Canada: Defenses To The Enforcement Of Foreign Judgments: Post-Pro Swing: A Fourth Defense?

Last Updated: November 26 2011
Article by Jon-David Giacomelli


In Morguard Investments Ltd. v. De Savoye1, Justice La Forest made a convincing case for replacing the territoriality-based test for the recognition of foreign judgments to a substantial connection test, which he argued was more consistent with our modern global economy.2 The "real and substantial connection" test adopted in Morguard applied to money judgments between Canadian provinces. Subsequent judgments before the Supreme Court of Canada held that the real and substantial connection test should be extended to the enforcement of money judgments from truly foreign courts (i.e. foreign countries)3 and further that this same criterion should be employed to address the recognition and enforcement of non-money judgments issued by foreign courts.4

Following Morguard, a foreign litigant is only required to show:

  1. That the foreign judgment was "issued by a court acting through fair process and with properly retrained jurisdiction,"5
  2. There exists a "real and substantial connection" between:

    - the issue in the action and the location where the action is commenced;
    - the damages suffered and the jurisdiction; and
    - the defendant and the originating forum;6 and
  3. The defendant fails to raise a recognized defence.7

The Supreme Court's modern approach has increasingly simplified the enforcement procedure for foreign litigants in Canada. So long as principles of natural justice are satisfied in the originating court's decision, the enforcing Canadian court is not interested in the substantive or procedural law of the foreign jurisdiction in which the judgment sought to be enforced was rendered.8 This means once jurisdiction simpliciter is established by a domestic Canadian court, using the "real and substantial connection" test, the issues to be raised will be limited to the application and scope of the defences available to a domestic defendant seeking to have a Canadian court refuse enforcement of a foreign judgment.9

Both the majority and dissenting opinions of the Supreme Court of Canada in Beals affirmed that once the foreign court's jurisdiction is recognized, there are only three limited defences to an action for enforcement in Canada; namely:

  1. Fraud,
  2. Denial of Natural Justice, and
  3. Public Policy.

The majority did not liberalize any of the existing common law defences to recognition and enforcement, determining that they applied equally to truly foreign judgments as to interprovincial judgments.

The Majority decision in Beals, delivered by Major J., held that the extension of the Morguard principles to foreign judgments and the resulting change in the jurisdiction test, did not require a reconsideration of the traditional common law defences to recognition and enforcement of judgments. Major J. stated:10

Unusual situations may arise that might require the creation of a new defence to the enforcement of a foreign judgment. However, the facts of this case do not justify speculating on that possibility. Should the evolution of private international law require the creation of a new defence, the courts will need to ensure that any new defences continue to be narrow in scope, address specific facts and raise issues not covered by the existing defences.

Note that in contrast to this reservation to broaden the scope of existing defences, Binnie J. in his dissent, argued that while the "real and substantial connection" test provides an appropriate conceptual basis for the enforcement of final judgments obtained in foreign jurisdictions11, given the "constitutional flavour of the Morguard analysis," a flexible approach to the availability of defenses to enforcement of foreign judgments should be adopted:12

While I accept that the Morguard test (real and substantial connection) provides a framework for the enforcement of foreign judgments, it would be prudent at this stage not to be overly rigid in staking out a position on available defenses beyond what the facts of this case require. Both Major J. and LeBel J. acknowledge (with varying degrees of enthusiasm) that a greater measure of flexibility may be called for judgments as distinguished from interprovincial judgments.

The Pro Swing Inc. v. Elta Golf Inc. case presented the SCC with the opportunity to consider whether the common law should be extended to permit the enforcement of foreign non-monetary judgments (and the circumstances under which they would be enforceable) in 2006. This seemed to be an occasion where changes were made to private international law such that the SCC would be compelled to consider the possibility of a new defence alluded to by the majority in Beals.

Recognition and Enforcement of Non-Money Judgments: Evolution Enough?

In Pro Swing, the SCC in a split-decision, unanimously held that modern day commercial transactions have prompted the need for a "new rule" accompanied by a "judicial discretion enabling the domestic court to consider relevant factors so as to ensure that the orders do not disturb the structure and integrity of the Canadian legal system."13

The issues inherent in the case before the Court relating to comity begged two questions:

  1. Whether Canadian courts can recognize and enforce foreign non-monetary judgments; and,
  2. If so, when is it appropriate to recognize and enforce such judgments?

Writing for the majority, Deschamps J. agreed that "the time is ripe" to revise Canada's traditional conflicts of laws rules to remove the requirement that foreign (outside of Canada)14 judgments must be for a fixed and ascertained sum of money to be recognized and enforced by our courts. In her decision, Deschamps J. recognizes that the nature of equitable judgments require that this "new rule" should be accompanied by a judicial discretion not afforded under the traditional rule. 15

The majority determined that the facts of the case at bar did not warrant application of this new rule. In contrast to the minority, the majority held that the contempt and injunction orders at issue in the case at bar were not an example of enforceable non-monetary judgment.

So while the Court determined that non-monetary foreign judgments can, in principle, be enforced in Canada; the SCC only provided general guidelines regarding the substance and application of such a principle to assist lower courts in drawing appropriate distinctions in future cases.16 Foreign non-monetary judgments can now be enforced in Canada provided that:

  • The terms are clear and certain;
  • The territorial scope is limited and well defined;
  • The judgment is final in the original jurisdiction;
  • The judgment is not penal or quasi-criminal;
  • The judgment is of a nature that the principle of comity requires the domestic court to enforce it.
  • The enforcement of the judgment would not unreasonably burden the courts; and,
  • Discretionary equitable considerations such as delay or estoppel should not bar enforcement.

