Rejecting defenses of fraud,
ordre public, and denial of justice, Supreme Court of Canada rules 6 to 3 that
Canadian courts should enforce substantial default judgment against Canadian
defendants in litigation over their Florida land
The defendants (below and in the
Florida proceedings) are Geoffrey Saldanha, Leueen Saldanha and Dominic Thivy,
residents of Ontario. They agreed to sell a vacant lot located in Sarasota
County, Florida to Frederick H. Beals‑III and Patricia A. Beals, the plaintiffs
(in both proceedings) for about $8,000. A controversy broke out, inter alia, as
to which lot was involved and, in September 1986, the plaintiffs sued the
defendants and two others in the Sarasota County courts. Defendants responded
to the original complaint but decided not to defend the complaint as altered by
the Second and Third Amendments. Under Florida rules of procedure, however, the
failure to file defenses to the amendments amounted to a default as to the
entire lawsuit.
In July 1990, the Florida court
duly noted that defendants lay in default on liability and notified them that
there would be a jury trial to determine damages. Defendants neither replied to
the notice nor did they put in an appearance personally or through counsel at
the damages hearing. In early December of 1991, the jury awarded the plaintiffs
US$ 210,000 in compensatory damages and US$ 50,000 in punitive damages, plus 12
percent per annum post-judgment interest.
When the Ontario defendants got
the notice of the adverse monetary judgment a few weeks later, they consulted
an Ontario attorney. The lawyer advised them that the plaintiffs would not be
able to enforce the foreign judgment in Ontario because the defendants had not
“attorned to the Florida court’s jurisdiction.” Heeding this questionable
advice, the defendants neither appealed nor moved to set aside the judgment
within one year as allowed under Florida law.
When defendants failed to satisfy
the damage awards, plaintiffs sued the them in the Ontario courts in 1993 to
enforce the Florida judgment. By the time of the hearing in 1998, the Florida
judgment with interest had increased to about C$ 800,000. The Canadian trial
judge dismissed the action for enforcement mainly on the ground that there had
been fraud in the award of damages. The Ontario appellate court allowed the
plaintiffs’ appeal. Upon further review, the Supreme Court of Canada in a 6 to
3 ruling, dismisses the defendants’ appeal, ruling that the lower court should
have enforced the Florida judgment.
In the majority’s view,
international comity and the growth of international cross‑border transactions
strongly suggest that the law of private international judgments needs
updating. Unless the Canadian legislatures enact to the contrary, the Court
believes that it should apply the “real and substantial connection” test (which
it has thus far applied only to the enforcement of interprovincial judgments)
equally to the recognition and enforcement of foreign country judgments.
The test generally requires that
a meaningful link exist between the cause of action and the foreign court. “In
light of Canadian rules of conflict of laws, Dominic Thivy [a former
co-defendant] attorned to the jurisdiction of the Florida court when he entered
a defence to the ... [original] action. His subsequent procedural failures
under Florida law do not invalidate that attornment. As such, irrespective of
the real and substantial connection analysis, the Florida court would have had
jurisdiction over Mr. Thivy for the purposes of enforcement in Ontario.” [¶ 34]
“The presence of more of the
traditional indicia of jurisdiction (attornment, agreement to submit, residence
and presence in the foreign jurisdiction) will serve to bolster the real and
substantial connection to the action or parties. Although such a connection is
an important factor, parties to an action continue to be free to select or
accept the jurisdiction in which their dispute is to be resolved by attorning
or agreeing to the jurisdiction of a foreign court.” [¶ 37] Finally, the
agreement of the parties on appeal that the Florida action met this test
reinforces the Court’s decision.
The Court then turns to the
defenses that may justify a refusal to enforce an otherwise valid foreign
judgment. “The defenses of fraud, public policy and lack of natural justice ...
still pertain. This Court has to consider whether those defenses, when applied
internationally, are able to strike the balance required by comity, the balance
between order and fairness as well as the real and substantial connection, in
respect of enforcing default judgments obtained in foreign courts.” [¶ 40]
“Inherent to the defense of fraud
is the concern that defendants may try to use this defense as a means of
relitigating an action previously decided and so thwart the finality sought in
litigation. The desire to avoid the relitigation of issues previously tried and
decided has led the courts to treat the defense of fraud narrowly.” [¶ 44]
“Courts have drawn a distinction
between ‘intrinsic fraud’ and ‘extrinsic fraud’ in an attempt to clarify the
types of fraud that can vitiate the judgment of a foreign court. Extrinsic
fraud is identified as fraud going to the jurisdiction of the issuing court or
the kind of fraud that misleads the court, foreign or domestic, into believing
that it has jurisdiction over the cause of action. Evidence of this kind of
fraud, if accepted, will justify setting aside the judgment.”
