687725 BC Ltd. Respondent/Applicant - v. -, 2021 ABQB 462

Court of Queen’s Bench of Alberta Citation: 687725 BC Ltd v Rakov, 2021 ABQB 462 Date: 20210614 Docket: 1901 13139 Registry: Calgary Between: 687725 BC Ltd. Respondent/Applicant - and - Ivo Ivanov Rakov Appellant/Respondent _______________________________________________________ Appeal from the Master Reasons for Judgment of the Honourable Mr. Justice C.M. Jones _______________________________________________________ I.

Introduction [ 1 ] The Appellant, Ivo Ivanov Rakov, appeals a decision of Master Farrington dated November 8, 2019, directing registration of a judgment of the Supreme Court of British Columbia pursuant to the Reciprocal Enforcement of Judgments Act , RSA 2000, c R-6 (“ REJA ”). For the reasons that follow, I allow the appeal. II. Background Facts [ 2 ] Rakov and Sergey Rozenberg were each 50% shareholders of I.S. Cargo Corporation (“Cargo”), an Alberta corporation that carried on a trucking business in Alberta and British Columbia.

Rakov asserts in his brief that Cargo’s head office and base of operations was in Calgary. [ 3 ] Cargo entered into an agreement (the “Lease Agreement”) to lease warehouse space and a yard in Kelowna from 687725 BC Ltd. (“687”). Under the Lease Agreement, Rakov and Rozenberg gave certain undertakings (the “Undertakings”) regarding the performance of Cargo’s obligations under the Lease Agreement. [ 4 ] Cargo defaulted on the lease and Rakov was served with Notice of Proceedings on November 15, 2017.

On September 12, 2019, 687 obtained judgment against Cargo, Rakov and Rozenberg in the British Columbia Supreme Court (the “BC Judgment”). Rakov did not attend the proceedings and was noted in default. He expressly declined to submit to the jurisdiction of the British Columbia Court.

[ 5 ] Meanwhile, relations between Rakov and Rozenberg deteriorated. They entered into a share transfer agreement (the “Share Transfer Agreement”) on May 27, 2018 under which Rozenberg acquired Rakov’s shares of Cargo and Rakov provided a non- competition covenant. [ 6 ] 687 then sought to register the BC Judgment in Alberta. Rakov resists registration, citing the following provisions of REJA : 2(6) No order for registration shall be made if it is shown by the judgment debtor to the Court that … (

b) the judgment debtor, being a person who was neither carrying on business nor ordinarily resident within the jurisdiction of the original court, did not voluntarily appear or otherwise submit during the proceedings to the jurisdiction of that court. … (

f) the judgment was in respect of a cause of action that for reasons of public policy or for some similar reason would not have been entertained by the Court, or (

g) the judgment debtor would have a good defence if an action were brought on the original judgment. [ 7 ] It is common ground that Rakov was never resident in British Columbia and did not voluntarily appear before the court in that province. 687 argues that Rakov carried on business in British Columbia or “otherwise submitted” to its jurisdiction. [ 8 ] Rakov also argues that the Undertaking 687 seeks to enforce against him constitutes a guarantee. He notes that underneath his signature on the Lease Agreement appear the words “Name of Guarantor”.

He relies on certain provisions of the Guarantees Acknowledgment Act, RSA 2000, c G-11 (“ GAA ” ) that require an acknowledgment in prescribed form to be signed by a guarantor in the presence of a lawyer. The parties are in agreement that Rakov did not appear before a lawyer and did not sign the prescribed acknowledgment. III. Master’s Decision [ 9 ] The parties appeared before Master Farrington, who granted the application for registration. His oral decision was sufficiently brief to be set out in its entirety: Based on [ REJA ] alone the matter comes down to whether Mr.

Rakov was a person who was neither carrying on business nor ordinarily resident within the jurisdiction of the original court. He certainly wasn’t ordinarily resident within the jurisdiction of the original court, so that leaves it with whether he was carrying on business. In my view, based upon what I have heard here, in my view, I think he was carrying on business within the meaning of [ REJA ], and I make that finding for several reasons. He is not sued simply because he is a director or a shareholder.

