- On May 2, 2018
By: Cameron Fiske and David Cassin
Given the proximity of upstate New York and Southern Ontario, cross-border businesses are commonplace. However, when disputes arise in connection with these cross-border businesses, New York lawyers may need to advise their clients on potential legal action in Canada. This paper provides a primer on the enforcement of foreign judgments, which are a routine part of business for lawyers on either side of the border.
Milosevic Fiske LLP has extensive experience in cross-border commercial litigation and debt recovery disputes. We have acted for judgment creditors and judgment debtors in enforcement proceedings regarding judgments from New York, the United Kingdom, and other provinces throughout Canada.1 We have also been retained by counsel in New York State to enforce judgments from both American federal and New York state courts in Ontario.
Over the past several years, Canadian courts have increased their willingness to recognize and enforce validly obtained foreign judgments. Our society has become increasingly globally integrated and courts have recognized the need to respect and uphold the decisions of valid foreign courts whose legal systems are similar to our own.2 Established defences to the recognition and enforcement of foreign judgments are narrow, applied sparingly, and have been limited significantly by courts in recent years.3
There have been few instances where Canadian courts have refused to recognize a foreign judgement and judgment debtors have successfully resisted the enforcement such judgment in Canada.4 The principles of comity and finality form the foundation for global business relationships. There is no question that the American and Canadian legal systems are similar in many ways and as such Canadian courts are regularly called upon to recognize and enforce judgments of American courts.
Enforcements of foreign judgments from New York are commonly brought under Rule 14.05 of Ontario’s Rules of Civil Procedure.5
I. Recognition and Enforcement of Foreign Judgments: The Common Law
Recognition and enforcement of foreign judgments in Canada is determined primarily by common law principles established by the courts. However, each province and territory (save for Quebec) has enacted legislation providing for the reciprocal enforcement of judgments issued by courts throughout Canada and certain foreign countries.6
Canadian law has developed to adopt a generous and liberal approach to the recognition and enforcement of foreign judgments. In Canada, the basic mandatory requirements for recognition and enforcement of a foreign judgement are: (i) the issuing court has properly established jurisdiction; (ii) the judgment is final and conclusive; and (iii) the judgment is not for a penalty, taxes, or enforcement of a foreign public law.
- Establishing Jurisdiction: A Real and Substantial Connection
The history of the courts’ discussion concerning jurisdiction in the context of proceedings to recognize and enforce a foreign judgment can be traced through several decisions of the Supreme Court, commencing in 1990.7
Historically, foreign judgments were only enforceable if the foreign court that issued the judgment took jurisdiction in one of two ways: (i) the defendant was present in the jurisdiction; or (ii) the defendant had attorned (or consented) to the foreign court’s jurisdiction.
However, the Supreme Court introduced an additional principle to determine whether a foreign court has exercised its jurisdiction appropriately: where a “real and substantial connection” exists between the foreign court and action’s subject matter or its defendants, the foreign judgment should be recognized and enforced.8
The traditional indicia of jurisdiction including attornment, agreement to submit to the jurisdiction of the foreign court, and/or evidence of residence and presence in the foreign jurisdiction will bolster the foreign court’s real and substantial connection to the action or parties.9 As stated by the Supreme Court, “because the defendant has chosen to have his day in court in the foreign forum, no unfairness results from the enforcement of the foreign court’s judgment.”10
One case that helps illustrate the concept of a ‘real and substantial connection’ is that of Marcus Food Co. v Di Panfilo.11 In that case, the applicant had its principal place of business in the State of Kansas and was in the food distribution business. The respondent was an individual person who resided in Toronto, Ontario. The respondent was going to act for the applicant for purchases and sales of food products in Ontario.
The case was held to be sufficiently linked to the State of Kansas because the applicant was headquartered in Kansas, and the negotiations with respect to the contract between the two parties had taken place by telephone from the applicant’s headquarters. The application judge recognized the Kansas judgment in Ontario as a result of the ‘real and substantial connection’ of the parties to the jurisdiction of the Kansas court. Also, of note, Marcus Food involved a Default Judgment. A default judgment is equally as enforceable by a Canadian court as a judgment derived at trial by judge or jury.
- Final and Conclusive Judgment
A foreign judgment will not be recognized by Canadian courts unless the judgment is final and conclusive in the foreign court that rendered it. However, a pending appeal from the foreign judgment in the foreign court (or if the time for appealing a foreign judgment has not expired) does not necessarily affect the finality of the judgement for enforcement purposes.
- Judgment is not for Penalty, Taxes, or Enforcement of Foreign Public Law
Canadian courts will not recognize monetary judgments relating to penalties, taxes or enforcement of a foreign public law since by enforcing such judgments, the Canadian court would be seen as facilitating a foreign sovereign power in Canada.12
II. DEFENCES TO RECOGNIITION AND ENFORCEMENT
In addition to challenging the jurisdiction of the foreign court, defendants are limited to three narrow defences available in the common law to attempt to resist the recognition and enforcement of a foreign judgment: (i) fraud; (ii) denial of natural justice; and (iii) public policy concerns. Importantly, a defendant is not entitled to raise merits-based defences that were subject to adjudication by the foreign court.
