COURT OF APPEAL FOR BRITISH COLUMBIA

BETWEEN:

                        BRAINTECH, INC.
                                                      PLAINTIFF
                                                   (RESPONDENT)
AND:
                        JOHN C. KOSTIUK
                                                      DEFENDANT
                                                    (APPELLANT)

Before:   The Honourable Mr. Justice Goldie
             The Honourable Mr. Justice Donald
             The Honourable Madam Justice Newbury

J. P. Scouten                            Counsel for the Appellant
Michael Wilhelmson                   Counsel for the Respondent

Place and Date of Hearing           Vancouver, British Columbia
                                                 February 1 and 2, 1999

Place and Date of Judgment        Vancouver, British Columbia
                                                 March 18, 1999
Written Reasons by:
The Honourable Mr. Justice Goldie
Concurred in by:
The Honourable Mr. Justice Donald
The Honourable Madam Justice Newbury

Reasons for Judgment of the Honourable Mr. Justice Goldie:

[1]  On 7 May 1997 the respondent ("Braintech") obtained a default judgment in the District Court of Harris County in the State of Texas against the appellant ("Kostiuk").  On 9 May 1997 Braintech commenced an action on this judgment in the Supreme Court of British Columbia.  On 2 April 1998, after a summary trial Braintech obtained a judgment in its favour from which the present appeal is taken.

                            ISSUES

[2]  The issues may be grouped as follows:
     1.  ... 
     2.  ... 
     3.   Whether there was a real and substantial connection between Texas and the wrongdoing alleged to have taken place in that state.

[58] It is apparent the "real and substantial connection" relied upon for the assumption of jurisdiction by the Texas court is the alleged publication there of a libel which affected the interests of resident present and potential investors.  This is true only if the mode of communication through the Internet supports this conclusion.

[59] It is trite law that a libel is only committed when the defamatory material is published to at least one person other than the complainant.

[60] I earlier referred to the constitutional limitation in the United States on the exercise of personal jurisdiction.  In Zippo Manufacturing Company v. Zippo DotCom, Inc.  952 F.Supp. 1119 (W.D.Pa. 1997) the following occurs at 1122 (with citations omitted): 

A three-pronged test has emerged for determining whether the exercise of special personal jurisdiction over a non-resident defendant is appropriate: (1) the defendant must have sufficient "minimum contacts" with the forum state, (2) the claim asserted against the defendant must arise out of those contacts, and (3) the exercise of jurisdiction must be reasonable.  ... The "Constitutional touchstone" of the minimum contacts analysis is embodied in the first prong, "whether the defendant purposefully established" contacts with the forum state. ... Defendants who "'reach out beyond one state' and create continuing relationships and obligations with the citizens of another state are subject to regulation and sanctions in the other State for consequences of their actions." ... "[T]he foreseeability that is critical to the due process analysis is ... that the defendant's conduct and connection with the forum State are such that he should reasonably expect to be haled into court there." ... This protects defendants from being forced to answer for their actions in a foreign jurisdiction based on "random, fortuitous or attenuated" contacts. ... "Jurisdiction is proper, however, where contacts proximately result from actions by the defendant himself that create a 'substantial connection' with the forum State." 

There are established criteria.  The court went on to consider the advent of Internet at p. 1123-4:
[I-3] Enter the Internet, a global "'super-network' of over 15,000 computer networks used by over 30 million individuals, corporations, organizations, and educational institutions worldwide." ... The Internet makes it possible to conduct business throughout the world entirely from a desktop.  With this global revolution looming on the horizon, the development of the law concerning the permissible scope of personal jurisdiction based on Internet use is in its infant stages.  The cases are scant.  Nevertheless, our review of the available cases and materials reveals that the likelihood that personal jurisdiction can be constitutionally exercised is directly proportionate to the nature and quality of commercial activity that an entity conducts over the Internet.  This sliding scale is consistent with well developed personal jurisdiction principles.  At one end of the spectrum are situations where a defendant clearly does business over the Internet.  If the defendant enters into contracts with residents of a foreign jurisdiction that involve the knowing and repeated transmission of computer files over the Internet, personal jurisdiction is proper. ... At the opposite end are situations where a defendant has simply posted information on an Internet Web site which is accessible to users in foreign jurisdictions.  A passive Web site that does little more than make information available to those who are interested in it is not grounds for the exercise personal jurisdiction. ... The middle ground is occupied by interactive Web sites where a user can exchange information with the host computer.  In these cases, the exercise of jurisdiction is determined by examining the level of interactivity and commercial nature of the exchange of information that occurs on the Web site.                                [Emphasis added.]

