Canadian businesses operating abroad need to be aware of a recent decision of the Ontario Court of Appeal enforcing a foreign injunction against Canadian business people and businesses. This is the first case of its kind in Canada.
Canadian courts have always had the power to enforce the judgements of “foreign” courts as if they were their own. Their willingness to exercise that power has broadened over the years, as the world has become more globalized. By 1989, it was clear that the courts of one province would generally enforce judgments from other provinces, provided there was a “real and substantial connection” between the original province and the case. By 2003, it was clear they would do so for judgments of foreign states on the same basis, particularly the United States of America and members of the British Commonwealth.
Throughout this period it was generally good legal advice to a Canadian business sued in another province or a foreign jurisdiction to defend that lawsuit on the merits there. The available defences to the enforcement of a foreign judgment in the business’s home province were few (three to be precise) and very restricted in scope. Some businesses opted to ignore foreign lawsuits, gambling they could persuade the courts of their home provinces not to enforce the resulting judgments. Whatever the practical appeal of that strategy when the business first learned of the foreign lawsuit, its consequences were generally disastrous.
But there was always a significant limitation on Canadian courts’ willingness to enforce foreign judgments: they would only do so if the foreign judgment was for a specific amount of money. They would not enforce foreign judgments granting other kinds of relief, such as injunctions and specific performance orders.
Then, in 2006, the Supreme Court of Canada, considering the attempt of a U.S. plaintiff to enforce a U.S. District Court injunction against a Canadian business in Ontario, concluded the time was ripe to discard that limitation, to open the door to the enforcement of foreign judgments that were not for specific amounts of money.
Without setting out exhaustively the criteria a Canadian court should consider in deciding whether to enforce a non-monetary foreign judgment, the Court listed these considerations:
- As with monetary orders, the foreign judgment must not have been obtained by fraud and must not violate Canadian principles of natural justice or public policy;
- The foreign judgment must have been granted by a court of competent jurisdiction and must be final;
- The order must be a similar kind of order to that which the Canadian court itself would have granted had the foreign situation been before it;
- The order must be clear and specific, so the defendant knows what is expected of it in response;
- The order must be limited in its scope and the foreign court should have retained the power to issue further orders if necessary;
- The order should not expose the defendant to unforeseen obligations;
- The order should not affect third parties; and
- The use of judicial resources enforcing the order should be consistent with what would be done in a Canadian case.
But, having laid down those general considerations, the Court decided not to enforce the U.S. injunction in that case. The Court had laid out a roadmap for what kinds of non-monetary foreign judgments Canadian courts should enforce. But there was no concrete example of a Canadian court doing so.
Now there is. On June 8, 2010, the Ontario Court of Appeal considered whether a U.S. District Court injunction should be enforced against Canadian business people and businesses in Ontario. The Court repeated the considerations set out by the Supreme Court of Canada. It concluded that almost all of them favoured enforcement of the injunction. The Court ordered that the U.S. injunction be enforced.
Businesses operating in foreign jurisdictions should be aware that the enforcement of foreign injunctions and other non-monetary orders in Canada is no longer just a theoretical possibility. It is now a concrete risk (or opportunity, depending on which side of the order the business is on). More than ever, businesses generally have only one chance to defend a foreign claim – when it is made, in the foreign jurisdiction. More than ever, the consequences of ignoring that reality are likely to be disastrous.