He is sued because he signed a contract in his personal capacity dealing with commercial business and apparently it was a warehousing-type of lease agreement that was to facilitate specifically operation of truck lines in British Columbia. While the truck line was apparently carried on by a corporation, Mr. Rakov facilitated those operations through his business arrangements. And I do consider at least in part the non-compete clause referred to by Mr. Harrison in his argument that it refers to personal non-competition on the part of Mr. Rakov. So, I think that’s a factor. I also think, as Mr.

Harrison argued, that the nature of the guarantee obligation, which makes it clear that Mr. Rakov agreed to be liable as a primary debtor, is also a factor here. In my view, the connection of Mr. Rakov to the business operations in British Columbia is sufficient to meet the requirements of [ REJA ] and, as such, it is enforceable here. IV. Analysis [ 10 ] The parties raised several issues, some of which are intertwined. It is undisputed that the standard of review on all issues is correctness.

Even though an appeal from a Master is not a de novo hearing, I have allowed the parties to make extensive additional submissions not put to Master Farrington in order to fill in gaps in the analysis, the discussion of law and the evidence to be found in the Master’s decision. A. GAA [ 11 ] Rakov raises s 3 of the GAA as an obstacle to registration of the BC Judgment in Alberta: 3. No guarantee has any effect unless the person entering into the obligation (

a) appears before a lawyer, (

b) acknowledges to the lawyer that he executed the guarantee, and (

c) in the presence of the lawyer signs a statement at the foot of the certificate of the lawyer in section 4(1). [ 12 ] Rakov argues that the absence of this acknowledgment renders registration of the BC Judgment contrary to public policy under s. 2(6)(

f) of REJA and/or gives him a good defence under s. 2(6)(g). 687 asserts that the GAA is inapplicable.

1. Is the Undertaking a Guarantee? [13] The first question is whether Rakov’s Undertaking is or is not a guarantee to which the GAA could apply.

Section 1 of theGAA defines “guarantee” as a deed or written agreement whereby a person, not being a corporation, enters into an obligation to answerfor

an act or default or omission of another. [14] Clause 15.16 of the Lease Agreement provides: Personal Indemnity For and in consideration of the Landlord entering into this Lease with the Tenant, the principal officer of the Tenant, namely theGuarantor, personally and unconditionally guarantees the due performance of all terms, conditions and provisions of this Lease on behalfof the Tenant and agrees to be considered primarily liable for all such Tenant’s obligations and shall not be released by any time given tothe Tenant or by any variation in or departure from the Tenant before being entitled to call upon the Guarantor to fulfill his obligationsherein.

This Guarantee shall extend and ensure (sic?) to the benefit of the Landlord, its successors and assigns and the Guarantor hereinshall be construed as including his respective heirs, executors, administrators and assigns. [Emphasis added.] [15] 687 disputes that this clause constitutes a guarantee within the meaning of the GAA.

It argues that Rakov did not merely agreeto answer for Cargo’s debts, but was personally bound by the Lease Agreement. [16] I find that the words “personally and unconditionally guarantees” manifest Rakov’s intention to answer for Cargo’s defaults oromissions. 687, however, notes that Rakov also “agrees to be considered primarily liable for all such Tenant’s obligations”. [17] In Hunter Duckworth Holdings Ltd v Kamino GP Ltd, 2014 ABQB 753, Master Hanebury stated at para 16 that: Some case law has held that a guarantee can, by its terms, make the guarantor a principal debtor.

In such a situation, the requirement inthe guarantee for a demand may not need to be fulfilled to start the limitation running. As the guarantor is also a principal debtor, his orher liability accrues pursuant to the terms of the principal debt. The terms of the guarantee must be carefully read to ascertain if the wording is sufficient to effect this result: G. Andrews and R. Millett, Law of Guarantees (5th ed.), Carswell: Toronto, 7-006; ManulifeBank of Canada v. Conlin, (SCC), [1996] 3 S.C.R. 415, para’s. 19 – 21; Royal Bank of Canada v.

SamsonManagement & Solutions Ltd., 2013 ONCA 313, para. 41, leave to appeal to the SCC refused, [2013] S.C.C.A. No. 301, 2013CarswellOnt 15573, Nov. 14, 2013. [18] This suggests to me that one can both guarantee the performance of another and, if called upon, be expected to perform thatother’s obligations under a contract.

