The Applicant, China National Overseas Oil Company Limited (the “Applicant”), a state-owned corporation whose registered office is in Hong Kong, applied for a stay pending Appeal (the “Stay Application”) of an Order validating service of a Counterclaim (the “Appeal”) which purported to be served pursuant to an Order for service ex juris (the “Service Order”).

The Respondent, 801 Seventh Inc., as landlord (the “Respondent”), and a wholly-owned subsidiary of the Applicant, as tenant (the “Tenant”), had entered into a lease in December of 2013 (the “Lease”). Contiguously, the Applicant and the Respondent had entered into a separate indemnity agreement whereby the Applicant would indemnify the Respondent from any losses arising out of a failure by the Tenant to pay rent. In 2018-2019, the Tenant vacated the leased premises and quit paying rent. The Respondent’s Counterclaim, which was served on the Applicant in accordance with the Service Order, sought damages from both the Applicant and Tenant for the Tenant’s failure to pay rent (the “Underlying Action”).

The Chambers Justice, having considered the Respondent’s ex parte Application to validate service brought pursuant to Rule 11.27, and the various Affidavits filed demonstrating the efforts to serve the Applicant, had granted the Service Order. The Chambers Justice had also granted the Respondent permission to serve further litigation documents in the Underlying Action on the Applicant by faxing them or by serving the Tenant.

In addressing the Stay Application of the Service Order, O’Ferrall J.A. noted that the Applicant must satisfy the Court that: (1) there is a serious issue to be determined on Appeal; (2) the Applicant will suffer irreparable harm if the stay is not granted; and (3) the balance of convenience favours granting the stay. Justice O’Ferrall found that Rule 11.25 provides that a claim may be served outside Canada if a real and substantial connection exists between Alberta and the facts. His Lordship emphasized that a real and substantial connection is presumed to exist when, inter alia, the claim relates to land in Alberta or the claim relates to a contract made, performed, or breached in Alberta. O’Ferrall J.A. also reviewed Rule 11.31(1) which provides that a Defendant may apply to the Court to set aside service of a commencement document and that an Application under this Rule is not an acknowledgment by the Defendant that the Court has jurisdiction.

In balancing these considerations, Justice O’Ferrall determined that: (1) His Lordship was not persuaded that there was a serious issue to be determined; (2) an appropriately worded Undertaking or Court-ordered protection could prevent any irreparable harm befalling the Applicant; and (3) the balance of convenience did not favour any Order which would discourage the taking of steps pending the determination of the Appeal. Accordingly, O’Ferrall J.A. dismissed the Stay Application but ordered that the Respondent was not permitted to prejudice the Applicant for any of its participation in the Underlying Action pending the hearing of the Appeal.