Enforcing Foreign Judgments in Canada

Introduction

In today’s globalized society, it is increasingly common for businesses to litigate disputes across international borders. This raises the potential hurdle of a judgment issuing in one jurisdiction, while the assets of the debtor are located in another jurisdiction. Canada is generally considered a cooperative jurisdiction in which to enforce a judgment. This article explains how to enforce foreign judgments against assets in Canada. 

1.    Choosing the appropriate province or territory

The first step when enforcing a foreign judgment in Canada is selecting the province in which to bring a claim for recognition and enforcement. A judgment creditor should choose a province in which the debtor has assets, as an enforcement order is only effective against assets in the province from which it was obtained. If the assets are unknown, the province in which the debtor resides or operates business is recommended.

2.    Recognizing a foreign judgment

Once an appropriate location is selected, a judgment creditor must seek to have its judgment “recognized” by filing an action before the province’s Superior Court. While certain provinces have enacted reciprocal enforcement legislation, including New Brunswick and Saskatchewan, to facilitate cross-border recognition and enforcement of certain foreign judgments, this process is principally governed by the common law (except in the province of Quebec, which is a civil law jurisdiction).  

At common law, a foreign judgment may be recognized in Canada if it was: (1) granted by a court of “competent jurisdiction”; (2) final and conclusive; and (3) sufficiently clear and specific.

     a)    The foreign court must be a court of competent jurisdiction 

The foreign court is one of “competent jurisdiction” if the debtor was either physically present within the jurisdiction of the foreign court at the time of the dispute, or agreed to litigate in that jurisdiction. Otherwise, the foreign court must have a “real and substantial” connection to the debtor or the subject matter of the dispute, which could be the case where, for example, the debtor carried on business in that jurisdiction.

This requirement is simply intended to ensure that the foreign court from which the judgment originated properly assumed jurisdiction over the underlying dispute. 

     b)    The foreign judgment must be final and conclusive

In general, a judgment is final and conclusive if the foreign court at issue no longer has the power to review, rescind, or vary the decision. Even though a pending appeal of a foreign judgment may not affect its finality, Canadian courts may exercise their discretion to stay execution against the debtor’s Canadian assets until all appeals are exhausted or the time to file an appeal has expired. 

     c)    The foreign judgment must be sufficiently clear and specific

Until recently, only foreign monetary judgments of a definite sum of money could be recognized and enforced in Canada. However, in Pro Swing, the Supreme Court of Canada expanded the types of judgments that are recognized and enforceable in Canada to include non-monetary judgments (such as, injunctions) in cases where the foreign order is sufficiently clear, such that the debtor knows what is expected of them. 

The enforcement of foreign penal orders, including contempt orders, is prohibited in Canada. 

3.    Possible defences against recognition and enforcement of a foreign judgment

If the three common law requirements noted above are met, a debtor can still challenge enforcement in certain limited circumstances, including the following:  

     a) Fraud: Canadian courts will not enforce a judgment that was obtained by fraud. In practice, this defence is limited and applies only where fraud allegations arose from new and material facts. Where the allegations have been (or could and should have been) previously adjudicated, Canadian courts will not re-evaluate the merits of the original judgment.

     b) Denial of natural justice: A judgment is not enforceable if the procedures of the foreign proceeding violate the principles of natural justice recognized in Canada – namely, the defendant must have the right to be heard and present its case. However, Canadian courts rarely apply this defence in practice, and require circumstances involving major violations of procedural fairness. A defendant choosing not to participate in a foreign proceeding does not qualify.

     c) Violation of public policy: Canadian courts will not enforce a judgment based on corrupt or biased foreign laws that are contrary to the Canadian concept of justice and fundamental morality (such as, a judgment compelling the debtor to disclose private information).

     d) Other procedural defences: Improper service or expiration of the limitation period can also bar enforcement of a foreign judgment. In many Canadian provinces, including Ontario, the limitation period is two years from the date the claim was discovered (e.g., the date the judgment creditor learns of the debtor’s assets in Canada). Therefore, it is important that judgment creditors act promptly in seeking legal advice if they wish to enforce a judgment in Canada. 

4.    Procedures for enforcement

Once a judgment is recognized, the Canadian court will issue a certified copy of the foreign judgment for enforcement. The judgment creditor can then follow the provincial rules to execute the judgment against the debtor’s assets as if it were a domestic Canadian judgment. This generally involves the administrative step of obtaining a “writ of seizure”, and then working with the provincial sheriff to seize the debtor’s assets. Examination of the debtor or its corporate representative under oath is available to obtain information regarding assets. The cost of enforcement will depend on the amount of work required to locate the assets and the type of assets to be seized, such as real estate, bank accounts, or wages. Creditors will generally be allowed to recover both the judgment debt and any additional reasonable disbursements spent on enforcement.

Conclusion

Canadian laws governing the recognition and enforcement of foreign judgments have evolved over the last few decades to adopt a more flexible and liberal approach in giving effect to foreign judgments. It is important to confer with Canadian counsel at the outset to ensure that the applicable tests are met and appropriate procedures are followed.
 

Authors: Matthew Burt, an Associate and Daniel Anthony, Counsel are both from Smart & Biggar’s Ottawa office. Smart & Biggar is widely recognized as Canada’s leading firm for intellectual property law, with offices in Ottawa, Toronto, Montreal, Vancouver and Calgary.