They need not be mutually exclusive. 687 asserts that the “primary liability” language in clause 15.16 ousts the applicability of the GAA and cites Kevin McGuiness, The Law of Guarantee, 3rd ed (LexisNexis, 2013) at para 7.37: …The meaning and effect of the principal debtor clause must be considered in the context of the agreement in which it appears, and inthe context of the intentions of the parties as revealed by the other documents relating to the transaction. A person can agree to assume apersonal and primary liability in respect of the indebtedness (or other obligation) of another person.

In such a case, the relationshipbetween the parties is not one of guarantee, although it may conceivably have a number of the incidents of a guarantee. [Emphasisadded.] [19] 687 also cites Manulife Bank of Canada v Conlin, [1996] 3 SCR 145 at paras 19 and 21: In Canadian Imperial Bank of Commerce v. Patel (1990), (ON SC), 72 O.R. (2d) 109 (H.C.), at p. 119, it was heldthat a principal debtor clause converts a guarantor into a full-fledged principal debtor.

I agree with this conclusion. … The principal debtor clause converts the guarantor into a full-fledged principal debtor with all the duties and obligations which that termimplies. [20] McGuiness states at para 7.40 that other clauses in a contract can alter the effect of a principal debtor clause. He concludes asfollows at para 15.156: If in its totality the “guarantee” confers the status of a principal debtor on the purported surety, then the liability of the “surety” is not as asurety.

In such a case, the “surety” is entitled to the same rights as a principal debtor. [21] In its efforts to distinguish between contracts of guarantee and of primary liability, 687 also cites Royal Bank of Canada vSwartout, 2011 ABCA 362 at paras 37 and 38: A plain reading of both of the above provisions shows that they impose obligations directly on the appellants. They are not secondaryobligations in the event of the Borrower’s default.

The case authorities have held that if the language of the agreement does not make the obligation conditional upon failure of another, theobligation is direct and not a guarantee: 32262 BC Ltd v Pataki Enterprises, 1998 ABCA 90, 216 AR 78 at para 11. Nor is it the casethat where individuals are jointly and severally liable with a corporation, the obligations are conditional. Similarly, in Standard Trust v Steel (1991), 1991 ABCA 211 , 117 AR 241, 83 DLR (4th) 130 at page 142, this court stated: The appellant promised to perform. He did not promise to perform only if the corporation did not.

As the trial judge stated, he cannottherefore rely upon the technical provisions of the Guarantees Acknowledgement Act to relieve him of the obligation to pay the debt. [22] Swartout is distinguishable. The agreement in issue in that case stated that the Appellants were “severally liable” with the

Borrower for the obligations. The Court of Appeal held that being severally liable does not describe a guarantor. [23] Clause 15.16 of the Lease Agreement does not describe the Guarantor’s obligations as several or joint and several liability.Rather, the Guarantor guarantees the due performance of all terms, conditions and provisions of the Lease on behalf of the Tenant andagrees to be considered primarily liable for all such Tenant’s obligations.

Logically, this articulation makes clear that the obligationsunder the Lease Agreement are those of the Tenant, not the Guarantor, and that the Guarantor must perform if, and only if, the Tenantdefaults. The Lease Agreement distinguishes between the Tenant and the Guarantor and the totality of the Lease Agreement confersrights and obligations on the Tenant, not the Guarantor. The word Guarantor is mentioned only twice, in clause 15.16 and on Rakov’ssignature line, and the only reference to obligations of the Guarantor is in clause 15.16.

Moreover, it would make no sense to expectRakov to perform the Tenant’s obligations. The entity that was to occupy the premises was Cargo, not Rakov, and it is in respect ofCargo’s acts, defaults or omissions that 687 seeks to enforce Rakov’s Undertaking. [24] I agree with 687 that Swartout reminds us it is the substance of an agreement, not the labels chosen to describe the parties toit, that determines whether it is a guarantee. Here, unlike Swartout, no rights or obligations are imposed under the Lease Agreement onthe Guarantor to the exclusion of the Tenant.

