Beals v. Saldanha

Beals v. Saldanha
Collection
Supreme Court Judgments
Date
2003-12-18
Neutral citation
2003 SCC 72
Report
[2003] 3 SCR 416
Case number
28829
Judges
McLachlin, Beverley; Gonthier, Charles Doherty; Iacobucci, Frank; Major, John C.; Bastarache, Michel; Binnie, William Ian Corneil; Arbour, Louise; LeBel, Louis; Deschamps, Marie
On appeal from
Ontario
Subjects
Action
Constitutional law
International law
Notes
SCC Case Information: 28829
Decision Content
Beals v. Saldanha, [2003] 3 S.C.R. 416, 2003 SCC 72
Geoffrey Saldanha, Leueen Saldanha and Dominic Thivy Appellants
v.
Frederick H. Beals III and Patricia A. Beals Respondents
Indexed as: Beals v. Saldanha
Neutral citation: 2003 SCC 72.
File No.: 28829.
2003: February 20; 2003: December 18.
Present: McLachlin C.J. and Gonthier, Iacobucci, Major, Bastarache, Binnie, Arbour, LeBel and Deschamps JJ.
on appeal from the court of appeal for ontario
Conflict of laws — Foreign judgments — Enforcement — Action brought in Florida court over sale of Florida land valued at US$8,000 — Florida court entering default judgment against defendants resident in Ontario — Jury subsequently awarding US$210,000 in compensatory damages and US$50,000 in punitive damages — Defendants not properly defending action according to Florida law and not moving to have default judgment set aside or appealing jury award for damages — Whether “real and substantial connection” test for enforcing interprovincial judgments should be extended to foreign judgments — Whether defence of fraud, public policy or natural justice established so that foreign judgment should not be enforced by Canadian courts — Whether enforcing foreign judgment constitutes violation of s. 7 of Canadian Charter of Rights and Freedoms .
Constitutional law — Charter of Rights — Fundamental justice — Whether s. 7 of Canadian Charter of Rights and Freedoms can shield a Canadian defendant from enforcement of foreign judgment.
Judgments and orders — Foreign judgments — Enforcement — Rules relating to recognition and enforcement of foreign judgments by Canadian courts — Nature and scope of defences available to judgment debtor.
The appellants, residents of Ontario, sold a vacant lot situated in Florida to the respondents. A dispute arose as a result of that transaction and in 1986 the respondents sued the appellants and two other defendants in Florida. A defence was filed but the appellants chose not to defend any of the subsequent amendments to the action. Pursuant to Florida law, the failure to defend the amendments had the effect of not defending the action. The appellants were subsequently noted in default and were served with notice of a jury trial to establish damages. They did not respond to the notice nor did they attend the trial. The jury awarded the respondents US$210,000 in compensatory damages and US$50,000 in punitive damages. Upon receipt of the notice of the monetary judgment against them, the appellants sought legal advice. They were advised by an Ontario lawyer that the foreign judgment could not be enforced in Ontario. Relying on this advice, the appellants took no steps to have the judgment set aside or to appeal the judgment in Florida. The damages were not paid and an action was started in Ontario to enforce the Florida judgment. By the time of the hearing in 1998, the foreign judgment with interest had grown to approximately C$800,000. The trial judge dismissed the action for enforcement primarily on the ground that there had been fraud in relation to the assessment of damages. The Court of Appeal allowed the respondents’ appeal.
Held (Iacobucci, Binnie and LeBel JJ. dissenting): The appeal should be dismissed. The judgment of the Florida court should be enforced.
Per McLachlin C.J. and Gonthier, Major, Bastarache, Arbour and Deschamps JJ.: International comity and the prevalence of international cross-border transactions and movement call for a modernization of private international law. Subject to the legislatures adopting a different approach, the “real and substantial connection” test, which has until now only been applied to interprovincial judgments, should apply equally to the recognition and enforcement of foreign judgments. The test requires that a significant connection exist between the cause of action and the foreign court. Here, the “real and substantial connection” test is made out. The appellants entered into a property transaction in Florida when they bought and sold land. As such, there exists both a real and substantial connection between the Florida jurisdiction, the subject matter of the action and the defendants. Since the Florida court properly took jurisdiction, its judgment must be recognized and enforced by a domestic court provided that no defences bar its enforcement.