Once the “real and substantial connection” test is found to apply to a foreign judgment, the court will then examine the scope of the defences available to a defendant in contesting the recognition of such a judgment.13 These limited defences were established by the common law to guard against potential unfairness in the recognition and enforcement of judgments but are narrow in their application.14
- The Defence of Fraud
Courts are cautious not to allow a defendant to attempt to relitigate an action by raising the defence of fraud. The court draws a distinction between “intrinsic fraud” and “extrinsic fraud”. Extrinsic fraud is the type of fraud that misleads the court, foreign or domestic, into believing that it has jurisdiction over the cause of action – such a fraud will justify setting aside the judgment.15
Intrinsic fraud, on the other hand, is fraud which goes to the merits of the case and to the existence of a cause of action. Evidence of intrinsic fraud may be admissible where the defendant can establish “proof of new and material facts” that were not available at the time of trial.16 However, these new and material facts are limited to facts that the defendant could not have discovered and brought to the attention of the foreign court through the exercise of reasonable due diligence.17
Ultimately, the defence of fraud to an application to recognize and enforce a foreign judgment is limited and narrow and is not likely of assistance to the matter at hand.
- Denial of Natural Justice
To establish that there was a denial of natural justice, the defendant must prove on a balance of probabilities that the foreign proceedings were contrary to Canadian notions of fundamental justice.
The Supreme Court has held that the enforcing court must ensure that the defendant was granted a fair process in the foreign court. A fair process is one that reasonably guarantees basic procedural safeguards such as judicial independence and fair ethical rules governing the participants in the judicial system.18
In Canada, natural justice has been viewed to include, but is not limited to, the necessity that a defendant be given adequate notice of the claim and that they be given an opportunity to defend.
- Public Policy
The defence of public policy prevents the enforcement of a foreign judgment that is contrary to the Canadian concept of justice. The defence turns on whether the foreign law is contrary to the Canadian view of basic morality.19
The use of defence of public policy to challenge the enforcement of a foreign judgment involves impeachment of that judgment by condemning the foreign law on which the judgment is based and as such, is not a remedy to be used lightly.20
Given the interconnectedness of the Canadian and American legal systems, it would be an extremely difficult position to argue for the impeachment of a New York Court’s judgment by condemning the law of New York (or any American Court) on which the foreign judgment is based.
- Challenges to the merits are generally barred
In CIMA Plastics Corp. v Sandid Enterprises Ltd.,21 a decision of the Ontario Court of Appeal, it was held that a challenge to the merits of a foreign judgment is barred at common law.
Therefore, on an application from New York, as an example, the court must assume that a judgment of the United States District courts or New York State courts are correct. The applicant need not re-litigate these issues in order to obtain judgement to enforce the foreign judgment in Ontario. Nor is the applicant required to file any documentary evidence to substantiate the damages accrued, since the matter has already been litigated in New York.22
III. INSTANCES WHERE FOREIGN JUDGMENTS WERE NOT RECOGNIZED
There are limited examples where Canadian courts have refused to recognize and enforce foreign judgments. In what follows we highlight three recent examples where Canadian courts have refused foreign judgments.
First, in Cortés v Yorkton Securities Inc.,23 the plaintiff, an Ecuadorian resident, brought an action to enforce a judgment in his favour by an Ecuadorian court. The British Columbia Supreme Court refused to enforce the foreign judgment on the grounds that there was a denial of natural justice – specifically, the defendant was not given adequate notice of the claim.24 Ultimately, the court concluded that the plaintiff failed to take effective steps to provide the defendants with notice of the action, which amounted to a breach of natural justice.
While an example of a Canadian court refusing to enforce a foreign judgment, the facts in Cortés evidence a breach of natural justice, albeit involving unusual circumstances.
