Practical Considerations For Enforcing U.S. Judgments in Ontario

In a world in which businesses, assets, and people cross borders with ease, courts are increasingly called upon to recognize and enforce judgments from other jurisdictions.¹

While tourism and ease of mobility between the United States and Canada may be muted as a result of COVID-19, there is no question that the economies between these two countries are still highly integrated. This integration at times can lead to cross-border commercial disputes, which have not been slowed by the pandemic. Ontario counsel may find themselves being asked by U.S. foreign judgment creditors about how they can enforce their U.S. judgment(s) in Ontario, and what is required to do so.

The purpose of this article is to provide counsel with practical advice concerning the strict legal and procedural requirements which will need to be met before an Ontario court will recognize and enforce a U.S. judgment. More specifically, this blog will provide a brief discussion on the following considerations for enforcing a U.S. judgment in Ontario:

• Relevant limitation periods
• Originating process: action vs. application
• Jurisdiction
• Rules and multilateral treaties pertaining to service
• Road to enforcement

It should be reiterated that this blog focuses only on the enforcement of U.S. judgements in Ontario as opposed to other provinces. This is a crucial distinction because Ontario and the U.S. lack legislation or treaties pertaining to the reciprocal enforcement of judgments whereas a number of provinces have legislated for the reciprocal enforcement of judgments from certain U.S. states.²As such, counsel would be wise to ensure whether the respective particular foreign judgment falls under the purview of reciprocal enforcement legislation.

I. Limitation Period

The Court of Appeal for Ontario has repeatedly confirmed that foreign judgments are to be treated as an action upon a simple contract debt, which attracts the basic two-year limitation period under the Limitations Act.³ The clock begins to “run” on this two-year period when the time to appeal the foreign judgment has expired, or if an appeal is taken, the date of the appeal decision.⁴

Importantly, the two-year limitation period is subject to the statutorily-enshrined discoverability principle that is found in section 5 of the Limitations Act.⁵ As a result, a claim based on a foreign judgment may not be discovered under section 5 of the Limitations Act, until such time as the judgment creditor knew or ought to have known that the judgment debtor had exigible assets in Ontario and could be served with process.⁶

The question of whether a judgment creditor “knew” or “ought to have known” is to be determined based on the factual context and the plaintiff’s actual circumstances, which necessitates a case-by-case analysis on these factors.⁷ That being said, a judgment creditor is under an obligation to exercise due diligence with respect to seeking enforcement against the judgment debtor.⁸ However, this obligation does not rise to such a level that a party is expected to conduct a worldwide search for assets or to scour jurisdictions with which the judgment debtor has no known ties.⁹

In light of the above, counsel should first determine when the appeal period(s) for the foreign judgment expires to ascertain when the limitation period begins to run. In the event that the two year period has lapsed, the next consideration is whether the judgment creditor knew or ought to have known that the debtor had exigible assets in Ontario.

II. Action or Application

There is a fragmentation in the law as to whether an application or an action should be brought to enforce a foreign judgment from a non-reciprocating jurisdiction such as the U.S. As further explained below, some courts have taken the position that either an application or action could be pursued, whereas others have vehemently held that an application is wholly inappropriate and only an action will suffice.

A. Application or Action?

In the case of Nuvex Ingredients Inc. v. Snack Crafters Inc.,¹⁰ the judgment creditor brought an application under rule 14-05(3)(h) to enforce a default judgment against the judgment debtor to enforce a judgment obtained in Minnesota; a non-reciprocating jurisdiction. At the return of the application, Justice MacKenzie raised the following inquiry:

As to whether or not a foreign judgment from a non-reciprocating jurisdiction under the Act was enforceable from the viewpoint of process in Ontario by means of an action rather than an application.¹¹

His Honour adjourned the application to allow submissions on the above point and noted there was a “dearth of authority” on the issue and it was unclear whether the enforcement of a foreign judgment is exclusively by way of an action.¹²

In written submissions from the parties, Justice McKenzie was directed to the cases of Lax v. Lax,¹³ and Metcalfe v. Racer Sportif Inc.¹⁴ In Metcalfe, the court had no problem granting an application by a judgment creditor to enforce a judgment awarding damages. By contrast, the Court of Appeal for Ontario in Lax held that an action must be brought where there is no reciprocal legislation. More specifically the Court of Appeal stated:

[E]xcept where there is an applicable Reciprocal Enforcement of Judgments Act, unlike a domestic judgment, a foreign judgment cannot be directly enforced by execution. Rather, an action must be brought to enforce the debt it creates.¹⁵

