Enforcement of Foreign Judgments 2003

PART 2 - ENFORCEMENT - GENERAL

Reasons for refusal

4.A foreign judgment cannot be enforced in [the enacting province or territory] if

(a) the court of the State of origin lacked jurisdiction over the judgment debtor or subject matter contrary to sections 8 and 9;

(b) the judgment has been satisfied;

(c) the judgment is not enforceable in the State of origin or an appeal is pending, or the time within which an appeal may be made or leave for appeal requested has not expired;

(d) the judgment debtor was not lawfully served in accordance with the laws of the State of origin or did not receive notice of the commencement of the proceeding in sufficient time to present a defence, and the judgment was allowed by default;

(e) the judgment was obtained by fraud;

(f) the judgment was rendered in a proceeding that was conducted contrary to the principles of procedural fairness and natural justice;

(g) the judgment is manifestly contrary to public policy in [the enacting province or territory];

(h) at the time the judgment was submitted for registration or an action for enforcement was commenced, a civil proceeding based on the same facts and having the same purpose

  • (i) was pending before a court in [the enacting province or territory], having been commenced before the civil proceeding that gave rise to the foreign judgment was commenced,
  • (ii) has resulted in a judgment or order rendered by a court in [the enacting province or territory], or
  • (iii) has resulted in a judgment or order rendered by a court of a foreign State, other than the State of origin, that meets the conditions for its registration and enforcement in [the enacting province or territory].

Comments: Section 4 lists in sub-par. (b) to (h) the traditional defences or exceptions which can be opposed to the enforcement of foreign final judgments in Canada. It includes notably the following circumstances: the foreign judgment is not final or is against public policy; the proceedings that were conducted show a lack of respect for the rights of the defendant; or lis pendens or res judicata can be invoked. Unlike the policy governing the enforcement of Canadian judgments based on full faith and credit under the UECJA, enforcement of a foreign judgment could also be opposed if, as provided in sub-par. (a), the foreign court lacked jurisdiction.

Paragraphs (e) and (f). The defence of fraud that is referred to in paragraph (e) is intended to replicate, for common law jurisdictions, the defence as it has been developed in the Canadian case law. The defence is distinct from that of violation of the principles of procedural fairness as provided in paragraph (f). The procedural fairness defence refers to the manner in which the foreign proceeding was conducted. Fraud refers to a deception that was practised on the court or on the judgment debtor in order to obtain judgment. It is possible for fraud to exist even in an action that, as far as procedure is concerned, complies with the requirements of procedural fairness.

In civil law, fraud would have been covered either by section 4 f) or by section 4 g). Principles of procedural fairness would most likely be understood as binding on the parties to the proceedings as well as on the court. Fraud could also be contrary to public policy. Paragraph e) clarifies the issue if there were any doubt.

Paragraph (g). For common law jurisdictions, “public policy” is intended to refer to the concept that is used in the Canadian case law to determine whether a foreign judgment must be denied recognition, or a foreign rule of law denied application. Public policy, used in this sense, applies only if the foreign judgment or rule violates concepts of justice and morality that are fundamental to the legal system of the recognizing jurisdiction. The word “manifestly” is used in this paragraph to emphasize that the incompatibility with justice and morality must be convincingly demonstrated. Public policy in this context is clearly distinct from public policy in the more general sense of the aims that are supposed to be served by a rule of domestic law. A foreign judgment may be at odds with domestic legislative policy, because it gives a different result from that which domestic law would produce, but that does not mean that the judgment contravenes public policy in the sense in which it is used here. The distinction corresponds to that drawn in the civil law between ordre public interne (policies served by rules of domestic law) and ordre public international (public policy in the international sense).

Subsection 4 (h) (i) addresses the situation where lis pendens in the enforcing court can be invoked based on either an originating process or an interlocutory proceeding the subject matter of which is related to the merits addressed in the foreign proceeding.

Subsection 4 (h) (ii) addresses the straightforward exception of res judicata based on an equivalent judgment on the merits in the enforcing court. It also addresses the possibility of interim unenforceability created by the existence of an order in the enforcing court resulting from an interlocutory proceeding the subject matter of which is related to the merits addressed in the foreign proceeding. In such a case, the interlocutory matter would have to be disposed of by the enforcing court in advance of it considering the enforcement proceeding any further.

Subsection 4 (h) (iii) addresses the situation of res judicata in a third jurisdiction coming to the attention of the enforcing court, the judgment of which jurisdiction would also qualify for recognition and enforcement.

Time periods

5.A foreign judgment can be enforced in [the enacting province or territory] only within the period provided by the law of the State of origin, or within ten years after the day on which the foreign judgment becomes enforceable in that State, whichever is earlier.

