Canada: Pro Swing Drives Foreign Judgments Forward

Last Updated: November 2 2005

Article by Pauline Wong, ©2005 Blake, Cassels & Graydon LLP

This article was originally published in Blakes Bulletin on Intellectual Property, October 2005

Canadian courts have long held that injunctions granted in foreign courts could not be enforced in Canada. Instead, only foreign judgments for a fixed sum of money or ‘definite sum certain’ could be enforced. In a recent decision in a trade-mark infringement case, Pro Swing Inc. v. ELTA Golf Inc., the Ontario Court of Appeal has indicated that the time has come to lift this prohibition.

Pro Swing, an Ohio corporation, manufactured and sold customized golf clubs and components under the trade-mark TRIDENT.

In April 1998, Pro Swing sued ELTA, an Ontario corporation, in the U.S. District Court for the Northern District of Ohio, Eastern Division, alleging that ELTA was selling golf clubs and components under the infringing trade-mark RIDENT. The action was settled in July 1998 when Pro Swing and ELTA reached an agreement, which included a consent decree endorsed by the U.S. District Court and signed by the parties. The consent decree enjoined ELTA from selling infringing golf clubs and components, and required ELTA to deliver infringing materials to Pro Swing. The decree also provided that the U.S. District Court retained jurisdiction over the parties to enforce it and that the parties would not contest that jurisdiction.

Years later, in December 2002, Pro Swing brought a motion for contempt of court against ELTA, alleging that ELTA was selling golf heads bearing the RIDENT and TRIDENT marks. Notice of the motion was given to ELTA, but it did not respond. In February 2003, the U.S. District Court found ELTA in contempt, enjoined ELTA again, required ELTA to provide the names and addresses of suppliers and purchasers, and awarded Pro Swing damages to be determined by an accounting to be provided by ELTA. Again, the U.S. District Court retained jurisdiction over the parties to enforce the order. ELTA did not comply, which meant that Pro Swing did not have ELTA’s sales information and, therefore, could not propose an amount and obtain the award for compensatory damages. In June 2003, Pro Swing brought an action in the Ontario Superior Court of Justice to enforce the consent decree and the contempt order. In response, ELTA filed a defence arguing that the two foreign judgments were not for fixed sums of money and, therefore, could not be recognized and enforced in Ontario. Pro Swing moved for summary judgment.

The Supreme Court of Canada outlined the principles applicable to the interprovincial recognition of judgments in Morguard Investments Ltd. v. De Savoye and later extended those principles to the recognition of judgments rendered outside Canada, in Beals v. Saldanha. For a foreign (whether from another province or another country) judgment to be enforceable, Morguard required that (i) comity apply, (ii) the foreign court’s jurisdiction was reasonable based on a real and substantial connection, (iii) the foreign court’s exercise of jurisdiction was fair to the defendant, and (iv) there are no reasons, such as fraud, public policy, or conflict with the law of the foreign state, for refusing to enforce the foreign judgment.

The issue in Pro Swing was whether there was still a requirement that a foreign judgment be for a fixed sum. At the motion for summary judgment, counsel were able to locate only one decision that addressed the issue, Uniforêt Pâte Port-Cartier Inc. v. Zerotech Technologies Inc., in which a Quebec company sought to enforce a Quebec judgment in British Columbia. The British Columbia Supreme Court determined that Morguard abrogated the common law and there was no longer a requirement that a foreign judgment be for a ‘sum certain’. However, the Court dismissed the application for enforcement, holding that the judgment was not ‘final and conclusive’.

The motions judge in Pro Swing applied Uniforêt. The Court held that while Morguard did not change the law relating to the need for a sum certain, the requirement may be relaxed or removed depending on the circumstances of the case; in this case, an action for enforcement of a foreign monetary judgment is an action for a debt, thus diminishing the need for detailed knowledge of the underlying factual matrix. There was also the issue of whether the foreign court intended that the non-monetary judgment have extraterritorial application. Pro Swing involved a consent decree which was signed by the parties and reflected a settlement agreement, which set out the underlying factual matrix. By the terms of the consent decree, it was clear that extraterritorial application was intended. Thus, the motions judge enforced the consent decree.

Morguard did not change the common law with respect to the requirement of finality, which exists because a domestic court does not wish to be faced with enforcing a foreign judgment that is later changed. In the contempt order, some items, such as the determination of the amount of damages, were left outstanding. In the result, the motions judge enforced only the provisions in the contempt order that mirrored the consent decree.

ELTA appealed the decision, arguing that the Court should not enforce any part of either foreign judgment.

The Court of Appeal agreed with the motions judge that the time was ripe for a re-examination of the rules governing the recognition and enforcement of foreign non-monetary judgments. However, the Court of Appeal disagreed that the consent decree was sufficiently certain that it could be enforced without having to interpret its terms or vary it. In the Court’s view, both judgments were ambiguous in respect of material matters, for example, the scope of the extraterritorial application of the judgments. Thus, the Court granted the appeal.

With the decision in Pro Swing, Ontario courts have shown a willingness to set aside pre-Morguard common law rules to facilitate the conduct of business across national borders. Leave to appeal to the Supreme Court of Canada has been granted and the appeal hearing has been scheduled for December 2005.

The results should indicate whether the Supreme Court of Canada agrees with this application of its Morguard principles

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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