Canada: Enforcement Of Foreign Non-Monetary Judgments

Last Updated: June 6 2007

Article by Barry Leon and Sarah Huggins

Originally published in IBA Legal Practice Division Litigation Committee Newsletter, May 2007.

In late 2006, the Supreme Court of Canada decided that foreign non-monetary judgments should be recognised and enforced by all Canadian courts in appropriate circumstances.

Under the traditional common law rule, only final monetary judgments would be recognised and enforced. However, in Pro Swing Inc v Elta Golf Inc, the Supreme Court held that ‘the time is ripe to revise’ this traditional rule.1

The decision is significant in this era of global commerce (including e-commerce) and increasing international interaction and cross-border disputes. It permits Canadian courts to recognise and enforce various types of equitable remedies granted elsewhere and should reduce the need for duplicative proceedings in several jurisdictions.

Canadian Law Before Pro Swing

Prior to the decision in Pro Swing, foreign nonmonetary judgments were not recognised or enforced in Canada’s common law jurisdictions. Canada is a federal state with 12 common law jurisdictions (nine provinces and three territories) and one civil law jurisdiction (Quebec). Rules of private international law, including those governing the recognition and enforcement of foreign judgments, are within the jurisdiction of the provinces and territories.

The Civil Code of Quebec, which contains the rules applicable to Quebec courts’ recognition and enforcement of non-Quebec judgments,2 does not distinguish between monetary and non-monetary judgments. Article 3155 of the Code provides that a Quebec court will recognise and declare enforceable ‘any decision rendered outside Quebec’, subject to the usual defences such as public policy and finality.

In the common law provinces and territories, however, foreign judgments were recognised and enforced only if they were for a definite sum of money. This requirement meant that the enforcing court would not need to consider the merits of the foreign judgment, nor interpret foreign law; it could simply focus on the obligation created on the face of the judgment itself.

This traditional common law rule is part of the rigid set of recognition and enforcement rules that was developed in 19th-century England. Canadian courts have been reappraising these rules in the face of the ‘acceleration, intensification, and nature of crossborder social and economic activity’.3 Notable are the Supreme Court of Canada’s decisions in 1990 in Morguard Investments Ltd v De Savoye4 and in 2003 in Beals v Saldanha.5

In 1990, in Morguard, the Supreme Court liberalised the law governing the recognition and enforcement of interprovincial judgments within Canada. Each of the 13 Canadian jurisdictions administers its own superior court system and, historically, the superior court judgments of one province or territory were treated as ‘foreign’ judgments by the superior courts of all other provinces and territories. Prior to Morguard, recognition and enforcement of these ‘foreign’ judgments followed the old English rule generally requiring that the defendant be present at the time of the action in the jurisdiction where the judgment was given. The US concept of giving to state judgments ‘full faith and credit’ in other states did not exist interprovincially in Canada. The Morguard decision changed that. The Court held that ‘the courts in one province should give full faith and credit … to the judgments given by a court in another province or a territory, so long as that court has properly, or appropriately, exercised jurisdiction in the action’.6 It held that jurisdiction is exercised appropriately when there is a ‘real and substantial connection’ between the action and the ‘foreign’ court.7

In 2003, the Supreme Court of Canada in Beals extended the ‘real and substantial connection’ test to the recognition and enforcement of judgments rendered by courts outside Canada.

At issue in Beals was the enforcement of a C$260,000 default judgment of a Florida court – what the dissenting judge in Beals termed a ‘Kafka-esque judgment’8 – against Ontario defendants. By the time the judgment came before the Canadian courts for enforcement, it had ballooned to over C$800,000. The Supreme Court held that the judgment should be enforced against the Canadian defendants. In the interest of international comity and having regard to the prevalence of crossborder transactions and movement, the Court enunciated a new Canadian approach to the enforcement of foreign judgments: a judgment of a foreign court will be enforced in Canada where there is a real and substantial connection between the foreign court and the cause of action.9

The principled and arguably modernised approach to recognition and enforcement taken in Morguard and Beals effectively invited lower courts in Canada to re-examine the traditional approach to the enforcement of nonmonetary judgments10 and paved the way for the Supreme Court’s decision in Pro Swing.

Background to Pro Swing

At issue in Pro Swing was whether a Canadian court should enforce two non-monetary judgments – a consent decree and a contempt order – rendered by a US district court in a trademark dispute.

Pro Swing, a US-based company and the owner of the Trident trademark for use in association with golf clubs, sued Elta Golf, an Ontario company that sold from its website golf clubs bearing the name Rident. The parties entered into a settlement agreement, which was endorsed by a consent decree of a US district court, enjoining Elta Golf from purchasing, marketing or selling golf clubs or golf club components bearing the Trident mark or variations thereof. Some years later, Pro Swing, upon learning that Elta Golf was violating the consent decree, launched a civil contempt proceeding to enforce the decree. Elta Golf did not appear to defend itself and the US court issued a contempt order.