Second, in Canadian Standards Assn. v Solid Applied Technologies Ltd.,25 the Ontario Superior Court of Justice refused to enforce an Israeli court’s judgment as it found the Israeli court was not entitled to take jurisdiction, and the judgment at issue from the foreign court was not final.26
Third, in Braintech Inc. v Kostiuk,27 the British Columbia Court of Appeal refused to enforce a default judgment of a Texas court. In this case, the Canadian defendant had allegedly posted defamatory comments online about the Texas plaintiff. However, the defendant was a non-resident of Texas and had not conducted business in Texas, the plaintiff had no presence in Texas for several years, and the mode of service was found to fall below the minimum standards for an American court.28
Ultimately, the British Columbia Court of Appeal held that the “real and substantial connection” relied upon by the Texas court in assuming jurisdiction was too weak and the court refused to recognize the default judgment.29
IV. TREBLE DAMAGES
One head of damages that many American lawyers deal with are known as treble damages. While treble damages do not exist in Canadian law, the Supreme Court of Canada has recognized that they are enforceable in Canada when they are awarded by an American court as stated in Beals:
“The award of damages by the Florida jury does not violate our principles of morality. The sums involved, although they have grown large, are not by themselves a basis to refuse enforcement of the foreign judgment in Canada. Even if it could be argued in another case that the arbitrariness of the award can properly fit into a public policy argument, the record here does not provide any basis allowing the Canadian court to re-evaluate the amount of the award. The public policy defence is not meant to bar enforcement of a judgment rendered by a foreign court with a real and substantial connection to the cause of action for the sole reason that the claim in that foreign jurisdiction would not yield comparable damages in Canada.”30
V. JURISDICTION AND VENUE
Despite the nature of a dispute, enforcement proceedings in Canada generally lie with the Superior Court of each province. There do not appear to be any exceptions. For example, in Canada, intellectual property matters are generally heard by the Federal Court of Canada. However, in a case that may have begun as an intellectual property dispute in New York, the subject matter of an application to enforce a foreign judgment is not intellectual property, but rather the enforcement of a foreign judgment in Ontario. As such, enforcement proceedings are not advanced before the Federal Court, but rather the province’s Superior Court.
In Litecubes v. Northern Light,31 the British Columbia Supreme Court recognized a foreign judgment in which the subject matter was copyright infringement when it was before the United States Federal District Court. After the plaintiffs obtained judgment against the defendants in the United States, their judgment was recognized by the province’s Superior Court and the application for enforcement did not have to be brought in Federal Court.
Enforcement of foreign judgements in Ontario can be a useful tool in upstate New York lawyers’ pocket to ensure clients can recover on outstanding judgments. While Canadian courts are generally receptive to enforcement of foreign judgments, especially American ones, it is integral to retain experienced and effective Canadian counsel to ensure your client is sufficiently advised. Canadian counsel can assist in advancing recognition and enforcement proceedings and ensure compliance with Canadian law.
Cameron Fiske is a partner at Milosevic Fiske LLP. He has extensive experience acting for clients in the recognition and enforcement of foreign judgments in Ontario from judgments of American, British, and Canadian courts. David Cassin is an associate at Milosevic Fiske LLP and a former associate at a national firm in Toronto. David has acted for clients in the recognition and enforcement of foreign judgments in Ontario from judgments of British and Canadian courts.
- Note: judgment creditors are parties to which a debt is owing by way of a judgment, whereas judgment debtors are those who a judgment has been obtained against in favour of a judgment creditor.
- Great America Leasing Corp. v Yates,  68 O.R. (3d) 225 (ONCA) at para 1.
- Beals v Saldanha, 2003 SCC 72, at para 41 [Beals].
- See for example: 2007 BCSC 282 [Cortés]; Canadian Standards Assn. v Solid Applied Technologies Ltd.,  154 ACWS (3d) 359 (Ont Sup Ct) [Canadian Standards]; and Braintech Inc. v Kostiuk, 1999 BCCA 169 [Braintech].
- RRO 1990, Reg 194.
- See for example: Ontario: Reciprocal Enforcement of Judgments Act, RSO 1990, c R5 and Reciprocal Enforcement of Judgments (UK) Act, RSO 1990, c R6; Alberta: Reciprocal Enforcement of Judgments Act, RSA 2000, c R6; British Columbia: Court Order Enforcement Act, RSBC 1996, c 78.
- See: Morguard Investments Ltd. v De Savoye,  3 SCR 1077; Beals; Pro Swing Inc. v ELTA Golf Inc., 2006 SCC 52; Van Breda v Village Resorts Ltd., 2012 SCC 17; and most recently, Chevron Corp. v Yaiguaje, 2015 SCC 42.
- Beals at para 29.
- Beals at para 37.
- Beals at para 208.
- Marcus Food Co. v Robert DiPanfilo, 2012 ONSC 1505 [Marcus Food].
- United States v Ivey (1995), 26 OR (3d) 533 (ON Gen Div), aff’d (1996), 30 OR (3d) 370 (ONCA), leave to appeal denied.
- Beals at para 39.
- Beals at para 41.
- Beals at para 45.
- Beals at para 47.
- Beals at para 50.
- Beals at paras 59-62.
- Beals at para 71.
- Beals at para 75.
- 2011 ONCA 589 [CIMA].
- CIMA at paras 19-20.
- Cortés, supra.
- Cortés at para 72.
- Canadian Standards, supra.
- Canadian Standards at paras xi-xiii.
- Braintech, supra.
- Braintech at para 66.
- Braintech at paras 58, 62.
- Beals at para 76.
- 2009 BCSC 181.