While fraud going to jurisdiction can always be raised before a domestic court to challenge the judgment, 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. The 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. Here, the defence of fraud is not made out. The appellants have not claimed that there was evidence of fraud that they could not have discovered had they defended the Florida action. In the absence of such evidence, the trial judge erred in concluding that there was fraud. Although 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.
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, 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. In the circumstances of this case, the defence does not arise. The appellants failed to raise any reasonable apprehension of unfairness. They were fully informed about the Florida action, were advised of the case to meet and were granted a fair opportunity to do so. They did not defend the action. Once they received notice of the amount of the judgment, the appellants obviously had precise notice of the extent of their financial exposure. Their failure to move to set aside or appeal the Florida judgment when confronted with the size of the award of damages was not due to a lack of notice but due to their reliance upon negligent legal advice. That negligence cannot be a bar to the enforcement of the respondents’ judgment.
The public policy defence prevents the enforcement of a foreign judgment which is contrary to the Canadian concept of justice, and turns on whether a foreign law is contrary to our view of basic morality. The award of damages by the Florida jury does not violate our principles of morality such that enforcement of the monetary judgment would shock the conscience of the reasonable Canadian. The sums involved, although they have grown large, are not by themselves a basis to refuse enforcement of the foreign judgment in Canada. The public policy defence is not meant to bar enforcement of a judgment rendered by a foreign court with a real and substantial connection to the cause of action for the sole reason that the claim in that foreign jurisdiction would not yield comparable damages in Canada.
Finally, the recognition and enforcement of the Florida judgment by a Canadian court would not constitute a violation of s. 7 of the Canadian Charter of Rights and Freedoms . Given that s. 7 does not shield a Canadian resident from the financial effects of the enforcement of a judgment rendered by a Canadian court, it should not shield a Canadian defendant from the enforcement of a foreign judgment.
Per Iacobucci and Binnie JJ. (dissenting): The “real and substantial connection” test provides an appropriate conceptual basis for the enforcement of final judgments obtained in foreign jurisdictions. While there is no doubt the Florida courts had jurisdiction over the dispute since the land was located in that jurisdiction, the question is whether the appellants in this proceeding were sufficiently informed of the case against them to allow them to determine, in a reasonable way, whether to participate in the Florida action, or to let it go by default. In this case, the appellants come within the traditional limits of the natural justice defence and the Ontario courts ought not to give effect to the Florida judgment.
The suggestion that the appellants are the authors of their own misfortune on the basis that if they had hired a Florida lawyer they would have found out about subsequent developments in the action cannot be accepted. The appellants decided not to defend the case set out against them in the complaint. That case was subsequently transformed. They never had the opportunity to put their minds to the transformed case because they were never told about it.
To make an informed decision, they should have been told in general terms of the case they had to meet on liability and been given an indication of the jeopardy they faced in terms of damages. The respondents’ complaint did not adequately convey to the appellants the importance of the decision that would eventually be made in the Florida court.
Cumulatively, the events demonstrate an unfair procedure which in this particular case failed to meet the standards of natural justice. Nowhere was it brought to the appellants’ attention that, under the Florida Rules of Civil Procedure, they were required to refile their defence every time the respondents amended their complaint against other defendants. In terms of procedural fairness, the appellants were entitled to assume that in the absence of any new allegations against them there was no need to refile a defence that had already been filed in the same action. A Canadian resident is not presumed to know the law of another jurisdiction. As the basis of the respondents’ judgment is default of pleading, this lack of notification goes to the heart of the present appeal.
Furthermore, a party must be made aware of the potential jeopardy faced. The appellants received no notice of a 1987 court order striking out the claim for punitive damages against the other defendants — the realtor and the title insurers — on grounds applicable, had they known about it, to the appellants. They were also not told, after being noted in default and before the jury trial, that the respondents had made a deal with the realtor to delete claims against the realtor for treble damages, punitive damages and statutory violations (though these claims were continued on almost identical facts against the appellants). Subsequently, the respondents settled with the realtor and with the title insurers, leaving the appellants as the sole target at the damages trial. They were not told about this. Nor were the appellants served with the court order for mandatory mediation which provided that all parties were required to participate or, as required by the Florida rules, with notice of the experts the respondents proposed to call at the damages assessment. Lastly, the respondents’ complaint did not indicate that they were claiming damages on behalf of corporations, whose names appeared nowhere in the pleadings, in which they had an interest, and that they would be seeking damages for a corporation’s lost opportunity to build an undefined number of homes on land to which neither the respondents nor the corporation held title.
