Enforcing a USA Judgment in Ontario Canada by Summary Judgment

Enforcement of U.S. Judgments – Summary Judgment Procedure is Proper

The Ontario Court of Appeal has re-affirmed the principle that a judgment from the United States is usually enforceable in Canada, with very few and very limited exceptions.

The case was United States of America v. Shield Development Co. (reproduced below), upholding a decision by the Ontario Superior Court of Justice (December 1, 2004).

The defendants were sued in the United States for the expenses the plaintiff (the US government) had incurred in cleaning up a site that the defendants owned. They did not appear in court to defend themselves, and the U.S. court granted summary judgment against them. When the plaintiffs brought an action to enforce the judgment in Ontario, the defendants appeared before the Ontario court to defend against it.

In their defence, the defendants claimed that the U.S. decision was contrary to natural justice, on the grounds that the plaintiff’s documents were sent to the wrong address, and that it was contrary to Canadian public policy, on the grounds that the plaintiffs had gone after them as an excuse to avoid going after the American corporations that actually caused the problem.

The Ontario Superior Court of Justice ruled that the U.S. judgment should be enforced in Canada by way of summary judgment. In her judgment, Justice Herman wrote that the defences were not strong enough to provide a “triable issue.” The natural justice defence failed because despite the mis-delivery of documents, the defendants had been provided with sufficient opportunity to defend the action. The public policy defence also failed because their argument was not that the law was contrary to Canadian public policy, but that the original court’s application of the law was contrary to Canadian public policy. This was not something that the Ontario court was prepared to evaluate.

Underlying the decision was the idea that the defendants had their chance to make their case – in the U.S. case – and could not now try to make arguments that they should have made before the original court. Justice Herman pointed out that whereas the defendants were now arguing that they had not been given sufficient opportunity to defend themselves, the record of what they did at the time showed that they simply were not interested in showing up to defend themselves: “Their actions suggest that they made a choice to walk away from the proceedings.”

In upholding the lower court’s decision, the Court of Appeal once again pointed out that the problems the defendants complained about, such as the fact that the documents went to the wrong address, were directly connected to the fact that the defendants did not bother to defend the action. The Ontario Court of Appeal’s decision, signed by the three Justices, suggested that the issues the defendants raised were issues that would not have existed if they had shown up in the U.S. court: “In effect, they now plead the consequences of their decision to walk away from the U.S. proceeding, to which they attorned, in an attempt to create a triable issue.”

Both courts ruled, in other words, that the defendants had to live with the consequences of having walked away from the U.S. action. They could not declare the judgment unenforceable on the basis of issues they themselves created by walking away, or issues that they should have brought up in the U.S.

The important thing to take away from this case is that if you are a Canadian being sued in the United States, you should not ignore it.  If you do, a default judgment will likely be entered against you, and it will almost always be enforceable in Canada.   In the short run, defending an action in the U.S. may seem like a lot of trouble and expense. But if you think you have an arguable case, then you will almost always be better off defending yourself while you can – because you cannot later turn around and make that case in front of a Canadian judge.

The Court of Appeal Judgment is Below:

United States of America v. Shield Development Co., 2005 CanLII 17768 (ON C.A.)

COURT OF APPEAL FOR ONTARIO

RE: UNITED STATES OF AMERICA (Respondent) -and- THE SHIELD DEVELOPMENT CO. LTD. and ANYOX METALS LTD. (Appellants)
BEFORE: CATZMAN, LABROSSE and MOLDAVER JJ.A.
COUNSEL: James C. Orr and Angela Yadav
for the appellants
H. Scott Fairley and John R. Archibald
for the respondent
HEARD AND RELEASED ORALLY:  

May 18, 2005

On appeal from the judgment of Justice Thea P. Herman of the Superior Court of Justice dated December 1, 2004 and from Justice Herman’s costs endorsement dated January 19, 2005.

E N D O R S E M E N T

[1]               The appellants appeal the granting of summary judgment to the respondent to enforce a judgment it obtained in the United States against the appellants.

[2]               The application judge rejected the appellants’ submissions that summary judgment should not be granted on the basis of a denial of natural justice and/or as being against public policy.  She gave detailed and clear reasons in rejecting these submissions on the basis that there had been no denial of natural justice and that there was no evidence that the respondent improperly targeted the appellants.  We see no error in her conclusions.

[3]               As stated by the respondent, the real essence of this matter is that the appellants had received adequate notice of the U.S. proceeding and had adequate opportunity to raise any defence of fact and law before the U.S. District Court.  In effect, they now plead the consequences of their decision to walk away from the U.S. proceeding, to which they attorned, in an attempt to create a triable issue.  Moreover, when the appellants learned of the U.S. judgment, neither appellant appealed nor moved to have the judgment set aside.

[4]               Accordingly, the appeal is dismissed, with costs fixed, inclusive of disbursements and G.S.T., in the amount of the monies currently standing in court to the credit of this action pursuant to the order of MacPherson J.A. dated March 30, 2005 (i.e. $20,000 plus accumulated interest).

Signed: “M.A. Catzman J.A.”

“J.-M. Labrosse J.A.”

“M.J. Moldaver J.A.”

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