The Guarantor is merely called upon to answer for the Tenant’s defaults. This

interpretationallows clause 15.16 to be read in harmony with the rest of the Lease Agreement and in light of its purposes and commercial context:Tercon Constructors Ltd v British Columbia (Transportation and Highways), 2010 SCC 4 at para 64. [25] Accordingly, I find that clause 15.16 gives rise to a guarantee within the meaning of the GAA. 2. Does the Guarantee bar registration of the BC Judgment? [26] Rakov asserts that s 2(6)(

g) of REJA precludes registration of the BC Judgment in Alberta on the grounds of public policy. Hecites HMB Holdings Limited v Antigua and Barbuda, 2020 ONCA 12, where the Court dealt with legislation virtually identical to s 2(6)of REJA. [27] In that case, HMB was not able to advance a claim in Ontario for limitations reasons. Instead, it advanced a claim in BritishColumbia. Antigua and Barbuda neither attorned nor entered any defence in British Columbia.

HMB obtained default judgment andapplied to register it in Ontario as a reciprocating jurisdiction. [28] The Ontario Superior Court of Justice dismissed HMB’s application, finding that it would circumvent the purposes ofOntario’s legislation to permit registration of a “ricochet judgment”, being a judgment of a reciprocating province that was itself theresult of an action to enforce a judgment obtained in a non-reciprocating jurisdiction. The Ontario Court of Appeal held that the judgmentcould not be registered because Antigua did not carry on business in British Columbia.

The Court of Appeal found it unnecessary toconsider if registering a ricochet judgment would run counter to Ontario’s legislative objectives. [29] Rakov argues that both his situation and the facts in HMB reflect a judgment creditor trying to do indirectly what they couldnot do directly. He takes the position that an action against him in Alberta would fail due to non-compliance with the GAA. [30] This conclusion, however, depends on which law an Alberta court would apply to an action on Rakov’s Undertaking.

As 687points out, if it applied British Columbia law, lack of compliance with the GAA would not be fatal. [31] 687 argues that as there is no equivalent to the GAA in British Columbia, clause 15.16 of the Lease is enforceable underBritish Columbia law.

It points to the choice of law clause at clause 16.9 of the Lease Agreement, which provides: Governing Law This Lease shall be construed in accordance with, and governed by, the laws of the Province of British Columbia. [32] 687 argues that a choice of law clause such as clause 16.9 generally will be upheld by the courts as determining the proper lawof the contract provided that the choice is bona fide and legal and there is no reason for avoiding the choice on the ground of public policy: Elderkin, Cynthia & Shin Doi, Julia, Behind the Boilerplate: Drafting Commercial Agreements, 4th ed (Toronto: ThomsonReuters, 2018) at pp 86-98. [33] 687 cites Bank of Montreal v Snoxell, (1982) (AB KB), 143 DLR (3d) 349 (ABQB).

In that case, thecontract of guarantee provided: This Contract shall be construed in accordance with the laws of the Province of British Columbia….for the purposes of legal proceedingsthis contact shall be deemed to have been made in the said Province (of British Columbia) and to be performed there, and the Courts ofthat Province shall have jurisdiction over all disputes which may arise under this contract, provided always that nothing herein containedshall prevent the Bank from proceeding at its election against the undersigned in the Court of any other Province or country. [Emphasisadded.] [34] In Snoxell, the principal debtor carried on business in British Columbia, the guarantor was resident in Alberta and theguarantee was executed in Alberta.

There was no GAA acknowledgement. The creditor sued in British Columbia. [35] This Court found that the parties’ choice of British Columbia law as the governing law was bona fide and was not a violationof Alberta’s public policy, citing O’Donovan et al v Dussault et al (1973), 1973 ALTASCAD 13 , 35 DLR (3d) 280 (ABCA)and Greenshields Inc v Johnston et al (1981), (AB KB), 119 DLR (3d) 714 (ABQB). Thus, s 2(6)(

f) of the REJA didnot prohibit registration in Alberta. Significantly, the Court found at para 14 that the forum selection provision in the contract ofguarantee, combined with service, meant that the guarantor had submitted during the proceedings to the jurisdiction of the BritishColumbia court. [36] In my view, the forum selection provision in Snoxell distinguishes it from this case. I do not believe that a mere choice of law

clause, absent forum selection language, amounts to submission to the jurisdiction of a foreign court, as required by s 2(6)(

b) of REJA . Master Farrington was of the same view. [ 37 ] In Greenshields , this Court considered whether to void a guarantee on grounds of public policy where, similar to clause 16.9 of the Lease Agreement, the choice of law clause referred to Ontario but the guarantee was signed in Alberta. There, the Court held that the choice of law clause was valid and ousted the GAA . The Court found at para 34 that there was a sufficient connection with Ontario to give effect to the choice of law clause, which was not inserted for the purpose of evading the GAA .

