Resources

Newsletter Article

Non-Monetary Judgment of US Court Recognized and Enforced for First Time in Canada

Published: 12/20/2010

By David Ward

A recent decision of one of Canada’s highest courts has expanded and clarified Canada’s laws regarding the enforcement of equitable orders of American courts.

The case, United States v. Yemec, concerns a cross-border telemarketing business that sold Canadian and foreign lottery tickets to consumers in the United States. Tickets were sold for between five and eight times cost.

In the fall of 2002, the United States of America and the United States Federal Trade Commission (the “US” or the “US Government”) brought proceedings against the lotto ticket sellers in Illinois, ultimately resulting in a permanent injunction and a $19 million judgment against them. Proceedings in Ontario followed.

Three years later, in 2005, the US amended its Ontario claim to seek enforcement of the Illinois judgment on a summary basis. At first instance, the Court dismissed the motion on the basis that there was a genuine issue as to whether the defendants were denied a “meaningful opportunity to be heard” in the context of the US proceedings. Leave to appeal to the Ontario Court of Appeal was granted.

The Court of Appeal was called upon to consider two novel issues. First, what are the defences to the enforcement of a US judgment in Canada? Second, should the long-standing common law rule that prevents the enforcement of foreign non-monetary judgments be adapted?

In evaluating the first issue, the Appeal Court considered Beals v. Saldanha, the leading Canadian decision on the enforcement of foreign judgments. The Court in Beals recognized three accepted defences to the enforcement of foreign judgments – jurisdiction, natural justice and public policy – but also noted that the list of available defences was not closed.

In United States v. Yemec, the Ontario Court of Appeal was asked to consider a possible fourth “new defence” - the denial of a “meaningful opportunity to be heard.”

The Court was asked to consider the new defence based on the defendants’ submission that they had not received a full and fair opportunity to defend the US proceedings because of the way the US Government conducted the litigation. It was contended that they could not mount an effective defence in the US because they were invested in fighting proceedings commenced by the US Government on two fronts - in Canada and the US. Evidence was also put forward to the effect that they feared arrest in the US and lacked access to seized business documents and computers, making it difficult to instruct counsel.

Upon consideration of the appeal, the Ontario Court ruled that there was no “new defence” to US judgment enforcement north of the border.

The Court rejected this submission on the basis that the considerations raised by the appellants under the proposed new category were the same as those under the rubric of the existing natural justice defence. Indeed, the Court noted that the right to be heard is one of the cornerstones of natural justice and is therefore indistinguishable from the natural justice defence.

However, perhaps of greater interest to US lawyers and litigants, was the Court’s conclusion that the injunctive relief component of the US court order should be fully recognized and enforced.

The traditional common law position in Canada is that foreign judgments are recognizable and enforceable only if they are for a specific sum of money and are final and conclusive. While an earlier decision of Canada’s Supreme Court, Pro Swing Inc. v. ELTA Golf Inc., had suggested that the time was “ripe” for a reconsideration of the absolute common law bar to the enforcement of foreign non-monetary orders, no such order had ever been granted.

In electing to enforce the equitable relief portion of the Illinois order, the Ontario Court of Appeal considered a number of relevant factors, all of which the Court found supported the enforcement of the order. Among other considerations, the terms of the injunction were found to be simple, clear and specific. The Illinois court order was found to be consistent with the types of orders that would be allowed for domestic litigants, and enforcement of the order would not place an undue burden on the Canadian justice system. The United States v. Yemec decision is of course highly relevant to issues of comity as between Canada and the United States. The decision establishes that an absolute common law ban on the enforcement of all foreign non-monetary judgments is no longer useful and will be reconsidered where appropriate. The departure from the old rule will affect both commercial activity and judicial assistance in the very many areas of Canada – US cross-border litigation and commerce.