file, and since this judicial decision has not been contested, it had become final and enforceable. The Court therefore had to declare valid the service made to the defendant residing in Portugal, confirming the exemption from following the rules and provisions enacted by The Hague Convention.

It will be useful to see whether the Quebec Courts provide further explanations or clarifications in future judgments on this topic. Despite the case law that sets aside Article 494 CCP, many judgments make it clear that The Hague Convention must be respected. One judgment supporting the rigor of the application of The Hague Convention is Gagnon v. Audi Canada Inc., which was the subject of a notice of appeal and a motion for leave to appeal in December 2017. This appeal judgment may provide welcomed clarifications on the issue of international service and on the application of Article 494 CCP.