Justice McKenzie ultimately concluded that either an application or action is appropriate, and stated the following:

I conclude that where a claimant is enabled under a statute to “apply” to the courts for relief, the law does not require the claimant to proceed by way of application under R.14.05(3). It is open to the claimant to proceed either by action or application under R.14.05(3)  [ … ] [t]o not grant the applicant the relief being sought in the circumstances of this application pursuant to clause (h) of sub-rule (3) of Rule 14.05 would be to give greater weight to form than substance.¹⁶

Despite the holding in Lax, the court in Nuvex found that since the Rules do not mandate one particular form of proceeding for the enforcement of a foreign judgment either an application or action would do.

B. Action Is the Only Appropriate Mechanism

In Noël et Associés, S.E.N.C.R.L. v. Sincennes,¹⁷ an application was brought under rule 14.05(3)(h) to recognize and enforce a Quebec judgment in Ontario. The court observed that this exact procedure was used in Nuvex and the court in that instance held that the broad wording of rule 14.05(3)(h) permits the use of an application to obtain declaratory relief to recognize and enforce a foreign judgment for a debt in Ontario.¹⁸

Despite the holding in Nuvex, the court disagreed that an application was appropriate. In reaching this conclusion the court stated:

Ontario courts in recent years have liberally interpreted the availability of applications under rule 14.05(3)(h) [ … ] [t]he expansive interpretation by the courts of rule 14.05(3)(h) is not limitless however and must be read within the context of rule 14.02 which states that every proceeding shall be by action, as opposed to an application, except where a statute or the Rules of Civil Procedureprovide otherwise [ … ] [f]ocusing solely upon the broad wording of rule 14.05(3)(h) ignores the Ontario remedy being requested as well as rules 14.02 and 76.02.

[ … ]

The above analysis leads to the conclusion that a proceeding to recover judgment on a promise to pay the amount of a foreign judgment from a non-reciprocating state should be brought by action, not application.¹⁹

Accordingly, the court in Noël disagreed with the holding in Nuvex and held that the appropriate way to proceed in such circumstances is exclusively by way of action.²⁰

C. The Latest Word

In the 2020 decision of JGB Collateral LLC v. John Rochon and Donna Jean Hewitt Rochon,²¹ the judgement creditor had brought an application to recognize and enforce a judgment issued by a court in New York that required the respondents to pay the applicant USD $6,72,197.87. The respondent resisted the application, inter alia, on the basis that the proceeding should have been brought as an action. More specifically, the respondent argued that Noël “conclusively determined” that the enforcement of a judgment is proper only by way of an action and not an application.

The court disagreed with the respondent holding:

The respondents have advanced no principled no [sic] reason why a proceeding to recognize and enforce foreign judgment should not be capable of the same procedural choices as any other claim.Where there are no material facts in dispute, there is no reason why the relief sought should not proceed by way of application. Even if the proceeding were commenced by way of action, it would still be open to the plaintiff to move for summary judgment, a procedure largely similar to an application.

[ … ]

To the extent that Noël does purport to set out a conclusive rule to the effect that claims for the recognition and enforcement of a foreign judgement must be commenced by way of action, I respectfully disagree with it for the reasons set out above.²²

The court also noted that a number of decisions both pre and post Noël have permitted applications to enforce a foreign judgment.²³

D. Conclusion

There is conflicting jurisprudence on whether an application as opposed to an action is the appropriate procedure for enforcing a foreign judgment in Ontario. Despite the recent ruling in JGB, which holds that an application or an action is appropriate, counsel would be wise to err on the side of caution and commence the proceeding by way of action until there is appellate guidance on this matter.

III. Jurisdiction

A Canadian court, as with any case, must have some jurisdictional basis to exercise authority over a party, including a foreign debtor.²⁴

In the case of Chevron Corp. v. Yaiguaje, the Supreme Court of Canada was asked, inter alia, to determine whether Ontario courts have jurisdiction to recognize and enforce a foreign judgment from Ecuador against a foreign judgment debtor, Chevron Corporation (“Chevron”), which had no connection, assets or otherwise, to Ontario.²⁵ Chevron argued that this question should be answered in the negative and took the position that there is a requirement that the company have assets in Ontario before a court can establish jurisdiction.