The Court of Appeal affirmed the decision. [ 38 ] 687 argues that the place of contracting, the place of performance, the place of business and the subject matter of the contract all militate in favour of applying the law of British Columbia.

It asserts that Cargo’s head office was in British Columbia, though I note Rakov’s brief states that it was in Alberta. 687 also argues that the subject of Cargo’s contracts was outside Alberta, though the record before me suggests that Cargo’s trucking business was carried on in both British Columbia and Alberta. 687 has provided no evidence that British Columbia was the place of contracting or the exclusive place of performance.

However, there is no evidence before me to suggest that clause 16.9 of the Lease Agreement was inserted to avoid the application of the GAA . [ 39 ] Greenshields was cited in Farm Credit Canada v Pacific Rockyview Enterprises Inc , 2020 ABQB 357 at para 151 . In Farm Credit, the Court rejected the application of the GAA to a lease governed by the laws of British Columbia. [ 40 ] However, the language in the guarantees in Farm Credit was substantially different from that in this case.

Though signed in Ontario, the guarantees provided: This instrument shall be construed in accordance with the laws of the Province of British Columbia and they shall be deemed to have been made there and shall be performed there , and the Guarantor agrees that any legal suit, action or proceeding relating to this instrument may be instituted in the Courts of the said Province, and the Guarantor hereby accepts and irrevocable [sic] submits to the jurisdiction of the said Courts and acknowledges their competence and agrees to be bound by any judgment thereof , provided that nothing herein shall limit FCC’s right to bring proceedings against the Guarantor elsewhere. [Emphasis added.] [ 41 ] In my view, this language manifests attornment to British Columbia in respect of performance of the guarantees and the jurisdiction of the courts to adjudicate that performance.

Such language is absent from the Lease Agreement. [ 42 ] I am of the view that the absence of the words such as “performed” and “enforced” distinguish between a mere choice of law clause, such as clause 16.9, and a more expansive clause such as that in Snoxell and Farm Credit. [ 43 ] I conclude that clause 16.9 is simply a choice of law clause indicating which jurisdiction’s laws apply in interpreting the terms of the Lease Agreement. It is not a forum selection clause and does not require that the parties’ obligations be performed in British Columbia.

It does not go so far as to oust the laws of Alberta, as the jurisdiction in which 687 seeks to compel performance of the Undertaking. [ 44 ] 687 states in its brief: The Parties’ decision to freely accept the jurisdiction of British Columbia in adjudicating their Lease ought to be respected. [ 45 ] This, in my view, is something of an overstatement. The parties certainly did not reject the jurisdiction of the courts of British Columbia. Indeed, that is where the action on the Lease Agreement was prosecuted.

However, nothing in the Lease Agreement precludes an Alberta court from taking jurisdiction over an action on the Undertaking. [ 46 ] Clause 16.9 does not say that the Lease Agreement is to be “enforced” or “performed” in accordance with the laws of British Columbia. An Alberta court hearing an action on the Undertaking might acknowledge British Columbia as the proper law of the Lease Agreement.

However, application of British Columbia law by an Alberta court could, under the doctrine of renvoi, result in Alberta law applying to enforcement or performance of the Undertaking, which in turn could mean that the GAA would apply and s 2(6)(

f) or (

g) of REJA would deny registration. [ 47 ] Fortunately, I do not have to decide the application of ss 2(6)(

f) and (

g) of REJA because I am able to base my decision on the question of whether Rakov was carrying on business in British Columbia. I simply note that I have serious reservations about 687’s argument that Alberta law is inapplicable. B. Carrying on Business [ 48 ] 687’s principal assertion is that Rakov carried on business in British Columbia at the time of commencement of its action, thus removing the obstacle of s 2(6)(

b) of the REJA and allowing this Court to register the BC Judgment. [ 49 ] The parties agree that the onus is on Rakov to satisfy the Court that he did not carry on business in British Columbia. In his Affidavit filed September 30, 2019, he states that he did not and this assertion was not challenged on Questioning. [ 50 ] 687 points to Mount Morgan Resources Ltd v Guardian Helicopters Inc , 2019 ABQB 99 , in which an administrative assistant of the judgment debtor swore in an affidavit: I am advised by P.

