2016 QCCA 1916, 2016 QCCA 1916

National Commercial Bank c. Suleman 2016 QCCA 1916 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL 500-09-025347-154 (500-17-079906-130) MINUTES OF THE HEARING DATE: November 3, 2016 CORAM: THE HONOURABLE FRANÇOIS PELLETIER , J.A. NICHOLAS KASIRER , J.A. CLAUDE C. GAGNON , J.A. APPELLANT COUNSEL THE NATIONAL COMMERCIAL BANK Mtre PIERRE-JÉRÔME BOUCHARD ( McCarthy Tétrault ) RESPONDENT COUNSEL SEID SULEMAN Mtre RYAN SCHWARTZ ( Dufresne Hébert Comeau Inc . ) On appeal from a judgment rendered on May 11, 2015 by the Honourable Madam Justice Claudine Roy, of the Superior Court, District of Montreal

DESCRIPTION : Revocation of a judgment Clerk: Marcelle Desmarais Courtroom: Antonio-Lamer HEARING 9:30 Submissions by Mtre Pierre-Jérôme Bouchard. 10:12 Submissions by Mtre Ryan Schwartz. 10:50 Reply by Mtre Pierre-Jérôme Bouchard. 10:51 End of arguments. 10:52 Suspension. 11:23 Resumption. Unanimous judgment rendered by the Honourable Nicholas Kasirer, J.C.A. - see page 3.

Marcelle Desmarais Clerk BY THE COURT JUDGMENT [ 1 ] For reasons to follow in the coming days, the Court : [ 2 ] ALLOWS the appeal and SETS ASIDE the judgment of the Superior Court rendered on May 11, 2015; [ 3 ] RECEIVES the motion for revocation of the default judgment rendered on February 12, 2015 by the Special Clerk of the Superior Court; [ 4 ] REMANDS the file to the Superior Court so that the motion for revocation may proceed on the merits; [ 5 ] THE WHOLE with costs against the appellant in both courts. FRANÇOIS PELLETIER, J.A.

NICHOLAS KASIRER, J.A. CLAUDE C. GAGNON, J.A. National Commercial Bank c. Suleman 2016 QCCA 1916 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No: 500-09-025347-154 (500-17-079906-130) DATE: November 4, 2016 CORAM: THE HONOURABLE FRANÇOIS PELLETIER, J.A. NICHOLAS KASIRER, J.A. CLAUDE C. GAGNON, J.A. NATIONAL COMMERCIAL BANK APPELLANT - Defendant v.

SEID SULEMAN RESPONDENT - Plaintiff REASONS FOR THE JUDGMENT OF THE COURT RENDERED AT THE HEARING, ON NOVEMBER 3, 2016 [1] The National Commercial Bank (the “Bank”) has appealed a judgment of the Superior Court, District of Montreal, (the Honourable Madam Justice Claudine Roy), rendered on May 11, 2015, which dismissed its motion to revoke a judgment rendered on February 12, 2015 by the Special Clerk of the Superior Court. The Special Clerk had condemned the Bank, by default, to pay $261,900 to Seid Suleman, with interest and the additional indemnity provided for by law, for breach of contract.

The motion for revocation, based on

article 482 of the former C.C.P. was dismissed at the reception stage. [1] *** [2] The context is simply stated. Mr Suleman, a Quebec businessperson, met in Jeddah, Saudi Arabia, with officials from the Bank, a Saudi financial institution with no place of business in Quebec. An exchange of documents and emails followed regarding a proposal made by Mr Suleman for the creation of an investment fund. The parties’ dealings were in the English language. Later, Mr Suleman sent a bill for his services. The Bank refused to pay based on its view that it had no settled contract with Mr Suleman.

He followed up with three demand letters; the Bank’s legal officers answered that he was owed no money. [3] Mr Suleman then filed suit against the Bank before the Superior Court in Montreal, claiming $250,000 (U.S.) for breach of contract. He obtained special permission from the Court to serve the Motion to Institute Proceedings and notices of presentation on the Bank by mail. These materials, all of which were prepared in English, were delivered to the Bank in Saudi Arabia.