The Supreme Court disagreed with Chevron’s position. Justice Gascon, writing on behalf of a unanimous bench, answered the question as follows:

In my view, jurisdiction in an action limited to recognition and enforcement of a foreign judgment within the province of Ontario is established when service is effected on a defendant against whom a foreign judgment debt is alleged to exist. There is no requirement, nor need, to resort to the real and substantial connection test.²⁶

[ … ]

In this case, jurisdiction is established with respect to Chevron, which was served ex jurispursuant to Rule 17.02(m) of the Rules.²⁷

The Court went on to take note that in the modern age it would be unfair to require the presence of assets in the enforcing jurisdiction as a prerequisite to the recognition and enforcement of a foreign judgment. More specifically, the Court remarked:

In today’s globalized world and electronic age, to require that a judgment creditor wait until the foreign debtor is present or has assets in the province before a court can find that it has jurisdiction in recognition and enforcement proceedings would be to turn a blind eye to current economic reality.²⁸

In summary, and in the context of enforcing a foreign judgment, the presence of assets in the enforcing jurisdiction is not a prerequisite to the recognition and enforcement of a foreign judgment.²⁹ In such instances, jurisdiction will be established when proper service is achieved. In the event that a foreign debtor has a physical presence or dealings in Ontario, then jurisdiction can simply be made out of the traditional, presence-based jurisdiction.³⁰

IV. Service

Clear and indisputable proof of proper service is absolutely vital for the enforcement of foreign judgments in Ontario. As a result of the onerous procedural requirements for service, many enforcement proceedings have failed due to the foreign plaintiff’s failure to properly serve, and document the service, of the defendant at the outset of the foreign proceeding.³¹

A. The Hague Convention

Canada and the United States are both signatories to the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (the “Hague Convention”).³² The Hague Convention governs the appropriate means of service of judicial and extrajudicial documents for signatory States and applies to all civil and commercial matters.³³ The Hague Convention does not allow service by any method other than the options identified within the Hague Convention itself. Accordingly it is critical that service complies with it.

As discussed below, there are two primary ways to serve under the Hague Convention; through a Central Authority or through personal service. Each are briefly discussed below.

I. Central Authority

The Hague Convention requires each contracting state to establish a Central Authority to receive requests for service of documents from other countries.³⁴ In Canada, each province and territory has a Central Authority³⁵o save time, requests should be forwarded directly to the Central Authority of the province or territory concerned. They may, however, also be forwarded to the Federal Central Authority which will transmit them to the relevant Central Authority.”] and in the United States the Central Authority is the Federal Department of Justice.³⁶ Once a Central Authority receives a request for service, it will serve the documents as prescribed by the internal law of the receiving state, or as designated by the requester and compatible with the law of the receiving state, and will then provide a certificate of service.³⁷

While service through a Central Authority is the main channel of transmission, it can often take up to or exceed thirty (30) business days to effect service.³⁸ For this reason, the next method discussed below is often utilized for more expedited results.

II. Personal Service

As above, each signatory to the Hague Convention is required to designate a “Central Authority” which will receive requests for service coming from another signatory country.³⁹ However, there are a number of exceptions to the requirement that the Central Authority be used for the service of documents, such as Article 10, which provides as follows:

Article 10

Provided the State of destination does not object, the present Convention shall not interfere with

1. the freedom to send judicial documents, by postal channels, directly to persons abroad,
2. the freedom of judicial officers, officials or other competent persons of the State of origin to effect service of judicial documents directly through the judicial officers, officials or other competent persons of the State of destination,
3. the freedom of any person interested in a judicial proceeding to effect service of judicial documents directly through the judicial officers, officials or other competent persons of the State of destination.⁴⁰

The most relevant provision is Article 10(c), which permits service within a contracting State through the normal procedures for service permitted within that State. Ontario incorporated the relevant articles of the Hague Convention, including Article 10, into Rule 17.05(3) of the Rules of Civil Procedure, which provides:

An originating process or other document to be served outside Ontario in a contracting state shall be served:

1. 1. through the central authority in the contracting state; or
   2. in a manner that is permitted by Article 10 of the Convention and that would be permitted by these rules if the document were being served in Ontario.⁴¹

Importantly, Article 10, including its codification within Rule 17.05(3), only applies where the “State of destination does not object”.⁴² A table which discloses whether a contracting State opposes the use of Article 10 can be found on the Hague Conferences’ website.⁴³ Relevant for the purposes of this article is the fact that the U.S. has filed no objections to the provisions or sub-provisions of Article 10.

