Docket: CACV2290 Viatcheslav Moshe Kantor (Defendant) Prospective Appellant - v. –, 2012 SKCA 78

THE COURT OF APPEAL FOR SASKATCHEWAN Citation: 2012 SKCA 78 Date: 20120815 Between: Docket: CACV2290 Viatcheslav Moshe Kantor (Defendant) Prospective Appellant - and – 101114752 Saskatchewan Ltd. and Jason Mann (Plaintiffs) Prospective Respondents - and – Devonian Potash Inc., 101109711 Saskatchewan Ltd., North Atlantic Potash Inc., Viasat Services Limited, Trustservice Limited Liability Company, Joint Stock Company Acron, Dmitry Kantor, Lyubov Kantor, Tony Le-Ta, Mark Windsor-Smith, Dmitry Goloubkov and Arie Zuckerman (Defendants) Non-Parties And Between: Viatscheslav Moshe Kantor (Defendant) Prospective Appellant - and – Agrikalium Mining Corporation, and 101119529 Saskatchewan Ltd. (Plaintiffs) Prospective Respondents) - and –

Joint Stock Company Acron, Subero Associates Inc., Viasat Services Limited, Trustservice Limited Liability Company, Devonian Potash Inc., 101109711 Saskatchewan Ltd., 101109718 Saskatchewan Ltd. (Defendants) Non-Parties Before: Vancise J.A. in Chambers Counsel: Joel Hesje for the Applicants Peter Bergbusch for the Respondents Application: From: 2012 SKQB 265 Heard: August 10, 2012 Disposition: Leave granted Written Reasons: August 15, 2012 By: The Honourable Mr. Justice Vancise

VANCISE J.A. I. Introduction [ 1 ] The prospective applicant Viatcheslav Moshe Kantor applies for leave to appeal the decision of Currie J. dated July 4, 2012 wherein he found that the Court of Queen’s Bench had territorial competence over Kantor in two actions: QBG 54 of 2011 and QBG 1108 of 2011 (the chamber decisions). In so deciding, Currie J. interpreted an applied s. 4 (

e) of The Court Jurisdiction and Proceedings Transfer Act , S.S. 1997, c. C-41.1 (“ CJPTA ”). [ 2 ] Kantor, the prospective appellant contends that leave should be granted concerning the

interpretation of the CJPTA and in particular, s. 4 (e). In addition he contends it is necessary for this Court to reconcile two competing approaches in decisions in the Court of Queen’s Bench. In his submission the proposed appeals raises issues of sufficient merit and are of sufficient importance to warrant an appeal. [ 3 ] I find that leave to appeal as requested by the applicant should be granted for the reasons that follow. II. Facts [ 4 ] The facts as contained in the pleadings and as they apply to Kantor are somewhat convoluted and somewhat difficult to follow.

Kantor, who is a citizen of Russia and Israel, resides in Switzerland. Joint Stock Company Acron is a company with headquarters in Moscow and is traded on the London Stock Exchange. Kantor controls the defendant Subero Associates Inc. (“Subero”) and through Subero owns over 70% of the shares of Acron. [ 5 ] Kantor also controls the defendants 101109711 Saskatchewan Ltd. (“711 Sask. Ltd.”) and 1011079718 Saskatchewan Ltd. (“718 Sask.

Ltd.”) through his direct or indirect control of each of the majority shareholders of Viasat Services Limited (“Viasat”) and Trustservice Limited Liability Company (“Trustservice”), a wholly owned subsidiary of Acron. [ 6 ] Devonian Potash Inc. (“Devonian”) is also controlled by Kantor, as all of the shares of Devonian are owned by 711 Sask. Ltd. [ 7 ] Igor Medge (“Medge”) and Jason Mann (“Mann”) are directors and officers of the plaintiffs Agrikalium Mining Corporation (“Agrikalium”) and 101119529 Saskatchewan Ltd. (“529 Sask.