The motion for special service bore a stamp from the Superior Court registry stating, in French, “motion granted” ( i.e. “requête accordée”). [4] In the Bank’s absence, the Special Clerk rendered judgment in Mr Suleman’s favour. The Bank received the default judgment on March 29, 2015 and filed a motion for revocation on April 9, 2015. [5] In its motion for revocation, the Bank argued that it was prevented from filing its defence by “any other reason considered sufficient / par quelque autre cause jugée suffisante” within the meaning of former

article 482 C.C.P., so that the default judgment should

be revoked. [ 6 ] As principal ground for revocation (the rescindant ), the Bank alleged that it did not have a proper understanding of the character of the documents sent by Mr Suleman until it received the default judgment on March 29, 2015. While the Bank acknowledged having received English-language copies of Motion to Institute Proceedings and two notices of presentation, it said officials at the Bank had concluded at the time that the documents constituted a mere threat to bring legal action, as opposed to actual court proceedings.

The Bank contended that its opinion at the time was based on the fact that the documents emanated from Mr Suleman himself and not an attorney or a court, and that the documents contained no official markings except for a French-language stamp the meaning of which was unclear to the Bank. [ 7 ] The Bank argued that it had serious grounds of defence (the rescisoire ) upon which it would have opposed Mr Suleman’s suit.

First, it alleged that the Superior Court of Quebec has no jurisdiction over the matter because the Bank is domiciled in Saudi Arabia, has no place of business or activities in Quebec, adding that the alleged contract between Mr Suleman and the Bank does not exist and, even if it did, says the Bank, it was not formed in Quebec but in Saudi Arabia. Quite apart from jurisdiction, the Bank alleged that the non- existence of a contract was a defence to the suit.

Finally, as a subsidiary argument, it argued that the amount claimed by Mr Suleman had never been discussed and was grossly exaggerated. *** [ 8 ] The motion for revocation was, for the judge, properly brought within the prescribed time limit. She held, however, that the motion did not disclose a serious cause for revocation, rejecting the appellant’s argument that it did not believe the materials it had received constituted veritable judicial proceedings.

The judge also characterized the grounds proposed to contest the default judgment, namely the alleged lack of jurisdiction of Quebec courts over the dispute and the absence of any contract between the parties, as weak. While she wrote that the grounds for contestation would have been sufficient to justify reception in the circumstances, the motion judge nevertheless dismissed the motion for revocation. *** [ 9 ] The appellant raises three principal arguments in support of its appeal: (

a) that the motion judge failed to consider the facts alleged in the motion as true for the purposes of deciding the motion at the reception stage; (

b) that the motion judge erred in applying an objective test, rather than a subjective one, in her evaluation of the grounds advanced by the appellant to explain its default; and (

c) that she failed to give due consideration to the appellant’s grounds for contesting the default judgment. *** [ 10 ] For the reasons that follow, the appeal should be allowed. The appellant’s third argument is decisive. [ 11 ] Respectfully stated, the judge erred by failing to give the grounds of contestation their proper due at the reception stage.

In the circumstances, and given the limited compass for review of motions for revocation at this stage, the judge should have received the motion and allowed the matter to proceed to a full consideration of the grounds for revocation of the default judgment and of the grounds of defence to the action. [ 12 ] The judge addressed the three defences raised in the motion for revocation and disposed of them as follows: 3.3 THE GROUNDS OF CONTESTATION [25] The first ground of contestation is that the Bank considers the Superior Court to have no jurisdiction to hear this claim because the Bank has no establishment in Quebec, does not do business in the province and the alleged contract would not have been formed in Quebec.

This is a possible explanation for the Bank’s lack of response to the judicial proceedings. On one hand, the Bank claims the Court had no jurisdiction to hear Mr. Suleman’s claim; on the other hand, it presents a motion in revocation to the same Court. If the Court had no jurisdiction over the merit of the case, it has no jurisdiction to hear the Bank’s Motion in Revocation. [26] Mr.

Suleman, on the contrary, argues that the Court has jurisdiction because the contract was formed in Quebec and, subsidiarily, because it would be impossible for him to obtain justice in Saudi Arabia (Art. 3136 C.C.Q.). [27] The Bank also argues that no contract was formed and that Mr. Suleman’s fees are exaggerated. The Bank’s affiant has no personal knowledge of the facts regarding the relationship of the Bank with Mr. Suleman. Furthermore, other than stating that the fees are exaggerated, the Bank offers no detailed reasons to put aside the expertise provided by Mr.

Suleman on this question. [28] On the whole, the Court finds that, as described, the grounds of contestation appear weak; however it would have considered them sufficient to receive the Motion for Revocation. [ 13 ] The judge’s assertion, in paragraph [25], that “[i]f the Court had no jurisdiction over the merit of the case, it has no jurisdiction to hear the Bank’s Motion in Revocation” is, with renewed respect, mistaken.