“On the other hand, intrinsic
fraud is fraud which goes to the merits of the case and to the existence of a
[meritorious] cause of action. The extent to which evidence of intrinsic fraud
can act as a defense to the recognition of a judgment has not been as clear as
that of extrinsic fraud.” [¶ 45]
The Court then notes the historic
complexity and confusion caused when courts try to apply the above distinction
and recommends its abolition. “It is simpler to say that fraud going to
jurisdiction can always be raised before a domestic court to challenge the
judgment. On the other hand, the merits of a foreign judgment can be challenged
for fraud only where the allegations are new and not the subject of prior
adjudication. Where material facts not previously discoverable arise that
potentially challenge the evidence that was before the foreign court, the
domestic court can decline recognition of the judgment.” [¶ 51]
“No evidence was led to show that
the jury was misled (deliberately or not) on the extent of the damages. The
admitted facts presented to the jury included allegations of fraudulent
misrepresentations and loss of profits. The claim by the [plaintiff] was for
damages to recoup the purchase price of the land, loss of profits and punitive
damages. ... [A]lthough the amount of damages awarded may seem
disproportionate, it was a palpable and overriding error for the trial judge to
conclude, on the dollar amount of the judgment alone, that the Florida jury
must have been misled.” [¶ 57]
Another defense is the foreign
court’s alleged denial of Canadian notions of natural justice. As with most
defenses, the defendants have the civil burden of persuasion that the foreign
proceedings had this fatal defect.
“In the present case, the Florida
judgment is from a legal system similar, but not identical, to our own. If the
foreign state’s principles of justice, court procedures and judicial protections
are not similar to ours, the domestic enforcing court will need to ensure that
the minimum Canadian standards of fairness were applied. If fair process was
not provided to the defendant, recognition and enforcement of the judgment may
be denied.”
“The defense of natural justice
is restricted to the form of the foreign procedure, to due process, and does
not relate to the merits of the case. The defense is limited to the procedure
by which the foreign court arrived at its judgment. However, if that procedure,
while valid there, is not in accordance with Canada’s concept of natural
justice, the foreign judgment will be rejected. The defendant carries the
burden of proof and, in this case, failed to raise any reasonable apprehension
of unfairness.” [¶¶ 63-64]
Disagreeing with a dissenter, the
majority holds that natural justice does not demand that plaintiffs in a
foreign litigation expressly or impliedly notify Canadian defendants of each
and every available procedural step that they might take when notified of a
foreign claim against them. “To find otherwise would unduly complicate cross‑border
transactions and hamper trade with Canadian parties. A defendant to a foreign
action instituted in a jurisdiction with a real and substantial connection to
the action or parties can reasonably be expected to research the law of the
foreign jurisdiction. The Saldanhas and Thivys owned land in the State of
Florida and entered into a real estate transaction in that state. When served
with notice of an action against them in the State of Florida, the [defendants]
were responsible for gaining knowledge of Florida procedure in order to
discover the particularities of that legal system.” [¶ 68]
“Once they received notice of the
amount of the judgment, the [defendants] obviously had precise notice of the
extent of their financial exposure. Their failure to act when confronted with
the size of the award of damages was not due to a lack of notice but due to
relying on the mistaken advice of their lawyer.” [¶ 69]
Citation: Beals v.
Saldanha, File No.: 28829, 2003 S.C.C. 72 (Sup. Ct. Can. Dec. 18, 2003).
**** Mr. William B. Blanchard (“Bill Blanchard”) is a Real Estate Attorney with offices in St. Charles and Oakbrook Terrace, Illinois. Bill specializes in representing real estate clients for purchases and sales as well as home owner real estate tax assessment appeals. Mr. Blanchard is General Counsel for Gaia Title, Inc. a title insurance agency and settlement services provider. The Company is owned by real estate attorneys who demand exemplary title insurance services and accurate and efficient settlement services. As General Counsel he is responsible for title examination, commitment and policy review, escrow settlement supervision and regulatory review. - Attorney Profile: https://solomonlawguild.com/william-b-blanchard%2C-esq - Attorney News: https://attorneygazette.com/william-blanchard%2C-esq#40b43d7b-94b2-48d3-b055-1979a636f1e7