Comments: Such a rule accords with the average limitation period for enforcement of judgments set up in most provinces.

Limit of damages

6.(1)Where the enforcing court, on application by a judgment debtor, determines that a foreign judgment includes an amount added to compensatory damages as punitive or multiple damages or for other non-compensatory purposes, it shall limit enforcement of the damages awarded by the foreign judgment to the amount of similar or comparable damages that could have been awarded in [the enacting province or territory.]

Excessive damages

(2)Where the enforcing court, on application by the judgment debtor, determines that a foreign judgment includes an amount of compensatory damages that is excessive in the circumstances, it may limit enforcement of the award, but the amount awarded may not be less than that which the enforcing court could have awarded in the circumstances.

Costs and Expenses

(3)In this section, a reference to damages includes the costs and expenses of the civil proceeding in the State of origin.

Comments: The enforcement in Canada of foreign awards of damages which could include punitive, multiple or excessive compensatory damages that would otherwise be considered enforceable under this Act has raised and continues to raise a number of issues. This situation warrants that under the UEFJA the enforcing Canadian court being expressly empowered to limit the enforcement of damages so awarded that would be in excess of similar damages that could be awarded in similar circumstances had the action been filed in Canada. The defendant would have the onus of establishing that the damages awarded by the foreign court are in excess of awards normally granted in Canada.

To clarify the rules, a distinction is made in s. 6 between punitive and multiple damages (para. 1) which are not considered compensatory, on the one hand, and excessive compensatory damages (para. 2) on the other, given the principles set forth by the S.C.C. in Hill v. Church of Scientology. In addition, the third paragraph provides that judicial costs and expenses are part of the damages award of which the enforcement could be limited.

Limits relating to non-monetary awards

7.(1)In the case of a non-monetary foreign judgment, the enforcing court may, on application by any party,

(a) make an order that the foreign judgment be modified as may be required to make it enforceable in [the enacting province or territory], unless the foreign judgment is not susceptible of being so modified;

(b) make an order stipulating the procedure to be used in enforcing the foreign judgment;

(c) make an order staying or limiting the enforcement of the foreign judgment, subject to any terms and for any period the enforcing court considers appropriate in the circumstances, if

  • (i) the enforcing court could have made that order with respect to an order or judgment rendered by it under [the statutes and the rules of court] [any enactment of the enacting province or territory] relating to legal remedies and the enforcement of orders and judgments, or
  • (ii) the judgment debtor has brought, or intends to bring, in the State in which the foreign judgment was made, a proceeding to set aside, vary or obtain other relief in respect of the foreign judgment.

Application

(2)An application must be made under subsection (1) before any measures are taken to enforce a foreign judgment where

(a)the enforceability of the foreign judgment is, by its terms, subject to the satisfaction of a condition; or

(b)the foreign judgment was obtained without notice to the persons bound by it.

Comments: The rules in section 7 are necessary to deal with special issues raised by non-monetary foreign judgments or, more precisely, foreign judgments containing orders that require the judgment debtor to do something other than pay a sum of money to the judgment creditor. An order to pay money is readily translated into the local procedure. An order made by a foreign court to do something else (such as an order for specific performance), or to refrain from doing something (an injunction), may not have an exact equivalent in the enforcing court’s own procedure. Also, non-monetary orders may involve issues of policy and convenience not raised by money judgments, such as the extent to which it is fair to restrain the judgment debtor’s freedom to act, or appropriate to place a burden on the court to monitor the judgment debtor’s conduct.

The provisions in section 7 are modeled on the corresponding ones in the Uniform Enforcement of Canadian Judgments and Decrees Act (UECJDA) (s. 6(2) and (4) of that Act). Paragraphs (a) and (b) of section 7(1) provide a mechanism whereby any party can ask the enforcing court to modify a foreign judgment, which is not enforceable in the enforcing jurisdiction as it stands, so as to make it enforceable (paragraph (a)), or to stipulate the procedure for enforcement (paragraph (b)). The concluding words in paragraph (a), which have no equivalent in the UECDJA, expressly contemplate that some foreign judgments may be so out of keeping with the relevant procedures in the enforcing jurisdiction that they are just not capable of being adapted so as to make them enforceable.

Paragraph (c) gives the enforcing court discretion, on application by any party, to stay or limit the enforcement of a non-monetary foreign judgment in either of two circumstances. One is where the enforcing court’s own procedure would allow a local order of the relevant type to be stayed or limited in this way. This is consistent with the policy expressed in section 14(2) that the enforcing court must have the same control over a registered foreign judgment as it does over one of its own judgments. The other circumstance is where the judgment debtor has taken or intends to take steps in the originating jurisdiction to set aside, vary or obtain relief in respect of the foreign judgment. This recognizes that relief from a non-monetary judgment can often be sought by procedures other than an appeal, so the rule in section 4(c), prohibiting enforcement of a foreign judgment while an appeal is pending or may still be brought, will not cover all the situations that can arise.