[61] From what is alleged in the case at bar it is clear Kostiuk is not the operator of Silicon Investor.  It is equally clear the bulletin board is "passive" as posting information volunteered by people like Kostiuk, accessible only to users who have the means of gaining access and who exercise that means.

[62] In these circumstances the complainant must offer better proof that the defendant has entered Texas than the mere possibility that someone in that jurisdiction might have reached out to cyberspace to bring the defamatory material to a screen in Texas.  There is no allegation or evidence Kostiuk had a commercial purpose that utilized the highway provided by Internet to enter any particular jurisdiction.

[63] It would create a crippling effect on freedom of expression if, in every jurisdiction the world over in which
access to Internet could be achieved, a person who posts fair comment on a bulletin board could be haled before the courts of each of those countries where access to this bulletin could be obtained.

[64] In the default judgment it is recited that the allegations of the Original and Amended Petitions "have been admitted". This simply reflects the convention in Texas that if a defendant who has been properly served does not appear the allegations in the petition are admitted as proven.  This is a deemed admission which does not assist the respondent in establishing a real and substantial connection between the appellant and the Texas court.

[65] In the circumstance of no purposeful commercial activity alleged on the part of Kostiuk and the equally material absence of any person in that jurisdiction having "read" the alleged libel all that has been deemed to have been demonstrated was Kostiuk's passive use of an out of state electronic bulletin. The allegation of publication fails as it rests on the mere transitory, passive presence in cyberspace of the alleged defamatory material.  Such a contact does not constitute a real and substantial presence.  On the American authorities this is an insufficient basis for the exercise of an in personam jurisdiction over a non-resident.

[66] The record demonstrates British Columbia was the natural forum for the resolution of a dispute between two residents. For the following reasons (which are not exhaustive) the connections in the case at bar show that Texas was not even an appropriate forum:

1.   Kostiuk is a non-resident of Texas who has neither done business nor maintained a place of business nor appointed an agent for service there.  His only connection is "deemed" by virtue of the allegation of having committed a tort in Texas.
2.   Braintech is a Nevada corporation domiciled in British Columbia.  According to the Standard & Poor service excerpt exhibited to Kostiuk's affidavit of 18 February 1998, it was incorporated in Nevada on 4 March 1987 and has undergone a number of name changes before assuming its present name in 1987.  As of 31 December 1996 its transfer agent was located in Salt Lake City; its office in North Vancouver, British Columbia; its stock was traded on the OTC Bulletin Board (the location of which is not identified); and its principal officers (Chairman, President and Vice President and Chief Financial Officers) were located in North or West Vancouver.
3.   Braintech has had no presence in Texas since 31 December 1996.  Between 1 September and 31 December 1996 its technical development activities are said to have been centered in Austin, Texas.  Between January 1994 and the fall of 1995 its head office was located in Arizona.  In the fall of 1995 it was moved to Vancouver.
4.   No person in Texas is alleged to have seen the alleged defamatory material and the witnesses required to prove its damages are acknowledged to be citizens of Canada. The only proof of damages in the record is the McDonald affidavit of 17 April 1997, sworn in Vancouver.
5.   No juridical advantage is alleged to accrue in Texas which is not available if a defamation action was brought in British Columbia.
6.   The authorities cited in Braintech's brief in support of default judgment relate to the use within Texas of electronic communication for actual business purposes. None support the passive posting on an electronic bulletin board as constituting in itself the commission of a tort within Texas.
7.   To enforce recovery of the default judgment obtained in Texas on the deemed proof of use of an electronic bulletin board would encourage a multiplicity of actions the world over wherever Internet was available.
8.   The mode of service in the case at bar falls below the minimum constitutional standards for an American court.
...

Conclusion

[69] In my opinion the trial judge erred in failing to consider whether there were any contacts between the Texas court and the parties which could, with the due process clause of the 14th Amendment to the Constitution of the United States, amount to a real and substantial presence.  In the circumstances revealed by record before this Court, British Columbia is the only natural forum and Texas is not an appropriate forum.  That being so, comity does not require the courts of this province to recognize the default judgment in question.

[70] I would allow the appeal, set aside the judgment below and dismiss the action.

"The Honourable Mr. Justice Goldie"

I AGREE:
"The Honourable Mr. Justice Donald"

I AGREE:
"The Honourable Madam Justice Newbury"