A judgment based on inadequate notice is violative of natural justice. A default judgment that rests on such an unfair foundation should not be enforced. The fact that the appellants did not appeal the Florida judgment or seek the indulgence of the Florida court to set the default judgment aside for “excusable neglect” is a relevant consideration, but is not necessarily fatal, and in this case does not justify the enforcement in Ontario of the flawed Florida default judgment.
Per LeBel J. (dissenting): The “real and substantial connection” test should be modified significantly when it is applied to judgments originating outside the Canadian federation. Specifically, the assessment of the propriety of the foreign court’s jurisdiction should be carried out in a way that acknowledges the additional hardship imposed on a defendant who is required to litigate in a foreign country. The purposive, principled framework should not be confined, however, to the question of jurisdiction. The impeachment defences of public policy, fraud and natural justice ought to be reformulated. Liberalizing the jurisdiction side of the analysis while retaining narrow, strictly construed categories on the defence side is not a coherent approach.
The jurisdiction test itself should be applied so that the assumption of jurisdiction will not be recognized if it is unfair to the defendant. This requires taking into account the differences between the international and interprovincial contexts. The integrated character of the Canadian federation makes a high degree of cooperation between the courts of the various provinces a practical necessity. It is also a constitutional imperative, inherent in the relationship between the units of our federal state, that each province must recognize the properly assumed jurisdiction of another, and conversely that no court in a province can intermeddle in matters that are without a constitutionally sufficient connection to that province. Comity as between sovereign nations is not an obligation in the same sense. It follows from the contextual and purpose-driven approach that the rules for recognition and enforcement of foreign-country judgments should be carefully fashioned to reflect the realities of the international context, and calibrated to further to the greatest degree possible, the ultimate objective of facilitating international interactions. However, this does not mean that they should be as liberal as the interprovincial rule. Ideally, the “real and substantial connection” test should represent a balance designed to create the optimum conditions favouring the flow of commodities and services across state lines. The connections required before foreign-country judgments will be enforced should be specified more strictly and in a manner that gives due weight to the protection of Canadian defendants without disregarding the legitimate interests of foreign claimants. This approach is consistent with both the flexible nature of international comity as a principle of enlightened self-interest rather than absolute obligation, and the practical differences between the international and interprovincial contexts.
While the test should ensure that, considering the totality of the connections between the forum and all aspects of the action, it is not unfair to expect the defendant to litigate in that forum, it does not follow that there necessarily has to be a connection between the defendant and the forum. There are situations where, given the other connections between the forum and the proceeding, it is a reasonable place for the action to be heard and the defendant can fairly be expected to go there even though he or she personally has no link at all to that jurisdiction. Under this approach, the connection must be strong enough to make it reasonable for the defendant to be expected to litigate there even though that may entail additional expense, inconvenience, and risk. If litigating in the foreign jurisdiction is very burdensome to the defendant, a stronger degree of connection would be required before the originating court’s assumption of jurisdiction should be recognized as fair and appropriate. In extreme cases, the foreign legal system itself may be inherently unfair. If the process that led to the judgment was unfair in itself, it is not fair to the defendant to enforce that judgment in any circumstance, even if the forum has very strong connections to the action and appears in every other respect to be the natural place for the action to be heard.
It follows from those propositions that the notion of interprovincial reciprocity is not equally applicable internationally. To treat a judgment from a foreign country exactly like one that originates within Canada fails to take into account the differences between the interprovincial and international contexts and fails to reflect the differences between assuming jurisdiction and enforcing a foreign judgment. Lastly, s. 7 Charter rights are not usually relevant to jurisdictional issues in civil disputes and do not arise in this case, although it is possible that there may be situations where fundamental interests of the defendant are implicated and s. 7 could come into play.