Section 7(2) stipulates two cases in which the judgment creditor, as a precondition of taking any steps to enforce a non-monetary foreign judgment, must make an application to the enforcing court under subsection (1). In effect, the judgment creditor must ask the court to approve the way in which the creditor proposes that the foreign judgment be enforced. One case (paragraph (a)) is where the foreign judgment by its own terms is subject to the satisfaction of a condition, making it essential that the enforcing court have an opportunity to rule on whether that condition is satisfied. The other (paragraph (b)) is where the foreign judgment was obtained without notice to the persons bound by it. In such a case, since the judgment debtor has not had the opportunity to contest the making of the order, enforcement should not take place without at least the express sanction of the enforcing court.

Jurisdiction

8.A court in the State of origin has jurisdiction in a civil proceeding that is brought against a person if

(a) the person expressly agreed to submit to the jurisdiction of the court;

(b) as defendant, the person submitted to the jurisdiction of the court by appearing voluntarily;

(c) the person commenced a counterclaim to the proceeding;

(d) the person, being a natural person, was ordinarily resident in the State of origin;

(e ) the person, not being a natural person, was incorporated in the State of origin, exercised its central management in that State or had its principal place of business located in that State; or

(f) there was a real and substantial connection between the State of origin and the facts on which the proceeding was based.

Comments: Section 8 sets out three groups of circumstances in which a foreign court has jurisdiction in a proceeding brought in its courts.

The first group describes party choice – the parties may contractually agree on a forum; the defendant may voluntarily appear in a forum chosen by the plaintiff; or, for purposes of orders against the plaintiff, the plaintiff is bound by the choice of forum it has made.

The second group describes the “home base” of defendants, using the accepted principle of habitual residence. For business entities, an equivalent is created by use of “place of incorporation,” which is the place which gives the entity its existence and personality. Since such legal entities always act through agents, two additional grounds are added for business entities – “central management” and “principal place of business.” These are consistent with decisions which have gone beyond a simplistic reliance on “place of incorporation” for all purposes. Almost all incorporation statutes mandate being subject to the authority of the courts of the place of incorporation. “Central management” and “principal place of business” depend on the particular circumstances of the case and the issues raised by it.

The third ground reflects the development of jurisprudence by the Supreme Court in Morguard and subsequent cases. The concept was developed with respect to recognition within Canada of other Canadian judgments. It has, however, been applied to non-Canadian judgments, even though the arguments relating to the comity between units within a federal state are less compelling in other circumstances. This issue has been discussed at differing levels of intensity in a number of cases, including Moses v. Shore Boat Builders Ltd., [1] Old North State Brewing Company v. Newlands Services Inc.,[2]

Braintech, Inc. v. Kostiuk [3] and U.S.A. v. Ivey.[4] The concept of “real and substantial connection” is well known in conflict of laws generally.

Real and substantial connection

9.For the purposes of paragraph 8(f), in the case of a foreign judgment allowed by default, a real and substantial connection between the State of origin and the facts on which the civil proceeding was based is established in, but is not limited to, the following cases:

(a) the judgment debtor, being a defendant in the court of the State of origin, had an office or place of business in that State and the proceedings were in respect of a transaction effected through or at that office or place;

(b) in an action for damages in tort or for extra-contractual damages

  • (i) the wrongful act occurred in the State of origin, or
  • (ii) injury to person or property was sustained in the State of origin, provided that the defendant could have reasonably foreseen that the activity on which the action was based could result in such injury in the State of origin, including as a result of distribution through commercial channels known by the defendant to extend to that State;

(c )the claim was related to a dispute concerning title in an immovable property located in the State of origin;

(d) in an action for damages in contract, the contractual obligation was or should have been performed in the State of origin;

(e) for any question related to the validity or administration of a trust established in the State of origin or to trust assets located in that State, the trustee, settlor or beneficiary had his or her ordinary residence or its principal place of business in the State of origin; or

(f) the claim was related to a dispute concerning goods made or services provided by the judgment debtor and the goods and services were acquired or used by the judgment creditor when the judgment creditor was ordinarily resident in the State of origin and were marketed through the normal channels of trade in the State of origin.

Comments: It was felt necessary for policy reasons to provide a list of examples of real and substantial connections in order to establish the subject-matter competence of the foreign court. Grounds are identified here for actions involving branches of corporate bodies (a); torts (b); immovables (c); contracts (d); trusts (e); consumer contracts and products liability (f). They would largely accord with those identified in the context of the enforcement of Canadian judgments (see s. 10 UCPTA).