Ltd.”). [ 8 ] Mann is also a shareholder in the plaintiff 101114752 Saskatchewan Ltd. (“752 Sask. Ltd.”) which in turn is a minority shareholder of each of 711 Sask. Ltd. and 718 Sask. Ltd. [ 9 ] In 2007 Acron made a decision to acquire potash exploration permits in Saskatchewan. To accomplish this end it engaged Medge and Mann to identify and negotiate the purchase of a number of potash permits. Medge and Mann acquired three Saskatchewan corporations to hold these permits: (

a) Devonian; (b) 711 Sask. Ltd., and (c) 718 Sask. Ltd. which later changed its name to North Atlantic Potash Inc. (“NAPI”) collectively the Saskatchewan companies. [ 10 ] Medge and Mann were appointed directors and officers of the Saskatchewan companies. [ 11 ] In November of 2010 the Acron board of directors discovered that Mann and Medge were marketing exploration permits in

competition with the Saskatchewan companies. They also discovered that Mann and Medge were directors and officers of Agrikaliumand 529 Sask. Ltd. (collectively the Competitors). [12] Succinctly stated the disputes in both actions arise from the purchase and sale of two sets of potash exploration permits: theDevonian permits acquired by Devonian/711 Sask. Ltd. in April 2008 for $15,000,000 and the 36 Vancouver Syndicate Permits. Vancouver Syndicate Permits acquired by 718 Sask. Ltd. for $61,000,000 in March 2008. The Devonian permits were sold in 2011 for$150,000,000 and eight permits of the 718 Sask.

Ltd. permits were sold for approximately $110,000,000. [13] The Saskatchewan companies brought an action against the Competitor companies and Medge and Mann personally for breach offiduciary duties owed as directors and claiming an interest in the Competitor’s permits as beneficiaries under a constructive trust. TheSaskatchewan companies also sought an ex parte injunction restraining the Competitor companies from disposing of the permits thatwere the subject of the action.

This injunction was granted on December 27, 2010 and set aside on December 30, 2010. [14] The Saskatchewan companies applied for a preservation order which was denied by Acton J. on the basis that the Saskatchewancompanies had not established a serious issue to be tried. He found that Medge and Mann were not fiduciaries of the Saskatchewancompanies.

That finding was reversed on appeal, but the appeal from Acton J.’s order was dismissed by reason that the Court found nobasis to find that the Saskatchewan companies had not established more than a possibility of irreparable harm. [15] The Competitors then commenced an action (QBG 55 of 2011) in which Kantor, the proposed appellant, was named as a defendantas well as Acron, Viasat, Trustservices, Subero, Devonian, 711 Sask. Ltd. and 718 Sask. Ltd. in which it is alleged that Kantor has used711 Sask. Ltd. 718 Sask. Ltd. and Devonian as instruments to unlawfully interfere with their economic interests.

It is alleged that Kantor,through Acron, Viasat, Subero and Trustservices used 711 Sask. Ltd., 718 Sask. Ltd. and Devonian to commence an action QBG 1802 of2010 against Agrikalium, 529 Sask. Ltd., and Medge and Mann to prevent them from exercising their rights to sell potash permits inorder to prevent competition with their own efforts to sell the Devonian and Vancouver Syndicate permits at a profit. [16] In addition to QBG 54 of 2011, the Competitors commenced an action (QBG 1108 of 2011) for oppression. The statement of claimin QBG 1108 advances an oppression action on behalf of 752 Sask. Ltd. 752 Sask.

Ltd. is a shareholder of the defendant 711 Sask. Ltd.as well as a defendant of NAPI. The prospective respondents 752 Sask.

Ltd. and Mann allege that some of the defendants actedoppressively by negotiating two sales of potash permits without providing disclosure that they sought. [17] After being served with the statements of claim for QBG 54 and QBG 1108, Kantor applied to the Court of Queen’s Bench for anorder striking out the actions against him on the basis that the Court lacks territorial competence over him. [18] The applications were brought pursuant to Queen’s Bench Rule 99 and the CJPTA. [19] Kantor is a citizen of Russia and Israel and a permanent resident of Switzerland.

He is not a resident of Saskatchewan and has notattorned to the jurisdiction or consented to the Court’s jurisdiction. [20] Thus the issue was reduced to whether there is a “real and substantial connection” to Kantor to this jurisdiction pursuant to theCJPTA. [21] Mr. Justice Currie found that the Court had territorial competence over Kantor in both actions. III. Legal Analysis A. Principles Applicable on an Application for Leave [22] The test applied to determine whether leave should be granted was set out in Rothmans, Benson & Hedges Inc. v. Saskatchewan,2002 SKCA 119, 227 Sask. R. 129.

The Court said this: 6 The power to grant leave has been taken to be a discretionary power exercisable upon a set of criteria which, on balance, must beshown by the applicant to weigh decisively in favour of leave being granted: Steier v. University Hospital, (SK CA),[1988] 4 W.W.R. 303 (Sask. C.A., per Tallis J.A. in chambers). The governing criteria may be reduced to two-each of which features a

subset of considerations-provided it be understood that they constitute conventional considerations rather than fixed rules, that they arecase sensitive, and that their point by point reduction is not exhaustive.