Pro Swing concerned a foreign contempt order, which the Court concluded was not enforceable in Canada because it was quasi-criminal in nature.

The majority acknowledged that the equitable nature of injunctions and other non-monetary judgments could require Canadian courts to revisit the meaning of finality requirement and recognize new defenses17. However, in her decision, Deschamps J. refused to elaborate on this point as well determining again that the facts of the present case did not merit the Courts consideration. Deschamps J. refused to expand on Major J.'s dictum in Beals18 that the evolution of private international law may require the creation of new defenses (i.e., defenses of public policy, natural justice and fraud), and reiterates the Court's acknowledgment that the list of available defenses to the enforcement of foreign non-monetary judgments was not closed. Thus, for the purposes of the Pro Swing decision, as in Beals, the SCC felt that the current, existing defenses available at common law would suffice.

Post-Pro Swing: A Fourth Defense?

While Pro Swing reversed a long-standing common law principle with respect to non-monetary judgments, the enforcement of such judgments remained only a theoretical possibility until last year. In 2010, the Ontario Court of Appeal in United States of America v. Yemec19provided the first example of a Canadian court recognizing and enforcing a U.S. injunction.

This case concerned a cross-border telemarketing business that sold Canadian lottery tickets to residents of the United States. In September 2002, the United States Federal Trade Commission commenced proceedings against the Yemec defendants in an Illinois District Court, which resulted in a permanent injunction against the Canadian defendants and a judgment of US $19 million.

In 2005, the US amended its Ontario claim to seek enforcement of the Illinois judgment on a summary basis. The motion judge refused to grant summary judgment based on his finding that the Yemec defendants had raised a genuine issue for trial capable in law of constituting a defense to the enforcement of the Illinois judgment. Leave to appeal was granted and the sole issue upon which leave was sought was the determination of a possible new defense. The motions judge referred to this new defense as "the loss of a meaningful opportunity to be heard."

The new defense was based on the Yemec defendants' submission that the plaintiffs had, through the Illinois injunction, tied up their assets to such an extent that they were unable to defend the foreign proceeding in both Canada and the US. The defendants also argued that they lacked access to seized business documents and computers, which prevented them from properly instructing counsel.

The Court considered the following issues:

  1. Whether there is a fourth defense to enforcement of a foreign judgment based on the "loss of a meaningful opportunity to be heard";
  2. Whether a foreign equitable remedy (in this instance, an injunction) is enforceable by courts in Ontario

Upon consideration of the Yemec defendants' submission, the Court found that this fourth defense was indistinguishable from the natural justice defense recognized in Beals since the defendants were essentially arguing that they could have mounted a better defense if they had more money. Since the defendants had not asserted this defense in the Illinois litigation, a trial on this issue would ultimately require the Ontario court to completely re-litigate the Illinois action, an outcome that was recognized in Beals20 (at para. 44) to be undesirable and inconsistent with comity between nations.


Upon consideration of the appeal, the Ontario court ruled that there was no new defense to US judgment enforcement in Canada. This means that when a Canadian defendant wishes to prevent the enforcement of a foreign equitable remedy - in addition to challenging the foreign court's jurisdiction for want of due process or a real and substantial connection to the subject matter of the action - there currently do not exist any legally valid defenses outside of the ones recognized in Beals, namely, fraud, denial of natural justice and public policy. Future defenses brought before the courts in Canada, as indicated by the decision in Yemec, will have to be fundamentally different from those recognized in Beals, in order to be recognized.

In the meantime, it seems that the courts will continue to apply the Pro Swing criteria to determine the enforceability of foreign equitable orders in precise circumstances and legal conditions as they arise on a case by case basis21.

United States of America v. Yemec is significant in that it represents the courts willingness to consider and articulate a new defense with regard to foreign non-monetary judgments; it also demonstrates that businesses operating in foreign jurisdictions must now actively address foreign non-monetary claims.


1. Morguard Investments Ltd. v. De Savoye, [1990] 3 S.C.R. 1077 [Morguard].

2. Morguard, at 1098

3. Beals v. Saldanha, [2003] 3 S.C.R. 416, 234 D.L.R. (4th) 1. [Beals]

4. Pro Swing Inc. v. Elta Golf Inc., [2006] 2 S.C.R. 612.

5. Morguard at 1103.

6. Beals at 489.

7. See Morguard at 1103-10.

8. Beals v. Saldanha [2003] 3 S.C.R. 416 at para. 37; Pro Swing Inc. v. Elta Golf Inc., [2006] 2 S.C.R. 612 at para. 12.

9. Id. at para. 17.

10. Id. para. 42.

11. Id. at para 85.

12. Id. at para 86.

13. Supra., at para. 15

14. Uniforet Pate Port-Cartier Inc. v. Zerotech Technologies Inc., 1998 CANLII 3817 BCSC), para. 24

15. See Morguard Investments Ltd. v. De Savoye and Beals v. Saldanha, discussed above.

16. Id., at para 31.

17. Id. at para 93

18. Id.., at para. 42.

19. United States of America v. Yemec [2010], ONCA 41

20. Beals at para. 44.

21. See Monteiro v. Toronto Dominion Bank [2008], 89 O.R. (3d) 565.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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