15 Nov Enforcement of Foreign Judgments in Canada, Law360 Canada (October 19, 2023)
A foreign money judgment is evidence of a debt. To recognize and enforce it in Canada, two conditions must be met: the judgment must be for a debt or definite sum of money (ie not being a sum payable in respect of taxes or other charges of a like nature or in respect of a fine or other penalty); and final and conclusive. Absent evidence of fraud or of a violation of natural justice or public policy, the enforcing court would not venture deeply into the structure of the foreign court’s justice system, interpret the substantive or procedural law of the foreign jurisdiction upon which the judgment is based, or look beyond the judgment to the merits of the case. Instead, the enforcing court’s focus is on the foreign judgment itself, because it is seen as creating a new obligation on the defendant. In the case of a money judgment, this is a debt. In Agrest v. Pekker, 2023 ONCA 616 (Pekker), the Court of Appeal for Ontario upheld the application judge’s decision to recognize Ontario’s jurisdiction and to enforce a judgment made by the Russian court. This case reaffirms that decisions made by foreign courts, acting within Canadian concepts of jurisdiction and in accordance with fundamental principles of fairness, would be respected and enforced.
In Pekker, the dispute stems from the non-payment of a loan that Boris Agrest advanced to Leonid Pekker. On June 27, 2013, Agrest commenced the claim against Pekker in the Nikulinsky District Court of Moscow pursuant to the Civil Procedure Code of the Russian Federation. The claim was properly served. On July 25, 2013, the court scheduled an appearance to address the scheduling of the trial. Pekker did not attend. At the July 25 appearance, the court scheduled the trial for Aug. 2, 2013.
Following the setting of the trial date, several attempts were made to inform Pekker of the trial date, to no avail. On Aug. 2, 2013, Pekker did not appear in court and the matter was adjourned to Sept. 23, 2013, which he also did not attend. At the Sept. 23 hearing, an ex parte judgment was rendered in favour of Agrest for the full amount of the claim, plus interest and costs.
Pekker learned about the judgment against him in mid-December 2013. He appealed it to the Moscow City Court, where he raised the issue of insufficient notice of the claim. In response, the court made a factual finding that the correct service standards were followed in the court below and dismissed Pekker’s appeal. While he had a right of further appeal to the Presidium of the Moscow City Court, Pekker did not exercise that right.
In early 2019, Agrest learned that Pekker had significant assets in Canada. Based on this new information, he brought an application in Ontario to enforce the Russian judgment. Pekker defended, arguing that he was denied natural justice during the proceedings in Russia.
I pause to remind that in Beals v. Saldanha, 2003 SCC 72, the Supreme Court of Canada clarified that the defence of natural justice is restricted to “the form of the foreign procedure and to due process, and does not relate to the merits of the case. If that procedure … is not in accordance with Canada’s concept of natural justice, the foreign judgment will be rejected. The defendant carries the burden of proof.”
Back to Pekker, where the application judge determined that, in the circumstances of that case, Pekker had not made out the defence of natural justice and that the Russian proceedings were not contrary to Canadian notions of fundamental justice.
Pekker appealed the application judge’s decision, but the Court of Appeal for Ontario declined to reverse it.
The court explained that throughout the Russian proceedings, Pekker: (a) was given adequate notice of the claim made against him; (b) was granted the opportunity to defend the claim; (c) had the opportunity to, and did raise, the issue of insufficient notice on appeal to the Moscow City Court, which found that he was given adequate notice; and (d) did not avail himself of the opportunity to further appeal the Moscow City Court’s decision (hence, the judgment became final).
In addition, the Court of Appeal noted that Pekker presented no evidence as to the arguments made, and the evidence presented on the appeal. These factors relate to the defence of fraud that is available to defendants in the recognition and enforcement of foreign money judgment cases.
As a general but qualified statement, neither foreign nor domestic judgments will be enforced if obtained by fraud. Where there is an assertion that a foreign judgment was obtained by fraud, a defendant has the burden of demonstrating that the facts sought to be raised could not have been discovered by the exercise of due diligence prior to the obtaining of the foreign judgment. In addition, inherent in the defence of fraud is the concern that defendants may try to use this defence as a means of relitigating an action previously decided. The desire to avoid the relitigation of issues has led Canadian courts to treat the defence of fraud narrowly.
In Pekker, the parties’ dispute was adjudicated in Russia in 2013. The enforcement proceeding in Canada commenced, approximately six years later, in 2019. This brings to mind a limitation-related question: what limitation period applies to the enforcement of a foreign judgment?
In Independence Plaza 1 Associates, L.L.C. v. Figliolini, 2017 ONCA 44, the Court of Appeal for Ontario determined that, in Ontario, the basic two-year limitation period in s. 4 of the Limitations Act, 2002, SO 2002, c 24, Sch B (Act) applies. The result is that the limitation clock begins to run when the claim is discovered, a fact that is ascertained through the application of s. 5(1), aided by the presumption in s. 5(2) of the Act.
The Pekker case reaffirms that as long as a foreign court has proper jurisdiction to adjudicate the dispute, absent evidence of fraud or of a violation of natural justice or public policy, all the Canadian enforcing court needs, in order to enforce the foreign judgment, is proof of the foreign order. Its own legal mechanisms take over from there.