Dean Strashok, counsel for [Guardian], and verily believe that [Guardian was not] ordinarily resident in Manitoba, and did not carry on business in Manitoba. [ 51 ] Master Prowse, noting that Guardian had the onus to establish that it was not carrying on business in Manitoba, stated at para 10:

This is a bald assertion, with no particulars responding to the evidence of connections between Guardian and Manitoba. It is of noevidentiary value whatsoever: Guarantee Co. of North America v.

Gordon Capital, (SCC), [1999] 3 SCR 423 at para.31. [52] At para 31 of Gordon Capital, the Supreme Court of Canada stated: We would add that the trial judge’s ruling on this point is entirely consistent with previous decisions holding that a self-serving affidavitis not sufficient in itself to create a triable issue in the absence of detailed facts and supporting evidence. [53] 687 argues that Rakov’s assertions in his affidavit, without more, are insufficient to establish that he was not carrying onbusiness in British Columbia. [54] Rakov is not attempting to assert a right.

Rather, he is responding to 687’s attempt to enforce the BC Judgment in Alberta. Forthat reason, I believe it incumbent upon 687 to provide at least some evidence that Rakov was carrying on business in British Columbiaso that he knows what case he has to meet to discharge his onus. While I agree that s 2(6)(

b) of the REJA imposes an onus on Rakov, hecould not have been expected to provide more evidence without contrary evidence from 687 to which he could respond. 687 hasprovided no such evidence. 1. Presence in British Columbia [55] 687 relies on the discussion of carrying on business in Wilson v Hull, 1995 ABCA 374 at paras 12 and 13: The phrase “carry on trade or business” is defined in Black’s Law Dictionary (Sixth Edition, 1990) as follows (p. 214): To conduct, prosecute or continue a particular avocation or business as a continuous operation or permanent occupation. The repetition ofacts may be sufficient.

To hold one’s self out to others as engaged in the selling of goods or services…. Term which has multiplemeanings depending on the context, but it is commonly used in connection with the degree of activity of a foreign corporation in a givenstate and the consequent right of that state to regulate such enterprise and the exposure of the foreign corporation to suit within that state. The words “carry on” are defined in the Oxford English Dictionary (Second Edition) as follows: a. To continue or advance (a proceeding) from the stage already attained. b. To maintain, keep up, prevent from stopping. c.

To practisecontinuously or habitually; to conduct, manage, work at, prosecute. d. To continue one’s course, move on. e. To continue a course ofconduct or relations. These

definitions indicate that there must be some direct or indirect presence in the state asserting jurisdiction, accompanied by a degreeof business activity which is sustained for a period of time.

In my view, the purchase of articles in Idaho from a seller located there andtheir removal to Alberta for resale does not constitute carrying on business in Idaho. [56] 687 also notes that the applications judge in HMB quoted from Wilson to the effect that “carrying on business” requires onlythat a defendant have “some direct or indirect presence in the state asserting jurisdiction, accompanied by a degree of business activitywhich is sustained for a period of time”. [57] The Ontario Court of Appeal commented on this as follows at paras 20-21: The application judge observed that whether a party is carrying on business in a province is a question of fact.

Citing Chevron Corp. v.Yaiguaje, 2015 SCC 42, [2015] 3 S.C.R. 69, the application judge noted that “for a party to be carrying on business within a province, heor she must have a meaningful presence in the province and that presence must be accompanied by a degree of business activity over asustained period of time.”[i] He also referred to the holding in Club Resorts Ltd. v.

