Tag Archive for: Canada

Court of Appeal for Ontario Rejects “Fourth Defence” to Enforcement of Foreign Judgments

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The long-running litigation between the United States and a group of defendants who operated a cross-border telemarketing business selling Canadian and foreign lottery tickets to Americans has reached another mile-post with the decision of the Court of Appeal for Ontario in United States of America v. Yemec, 2010 ONCA 414 (available here).  The defendants were likely riding high before this decision, having done quite well in resisting the enforcement of the judgment of an Illinois court finding them liable for $19 million and permanently enjoining them from telemarketing any product or service to anyone in the United States.  But the tables are now turned, with the Court of Appeal for Ontario ordering enforcement of the Illinois judgment.

The most notable jurisprudential issue in the case concerns the scope of the defences at common law to an action to recognize and enforce a foreign judgment.  At common law there are three central defences: fraud, denial of natural justice, and public policy.  However, the Supreme Court of Canada indicated in Beals v. Saldanha, [2003] 3 S.C.R. 416 that this was not a closed list and in the appropriate circumstances a new defence might be created.  In Yemec the motions judge of the Superior Court of Justice hearing the case was persuaded that there was a genuine issue requiring a trial on the question of a “fourth defence”, namely “denial of a meaningful opportunity to be heard”.  The Court of Appeal has now held that there is no such defence: that concerns of this nature fall comfortably within the scope of the denial of natural justice defence.  Further, on the facts, the appellate court found that the defendants were not denied an opportunity to be heard in the courts of Illinois (paras. 26-29). 

The case is one of several in the wake of Pro Swing Inc. v. Elta Golf Inc., [2006]  2 S.C.R. 612 to enforce a foreign non-monetary order, namely the permanent injunction.  The Court of Appeal found the criteria for enforcement set out by the Supreme Court of Canada in Pro Swing were met in this case (paras. 45-53).

The case raises one other interesting issue.  The United States had, at the outset of the litigation in Illinois and Ontario, obtained a freezing order (Mareva) and a civil seizure order (Anton Piller).  These interlocutory orders were subsequently dissolved, in part for failure of the United States to make full disclosure when moving ex parte to obtain the orders.  The defendants then insisted on a damages inquiry under the undertaking in damages the United States had provided as a condition of obtaining the orders.  The plaintiff argued that such an inquiry should not proceed, given that in effect the defendants were seeking to recover lost profits from a business the Illinois court had concluded was illegal.  The Court of Appeal for Ontario held that the damages inquiry should proceed, stressing the importance of enforcing the general undertaking in damages (paras. 69-72).  It did note, though, that there was evidence that the defendants had violated both Canadian and American law (paras. 78-83) and that accordingly it would be difficult for them to establish compensable damages.  But they were entitled to try (paras 85-86).

Canadian Articles on Multijurisdictional Class Actions

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Three recent articles have been published about multijurisdictional class actions in Canada.  One of the most critical issues is whether the courts of a province will enforce a class action judgment from another province or another country approving a settlement that purports to bind plaintiffs resident in the province.  I know that similar issues are under consideration in other countries, so this literature could be of value as comparative law.

Genevieve Saumier, “Competing Class Actions Across Canada: Still at the Starting Gate after Canada Post v. Levine” (2010) 48 C.B.L.J. 462

Tanya Monestier, “Personal Jurisdiction over Non-Resident Class Members: Have We Gone Down the Wrong Road?” (2010) 45 Texas International Law Journal 537

Peter W. Hogg & S. Gordon McKee, “Are National Class Actions Constitutional?” (2010) 26 N.J.C.L. 279

These take their place alongside several other articles on this topic from the past few years.

Limitation Period for Enforcing Foreign Arbitration Award

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In Yugraneft Corp. v. Rexx Management Corp., 2010 SCC 19 (available here) the Supreme Court of Canada has upheld the decision of two lower courts that the plaintiff’s claim to enforce a Russian arbitration award was brought after the expiry of the applicable provincial limitation period.