The nature of this defence – that the rules on the international jurisdiction of Quebec authorities set forth in articles 3134 C.C.Q. et seq . did not provide the Superior Court with jurisdiction over the dispute – was a question that could have been raised by declinatory exception had the defendant Bank been present to defend the action.

The motion judge seems to be of the view that to bring a motion of revocation before the Superior Court necessarily amounts to a submission, by the Bank, to the Superior Court’s international jurisdiction over the matter on the merits or a renunciation of arguments contesting jurisdiction pursuant to

article 3148, para. 5 C.C.Q. This is clearly not the case. [ 14 ] The preliminary jurisdictional argument can most certainly be raised in revocation proceedings in like circumstances. Indeed, it is entirely possible that a court hear and receive a motion for revocation and, thereafter on the merits, revoke the default judgment by reason of lack of jurisdiction. To decide otherwise leaves open the possibility – intolerable in law – that a default judgment rendered by a court lacking jurisdiction would be insulated from review by revocation. It is true that the legislative policy limiting the basis for

revocation of judgment to promote the stability of judgments is an important one.

However, treating a judgment rendered without jurisdiction as irrevocable when revocation is the only realistic remedy available and serious arguments exist to challenge jurisdiction, does not usefully promote the stability of judgments nor does it foster international confidence in the administration of justice in Quebec. [ 15 ] The judge nevertheless went on to consider summarily the Bank’s argument that the Quebec courts had no jurisdiction over this international matter as well as Mr Suleman’s counterargument, which she described in paragraph [26] quoted above. [2] Mr Suleman argued that jurisdiction was founded on the fact that the contract was concluded in Quebec and that he could not obtain justice in Saudi Arabia. [ 16 ] The motion judge’s conclusion on the merits of the jurisdictional defence raised by the appellant is unclear.

She mentions Mr Suleman’s allegation that a contract was formed in Quebec. This is, strictly speaking, a matter more directly concerned with the proper place of instituting the action, pursuant to former

article 68, para. 1

(3) C.C.P., rather than the international jurisdiction of Quebec authorities over personal actions of a patrimonial nature pursuant notably to

article 3148 C.C.Q. We know that the Bank does not have its domicile in Quebec (art. 3148, para. 1), or an establishment in Quebec (art. 3148, para. 2). The issue as to whether a contract was actually concluded, whether it was formed in Quebec, whether a fault was committed or an injury suffered in Quebec, or if an obligation thereunder was to be performed in Quebec, appears to have been left open for debate by the motion judge.

Moreover, the question as to whether Mr Suleman could or could not obtain justice in Saudi Arabia would call for extensive proof of facts not alleged in his motion to institute proceedings before the Superior Court. [ 17 ] Moreover, the Bank made plain, in its motion for revocation, of its intention to contest the international jurisdiction of the Superior Court of Quebec at the first possible occasion as its principal ground of defence to the action. The Bank brought its motion for revocation within the time limits prescribed by law, as the judge recognized.

There is no basis for concluding that, in so doing, the Bank showed, explicitly or implicitly, “l’intention de se soumettre à la jurisdiction québécoise”. [3] [ 18 ] As to the seriousness of the defence that there was no binding agreement between the parties giving rise to a claim for the amount of the suit, the record before the motion judge contained answers from the Bank written in response to Mr Suleman’s demand letters.

As the motion judge herself noted in paragraph [5] of her reasons, legal counsel to the Bank replied to each of these letters explaining the Bank’s view that there was no contract and that the discussions between the parties had been merely exploratory. The motion judge does not explicitly consider these materials in the portion of her reasons devoted to the seriousness of the grounds of defence. [ 19 ] The task at the reception stage is to determine whether there are prima facie grounds of contestation.

Her comment in paragraph [28] suggests that, despite what she characterized as a weakness, the arguments advanced by the appellant were nevertheless sufficient. The comment that the arguments are weak is not further explained. [ 20 ] The jurisdictional defence cannot be rejected or discounted for the reason given by the motion judge in paragraph [25].

Had that error not been made, this ground for contesting the default judgment would have been properly characterized as sufficient and serious, rather than sufficient and weak. [ 21 ] In the circumstances, the judge should have taken the seriousness of the grounds of defence into account in deciding whether to receive the motion in revocation. In Groupe J.V.S. inc. v. Goal Capital inc. , Vézina, J.A. wrote for the Court that the grounds for revocation (the rescindant ) and the grounds for contestation (the rescisoire ) should be treated as “vases communicants”.

