Canada: Clarifying "Carrying On Business": Supreme Court Of Canada Provides Guidance In The Context Of Enforcing Foreign Judgments

In  H.M.B. Holdings Ltd. v. Antigua and Barbuda, the Supreme Court of Canada  clarified what "carrying on business" means in the context of enforcing foreign judgments. Specifically, the Court held that the Ontario Superior Court did not err when it considered the common law jurisprudence on jurisdiction simpliciter in determining whether an entity was "carrying on business" for the purposes of Ontario's statutory scheme for enforcing foreign judgments.

Background

The Antiguan ruling

In 2014, H.M.B. Holdings Ltd. ("HMB") obtained an order from the final appellate court in Antigua and Barbuda requiring the Antiguan government ("Antigua") to compensate HMB for a 2007 expropriation of a beachfront property owned by HMB.

Registration in B.C. and attempted registration in Ontario

In 2016, HMB registered this order as a default judgment in the Supreme Court of British Columbia. Shortly thereafter, HMB applied to have the British Columbia default judgment registered in Ontario under the Reciprocal Enforcement of Judgments Act ("REJA").

The REJA, among other things, allows a person who has obtained a judgment in another jurisdiction (the "judgment creditor") to apply to register the judgment in Ontario without having to commence a separate action to have the judgment recognized and enforced. The person against whom the judgment was obtained (the "judgment debtor") can resist the registration under any of the seven defences set out in section 3 of the Act.

Antigua resisted HMB's application based on subparagraphs 3(b) and 3(g) of the REJA, which bar the registration of a judgment in the following circumstances:

• if the judgment debtor was not carrying on business, or ordinarily resident in the jurisdiction of the original court (3(b)); or
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• if the judgment debtor would have a good defence if an action were brought on the original judgment (such as a limitation defence) (3(g)).

These issues have since proceeded through the Ontario courts and finally to the Supreme Court of Canada, as outlined below.

Superior Court of Justice (Ontario)

The Ontario Superior Court of Justice held, with respect to 3(b), that Antigua was not "carrying on business" in British Columbia ("B.C."). In its reasons, the Court considered the jurisprudence on jurisdiction simpliciter and how "carrying on business" has been interpreted by the courts, beginning with the leading Supreme Court of Canada decision, Club Resorts Ltd. v. Van Breda ("Van Breda"). In Van Breda, the Supreme Court of Canada held that carrying on business in a jurisdiction requires some form of actual, not only virtual (i.e. not merely virtual) presence in the jurisdiction. Based on this precedent, the Superior Court reasoned that Antigua had no physical presence in B.C., nor did it carry on any sustained business activity in the province. HMB could only point to the fact that Antigua had contracts with four businesses in B.C. to support its argument that Antigua was carrying on business in B.C. While these businesses:

• were authorized representatives for Antigua;
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• had directed applicants to Antigua's investment for citizenship program (where Antiguan citizenship was granted in exchange for investments); and
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• had earned a finder's fee for each applicant they referred to the program,

these facts were not sufficient to establish that Antigua was carrying on business in B.C..

The Superior Court held that subsection 3(g) could also, in the alternative, apply to bar registration of the default judgment. This finding turned on the meaning of "original judgment". The Ontario Superior Court concluded that this term referred to the Antiguan appellate judgment ("Antiguan judgment") and not the B.C. default judgment, which was a "derivative judgment" (a judgment that itself is based on a foreign judgment). Since the Antiguan judgment was obtained more than two years prior to the Ontario application, Ontario's 2-year limitation period could bar an action brought on this judgment. This was a good defence against the original judgment.

Court of Appeal for Ontario

HMB appealed the Superior Court decision, arguing that it was an error of law to consider the jurisdiction simplicter jurisprudence on "carrying on business". In the context of the REJA, HMB submitted that the common law of jurisdiction simpliciter, as outlined in cases like Van Breda, should not be considered. According to HMB, these cases contain a higher threshold for "carrying on business" than what is appropriate in the context of enforcing foreign judgments. HMB argued that a more "generous and liberal" interpretation of the standard was required in the context, and that Antigua satisfied this standard through its contracts with the four businesses. With respect to the Superior Court's analysis of the 3(g) issue, HMB argued that the "original judgment" is not the Antiguan judgment, but rather, the B.C. default judgment.