Following a contractual dispute, Yugraneft commenced arbitration proceedings before the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation.  The arbitral tribunal issued its final award on September 6, 2002, ordering Rexx to pay US$952,614.43 in damages to Yugraneft.  Yugraneft applied to the Alberta Court of Queen’s Bench for recognition and enforcement of the award on January 27, 2006, more than three years after the award was rendered.

The court was required to interpret article 3 of the New York Convention, which provides that recognition and enforcement shall be “in accordance with the rules of procedure of the territory where the award is relied upon”.  This raised an issue in Canadian litigation since the Supreme Court of Canada has held (in Tolofson v. Jensen, [1994] 3 S.C.R. 1022) that limitation periods are substantive and not procedural.  The court rightly concludes that this does not mean that the forum’s limitation period cannot be applied to the enforcement action (paras. 18-29). 

The remainder of the decision deals with what the limitation period is under Alberta law.  The plaintiff attempted to convince the court to apply a ten-year period, applicable to a “claim based on a judgment or order for the payment of money” (para. 43).  The court, based on the clear wording of the statute, had to conclude that an arbitration award did not fall within this language (para. 44).  As a result, the claim was governed by the general two-year period and so was, on the facts, time barred (para. 63).

The court does suggest that the two-year time period will not start to run until the plaintiff discovers, or should have discovered, that the defendant has assets in the place where enforcement is sought (para. 49).  This fact is not strictly part of the cause of action.  Still, this statement, if accepted as correct, should provide some comfort in the face of the relatively short two-year period.  However, this statement draws in part on the specific language of s. 3(1)(a)(iii) of the Alberta limitation statute, which deals with knowing whether a proceeding is “warranted” (see para. 61).  If so, the analysis could be different under a statute that did not have this specific language as part of the test of discoverability (see for example the language in s. 5(1)(a)(iv) of the Ontario limitation statute).

This area would benefit from a clear legislative solution, namely a provision containing an express limitation period for claims on foreign arbitration awards.  Such a period should, in recognition of the issues involved, be longer than the province’s general limitation period.

Two New Books

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Two new books on private international law have recently been published in Canada.

The first is a new textbook: Stephen G.A. Pitel & Nicholas S. Rafferty, Conflict of Laws (Toronto: Irwin Law Inc., 2010).  Though I say it myself, for those in other countries this book should serve as a useful comparative reference to the Canadian law on the subject.  More information is available here.

The second is the third edition of the Canadian casebook in the area: Nicholas S. Rafferty, general editor, Private International Law in Common Law Canada: Cases, Text, and Materials, 3d ed. (Toronto: Emond Montgomery Publications Limited, 2010).  There are seven contributors to the casebook: Professors Nicholas Rafferty, Joost Blom, Elizabeth Edinger, Genevieve Saumier, Stephen Pitel, Janet Walker and  Catherine Walsh.  More information is available here.

Reformulating a Real and Substantial Connection

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In Canada, the test for taking jurisdiction over an out-of-province defendant requires that there be “a real and substantial connection” between the dispute and the forum.  In 2002 the Court of Appeal for Ontario created a framework for analyzing a real and substantial connection, setting out, in Muscutt v. Courcelles, eight factors to consider.  This framework became the standard in Ontario and was adopted by appellate courts in some other Canadian provinces.  However, in 2009, in preparing to hear two appeals of decisions on motions challenging the court’s jurisdiction, the Court of Appeal for Ontario indicated that it was willing to consider whether any changes were required to the Muscutt framework.  The two cases, consolidated on appeal as Van Breda v. Village Resorts Limited, 2010 ONCA 84 (available here), each concerned serious injuries that were suffered outside of Ontario.

