Canadian companies doing business in the United States face the ever-present danger of becoming embroiled in litigation in U.S. courts. If a judgment is obtained in the U.S. against a person with assets in Canada, the judgment may be enforced in Canada. In many cases, how easy that will be depends in large part on whether the U.S. state from which the original judgment emanates is a "reciprocating" jurisdiction with the province in which enforcement of the judgment is being sought. The term "reciprocating" refers to a designation by statute (often based on treaty) providing for the enforcement in one jurisdiction of judgments obtained in the other.
There are two ways that a U.S. judgment may be enforced in Canada. One common way is to commence an action on the judgment in the Canadian jurisdiction where the defendant has assets. This type of action is often tried by summary proceeding. Another way to enforce a U.S. judgment in Canada – and often the easiest way to do it – is to have the judgment "registered" with a court in the province where the assets are located. This method of enforcement, however, is available only where the judgment has been given in a court in a reciprocating U.S. state. For example, the reciprocating U.S. states for B.C. are Alaska, California, Colorado, Idaho, Oregon and Washington.
In situations where a judgment creditor has obtained judgment in a non-reciprocating U.S. state, there has been some authority to suggest that the creditor could still avail itself of this simplified enforcement mechanism by first having the judgment registered (or otherwise recognized) in a reciprocating U.S. state, and then registering that judgment in the Canadian jurisdiction for enforcement. In December 2008, however, the British Columbia Court of Appeal issued a decision that casts some doubt on the availability of the two-step registration process.
In British Columbia, Part 2 of the Court Order Enforcement Act provides for the reciprocal enforcement of foreign judgments.Under the Act, a U.S. judgment may be registered in BritishColumbia if it is from a reciprocating U.S. state. In a 1996 decision, the British Columbia Supreme Court (a trial level court) appeared to have approved theenforcement of a foreign judgment thathad emanated from a non-reciprocatingstate and had been, in what the Courtcalled a "jurisdictional convenience",registered in a reciprocating U.S. state.
In Hickman v. Kaiser, the debtor applied to set aside an ex parte order restraining him from dealing with his assets. The basis of that order was a $2.9 million judgment against the debtor and some of his affiliates. The basis of the judgment was that Hickman had through fraud, theft or misappropriation during his tenure as trustee of a pension fund established by one of the defendants, wrongfully removed to his own benefit substantial sums from the trust. The Texas judgment obtained was for triple damages.
Texas is not a reciprocating jurisdiction with British Columbia. In Hickman, the judgment creditor had registered the Texas judgment in Idaho, a reciprocating jurisdiction with British Columbia. Although the Court did not specifically consider the issue of whether registration in British Columbia was valid, Hickman v. Kaiser had been interpreted as sanctioning this procedure.
In December 2008, however, the British Columbia Court of Appeal cast doubt on the continuing viability of that aspect of the Kaiser decision in Owen v. Rocketinfo, Inc.
In Owen v. Rocketinfo, Inc., the issue before the Court was whether a judgment obtained in Nevada (a non-reciprocating state) and entered as a sister state judgment in California (a reciprocating state) may be registered in British Columbia under Part 2 of the Court Order Enforcement Act. The judgment creditor relied on Kaiser for its position that the registration was valid. But the Court of Appeal distinguished Kaiser on the grounds that, "the issue in that decision related to the setting aside of a Mareva injunction…". The Court went on to note that in Kaiser, "there was no judicial determination as to the validity of registration in British Columbia…[and] the decision is not considered authority on the point capable of providing assistance to this Court."
Applying principles of statutory interpretation, the Court concluded that, "the Legislature did not intend to provide for registration in British Columbia of a judgment granted by a court of another jurisdiction by an indirect method when it is not permitted to be done directly." The Court was also persuaded by commentary suggesting that laws like the Court Order Enforcement Act apply "only to original foreign judgments and not to judgments recognizing a foreign judgment."
The decision in Owen v. Rocketinfo, Inc. appears to foreclose the ability of those seeking to register a judgment in British Columbia from a non-reciprocating U.S. state by first having the judgment recognized in a reciprocating U.S. state. While not binding, the decision is likely to persuade courts in other Canadian provinces with similar statutory provisions for the enforcement of foreign judgments.