By a 2-1 majority, the Court of Appeal for Ontario disagreed with HMB. The Court of Appeal found no error in law in the lower court judge's consideration of the jurisdiction simplicter jurisprudence and no palpable and overriding error in its assessment of whether Antigua was carrying on business in B.C.. As subsection 3(b) applied, the Court of Appeal held there was no need to consider subsection 3(g) of the REJA.

Supreme Court of Canada

HMB then appealed to the Supreme Court of Canada, which agreed with the majority of the Court of Appeal and dismissed HMB's appeal.

"Carrying on business" in the REJA

Chief Justice Wagner, writing for the majority, held that, while the REJA did not define "carrying on business" for the purposes of subsection 3(b), the concept has had a long common law history, and that common law terms and concepts are presumed to retain their common law meaning when used in legislation.

At common law, the concept of "carrying on business" forms part of the jurisprudence on jurisdiction simplicter. Therefore, the Court held that this jurisprudence, including cases like Van Breda, is directly applicable to interpreting "carrying on business" in the REJA.

Wagner C.J. proceeded to elaborate the test for "carrying on business." Specifically, a court "must inquire into whether a defendant has some direct or indirect presence in the jurisdiction, accompanied by a degree of business activity that is sustained for a period of time". For direct or indirect presence, "a physical presence in the form of a physical premises will be compelling, and a virtual presence falling short of actual presence will not suffice".

In instances where a party relies on the work of a representative to establish that another party is carrying on business in a jurisdiction, Wagner C.J. suggested that the following factors be considered:

• whether or not the fixed place of business from which the representative operates was originally acquired for the purpose of enabling them to act on behalf of the foreign corporation;
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• whether the foreign corporation has directly reimbursed the representative for the cost of their accommodation at the fixed place of business and the cost of their staff;
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• what other contributions, if any, the foreign corporation makes to the financing of the business carried on by the representative;
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• whether the representative is remunerated by reference to transactions (e.g., by commission), by fixed regular payments or in some other way;
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• what degree of control the foreign corporation exercises over the running of the business conducted by the representative;
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• whether the representative reserves part of their accommodation and part of their staff for conducting business related to the foreign corporation;
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• whether the representative displays the foreign corporation's name at their premises or on their stationery, and if so, whether the representative does so in a way as to indicate that they are a representative of the foreign corporation;
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• what business, if any, the representative transacts as principal exclusively on their own behalf;
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• whether the representative makes contracts with customers or other third parties in the name of the foreign corporation or otherwise in such manner as to bind it; and
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• if the representative does make such contracts in the foreign corporation's name, whether the representative requires specific authority in advance before binding the foreign corporation to contractual obligations

In considering the foregoing factors, Wagner C.J. found no error of law in the Ontario Superior Court's interpretation of subsection 3(b) of the REJA, nor any palpable and overriding error in its assessment of whether Antigua was carrying on business in B.C..

"Original judgment" under the REJA

The majority of the Supreme Court held that subsection 3(g) did not need to be considered because the requirements for registering a judgment under subsection 3(b) had not been satisfied. Accordingly, the question of the correct interpretation of "original judgment," and whether a derivative judgment could fall under this definition, are left for another day.

Justice Suzanne Côté concurred with the majority opinion on the subsection 3(b) REJA analysis and with dismissing the appeal. However, Justice Côté believed that "original judgment" in the REJA can include "derivative judgments" such as the B.C. default judgment. According to Justice Côté, the REJA contains a broad enough definition of "judgment" that captures derivative judgments.

Key Take-aways

• Courts will consider the jurisprudence on jurisdiction simpliciter when interpreting "carrying on business" under the REJA.
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• Whether a party carried on business in a jurisdiction is a question of fact that must be assessed contextually. The Supreme Court has made it clear that parties seeking to successfully enforce a foreign judgment under the REJA must be prepared to meet the common law's standard for "carrying on business", which entails some direct or indirect presence in the jurisdiction, accompanied by a degree of business activity that is sustained for a period of time.

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.