Rule 17.02 of the Ontario Rules of Civil Procedure provides that a plaintiff may serve a defendant outside Ontario with an originating process in certain defined categories of cases.  Prior to Morguard Investments Ltd. v. De Savoye, the analysis of jurisdiction centered on whether the plaintiff’s claim fell within one or more of the enumerated categories.  However, Morguard established, and Muscutt confirmed, that rule 17.02 did not in itself create jurisdiction.  Separate and apart from whether the claim fell inside the categories, the plaintiff had to establish that there was a real and substantial connection between the dispute and the forum.

In Van Breda the court made a significant change to the relationship between the categories in rule 17.02 and the real and substantial connection requirement.  It has now held that if a case falls within the categories in rule 17.02, other than rules 17.02(h) and (o), a real and substantial connection with Ontario shall be presumed to exist.  The central catalyst for this change is section 10 of the model Civil Jurisdiction and Proceedings Transfer Act.  Section 3 of that statute provides in quite general terms that a court has jurisdiction when there is a real and substantial connection between the dispute and the forum.  However, section 10 contains a list of specific situations in which a real and substantial connection is presumed to exist.  Ontario has not adopted the CJPTA, but in Van Breda the court has adopted the CJPTA’s basic approach. 

Even with this presumption, a framework for analyzing whether there is a real and substantial connection is still required in any case where a defendant seeks to refute the presumption, any case in which a plaintiff is relying on rule 17.02(h) or (o) so that no presumption arises, and any case in which a plaintiff does not rely on 17.02 at all and instead seeks leave of the court to serve a defendant outside Ontario under rule 17.03.  Prior to Van Breda the courts used the Muscutt framework, which considered the following eight factors to determine whether there was a real and substantial connection to Ontario: (1) the connection between the forum and the plaintiff’s claim, (2) the connection between the forum and the defendant, (3) unfairness to the defendant in taking jurisdiction, (4) unfairness to the plaintiff in not taking jurisdiction, (5) the involvement of other parties, (6) the court’s willingness to enforce a foreign judgment rendered on the same jurisdictional basis, (7) whether the dispute is international or interprovincial, and (8) comity and the standards of jurisdiction used by other courts.

In Van Breda the court determined that it was necessary to “simplify the test and to provide for more clarity and ease in its application”.  It held that “the core of the real and substantial connection test” is factors (1) and (2), and held that factors (3) to (8) will now “serve as analytic tools to assist the court in assessing the significance of the connections between the forum, the claim and the defendant”.  The court affirms that factors (3) to (8) remain relevant to the issue of jurisdiction, but the court nevertheless reworks the framework, ostensibly so that no one factor from factors (3) to (8) could be analyzed separately from the other factors and could be independently determinative of the outcome.  It is not clear that this change was necessary or that it makes the framework clearer and easier to apply.

For many, Van Breda violates the idiom “if it ain’t broke, don’t fix it”.  The Muscutt framework was well-known and was working effectively.  It was relatively easy to explain and to apply.  In time we will know if as much can be said for the use of presumptions and the Van Breda framework, but for the moment there are questions about how the presumption will operate when challenged by a defendant and about the ongoing role of the factors the court now calls analytic tools.

Approach to Jurisdiction under the CJPTA

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The British Columbia Court of Appeal’s decision in Stanway v. Wyeth Pharmaceuticals Inc., 2009 BCCA 592 (available here) is an important contribution to the developing Canadian jurisprudence on the Civil Jurisdiction and Proceedings Transfer Act, a statute governing the taking of jurisdiction that has been adopted in several provinces.

A leading common law approach to the question of whether there is a real and substantial connection between a dispute and the forum (the test for jurisdiction) is that outlined in the Court of Appeal for Ontario’s decision in Muscutt v. Courcelles (available here).  There is an ongoing controversy about the extent to which that approach has any relevance after a province has adopted the CJPTA.  This is because the statute sets out an open-ended list of situations in which a real and substantial connection is presumed to exist (s. 10).  However, it remains open to a plaintiff (under s. 3) to otherwise establish such a connection, and on one view the approach in Muscutt is relevant to that analysis.  See in Nova Scotia the decision in Bouch v. Penny (available here).