Generally, leave is granted or withheld on considerations of meritand importance, as follows: First: Is the proposed appeal of sufficient merit to warrant the attention of the Court of Appeal? * Is it prima facie frivolous or vexations? * Is it prima facie destined to fail in any event, having regard to the nature of the issue and the scope of the right of appeal, forinstance, or the nature of the adjudicative framework, such as that pertaining to the exercise of discretionary power? * Is it apt to unduly delay the proceedings or be overcome by them and rendered moot? * Is it apt to add unduly or disproportionately to the cost of the proceedings?

Second: Is the proposed appeal of sufficient importance to the proceedings before the court, or to the field of practice or the state of thelaw, or to the administration of justice generally, to warrant determination by the Court of Appeal? * does the decision bear heavily and potentially prejudicially upon the course or outcome of the particular proceedings? * does it raise a new or controversial or unusual issue of practice? * does it raise a new or uncertain or unsettled point of law? * does it transcend the particular in its implications? See also: Schroeder v. Korf (1996), (SK CA), 144 Sask. R. 229 (C.A.

Chambers) to the same effect. [23] Kantor submits that the proposed appeal is of sufficient importance and sufficient merit to attract the attention of this Court and towarrant this Court’s review of Mr. Justice Currie’s decision. [24] Kantor contends that the

interpretation of s. 4(

e) of CJPTA by Mr. Justice Currie has application beyond the parties and transcendsthe particular in its implications. In addition, he contends that the relevant parties to the actions as pled are foreign and domesticcorporations with distinctive corporate structures with the result that the chambers judge failed to see the disconnect between Kantor andthis jurisdiction. [25] Kantor sets out the following proposed grounds of appeal: (

a) the learned Chambers Judge erred in holding that the Court of Queen’s Bench for Saskatchewan has territorial competence and/orjurisdiction simpliciter over the Appellant in these proceedings; (

b) the learned Chambers Judge failed to give proper effect to the provisions of The Court Jurisdiction and Proceedings TransferAct, supra with respect to territorial competence; (

c) the learned Chambers Judge failed to examine whether there is a real and substantial connection between Saskatchewan and thefacts on which the proceedings against the Appellant are based, as required under s. 4(

e) of The Court Jurisdiction and ProceedingsTransfer Act, supra. In particular, the learned Chambers Judge erred in grounding his reasoning in whether there is a connection betweenSaskatchewan and the facts upon which these proceedings are based generally and not, the facts as against the Appellant; (

d) the Chambers Judge erred in his

interpretation of s. 4(

e) of The Court Jurisdiction and Proceedings Transfer Act, supra. Inparticular, he erred in holding that “s. 4(

e) casts a broader net, aimed not at the individual defendant but at the context of the action”; (

e) the learned Chambers Judge erred in not giving due consideration to the Statements of Claim, which set out the facts on whichthe proceedings against the Appellant are based; and (

f) the learned Chambers Judge failed to give due consideration and effect to the differences between the Appellant – an individual –and the corporate personalities of other defendants in the proceedings. [26] In reality, the most important issues that are raised in the notice of appeal are grounds (

c) and (

d) which deal with the

interpretationby the chambers judge of s. 4(

e) of the CJPTA wherein the found a substantial connection between Saskatchewan and Kantor in thecontext of the actions generally and not on the facts, jurisdictional or otherwise, pled as against Kantor. [27] The proposed appeal concerns the proper

interpretation of s. 4(

e) of the CJPTA as it relates to a real and substantial connectionbetween the defendant Kantor and the Province of Saskatchewan.

[28] Kantor points out in some detail a change in the law of jurisdiction by changing it from a procedure based rule, i.e., rules based onservices ex juris and to one based on the concept of a “real and substantial connection.” The Supreme Court of Canada in Morguard v.De Savoye, (SCC), [1990] 3 S.C.R. 1077 and Beals v.

Saldanha, 2003 SCC 72, [2003] 3 S.C.R. 416 established acommon law test for jurisdiction simpliciter and the enforcement of foreign judgments to a concept based on a real and substantialconnection. [29] The Supreme Court of Canada stated in Saldanha 32 The "real and substantial connection" test requires that a significant connection exist between the cause of action and the foreigncourt. Furthermore, a defendant can reasonably be brought within the embrace of a foreign jurisdiction's law where he or she hasparticipated in something of significance or was actively involved in that foreign jurisdiction.

A fleeting or relatively unimportantconnection will not be enough to give a foreign court jurisdiction. The connection to the foreign jurisdiction must be a substantial one. [30] Following these landmark decisions, the Uniform Law Conference of Canada developed the model The Court Jurisdiction andProceedings Transfer Act. Saskatchewan adopted the model Act with minor modifications. [31] The Court commented on the effect of the adoption of the model Act in this Province in Hunter v. Hunter, 2005 SKCA 76, 269Sask. R. 223 as follows: 13 . . . [The CJPTA] has four main purposes.

First, to introduce standard rules in Canadian courts for determining jurisdiction over a matter;second, to coordinate Canadian jurisdictional rules with the principle set out by the Supreme Court of Canada in the Morguard case;third, to complement The Enforcement of Canadian Judgments Act by providing uniform jurisdictional standards; and finally, tointroduce for the first time a mechanism by which superior courts of Canada may transfer litigation to a court in another jurisdictionwhen the receiving court accepts such a transfer [32] The issue, as noted is therefore reduced to the proper

interpretation to be placed on the relevant sections of the CJPTA which readsas follows: 4 A court has territorial competence in a proceeding that is brought against a person only if: (

a) that person is the plaintiff in another proceeding in the court to which the proceeding in question is a counterclaim; (

b) during the course of the proceeding, that person submits to the court’s jurisdiction; (

c) there is an agreement between the plaintiff and that person to the effect that the court has jurisdiction in the proceeding; (

d) that person is ordinarily resident in Saskatchewan at the time of the commencement of the proceeding; or (

e) there is a real and substantial connection between Saskatchewan and the facts on which the proceeding against that person isbased. [33] The only circumstance relevant in this application is s. 4(e). The chambers judge in interpreting s. 4(

e) stated: 20 The foundation of Mr. Kantor's argument is that s. 4(

e) requires a real and substantial connection between Saskatchewan and thepleaded facts relating to him. That is not what s. 4(

e) says, however. It does not require a connection between Saskatchewan and Mr.Kantor, or between Saskatchewan and the alleged conduct of Mr. Kantor, or between Saskatchewan and the pleaded facts relating to Mr.Kantor. Rather, s. 4(

e) casts a broader net, aimed not at the individual defendant but at the context of the action. [34] The prospective applicant Kantor contends that the chambers judge erred in failing to exercise judicial restraint and taking a broadapproach which resulted in the court assuming jurisdiction in circumstances where the defendant has not pled jurisdictional facts todemonstrate that the defendant has a connection to the Province. [35] The respondents contend, on the other hand, that there is no merit to the appeal and that the

interpretation placed upon s. 4(

e) by thechambers judge is entirely consistent with the governing jurisdiction both before and after the introduction of the CJPTA includingMorguard, supra and Beals v. Saldanha, supra.

[ 36 ] The respondents point out that in various proceedings, most notably in the decision of Mr. Justice Acton’s dismissing applications for interlocutory injunctions in both QB 1802 of 2010 and QB 54 of 2011 dated February 7, 2011 ( 2011 SKQB 66 ), a number of comments and findings were made concerning Kantor’s involvement in the subject matter of the actions as follows: (

a) It was alleged that “Kantor or Acron had instructed Medge and Mann that they wished to purchase all potash permits available in Saskatchewan in 2008” [at para. 5]’ (

b) Upon being advised of the availability of the Devonian Permits and the Vancouver Syndicate Permits, “Kantor requested Mann and Medge, through Medge, secure these permits for him and arrange for the necessary legal requirements to hold ownership of these in Saskatchewan” [at para. 7]; (c) “Kantor arranged for the purpose money” and determined to whom the shares in the Saskatchewan corporations were to be issued [at para. 8]; (d) “Mann and Medge were authorized by Kantor to sign the purchase agreements” for the potash permits [at para. 9]; (

e) Kantor instructed Medge that Arie Zuckerman would make all of the decisions regarding the Saskatchewan corporations, such that all day-to-day operational decisions of these corporations would be made by Arie Zuckerman, “on the instructions of Kantor” [at para. 10]; (f) “It was Kantor’s intention to sell off the Saskatchewan potash permits at a profit” [at para. 11]; (g) “It was only when Acron became aware in the fall of 2010 that it was competing for the sale of its Saskatchewan potash permits with Mann and Medge in an attempt to sell to the Chinese that Kantor became livid with Mann and Medge.