Van Breda, 2012 SCC 17, [2012] 1 S.C.R. 572, at para. 87, that “carrying onbusiness requires some form of actual, not only virtual, presence in the jurisdiction, such as maintaining an office there or regularlyvisiting the territory of the particular jurisdiction.” Active advertising in the jurisdiction and an internet presence would not suffice toestablish that a corporation was carrying on business in a particular jurisdiction. [58] These cases do not address the central issue in this case, namely whether Rakov can be said to be carrying on business inBritish Columbia merely because Cargo was. [59] Rakov argues that being a shareholder and a director of a corporation that does business in British Columbia does not, withoutmore, mean that shareholder/director also carries on business there.

To find otherwise would inappropriately pierce the corporate veil. [60] I agree. Business is carried on through corporations largely to protect shareholders, officers and directors from personalliability for the acts and omissions of the corporation. To find that a corporation’s mind and management, being its directors andofficers, carry on the corporation’s business themselves jeopardizes that protection.

It also exposes directors and officers to liability forfailing to secure in their own capacities regulatory and licensing authorizations necessary to the corporation’s business. [61] Rakov points to Royal Bank of Canada v Lo (1990), (BC SC), 46 BCLR (2d) 161 (SC), where the Courtstated at para 9: Clearly the mere holding of shares in an Ontario company cannot of itself constitute carrying on business there. The mere holding ofoffice is likewise not of itself "carrying on business" where the evidence shows the positions were nominal.

No decision-making ordirectory input was contributed in the sense of "carrying on" or operating the corporate activities. [62] While the Court in Lo did not expand upon the distinction between nominal and active engagement, the inference is that

actively engaging in corporate decision-making at the board of directors level means that a director is personally carrying on the business of the corporation. [ 63 ] I reject that inference. I note that directors and officers typically report their remuneration as employment or stipend income, not as business income. Further, decisions of directors are not implemented through their own “business” acts, but through acts of the corporation.

Directors are not, without more, joint venturers in the conduct of business with their corporations. [ 64 ] Accordingly, it is not sufficient for 687 to observe that Rakov was a director and shareholder of Cargo as this ignores the respective roles and legal status of a corporate entity and that corporation’s management team.

There is no evidence that Rakov entered into a joint venture or partnership arrangement with Cargo, that he carried on business as a sole proprietor or that he was anything more than an employee of Cargo. [ 65 ] 687 argues that Rakov had an “indirect presence” in British Columbia, as that term is used in Wilson , but does not provide any evidence of what that indirect presence was.

It argues that the Court should not ignore Rakov’s “business relationship with [Cargo] and [Cargo’s] British Columbia operations”, but does not offer any explanation of what those business relationships are and why they amount to Rakov carrying on business in British Columbia. Master Farrington also did not provide any explanation of what “business arrangements” Rakov may have had in British Columbia that constituted an indirect presence or carrying on business there. [ 66 ] The indicia of carrying on business that the Court of Appeal found lacking in Wilson are also lacking here.

At para 11 of Wilson, the Court of Appeal noted in respect of the individual involved: …Hull had no physical presence in Idaho, that is he had no office, factory or other business premises there. He did not employ salesmen, agents or other representatives or employees in Idaho. He had no commercial relationships with other residents of Idaho.

He did not advertise his products or seek to sell them in Idaho. [ 67 ] Similarly, there is no evidence before me that Rakov, as distinct from Cargo, had an office, factory or other business premises in British Columbia, had commercial relationships with any residents of British Columbia, advertised or sold products belonging to him in British Columbia, employed anyone in British Columbia or held himself out as engaging in the selling of goods or services. [ 68 ] The Ontario Court of Appeal’s decision in HMB draws attention to the need for some physical presence in the jurisdiction in question.

There is no evidence before me to suggest that Rakov ever visited Cargo’s warehouse in British Columbia, let alone maintained an office of his own there. He resided in Alberta and as of May 1, 2018, Cargo’s registered office and the residential addresses of its two directors, Rakov and Rozenberg, were all in Alberta. [ 69 ] 687 cites the reference in Wilson at para 12 to the definition of “carry on” as “to continue a course of conduct or relations”. It argues that Rakov is engaged with Cargo in carrying on the business of leasing the premises. [ 70 ] I reject this argument.

