Two Year Limitation Period Applies to Foreign Judgments

In the recent case of Independence Plaza One Associates, LLC v. Figliolini 2017 ONCA44, the Ontario Court of Appeal confirmed that:

 

1. a two-year limitation period applies to a proceeding on a foreign judgment; and
2. the limitation period begins to run, at the earliest, when the time to appeal the foreign judgment has expired or, if an appeal is taken, the date of the appeal decision.

The court held that the time may be longer if the claim was not “discovered” within the meaning of section 5 of the Limitations Act, 2002 (“Limitations Act”) until a date later than the appeal decision.

     

In this case, the plaintiff had obtained a judgment against the defendant on January 24, 2013 in the New Jersey Superior Court in the amount of US$115,248.  The defendant’s appeal to the Appellant Division of the court was dismissed on July 17, 2014. 

 

The plaintiff brought an application in the Ontario Superior Court of Justice based on the New Jersey judgment.  The application was commenced more than two years after the New Jersey judgment was rendered but less than two years after the dismissal of the appeal.  The appellant, in the Court of Appeal, pleaded that the application was time-barred because it was commenced more than two years after the New Jersey judgment.  The application judge rejected this position and granted judgment in favour of the respondent. 

 

The Ontario Court of Appeal (Chief Justice Strathy and Justices Pardu and D. M. Brown) dismissed the appeal but considered two issues:

 

1. whether no limitation period applies to a proceeding on a foreign judgment because it falls under section 16(1)(b) of the Limitations Act; or
2. whether, if there is a two year limitation period, the time does not begin to run until appeal rights in the foreign jurisdiction have been exhausted. 

 

The decision of the court was delivered by the Chief Justice.  The court began its analysis by stating that the correct approach to resolving the two questions raised on the appeal begins and ends with provisions of the Limitations Act, which is a comprehensive and exhaustive scheme for dealing with limitation periods.

 

Justice Strathy explained the purposes of statutes of limitation.  He held that such statutes reflect public policy about efficiency and fairness in the justice system.  They promote finality and certainty in legal affairs so that potential defendants are not exposed indefinitely for past acts.  They ensure the reliability of evidence because evidence becomes unreliable with the passage of time and limitation periods promote diligence because they encourage litigants to pursue claims with reasonable dispatch.  This latter justification was related to this case. 

 

The Chief Justice explored former Limitations Act in Ontario, the history of Limitations Act and the “new” Limitations Act.

 

He reviewed section 16(1)(b) of the Limitations Act that provides that “there is no limitation period in respect of a proceeding to enforce an order of a court, or any other order that may be enforced in the same way as an order of the court”.     

 

The issue is whether that section applied to a proceeding on a foreign judgment.  The court held that it did not.  After a lengthy discussion about what section 16(1)(b) applied to, Justice Strathy held that the common feature was the concept of enforceability.  Section 16(1)(b) of the Limitations Act applies to court orders and to other orders that are enforceable in the same way as a court order.   That common thread did not extend to foreign judgments.  Domestic judgments are directly enforceable in Ontario by means of the execution procedures in rule 60 of the Rules of Civil Procedure, including writs of seizure and sale, garnishment or the appointment of a receiver.  In contract, a foreign judgment creates a debt obligation in which a proceeding in Ontario must be brought first.  In other words, a foreign judgment is one step removed from being an order of an Ontario court for the purposes of section 16(1)(b) of the Limitations Act. 

Justice Strathy held that there were good reasons for giving different treatment for limitations purposes to Ontario judgments and foreign judgments, including the principle of territorial sovereignty.  In addition, a foreign judgment debtor has some limited defences to the recognition and enforcement of the foreign judgment.  Accordingly, he concluded that section 16(1)(b) of the Limitations Act did not apply to proceedings of foreign judgments.

 

The Court of Appeal did agree with the application’s judge with respect to the two year limitation period. 

 

It held that the question of a judgment’s finality in the foreign jurisdiction is not relevant to statutory limitation periods to commence a proceeding on a foreign judgment but to the conditions that a foreign judgment creditor must satisfy to succeed on the proceeding.  The test under the Limitations Act is not whether the judgment is final it is when the claim is discovered, a fact that is ascertained through the application of section 5(1) of the Limitations Act aided by the presumption in section 5(2).

 

Section 5(1) provides that a claim is discovered on the earlier of the day on which the claimant first knew that having regard to the nature of the injury or damage a proceeding would be an appropriate means to seek to remedy it.  Cases have held that the legislature added the words “appropriate means” as an element of discoverability.  Appropriate means legally appropriate.  Appropriateness must be assessed on the facts of each case.