In this case, Florida was the natural place for the action to be heard because there were very strong connections between that state and every component of the action: the plaintiffs, who live there; the land, which is in Florida; and the defendants, who involved themselves in real estate transactions there.
The public policy defence should be reserved for cases where the objection is to the law of the foreign forum, rather than the way the law was applied, or the size of the award per se. It should also apply to foreign laws that offend basic tenets of our civil justice system, principles that are widely recognized as having a quality of essential fairness. Here, the defects in the judgment, while severe, do not engage the public policy defence. The enforcement of such a large award in the absence of a connection either to harm suffered by the plaintiffs and caused by the defendants or to conduct deserving of punishment on the part of the defendants would be contrary to basic Canadian ideas of justice. But there is no evidence that the law of Florida offends these principles. On the contrary, the record indicates that Florida law requires proof of damages in the usual fashion and there is no indication that punitive damages are available where the defendant’s conduct is not morally blameworthy.
In general, the rule that the defence of fraud must be based on previously undiscoverable evidence is a reasonably balanced solution. However, the possibility that a broader test should apply to default judgments in cases where the defendant’s decision not to participate was a demonstrably reasonable one should not be ruled out. If the defendant ignored what it justifiably considered to be a trivial or meritless claim, and can prove on the civil standard that the plaintiff took advantage of his absence to perpetrate a deliberate deception on the foreign court, it would be inappropriate to insist that a Canadian court asked to enforce the resulting judgment must turn a blind eye to those facts. Accordingly, a more generous version of the fraud defence ought to be available, as required, to address the dangers of abuse associated with the loosening of the jurisdiction test to admit a broad category of formerly unenforceable default judgments. In the present case, the defence of fraud is not made out. All the facts that the appellants raise in this connection were known to them or could have been discovered at the time of the Florida action. Furthermore, even though this is the kind of case for which a more lenient interpretation of the fraud defence would, in principle, be appropriate, because the appellants’ decision not to attend the Florida proceedings was a reasonable one, given the lack of evidence, the defence could not succeed even on the view that the judgment could be vitiated by proof of intentional fraud.
The defence of natural justice concerns the procedure by which the foreign court reached its decision. If a defendant can establish that the process by which the foreign judgment was obtained was contrary to the Canadian conception of natural justice, then the foreign judgment should not be enforced. Two developments should be recognized in connection with this defence: the requirements of notice and a hearing should be construed in a purposive and flexible manner, and substantive principles of justice should also be included in the scope of the defence. Notice is adequate when the defendant is given enough information to assess the extent of his or her jeopardy. This means, among other things, that the defendant should be made aware of the approximate amount sought. Adequate notice must also include alerting the defendant to the consequences of any procedural steps taken or not taken, as well as to the allegations that will be adjudicated at trial. In assessing whether the defence of natural justice has been made out, the opportunities for correcting a denial of natural justice that existed in the originating jurisdiction should be assessed in light of all the relevant factors. Here, the Ontario defendants were not given sufficient notice of the extent and nature of the claims against them in the Florida action and its potential ramifications. Furthermore, there was no notice as to the serious consequences to the defendants of failure to refile their defence in response to the plaintiffs’ repeatedly amended pleadings. As a result, the notice afforded to the defendants did not meet the requirements of natural justice. Finally, the mere fact that the appellants have received mistaken legal advice and did not avail themselves of the remedies available in Florida should not operate to relieve the respondents entirely of the consequences of a significant or substantial failure to observe the rules of natural justice, and it should not, in itself, bar the appellants from relying on this defence. In the circumstances of this case, when all the relevant factors are considered, the appellants’ apprehensiveness about going to Florida to seek relief was understandable.