Our colleague explained as follows: [28] En outre, l’Appelante a des moyens de défense sérieux, le premier est patent : la vente n’a pas eu lieu. [29] Certes, la Juge note que l’Intimée « ne prétend pas que la défense est frivole », mais elle n’y revient plus. Elle soupèse par la suite les explications de l’Appelante en occultant ses moyens de défense.

À mon avis, c’est une erreur de perspective, une erreur de droit. [30] En matière de rétractation de jugement pour cause de « surprise ou autre cause jugée suffisante » (C.p.c., art. 482), le rescindant (les « motifs qui justifient la rétractation ») et le rescisoire (« les moyens de défense à l’action ») sont des vases communicants.

Plus les moyens de défense sont sérieux, plus sont vraisemblables et recevables les motifs du défendeur pour expliquer que son défaut est dû à la surprise, à l’oubli, à l’inadvertance, à la méprise, à une erreur, peut-être même stupide, mais sincère. [ 22 ] It was imprudent and, in light of the judgment in Groupe J.V.S ., mistaken in law to refuse reception of the motion of revocation given the seriousness of the grounds for contestation of the action on the merits.

The judge was not wrong to observe in a footnote that Groupe J.V.S . is not identical on the facts, but the notion of “vases communicants” has been understood, since the decision was rendered, as a matter of principle. [4] In the circumstances, to paraphrase Vézina, J.A., the seriousness of the grounds of defence relating to jurisdiction and the absence of a contract means that the Bank’s failure to appear is more likely explained by a mistake, even a “stupid but sincere” one, than not. [ 23 ] Indeed, the motion judge herself commented, in paragraph [25] quoted above, that the lack of response to the judicial proceedings sent by Mr Suleman had, “as a possible explanation”, the Bank’s belief that the Superior Court had no jurisdiction over the dispute.

Given that the Bank’s officials were convinced that there was no contract with Mr Suleman, and thus that his claim was unfounded, it is certainly possible that the Bank’s inaction following receipt of the motion to institute proceedings and the notices of presentation be explained on this basis. This

interpretation becomes even more plausible when one considers that the Bank reacted quickly – by engaging Canadian counsel and filing a motion for revocation – upon learning of the default judgment rendered against it. [ 24 ] Given her own view that rescisoire was sufficient, the motion judge should have applied the principle of “vases communicants” in Groupe J.V.S. , and reviewed her evaluation of the rescindant based on what she had already described as a “possible explanation” for the Bank’s default. Moreover, nothing in the record suggests that the Bank is acting in a dilatory or abusive manner here.

As Vézina, J.A. further remarked: [52] En présence d’une manœuvre dilatoire ou d’un je-m’en-foutisme à l’égard du système judiciaire, souvent liés à une situation

d’insolvabilité, il ne faut pas jouer le jeu. Mais c’est tout le contraire s’il s’agit d’une méprise, même si elle nous paraît plutôt stupide. Personne n’est exempt de pareille erreur un jour ou l’autre. [ 25 ] The possibility of an injustice here – in that the Bank faces no useful remedy against a default judgment rendered by a court without jurisdiction – is sufficiently important that the judgment refusing to receive the motion for revocation should be set aside.

This is especially the case given that the motion judge was mistaken in her view that the jurisdictional argument could not be raised in revocation proceedings. [ 26 ] It is unnecessary to address the Bank’s other grounds of appeal. [ 27 ] Finally, at the hearing, counsel for the Bank acknowledged that, in the event it succeeded on appeal, it should nevertheless pay costs in both courts.

For the foregoing reasons, the following judgment was rendered at the hearing: THE COURT: [ 28 ] ALLOWS the appeal and SETS ASIDE the judgment of the Superior Court rendered on May 11, 2015; [ 29 ] RECEIVES the motion for revocation of the default judgment rendered on February 12, 2015 by the Special Clerk of the Superior Court; [ 30 ] REMANDS the file to the Superior Court so that the motion for revocation may proceed on the merits; [ 31 ] THE WHOLE with costs against the appellant in both courts. FRANÇOIS PELLETIER, J.A. NICHOLAS KASIRER, J.A. CLAUDE C. GAGNON, J.A.

Mtre Pierre-Jérôme Bouchard McCarthy Tétrault For the Appellant Mtre Ryan Schwartz Dufresne Hébert Comeau Inc. For the Respondent Date of hearing: November 3, 2016