 

In the usual case, it would not be legally appropriate to commence a legal proceeding on a foreign judgment in Ontario until the time to appeal the judgment in the foreign jurisdiction has expired or all appeal remedies have been exhausted. 

 

Such an approach is consistent with other cases, it avoids the risk of multiplicity of proceedings by not requiring the judgment creditor to commence a proceeding on a foreign judgment in Ontario before all proceedings in the foreign jurisdiction had run their course.  It furthers the purpose of the Limitations Act by deterring the unnecessary litigation that may result from commencing an Ontario proceeding on a foreign judgment that is subsequently overturned.

 

The Court of Appeal held that the foregoing approach to discoverability does not preclude a foreign judgment creditor seeking such relief as an interim Mareva injunction or a stay of execution pending the appeal.     

Regards,

Blair

US Supreme Court Says Service By Mail in Canada is Okay

Water Splash Inc. v. Menon, 2017 No. 16-254, Supreme Court of the United States 581 U. S. ___ (2017)

 

The plaintiff, Water Splash Inc., is a corporation that produces aquatic playground systems.  The defendant, Tara Menon, is a former employee of Water Splash.  In 2013, Water Splash sued Menon in State Court in Texas, alleging that she had begun working for a competitor while still employed by Water Splash. 

 

Menon resided in Canada.   As a result, Water Splash sought and obtained permission from the Texas court to effect service of its complaint on Menon by mail.  After Menon declined to answer or otherwise enter an appearance, the Texas court issued a default judgment in favour of Water Splash.  Menon moved to set aside the judgment on the ground that she had not been properly served, but the trial court denied her motion. 

 

Menon appealed, arguing that service by mail does not “comport with the requirements of the Hague Service Convention”.   A majority of the Texas Court of Appeals sided with Menon and held that the Convention prohibited service of process by mail.  One Justice dissented.  The Court of Appeals declined further review and the matter made its way to the US Supreme Court.

 

In an 8 – 0 decision, the court found in favour of Water Splash and vacated the judgment of the Court of Appeals.  The Supreme Court remanded the case back to the Texas Trial Court for further consideration. 

 

The court’s reasoning is as follows.

 

The primary innovation of the Convention is that it requires each state to establish a central authority to receive requests for service of documents from other countries.  When a central authority receives an appropriate request it must serve the documents or arrange for their service and then provide a certificate of service.  However, submitting a request to a central authority is not the only method of service approved by the Convention.  At issue in this case was Article 10 of the convention which reads as follows:

 

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

(a) the freedom to send judicial documents by postal channels directly to persons abroad,

(b) 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,

(c) 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.

 

Articles 10(b) and 10(c) address additional methods of service that are permitted by the Convention (unless the receiving state objects).  By contrast, Article 10(a) does not expressly refer to “service”.  The question in this case was whether, despite this difference, Article 10(a) encompassed sending documents for the purposes of service. 

 

The US Supreme Court found that it did.  The key word in Article 10(a) “send” is a broad term and there is no apparent reason why it would exclude the transmission of documents for the purpose of service.  The Convention’s preamble and Article 1, limit the scope of the Convention to service of documents abroad and its full title includes the phrase “service abroad”.  The US Supreme Court had also previously held that the scope of the Convention is limited to service of documents.  It would therefore be strange if Article 10(a) concerned something other than service of documents.  Indeed such a reading would render Article 10(a) superfluous.  Since Article 1 already eliminated the possibility that the Convention would apply to any communications that do not culminate in service, in order for Article 10(a) to make sense it must pertain to sending documents for the purpose of service.  If the drafters of the Convention wished to limit Article 10(a) to something else, they could have said so as they did in other Articles.

 

Secondly, the structural considerations of the Convention strongly suggests that Article 10(a) pertains to service of documents.  Reading the word “send” as a broad concept that includes, but is not limited to, service is probably more plausible than interpreting the word to exclude service.  Indeed, the French version of the Convention which is equally authentic uses the word “adresser” which has consistently been understood to mean service or notice. 

 

Thirdly, extratextual sources are especially helpful in ascertaining Article 10(a)’s meaning.  The Convention’s drafting history strongly suggests that the drafters understood that service by postal channels was permissible.  In the half century since the Convention was adopted, the Executive Branch of the United States has consistently maintained that the Convention allows service by mail.  Also, other signatories to the Convention have adopted Water Splash’s view.