Only then was the Acron Claim commenced. There is very credible evidence in the affidavits before the Court that Kantor expressed an intention to do all in his power to financially ruin both Mann and Medge if they did not transfer immediately to him all of the Saskatchewan potash permits controlled by them” [para. 13]; and (

h) It was noted that Kantor “was actively involved in and made all the decisions respecting the Russian involvement in the Saskatchewan potash permit t ransactions of 2008.

Kanotr has not provided any affidavit evidence before the Court in spite of the fact that he provided the instructions to Medge and the funds for purchase of the permits” [at para. 14]. [ 37 ] Notwithstanding those comments and the findings of Acton J., Kantor contends that the chambers judge failed to analyze the statement of claim to determine whether there were sufficient jurisdictional facts pled to make a sufficient link to connect the particular defendant Kantor to the Province. [ 38 ] The respondent argues that the approach advanced by Kantor, that is that the question of territorial competence must be determined on a narrow basis related solely to jurisdictional facts linking the individual to the claim is inconsistent with established precedent.

They argue that the approach adopted by the chambers judge that is based on an examination of the surrounding facts on which the entire proceedings are based is consistent with and supported by the current jurisprudence. [ 39 ] That, in a nutshell, is the first issue – must there be a narrow approach on which jurisdictional facts pleaded must establish a substantial connection between the person and the province or can jurisdictional competence be determined in the context of the action itself. [ 40 ] Kantor also contends as a second issue that the approach adopted by Mr.

Justice Currie is inconsistent with the approach taken by Mr. Justice Popescul (as he then was) in Wall Estate v. GlaxoSmithKline Inc. , 2010 SKQB 351 , 367 Sask. R. 21. In that case, several foreign corporation defendants applied to the Court for an order dismissing a proposed class action by reason that the Saskatchewan Court did not have territorial competence.

The plaintiff had commenced an action against a Canadian corporation as well as foreign corporations incorporated in both the U.S. and the U.K. [ 41 ] There, the Court examined the pleadings to determine whether there was a sufficient link between the corporations as pled to connect this jurisdiction to the foreign corporations. Popescul J. stated: 42 . . .

The pleadings must disclose enough material facts to form a basic factual foundation for such allegations. 43 I find that the plaintiffs' particularization of the claim falls far short of what is necessary to assert that there is a real and substantial connection between Saskatchewan and the facts on which the proposed class action against the foreign defendants is based. The claim fails to make any plausible causal connection between the foreign defendants and Avandia's existence in Saskatchewan.

Specifically, there is no claim that any of the foreign defendants played any role whatsoever in anything to do with the manufacturing, promoting, marketing, labelling or selling of Avandia in Saskatchewan. The plaintiffs have made vague, obscure and unparticularized assertions against the foreign defendants through the indiscriminate use of the term "the GSK defendants".

However, the inclusion of all defendants within the collective definition of "the GSK defendants" followed by the inarticulated assertions that all defendants are connected to all the alleged wrongdoings does not provide a sufficient basis to establish the requisite real and substantial connection

between Saskatchewan and the foreign defendants in the pleadings. 44 Accordingly, I conclude that the plaintiffs' claim is deficient in its articulation of linking the foreign defendants' conduct to the alleged wrongful conduct giving rise to the action such that there is no basis for this Court's assumption of jurisdiction over the foreign defendants. [ 42 ] Thus, the focus was on a direct link in the pleadings with the defendants rather than on an approach that considered whether the alleged conduct of the defendants (in this case Kantor) pleaded is caught in a broader net, one not aimed at the individual defendant or defendants, but at the defendant in the context of the action. [ 43 ] It is not necessary in the context of this application to examine the jurisdictional factors pled to decide whether to grant leave.

Suffice it to say that the plaintiffs do not plead that Kantor has ever entered into a contract in Saskatchewan, has ever contracted with the plaintiffs or managed the day-to-day operations of the Saskatchewan corporation.

It is acknowledged that Kantor does not have any assets in Saskatchewan aside from the indirect control he exercises over the Saskatchewan companies. [ 44 ] Thus, I conclude that the prospective appellant Kantor has demonstrated that the issues here are of importance beyond the parties and that the appeal has merit to resolve the proper approach to be taken to determine whether there is a real and substantial connection between the proposed defendant and Saskatchewan and to resolve the difference in approach taken by Mr. Justice Currie and Mr. Justice Popescul in the Court of Queen’s Bench to the

interpretation of s. 4 (

e) of the CJPTA . [ 45 ] Leave to appeal is therefore granted with costs in the cause. DATED at the City of Regina, in the Province of Saskatchewan, this 15 th day of August, A.D. 2012. “Vancise J.A.” _____________________ Vancise J.A.