In Stanway the court expresses considerable hostility towards the Muscutt approach.  It references academic and judicial criticism of the decision, while selectively omitting any reference to the competing academic and judicial support for it.  It makes clear that it has no application in cases that are caught by s. 10.  It does not indicate what should happen in cases outside that section, but the overall tone suggests that it would not welcome using Muscutt in such cases.

My own view is that the Muscutt analysis should remain relevant to cases that are not caught by the statutory presumptions – cases which the statute has deliberately chosen to leave governed by the open-ended language of the real and substantial connection test.

Some might find it interesting that despite the difference in analysis between the appellate court and the motions court judge in Stanway, this is one of many cases where the two competing analyses reach the same conclusion (here that the court of British Columbia has jurisdiction).

The approach in Muscutt is the dominant one in Ontario, which has not enacted the CJPTA.  However, last October the Court of Appeal for Ontario heard submissions about whether that approach should be modified.  The decision in those appeals is eagerly awaited.

Eldon Foote’s Domicile on May 17, 2004

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Those interested in lengthy discussions of the law of domicile might enjoy the Alberta Court of Queen’s Bench’s odyssey undertaken to determine where the late Eldon Foote died domiciled (available here).  The decision is over 100 pages long.  Spoiler alert – the answer is Norfolk Island, an external territory of Australia located in the south Pacific Ocean.  Other options considered but rejected were Alberta and British Columbia.  The court sets out the applicable legal principles over some 23 pages, providing a useful summary of the law of domicile in common law Canada.  The reasons then contain extended discussion of whether, at various points in his life, Mr. Foote had changed his domicile.

One point of note on the law is that the court rejects the old notion that a domicile of origin should be considered particularly difficult to change.  Instead, the ordinary standard of proof on the balance of probabilities is all that is required (paras. 71-74).

Another interesting point is the court’s view that if a revival of the domicile of origin would produce an “absurd” result, the court has “residual authority to instead conclude that a person has retained their last domicile of choice” (para. 97).  Thre is little authority to support this view, and if it is correct it represents an important development in the Canadian law of domicile.

At the time of his death Mr. Foote was worth over US$130 million.  He was a civil litigation lawyer who made his money after leaving the law, ultimately having his business bought out by the Dutch conglomerate Sara Lee.  He was apparently drawn to Norfolk Island because it was a tax haven.

Quebec Court Stays Palestinian Claim Against West Bank Builders

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Things have certainly been quiet on the Canadian front over the past few months.  Ending the lull, in a decision filled with different conflict of laws issues, the Quebec Superior Court held, in Bil’In Village Council and Yassin v. Green Park International Inc. (available here), that Israel is the most appropriate forum for the dispute and therefore it stayed the proceedings in Quebec.

The plaintiffs, resident in the occupied West Bank, sued two corporations incorporated in Quebec for their involvement in building housing for Israelis in the West Bank.  The plaintiffs alleged violation of several international law principles.

The reasons address several interesting issues: 1. whether the defendants are protected by state immunity as agents of Israel [no], 2. whether decisions of the High Court of Justice in Israel in which the plaintiffs participated were recognizable in Quebec [yes], 3. whether these judgments statisfied the test for res judicata [no], 4. whether the plaintiffs had the necessary legal interest required under Quebec law to bring the proceedings [yes for one, no for the other], 5. whether the cause of action had no reasonable hope of succeeding [no], 6. whether the court should stay the proceedings [yes].

On the appropriate forum issue, the factual connections massively pointed away from Quebec.  The defendants were incorporated there, but largely for tax purposes – they did no business there – and that was the only connection to Quebec.  A key issue was whether the issues raised in the proceedings could be fairly resolved by an Israeli court, but the court found the expert evidence on this point favoured the defendants, not the plaintiffs.  This may be the most controversial aspect of the decision.

The decision also contains lengthy analysis of the applicable law and some comments on the absence of proof of foreign law.