As a result of the discussions held in August 1998, section 9 is intended to operate :

  • only in the case of default judgments; and
  • in a non-exhaustive fashion so that additional grounds which would be acceptable both in the State of origin and in Canada could be considered by the enforcing court.

Paragraph (a) should be read together with s. 8(e). The latter provides, in essence, that a court in the state of origin has jurisdiction in a proceeding against a corporation whenever that body is headquartered in the state of origin. This is general jurisdiction, that is, jurisdiction irrespective of the subject matter of the proceeding. Section 9(a), by contrast, is more restricted. It applies if the judgment debtor, which may be a natural person or a corporation, has an office or place of business in the territory of origin. The office or place of business need not be a principal one. Section 9(a) provides that a court in the state will have jurisdiction to give default judgment against the judgment debtor, based on a real and substantial connection, but this is special jurisdiction. That is, jurisdiction exists only with respect to certain proceedings. The proceeding must be “in respect of a transaction effected through or at that office or place”. The word “transaction” implies a business context, but a proceeding “in respect of a transaction” could be for contractual, tortious (delictual) or restitutionary claims, so long as the claims arise out of a “transaction” effected through or at the relevant location.

Judgment not enforceable

10.A foreign judgment may not be enforced in [the enacting province or territory] if the judgment debtor proves to the satisfaction of the enforcing court that

(a) there was not a real and substantial connection between the State of origin and the facts on which the civil proceeding was based; and

(b) it was clearly inappropriate for the court in the State of origin to take jurisdiction.

Comments: Section 10 recognizes that there will be exceptional cases where the basis for jurisdiction can be found under Section 8(a) to (e), but nonetheless the exercise of jurisdiction by the court in the State of origin was clearly inappropriate. In those rare instances, the enforcing court may decline to recognize or enforce the judgment. A real and substantial connection between the State of origin and the facts on which the proceeding was based is not necessary for the court in the State of origin to have exercised jurisdiction but its absence, coupled with a finding that for some reason it was inappropriate for it to have done so, may be a sufficient reason to decline to enforce or recognize the judgment.

Section 10 provides the ultimate possibility at the enforcement stage to challenge the jurisdiction of the foreign court even though the defendant was not successful in challenging jurisdiction or has not done so at the time of the initial proceeding.

On that point, a useful reference can be made to s. 3164 of the Civil Code of Québec which reads as follows:

“The jurisdiction of foreign authorities is established in accordance with the rules on jurisdiction applicable to Québec authorities under Title Three of this Book, to the extent that the dispute is substantially connected with the State whose authority is seised of the case.” (our emphasis)

As pointed out during the deliberations of the ULCC-Civil Section in August 1998, the application of s. 10 should be appreciated as clearly as possible, particularly in light of its relationship with other sections of Part II that deal with jurisdiction, namely s. 4, 8 and 9.

In principle, the enforcement of a foreign judgment can be granted if the foreign court was competent to make a final order in accordance with the rules to be set out in the future UEFJA. Defences to enforcement are those listed in s. 4, one of which being the lack of jurisdiction. This has to be determined in light of the requirements mentioned in s. 8 and 9.

For instance, if jurisdiction can be determined on the basis of a real and substantial connection as provided in s. 8(f), examples of which are contained in s. 9 in the case of default judgments, the defendant would not be successful in establishing that the foreign court lacked jurisdiction. For this reason, it might be necessary to adopt quite a high threshold for allowing the defendant to be able to do so.

Recognition of foreign judgments

11. The rules in this Part that determine whether a foreign judgment is unenforceable for lack of jurisdiction in the court of the State of origin over a party or subject matter, or on account of fraud, public policy or a violation of the principles of procedural fairness and natural justice, also apply, with any necessary modifications, in determining whether a foreign judgment is binding on the parties so as to be a defence to a claim, or to be conclusive of an issue, in an action in [the enacting province or territory].

Comments: It is recognized that enforcement and recognition operate in similar ways, one initiated by the successful plaintiff/judgment creditor, and the other by the successful defendant. However, recognition operates in a narrower compass, especially where the foreign action is dismissed. It is possible that the unsuccessful plaintiff may attempt to sue again in another forum or appeal the foreign judgment. In the meantime, however, the successful defendant in the foreign litigation must be able to rely on the judgment dismissing the action to prevent a new action (estoppel in common law), unless and until circumstances are shown to have changed.

Because recognition operates in a slightly narrower compass, we have indicated the grounds which would preclude the foreign action being raised by the successful defendant.

Next Annual Meeting

2018 Conference (Centennial)

Delta Hotel

Québec City, QC

August 12 - 16, 2018