Even if the natural justice defence did not apply, this judgment should not be enforced. The facts raise very serious concerns about the fairness of enforcing the Florida judgment which do not fit easily into the categories identified by the traditional impeachment defences. The circumstances of this case are such that the enforcement of this judgment would shock the conscience of Canadians and cast a negative light on our justice system. The appellants have done nothing that infringes the rights of the respondents and have certainly done nothing to deserve such harsh punishment. Nor can they be said to have sought to avoid their obligations by hiding in their own jurisdiction or to have shown disrespect for the legal system of Florida. They have acted in good faith throughout and have diligently taken all the steps that appeared to be required of them, based on the information and advice they had. The plaintiffs in Florida appear to have taken advantage of the defendants’ difficult position to pursue their interests as aggressively as possible and to secure a sizeable windfall. The Ontario court should not have to set its seal of approval on the judgment thus obtained without regard for the dubious nature of the claim, the fact that the parties did not compete on a level playing field, and the lack of transparency in the Florida proceedings. The implication of the majority position is that Canadian defendants will from now on be obliged to participate in foreign lawsuits no matter how meritless the claim or how small the amount of damages appears to be, on pain of potentially devastating consequences from which Canadian courts will be virtually powerless to protect them. Moving the law of conflicts in such a direction should be avoided.
Cases Cited
By Major J.
Applied: Morguard Investments Ltd. v. De Savoye, [1990] 3 S.C.R. 1077; referred to: Moses v. Shore Boat Builders Ltd. (1993), 106 D.L.R. (4th) 654, leave to appeal refused, [1994] 1 S.C.R. xi; United States of America v. Ivey (1996), 30 O.R. (3d) 370; Old North State Brewing Co. v. Newlands Services Inc., [1999] 4 W.W.R. 573; Muscutt v. Courcelles (2002), 213 D.L.R. (4th) 577; Indyka v. Indyka, [1969] 1 A.C. 33; Moran v. Pyle National (Canada) Ltd., [1975] 1 S.C.R. 393; Hunt v. T&N plc, [1993] 4 S.C.R. 289; Spar Aerospace Ltd. v. American Mobile Satellite Corp., [2002] 4 S.C.R. 205, 2002 SCC 78; Woodruff v. McLennan (1887), 14 O.A.R. 242; Jacobs v. Beaver (1908), 17 O.L.R. 496; Roglass Consultants Inc. v. Kennedy, Lock (1984), 65 B.C.L.R. 393; Powell v. Cockburn, [1977] 2 S.C.R. 218.
By Binnie J. (dissenting)
Morguard Investments Ltd. v. De Savoye, [1990] 3 S.C.R. 1077; Hunt v. T&N plc, [1993] 4 S.C.R. 289; Tolofson v. Jensen, [1994] 3 S.C.R. 1022; Spar Aerospace Ltd. v. American Mobile Satellite Corp., [2002] 4 S.C.R. 205, 2002 SCC 78; Baker v. Canada (Minister of Citizenship and Immigration), [1999] 2 S.C.R. 817; Adams v. Cape Industries plc, [1991] 1 All E.R. 929.
By LeBel J. (dissenting)
Morguard Investments Ltd. v. De Savoye, [1990] 3 S.C.R. 1077; Hunt v. T&N plc, [1993] 4 S.C.R. 289; Spar Aerospace Ltd. v. American Mobile Satellite Corp., [2002] 4 S.C.R. 205, 2002 SCC 78; Hilton v. Guyot, 159 U.S. 113 (1895); Yahoo!, Inc. v. Ligue contre le racisme et l’antisémitisme, 169 F.Supp.2d 1181 (2001); Emanuel v. Symon, [1908] 1 K.B. 302; Moran v. Pyle National (Canada) Ltd., [1975] 1 S.C.R. 393; Mercandino v. Devoe & Raynolds, Inc., 436 A.2d 942 (1981); United States of America v. Ivey (1995), 26 O.R. (3d) 533; Kidron v. Grean (1996), 48 O.R. (3d) 775; Boardwalk Regency Corp. v. Maalouf (1992), 88 D.L.R. (4th) 612; BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996); Loewen Group, Inc. v. United States of America, International Centre for Settlement of Investment Disputes, Case No. ARB(AF)/98/3, June 26, 2003; Woodruff v. McLennan (1887), 14 O.A.R. 242; Abouloff v. Oppenheimer (1882), 10 Q.B.D. 295; Owens Bank Ltd. v. Bracco, [1992] 2 All E.R. 193; Jacobs v. Beaver (1908), 17 O.L.R. 496; Duchess of Kingston’s Case (1776), 2 Sm. L.C. (8th ed.) 784; Powell v. Cockburn, [1977] 2 S.C.R. 218; Adams v. Cape Industries plc, [1991] 1 All E.R. 929; Cité de Pont Viau v. Gauthier Mfg. Ltd., [1978] 2 S.C.R. 516.
