Canada: The "Difficult Strategic Choice" Of Parties Sued Before A Foreign Court They Believe Does Not Have Jurisdiction

Last February 22, the Supreme Court of Canada dismissed the appeal from a judgment of the Court of Appeal of Québec in an action instituted by Knight Brothers LLC (Knight) against David Barer (Barer) seeking recognition of the default judgment rendered by a Utah court against Barer and two companies he controlled.

The Supreme Court of Canada's decision in Barer v. Knight Brothers LLC1  is relevant for a number of reasons, chief among them being the court's teachings on the recognition of a foreign authority's jurisdiction.

The facts and judicial history

In 2009, following a dispute over an amount owing to Knight under a subcontracting agreement, Knight brought proceedings before a Utah court against Barer personally and the two companies he controlled.2  At the preliminary stage, Barer filed a motion to dismiss Knight's action arguing, besides the Utah court's lack of jurisdiction over Barer, that the action was barred by the pure economic loss rule.3

The Utah court dismissed Barer's motion to dismiss and, in 2012, granted a motion for a default judgement filed by Knight. Knight then filed an originating application before the Superior Court of Québec to have the Utah decision recognized and declared enforceable.4

The Quebec courts then addressed the issue of the Utah court's jurisdiction over Barer. At trial, Judge Blanchard, j.c.s., recognized the Utah court decision and declared it enforceable in Quebec against Barer. In Judge Blanchard's opinion, the Utah court had jurisdiction given, among other reasons, that Barer had submitted to the court's jurisdiction5  by raising substantive arguments in his motion to dismiss.6

Barer appealed this decision. The Court of Appeal, in a two-sentence ruling and without endorsing all the reasons of the judge of first instance, upheld its ruling.7

The difficult strategic choice, recognition of jurisdiction and "legal mulligan"

While emphasizing that this debate remains particularly contentious,8  Justice Gascon, writing for the majority of the Supreme Court justices, concluded that a defendant submits to a foreign court's jurisdiction when it "presents substantive arguments which, if accepted, would resolve the dispute – or part of the dispute – on its merits."9

Justice Gascon rejected the argument holding that a party presenting "an argument on the merits not in the belief that a court has jurisdiction," but to "avoid the negative consequences that may result from non-participation in the proceedings" does not submit to a foreign court's jurisdiction.10  Consequently, a Quebec defendant sued abroad cannot present substantive arguments in order to "save its skin" without submitting to the foreign court's jurisdiction.11

Being of the opinion that the argument Barer raised in his motion – namely that Knight's action was barred by the pure economic loss rule – constituted a substantive argument, Justice Gascon concluded that Barer, by raising this argument, submitted to the Utah court's jurisdiction.12

This Supreme Court of Canada judgment illustrates the "difficult strategic choice" that Quebec defendants face when sued abroad. The outcome of this dispute shows that Quebec defendants cannot use foreign courts in an attempt to definitively settle their dispute by presenting substantive arguments without assuming the consequences. Indeed, it would be unfair, as Justice Gascon points out, for Quebec defendants sued abroad to try to convince the foreign authorities of the merits of their substantive arguments "while at the same time preserving their right to challenge the jurisdiction of that authority later if they are ultimately displeased" with the decisions rendered, seeing as this would be tantamount to granting them "two kicks at the can" (a "legal mulligan") to raise their arguments.13  The same would hold for foreign defendants sued in Quebec when determining whether or not they have submitted to the jurisdiction of Quebec courts.

The need for substantial connection: issue left for another day

On this point, Barer argued that the substantial connection factor described in article 3164 C.C.Q. is an additional criterion that must be demonstrated.14  Leaving this issue for another day, Justice Gascon did emphasize however that "once one of the conditions under art. 3168 C.C.Q. is satisfied, the substantial connection requirement in art. 3164 C.C.Q. will in most cases be satisfied as well."15  Thus, the fact that Barer "participated in the legal proceedings in Utah to the extent of submitting to the Utah court's jurisdiction suffices amply and raises no questions as to whether the dispute is substantially connected with Utah and the Utah court."16

Footnotes

1            2019 SCC 13.

2            Id., para. 8-9.

3            Id., para. 11-12.

4            Id., para. 15-16.

5            Civil Code of Québec, S.Q. 1991, c. 64, art. 3168(6).

6            Barer v. Knight Brothers LLC, supra, note 1, para. 18; Knight Brothers, L.L.C. v. Central Bearing Corporation Ltd., 2016 QCCS 3471.

7            Barer v. Knight Brothers, 2017 QCCA 597.

8            Barer v. Knight Brothers LLC, supra, note 1, para. 64.

9            Id., para. 69.

10          Id., para. 64-68

11       Id., para. 68. For more on this argument holding that defendant presenting substantive arguments in order to "save its skin" is not submitting to the foreign court's jurisdiction, see: Gérald GOLDSTEIN and Ethel GROFFIER, Droit international privé, t. I, "Théorie générale", Cowansville, Éditions Yvon Blais, 1998, para. 183.

12          Id., para. 81.

13          Id., para. 69.

14          Id., para. 83.

15          Id., para. 87-88.

16          Id., para. 88.


About Norton Rose Fulbright Canada LLP

Norton Rose Fulbright is a global law firm. We provide the world's preeminent corporations and financial institutions with a full business law service. We have 3800 lawyers and other legal staff based in more than 50 cities across Europe, the United States, Canada, Latin America, Asia, Australia, Africa, the Middle East and Central Asia.

Recognized for our industry focus, we are strong across all the key industry sectors: financial institutions; energy; infrastructure, mining and commodities; transport; technology and innovation; and life sciences and healthcare.

Wherever we are, we operate in accordance with our global business principles of quality, unity and integrity. We aim to provide the highest possible standard of legal service in each of our offices and to maintain that level of quality at every point of contact.

For more information about Norton Rose Fulbright, see nortonrosefulbright.com/legal-notices.

Law around the world
nortonrosefulbright.com

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Sign Up
Gain free access to lawyers expertise from more than 250 countries.
 
Email Address
Company Name
Password
Confirm Password
Country
Position
Industry
Mondaq Newsalert
Select Topics
Select Regions
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions