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Enforcing Foreign Judgments in Canada for Fraud Victims

Canadian Fraud Lawyer

It is well known internationally that the Canadian Criminal Courts are soft on fraud and financial crimes and accordingly fraudsters seek haven in Canada to perpetrate their frauds. Only frauds over $1M in value have mandatory minimum prison sentences. Part of the reason for Canada’s lax sentencing of financial crimes is because it costs Canadian taxpayers over $100,000 a year to house inmates in Canadian prisons.

Other reasons why frauds often are not prosecuted criminally in Canada is because Canadian police and Crown lawyers lack the resources to investigate and prosecute them, and because many Canadian police officers and prosecutors find fraud cases overly complicated and tedious, and would rather spend their time responding to violent crime. In other words, often the psychological and financial devastation to fraud victims is not accorded the same respect as acts of violence, although their effect may be far more permanent in nature.

Foreign judgment holders may not be aware, however, that Canadian Civil Courts are reasonably sympathetic to fraud victims. In scenarios where no one goes to jail and only money judgments are handed out, Canadian Courts will issue pre-emptive asset tracing and asset freezing orders in scenarios where foreign courts often will not, and issue Declarations and money judgments where the evidence supports the allegations.

It is because financial recovery is judicially supported in Canada’s civil courts that foreign fraud victims seek to recover money from fraudsters resident or holding property in Canada. In this blog we provide some general principles for foreign fraud victims with judgments received from their courts to consider when considering spending their litigation funds enforcing their judgments in Canada.

Canadian Recognition of Foreign Judgments

Although reluctant to put fraudsters in prison, Canadian Courts are generally receptive to the recognition and enforcement of a final and conclusive foreign money judgment, subject to applicable statutory and procedural exceptions. The provincial and federal laws of Canada are imbued with respect for foreign money judgments if they are issued in accordance with the rule of law and are consistent with domestic public policy.

The principle of comity (or the domestic court’s deference to the decision of a court of competent jurisdiction in a foreign state with respect to conduct carried out within that foreign state) serves as the foundation for the recognition and enforcement of foreign judgments in Canada. This principle presumes that the foreign court was competent or proper in its jurisdiction when granting the judgment. One aspect of jurisdiction is where the foreign court expressly considers the legal forum and declares that it has a real and substantial connection to the parties or to the action.

With the exception of certain judgments falling within the federal jurisdiction, the recognition and enforcement of foreign judgments will generally lie with the provincial courts (money judgments are usually the domain of the provincial courts). Ontario Courts will recognize foreign judgments unless the foreign court did not have jurisdiction to hear the case, the foreign court did not respect principles of natural justice, and / or the defendant can prove there was a fraud perpetrated on the foreign court.

Jurisdiction of the Foreign Court

Jurisdiction simply means the authority of a court to hear a case. Jurisdiction within the common law is either in rem or in personam. In rem jurisdiction is asserted over a particular thing, and will affect the rights and interests of all persons with respect to the particular thing. Such a thing or object must be located within the territory of the court that is asserting jurisdiction.

A court asserts in personam jurisdiction in order to impose an obligation or liability over an individual to pay a judgment. This form of jurisdiction may be either in juris (i.e. within the territory) or ex juris (i.e. outside the territory).

Certain limitations may apply when asserting either in rem or in personam jurisdiction over the subject matter and the parties. For example, the Ontario Courts will not enforce a foreign law or judgment where the nature of the foreign law or judgment is: (a) is penal (e.g. criminal sanction), (b) relates to revenue (e.g. taxation), or (c) is a matter of foreign public policy. Further, the Ontario Courts will not assert in rem jurisdiction over a foreign object, or for damages for trespass against a foreign object.

The Ontario Courts will also not enforce a judgment against a foreign state, foreign sovereign, or against the head of a foreign state (reference Immunity Act, R.S. 1985, c. S-18). Where, however, there is evidence demonstrates that the foreign state was engaged in (a) commercial activity, (b) death and personal injury, (c) maritime law, (d) offences regarding property located in Canada, and (e) human rights violations, the enforcement of a foreign judgment may be possible

The enforcement of a foreign judgment upon defendants located within Ontario may be carried out according to the Ontario Rules of Civil Procedure either by way of a Statement of Claim to obtain a summary judgment or by way of an application to register the foreign judgment in Ontario. Choosing the method by which to enforce a foreign judgment is the topic of a separate blog.

The Real and Substantial Connection Test

The “real and substantial connection” test stands for the proposition that the proper court to hear a trial in an action is the Court in a place that is most connected to the parties, witnesses and where the wrong occurred. The Supreme Court of Canada has confirmed that the “real and substantial connection” test applies to the judgments of foreign courts: Beals v. Saldanha, [2003] 3 S.C.R. 416, at paragraph 19. The policies underlying the real and substantial connection test in the context of foreign judgments are international comity and reciprocity.

Natural Justice & Service of the Foreign Claim 

Natural justice is the right to a fair hearing. It requires that individuals should not be penalized by decisions affecting their rights or legitimate expectations unless they have been given prior notice of the case, a fair opportunity to answer it, and the opportunity to present their own case. Where a defendant provides sufficient evidence that it was not provided notice of the foreign action, or that other basic procedural rights as accorded in Ontario’s Rules of Civil Procedure were not followed, a Court in Ontario may refuse to recognize a foreign judgment: Bank of Mongolia ats Taskin (2011 ONSC 6083), paragraph 42

Default Judgment Based on Comprehensive Claims and Evidence

Where default judgments (judgments from cases which are not defended) are obtained in foreign jurisdictions, it is preferable that the foreign court give reasons to substantiate its ruling. It is sufficient that the reasons indicate that because the defendant fraudster did not defend the case, the allegations contained in the Statement of Claim are deemed to be true. However, when this is done, it is preferable that foreign fraud victims file comprehensive affidavit and documentary evidence to support their foreign default judgment motions so that this evidence can be used to support the application or claim for judgment filed in the Canadian Courts.

Default Judgments and Expert Evidence on Service

Foreign judgments obtained by default judgment are recognized by Canadian Courts if the claimant can prove:

  • service in the foreign jurisdiction,
  • if service complied with rules of the foreign jurisdiction, and
  • if continued notice of each step in the foreign proceeding was given to the fraudster.

In other words, it is no defence for a fraudster to simply ignore a foreign claim and later say that he or she wishes to have a trial in Canada or some other jurisdiction of their choosing.

If a judgment is obtained by default, the fraud victim may have to obtain an affidavit by an expert on foreign procedural law to provide the Canadian Court with evidence that the foreign procedural law on service was followed. Foreign fraud victims will also likely be required to examine Canadian situated fraudsters on their affidavits wherein they attempt to refute notice in the foreign jurisdictions: Bank of Mongolia ats Taskin (2011 ONSC 6083), paragraph 26.

To support their contention that fraudsters were given the opportunity to defend the foreign action, foreign fraud victims are well advised to put fraudsters on notice of every step in the litigation, especially motions involving co-defendants. If fraudsters fail to defend allegations made by fraud victims and co-defendants, Canadian Courts will be less open to claims of a fraudster that they did not have the opportunity to defend the allegations made against them: Bank of Mongolia ats Taskin (2011 ONSC 6083), paragraphs 28 and 29.

Language and the Use of Certified Interpreters

Another issue of natural justice that is often raised is that language. Those seeking to register a foreign judgment in Canada must provide evidence that the trial or default judgment proceeding was obtained in the language of the foreign courts, and that the procedural rules with respect language and certified interpreters. Again, this evidence is often led through an affidavit on someone who is an expert on foreign law. Often the foreign judgment will be issued in a foreign language. If the foreign judgment is obtained in a foreign language, an affidavit from a certified Canadian court interpreter should be filed with an English version of the foreign judgment and other court documents.

Dishonesty in the Foreign Court

The primary defence of most fraudsters to foreign judgments being registered against them in Canada is that the foreign judgment against them was obtained through dishonesty. For example, the fraudster may allege the judgment against them was made on the basis of forged documents being relied upon by the plaintiff, or that the co-defendants evidence was untruthful: see Bank of Mongolia ats Taskin (2011 ONSC 6083), paragraphs 30 and 31. Where a foreign judgment was obtained by dishontest that was undetected by a foreign court, that judgment will not be enforced in Canada: Beals ats Saldanha, [2003] 3 SCR 416, paragraph 52.

The Canadian response to the defence of dishonest / fraud on the court is that the fraudster must prove:

  • the nature of the dishonesty (such as forgery); and
  • the reason why the alleged dishonesty could not have discovered at the time the foreign trial was conducted or the default judgment obtained.

With respect to allegations that the co-defendants evidence was untruthful, Canadian Courts will generally give deference to a foreign court’s findings of credibility. It is only when it is plain and obvious that the evidence does not support the findings of fact that a Canadian Court will require a trial in Canada.

To state matters otherwise, bald denials by a fraudster will not be sufficient to deter a Canadian Court from recognizing a foreign judgment either by way of application or by granting summary judgement. Those found liable for fraud have the onus of proving on a balance of probabilities why a Canadian Court should not recognize the foreign judgement against them: Bank of Mongolia ats Taskin (2011 ONSC 6083), paragraphs 34 and 35.

The Two Year Limitation Period

The Ontario Courts have confirmed that the two year limitation period for causes of action in Ontario applies also to the registration and enforcement of a foreign judgment (Commission de la Construction du Quebec v. Access Rigging Services Inc., 2010 ONSC 5897 (S.C.J.)). However, there appears to be jurisprudence that the two year date is flexible.

It is relevant to inquire whether or not a defendant to a foreign judgment resided in the foreign forum, or in the domestic forum, at the time the cause of action arose (i.e. when the foreign judgment became final and conclusive). Generally, the Ontario Courts are hesitant to apply provincial tolling statutes to non-resident defendants. “Prescription”, or the expiry of a limitation period, may be an available defence to the enforcement of a foreign judgment.  That said, delay only benefits the fraudster, and those holding foreign judgments to enforce in Canada should seek to have the judgment recognized and enforced in Canada without delay.

Inquiries

Fraud victims should conduct an asset tracing investigation and have their recovery assessed with their fraud recovery lawyers before commencing the process of registering foreign judgments in Canada. For further information or to have your case assessed, please contact us.

 

Norman Groot, LLB, CFE, CFI – March 31, 2014

www.investigationcounsel.com

Disclaimer

Norman Groot

About Norman Groot

Based on my police experience and my experience thereafter as a litigator, I have joined forces with other lawyers with police experience and created the law firm Investigation Counsel Professional Corporation.

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