Tag Archive for: enforcement

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

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

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

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.