When Elta failed to comply with the contempt order, Pro Swing asked the Ontario Superior Court of Justice to recognise and enforce the consent decree and the contempt order. Elta argued that those foreign orders could not be enforced in Ontario because they were not final judgments for a fixed sum of money.

The Ontario Superior Court rejected this defence. It held that the latest jurisprudence opened the way for a relaxation of the traditional common law rule on the enforcement of foreign non-monetary judgments and that the consent decree and contempt order were enforceable in Ontario. This decision was overturned by the Court of Appeal for Ontario, which held that although ‘the time is ripe for re-examination of the rules governing the recognition and enforcement of foreign non-monetary judgments’,11 the orders at issue were not ‘sufficiently certain in [their] terms’12 to be enforced.

The Supreme Court of Canada’s Decision

The Supreme Court of Canada’s decision was unanimous that it was time to re-examine the rules governing the recognition and enforcement of foreign non-monetary judgments:

The principled approach to recognition of foreign monetary judgments in cases such as Morguard and Beals invites application of the same principles to nonmoney judgments in order to preserve the consistency and logic of this body of the law…

The time has come to permit the enforcement of foreign non-money orders where the general principles of Morguard are met and other considerations do not render recognition and enforcement of the foreign judgment inadvisable or unjust.13

Although the Court recognised the importance of adjusting the law to suit modern realities, it called for a cautious approach to implementing this change. Since the enforcement of foreign non-monetary judgments raises issues of policy and enforceability that do not arise when a court merely enforces a judgment debt, ‘[t]he recognition and enforcement of equitable orders will require a balanced measure of restraint and involvement by the domestic court’.14 Specifically, an enforcing court must be left with the necessary discretion to ‘ensure that the orders do not disturb the structure and integrity of the Canadian legal system’ or result in unfair results for the parties.15

In fact, the seven Supreme Court judges who decided Pro Swing were split four to three on how the revised approach applied to the facts at issue in Pro Swing. The majority refused to enforce the foreign contempt order and consent decree, citing the quasi-criminal nature of a contempt order, the ambiguity of the consent decree and the quasi-constitutional protection of personal information.16

The Supreme Court did not provide a comprehensive list of guidelines or criteria to guide lower courts that will be asked to recognise and enforce foreign non-monetary judgments. Throughout the judgment, however, the Court did identify several issues that enforcing courts ought to consider. Justice Deschamps, writing for the majority, said that an enforcing court should be guided by the criteria that guide Canadian courts in crafting domestic non-monetary orders.17 She also set out in general terms the conditions for recognition and enforcement as follows: ‘The judgment must have been rendered by a court of competent jurisdiction and must be final, and it must be of a nature that the principle of comity requires the domestic court to enforce.’18 Chief Justice McLachlin, writing for the minority, identified three requirements for the enforcement of foreign non-monetary judgments: first, the issuing court must have properly taken jurisdiction; second, the foreign judgment must be clear and final; and third, the order must not have penal consequences.19

Implications of Pro Swing

The Supreme Court of Canada’s decision in Pro Swing has liberalised Canadian law governing the recognition and enforcement of foreign non-monetary judgments. In place of the common law rule that precluded the recognition and enforcement of these judgments, Canada now has, following on Morguard and Beals, a principled approach that requires courts to enforce foreign non-monetary judgments in appropriate circumstances. This approach will enable litigants to enforce anywhere in Canada a variety of foreign judgments, including injunctions, orders for specific performance of contractual obligations, accountings of profits, and declarations. This approach should also reduce the duplicative (and costly) legal proceedings that previously had to be commenced in two countries when a litigant wished to obtain in Canada the same non-monetary relief that the litigant had obtained in a foreign jurisdiction.

While litigants may appreciate the rationalisation of court processes (and the associated cost-savings) that will likely result from the decision in Pro Swing, some commentators are wary of the liberalised Canadian private international law regime being ushered in unilaterally by cases like Beals and Pro Swing. Janet Walker, a noted Canadian academic in the area of private international law, calls it ‘the great Canadian comity experiment’.20 She worries that Canada’s generous standards for the enforcement of foreign judgments show ‘far more deference to foreign judgments than the basic standards of international comity require’, in some cases (Beals being one of them) at the expense of local defendants.21 This concern suggests that Canadian courts asked to recognise and enforce foreign non-monetary judgments should be mindful to proceed with the caution and restraint that is called for in the Pro Swing decision and, in appropriate cases, revisit and recalibrate the list of defences to the recognition and enforcement of foreign judgments. In fact, the majority judgment in Pro Swing leaves open the possibility that there may be defences particular to the nature of non-monetary orders and other considerations, such as laches (delay), that would make it inequitable to enforce a foreign non-monetary judgment.22

The decision in Pro Swing leaves at least one significant question unanswered: how will Pro Swing apply to the various important types of foreign non-monetary interim orders, such as interlocutory/preliminary injunctions, orders for the preservation of property and freezing orders, that are made in today’s complex disputes, particularly disputes with cross-border aspects?