As noted above, Rakov guaranteed the performance of the terms, conditions and provisions of the Lease Agreement on behalf of the Tenant and agreed to be primarily liable for all such Tenant’s obligations . It is clear that the Tenant, Cargo, is leasing the premises. Rakov’s liability in the event of default is on behalf of Cargo in respect of Cargo’s obligations. 2. Primary Liability [ 71 ] 687 also argues that Rakov was directly carrying on business by virtue of being primarily liable for Cargo’s defaults under clause 15.16 of the Lease Agreement.

For reasons set forth above, I reject 687’s assertion that Rakov was more than a mere guarantor. [ 72 ] Even if I am wrong on that point, I am not satisfied that assuming primary liability for Cargo’s defaults means that Rakov was carrying on Cargo’s business, or any business for that matter, especially during periods in which Cargo was not in default under the Lease Agreement and there was no right to look to Rakov for performance.

Even circumstances triggering 687’s right to look to Rakov for performance or indemnification under the Lease Agreement would not mean he was suddenly thrust into the role of carrying on a trucking business in British Columbia. If Cargo defaults and 687 suffers a monetary loss, Rakov agreed to indemnify 687 for that monetary loss. It is not reasonable to interpret Rakov’s “primary liability” as elevating him to the status of someone carrying on business. 3.

The Share Transfer Agreement Non-Competition Clause [ 73 ] In the Share Transfer Agreement transferring his Cargo shares to Rozenberg, Rakov agreed to the following: Non-Competition.

For a period of 24 months after the date hereof, Rakov shall not … carry on or be engaged in … any business competitive with the whole or any part of the business of [Cargo] within a 30 kilometer radius of the municipalities of Calgary, Alberta; Langley, British Columbia; and any other municipality or location in which [Cargo] has carried on its business. [ 74 ] 687 asserts that this covenant is evidence that Rakov was carrying on business in British Columbia when proceedings were commenced there. [ 75 ] I disagree.

As discussed above, the record before me is devoid of indicia that Rakov was carrying on business in British Columbia. In my view, what this non-competition clause was intended to do was prevent Rakov from starting a competing business once he ceased to be involved with Cargo. C. Otherwise Submitted [ 76 ] 687 argued both before Master Farrington and before me that by signing the Lease Agreement containing the choice of law provision in clause 16.9, Rakov attorned to the jurisdiction of the courts of British Columbia.

This would remove the bar to registration of the BC Judgment because Rakov could be said to have “otherwise submitted” to the British Columbia jurisdiction under s 2(6)(

b) of

REJA . [ 77 ] Master Farrington rejected this argument, stating as follows: Mr. Rakov was clear in his intention not to voluntarily submit, that was made clear. The clause in the lease agreement [16.9] referring to adopting British Columbia law is not an attornment clause where attornment to the specific jurisdiction of the British Columbia court. [ 78 ] I agree with the Master on this point. 687’s position that, by selecting British Columbia law as the governing law, the parties submitted to the jurisdiction of the British Columbia court is clearly wrong. Choice of law is not equivalent to choice of forum.

I find that Rakov did not attorn to the jurisdiction of British Columbia. V. Conclusion [ 79 ] 687 argues that permitting parties to enter into otherwise binding agreements only to skirt their contractual obligations years later by abandoning the jurisdiction under which contracts were made would render REJA meaningless. [ 80 ] The problem with this argument is that Rakov cannot be said to have abandoned the jurisdiction under which the Lease Agreement was made. He never resided there, so he cannot be said to have given up residence there to avoid his obligations.

I find that he never carried on business there, so he cannot be accused of abandoning his business undertakings. [ 81 ] He never disputed the choice of British Columbia law as the governing law of the Lease Agreement. He simply resists registration of the BC Judgment on the grounds that REJA exempts him from such registration. I find his position is valid. [ 82 ] In consequence, Master Farrington’s decision does not withstand review and Rakov’s appeal is allowed. If the parties cannot agree on costs, they may provide me with written submissions within thirty days of the date of this decision.

Heard on the 30 th day of March, 2021. Dated at the City of Calgary, Alberta this 14 th day of June, 2021. C.M. Jones J.C.Q.B.A. Appearances: Quinn Kuefler for the Appellant/Respondent Richard Harrison for the Respondent/Applicant