As noted above, Rule 17.05(3)(b) permits service in a manner that is permitted by Article 10 of the Hague Convention and that would be permitted if the document were being served in Ontario. In the case of Pitman v. Mol, it was observed that a number of American cases have concluded that Article 10(c) authorized the use of private servers, so long as their use is authorized in the contracting State where the documents are to be served.⁴⁴

By way of example, let’s say you wished to enforce a foreign judgment in Ontario and the judgment debtor resided in Colorado. As the use of private process servers to deliver judicial documents is permitted in Colorado and in Ontario, this means you could hire a process service in that state and have them effect personal service.⁴⁵ Such service would have to comply with the local jurisdiction in this example, the Colorado Rules of Country Civil Procedure and the Ontario Rules.⁴⁶

III. Personal Service – Additional Considerations

It should be noted that when personnel service is conducted under the purview of the Hague Convention, such service cannot be substituted, validated, or dispensed with under the Rules in Ontario. This is the case even if the defendant has actual notice of service!⁴⁷ As noted by the Court of Appeal for Ontario in Khan Resources Inc. v. Atomredmetzoloto JSC,⁴⁸to allow otherwise would allow Canadian courts to do away with the international standard demanded by the Hague Convention and undermine Canada’s treaty obligations.⁴⁹

Nonetheless, the courts in Canada have refused to rule out a potential access to justice exception to the otherwise prevailing rule that the Hague Convention is exclusive, which may provide a litigant reprieve in “extreme circumstances”.⁵⁰ More specifically, the access to justice exception would allow a plaintiff who has exhausted all possible avenues of service under the Hague Convention, to use an alternative means of service to prevent a denial of access to justice.⁵¹

V. Road to Enforcement

To summarize, counsel should ensure that the enforcement of the foreign judgment falls within the two (2) year limitation period prescribed by the Limitations Act. If not, counsel then should conduct a discoverability analysis to determine whether the exigible assets ought to have been discovered within the two year period. Assuming the matter does not suffer from any fatal limitations deficiency, counsel will then commence their claim by way of statement of claim and ensure service of the same complies with the Hague Convention. The valid ex juris service in turn provides the Ontario court with jurisdiction over the matter.

It has been observed by the courts that once an action for the recognition and enforcement of a foreign judgment has been commenced that the usual procedure is to proceed by way of summary judgment thereafter, given the very limited defences available to a judgment debtor, which defences are usually not available in most cases as set out in detail below.⁵²

A. Test for Recognition and Enforcement⁵³

Canadian courts have adopted a “generous and liberal approach” to the recognition and enforcement of foreign judgments.⁵⁴ In fact, a court is to make every presumption in favour of a foreign judgment, including the presumption that the foreign judgment is valid.⁵⁵ In Chevron, the Supreme Court of Canada provided the following guidance on a domestic court’s purpose and role in the enforcement of a foreign judgment:

[T]he purpose of an action for recognition and enforcement is not to evaluate the underlying claim that gave rise to the original dispute, but rather to assist in enforcing an already-adjudicated obligation.  In other words, the enforcing court’s role is not one of substance, but is instead one of facilitation. The court merely offers an enforcement mechanism to facilitate the collection of a debt within the jurisdiction.⁵⁶

In order to facilitate the recognition and enforcement of a foreign judgment, the following  requirements must be satisfied:

1. that the foreign court properly exercised jurisdiction in the action in that it had a real and substantial connection with either the subject matter of the action or  the defendant;⁵⁷
2. the judgment seeking to be enforced is final and conclusive and there is proof of the amount of the judgment;⁵⁸ and,
3. whether the domestic court should refuse enforcement of the foreign judgment due to the defence of fraud, public policy, or lack of natural justice.⁵⁹

Once it has been established that the foreign court had jurisdiction, the only recognized defences, which can only be raised by a judgment debtor to an action for recognition of a foreign judgment in Ontario are that:

1. 1. the judgment was obtained by fraud;
   2. the judgment was obtained in contravention to principles of natural justice; or,
   3. enforcement of the judgment would be contrary to public policy.⁶⁰

The burden of proof for these affirmative defences lies on the party who seeks to impeach the foreign judgment to prove the grounds on which it ought to be impeached.⁶¹ As every presumption is to be made in favour of a foreign judgment, it has historically been quite difficult to successfully make out any of these defences.

VI. Conclusion

While Ontario remains a judgment creditor friendly jurisdiction for U.S. judgments, it lacks a statutory regime for the expedited and efficient enforcement of these judgments. The legislative absence of a reciprocal enforcement regime results in the need for counsel to carefully and expertly navigate the strict procedural requirements in having a U.S. judgment recognized and enforced in Ontario.