 

Fourthly, the fact that Article 10(a) encompasses service by mail does not mean that it affirmatively authorizes such service.  Rather, service by mail is permissible if the receiving state has not objected to service by mail and if such service is authorized under otherwise applicable law.  Because the Texas Court of Appeals concluded that the Convention prohibited service by mail, it did not consider whether Texas law authorized the method of service used by Water Splash.  The US Supreme Court remanded that issue and any other remaining issues back to the trial court in Texas for consideration.

Regards,

Blair

 

Supreme Court Permits Enforcement Proceedings Against Chevron

In closing another chapter in what has been a very long story, the Supreme Court of Canada ruled unanimously that forty-seven Ecuadorian villagers can proceed with their Ontario lawsuit against Chevron Corporation (“Chevron”) and Chevron Canada Limited (“Chevron Canada”) to recognize and enforce a U.S. $9.51 million judgment that they obtained against Chevron in the courts of Ecuador.

 

This writer has written about this case before. After the plaintiffs commenced an action in the Ontario Superior Court, Chevron moved to permanently stay the action on the basis that the Ontario Court had no jurisdiction to hear the matter. The motion judge ruled in the villagers’ favour with respect to the issue of jurisdiction. However, the judge exercised the court’s power to stay the proceedings on its own motion on the basis that pursuing a recognition and enforcement proceeding against Chevron in Ontario, where Chevron claimed it had no assets, would be futile and a waste of time and resources.

 

The Ontario Court of Appeal reversed that decision, holding that the Ontario courts need not erect additional obstacles  to the villagers' 27 year fight against Chevron and its predecessor Texaco Oil.  The action had been brought in Ecuador as a result of extensive environmental pollution that had disrupted the lives and jeopardized the futures of approximately 30,000 Ecuadorian indigenous villagers.  The plaintiffs' attempts to obtain compensation had been met with obstacles and roadblocks by Chevron the entire way.

 

The Supreme Court of Canada agreed. Justice Gascon, writing for the unanimous court, held that in order to recognize and enforce a foreign judgment, the only prerequisite is that the foreign court have a real and substantial connection with the litigants or with the subject matter of the dispute or that the traditional bases of jurisdiction were satisfied.

 

Canadian courts have never required that there be a real and substantial connection between the defendant or the action and the enforcing court for jurisdiction to exist in recognition and enforcement proceedings. The Supreme Court held that an unambiguous statement  that a real and substantial connection was not necessary would have the benefit of providing a fixed, clear and predictable rule, and would help to avoid needless and wasteful jurisdictional inquiries.

 

The Court held that there were two considerations of principle that support the view that a real and substantial connection test should not be extended to an enforcing court. Firstly, in an action for recognition and enforcement, the only purpose of the action is to allow a pre-existing obligation to be fulfilled. As the enforcing court is not creating a new substantive obligation, there can be no concern that the parties are situated elsewhere or that the facts underlying the dispute are properly addressed in another court. Each jurisdiction has an equal interest in the obligation resulting from the foreign judgement and no concern about territorial overreach could emerge.

 

The Court held that it must be remembered that the notion of comity has consistently been found to underlie Canadian recognition and enforcement law. The need to acknowledge and show respect for the legal action of other states has remained one of comity’s core components and militates in favour of recognition and enforcement. No unfairness results to judgment debtors from having to defend against recognition and enforcement proceedings – through their own behaviour and illegal non-compliance, they have made themselves a subject of outstanding obligations, so they may be called upon to answer for their debts in various jurisdictions.

 

The court held that requiring any defendant to be present or to have assets in the enforcing jurisdiction would only undermine order and fairness. 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.

 

Secondly, the court held that finding that there is no requirement of a real and substantial connection between the defendant or the action and the enforcing court is also supported by the choices made by the Ontario legislature, all other common-law provinces and territories, Quebec, other international common-law jurisdictions and most Canadian conflict of laws scholars.

 

In this case, the motion judge had correctly found jurisdiction with respect to both Chevron and Chevron Canada. The establishment of jurisdiction did not mean that the plaintiffs would necessarily succeed in having the Ecuadorian judgment recognized and enforced. It did nothing more than afford the Plaintiffs the opportunity to seek recognition and enforcement in Ontario. Chevron and Chevron Canada could use the available procedural tools to defend against the plaintiffs’ allegations.

The case will continue and will continue to be hard fought.

Regards,

Blair