It is not common for Canadian courts to mention, as a factor in the forum non conveniens analysis, the state of access to the local courts for local plaintiffs (the docket-crowding issue American courts do consider).  In this case, however, this factor is noted by the court in its reasons for staying the proceedings.

Round-Up of Canadian Conflicts Publications

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Readers of this web site might find some of the following publications to be of interest.  I have tried to gather togther recent work by Canadian conflicts scholars.  Please post a comment if you are aware of another piece.

Vaughan Black & Angela Swan, “Concurrent Judicial Jurisdiction: A Race to the Court House or to Judgment?” (2008) 46 C.B.L.J. 292

Joost Blom, “Concurrent Judicial Jurisdiction and Forum Non Conveniens – What is to be Done?” (2009) 47 C.B.L.J. 166

Wayne Gray & Robert Wisner, “The Russians are Coming, But Can They Enforce their Foreign Arbitral Award?” (2009) 47 C.B.L.J. 244

Jacqueline King & Andrew Valentine, “The Structure of Jurisdictional Analysis” (2008) 34 Adv. Q. 416

Kenneth C. MacDonald, Cross-Border Litigation: Interjurisdictional Practice and Procedure (Aurora: Canada Law Book, 2009)

James Mangan, “The Need for Cross-Border Clarity: Recognizing American Class Action Judgments in Canada” (2009) 35 Adv. Q. 375

Tanya Monestier, “Lepine v. Canada Post: Ironing Out Wrinkles in the Interprovincial Enforcement of Class Judgments” (2008) 34 Adv. Q. 499

Austen Parrish, “Comity and Parallel Foreign Proceedings: A Reply to Black and Swan” (2009) 47 C.B.L.J. 209

Nicholas Pengelley, “Alberta Says Nyet! Limitation Act Declares Russian Arbitral Award DOA” (2009) 5 J.P.I.L. 105

Stephen Pitel, “Rome II and Choice of Law for Unjust Enrichment” in John Ahern & William Binchy, The Rome II Regulation on the Law Applicable to Non-Contractual Obligations (Leiden: Martinus Nijhoff Publishers, 2009) 231

Stephen Pitel, “Choice of Law for Unjust Enrichment: Rome II and the Common Law” [2008] Nederlands Internationaal Privaatrecht 456

Antonin Pribetic, “Staking Claims Against Foreign Defendants in Canada: Choice of Law and Jurisdictional Issues Arising from the In Personam Exception to the Mocambique Rule for Foreign Immovables” (2009) 35 Adv. Q. 230

Prasanna Ranganathan, “Survivors of Torture, Victims of Law: Reforming State Immunity in Canada by Developing Exceptions for Terrorism and Torture” (2008) 71 Sask. L. Rev. 343

Geneviève Saumier, “Transborder Litigation and Private International Law: The View from Canada” in F. Cafaggi & H.-W. Micklitz, eds., New Frontiers of Consumer Protection: The Interplay between Private and Public Enforcement (Antwerp: Intersentia, 2009) 361

Janet Walker, “Recognizing Multijurisdictional Class Action Judgments Within Canada: Key Questions – Suggested Answers” (2008) 46 C.B.L.J. 450

Janet Walker, “Teck Cominco and the Wisdom of Deferring to the Court First Seised, All Things Being Equal” (2009) 47 C.B.L.J. 192

Manitoba Law Reform Commission Releases Report on Private International Law

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The province of Manitoba’s Law Reform Commission has released a report on Private International Law (available here).  It considers three central issues:

1.  Should legislation be adopted to modify the common law choice of law rule for torts as formulated in Tolofson v. Jensen?

2.  Should legislation be adopted regarding the characterization of limitation periods?

3.  Should Manitoba adopt the Uniform Law Conference of Canada’s model Court Jurisdiction and Proceedings Transfer Act?

A secondary question under the first issue is how similar the legislation should be to the English PIL(MP)Act 1995.