Both the minority and majority judgments in Pro Swing emphasised the ‘finality’ requirement for the enforcement of foreign non-monetary judgments. The minority defined finality as completeness:

Finality demands that a foreign order establish an obligation that is complete and defined. The obligation need not be final in the sense of being the last step in the litigation process … [but] the order must be complete and not in need of future elaboration.23

The majority said that defining the finality requirement was ‘better left for another day’ but suggested that finality might be more complex in the context of a foreign nonmonetary order than in the context of a monetary order.24

It is not clear how the minority’s definition of finality as ‘complete’ will accommodate the enforcement of foreign non-monetary interim orders. Does the fact that an interim order may be varied or terminated before trial make the order incomplete? Does the fact that an interim order may be elaborated upon, though it is not in ‘need of future elaboration’, make the order incomplete? Given the practical importance of non-monetary interim orders in the international litigation process, there is much to be said in support of Canadian courts’ recognising and enforcing them in a relatively liberal manner. However, because interim orders are typically rendered without a full hearing and complete examination of the merits, arguably ‘[t]here … is less reason for the [enforcing court] to defer to the issuing court’s judgment, and … more reason to examine de novo the merits of the injunction order’.25

Those involved in international litigation around the world should follow with interest the development of Canada’s approaches to the recognition and enforcement of foreign judgments and particularly foreign nonmonetary judgments. These developments are one country’s step in the direction of greater cooperation and coordination among courts of different jurisdictions. Many would say such cross-border cooperation and coordination is sorely needed in this era of increasingly borderless commercial activity. The challenge for other jurisdictions is to find more and better ways to respond effectively to the evolving needs of those involved in transnational disputes.

Barry Leon is a partner in the Toronto office of Torys LLP, where he practises business litigation and international and domestic commercial arbitration.

Sarah Huggins is a lawyer in the Toronto office of Torys LLP, where she practises corporate/commercial litigation, as well as public law and intellectual property litigation.

Footnotes

1. Pro Swing Inc v Elta Golf Inc, 2006 SCC 52 at para. 15 [Pro Swing].

2. Civil Code of Quebec, S.Q. 1991, c. 64, arts. 3155-3163 (CCQ).

3. Pro Swing, supra note 1 at para. 78.

4. [1990] 3 S.C.R. 1077 [Morguard].

5. [2003] 3 S.C.R. 416 [Beals].

6. Morguard, supra note 4 at 1102.

7. Ibid. at 1106-1107.

8. Beals, supra note 5 at para. 88.

9. Ibid. at paras. 29-32.

10. Port-Cartier Inc v Zerotech Technologies Inc, [1998] 9 W.W.R. 688 (B.C.S.C.); Barrick Gold Corp. v Lopehandia (2004), 71 O.R. (3d) 416 (C.A.); Cavell Insurance (Re) (2004), 6 C.B.R. (5th) 11 (S.C.J.), aff’d (2006), 269 D.L.R. (4th) 679 (C.A.); Grace Canada (Re), [2006] O.J. No. 3643 (S.C.J.).

11. Pro Swing Inc. v Elta Golf Inc (2004), 71 O.R. (3d) 566 at para. 9 (Ont. C.A.).

12. Ibid. at 10.

13. Pro Swing, supra note 1 at paras. 86-87.

14. Ibid. at para. 14.

15. Ibid. at paras. 15 and 86.

16. The quasi-constitutional protection of personal information was an issue because the contempt order required Elta Golf to provide Pro Swing with information about all the suppliers and purchasers of infringing goods.

17. Pro Swing, supra note 1 at para. 30.

18. Ibid. at para. 31.

19. Ibid. at paras. 90, 91 and 100.

20. Janet Walker, ‘The Great Canadian Comity Experiment Continues’ (2004) 120 L.Q.R. 365.

21. Ibid. at 365-366.

22. Pro Swing, supra note 1 at 28-29.

23. Ibid. at para. 95.

24. Ibid. at para. 29.

25. Ken MacDonald, ‘A New Approach to Enforcement of Foreign Non-Monetary Judgments’ (2006) 31 The Advocates’ Quarterly 44 at 64.

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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