Statutes and Regulations Cited
Canadian Charter of Rights and Freedoms, s. 7 .
Civil Code of Québec, S.Q. 1991, c. 64.
Fla. Stat. Ann. R. Civ. P. § 1.190(a) (West 1967).
Rules of Civil Procedure, R.R.O. 1990, Reg. 194, r. 19.02(3).
United States Constitution, Article IV, Amendment V, Amendment XIV.
Authors Cited
Blom, Joost. “Conflict of Laws — Enforcement of Extraprovincial Default Judgment — Real and Substantial Connection: Morguard Investments Ltd. v. De Savoye” (1991), 70 Can. Bar Rev. 733.
Blom, Joost. “The Enforcement of Foreign Judgments: Morguard Goes Forth Into the World” (1997), 28 Can. Bus. L.J. 373.
Brown, Donald J. M., and John M. Evans. Judicial Review of Administrative Action in Canada. Toronto: Canvasback, 1998 (loose-leaf updated July 2003).
Castel, Jean-Gabriel, and Janet Walker. Canadian Conflict of Laws, 5th ed. Toronto: Butterworths, 2002 (loose-leaf updated May 2003, Issue 5).
Dicey and Morris on the Conflict of Laws, vol. 1, 13th ed. Under the general editorship of Lawrence Collins. London: Sweet & Maxwell, 2000.
Nygh, P. E. Conflict of Laws in Australia, 6th ed. North Ryde: Butterworths, 1995.
Talpis, Jeffrey A., with the collaboration of Shelley L. Kath. “If I am from Grand-Mère, Why Am I Being Sued in Texas?” Responding to Inappropriate Foreign Jurisdiction in Quebec-United States Crossborder Litigation. Montréal: Thémis, 2001.
Walker, Janet. “Beals v. Saldanha: Striking the Comity Balance Anew” (2002), 5 Can. Int’l Law. 28.
Watson, Garry D., and Frank Au. “Constitutional Limits on Service Ex Juris: Unanswered Questions from Morguard” (2000), 23 Advocates’ Q. 167.
Yntema, Hessel E. “The Objectives of Private International Law” (1957), 35 Can. Bar Rev. 721.
Ziegel, Jacob S. “Enforcement of Foreign Judgments in Canada, Unlevel Playing Fields, and Beals v. Saldanha: A Consumer Perspective” (2003), 38 Can. Bus. L.J. 294.
APPEAL from a judgment of the Ontario Court of Appeal (2001), 54 O.R. (3d) 641, 202 D.L.R. (4th) 630, 148 O.A.C. 1, 10 C.P.C. (5th) 191, [2001] O.J. No. 2586 (QL), reversing a judgment of the Ontario Court (General Division) (1998), 42 O.R. (3d) 127, 27 C.P.C. (4th) 144, [1998] O.J. No. 4519 (QL). Appeal dismissed, Iacobucci, Binnie and LeBel JJ. dissenting.
J. Brian Casey, Janet E. Mills and Matthew J. Latella, for the appellants Geoffrey Saldanha and Leueen Saldanha.
Neal H. Roth, for the appellant Dominic Thivy.
Messod Boussidan, Larry J. Levine, Q.C., and Kevin D. Sherkin, for the respondents.
The judgment of McLachlin C.J. and Gonthier, Major, Bastarache, Arbour and Deschamps JJ. was delivered by
Major J. —
I. Introduction
1 The rules related to the recognition and enforcement of foreign judgments by Canadian courts are the focus of this appeal. “Foreign” in the context of this case refers to a judgment rendered by a court outside Canada, as opposed to an interprovincial judgment.
2 The appellants, residents of Ontario, were the owners of a vacant lot in Sarasota County, Florida. They sold the lot to the respondents. A dispute arose as a result of that transaction. The respondents eventually commenced two actions against the appellants in Florida. Only the second action is relevant to this appeal. The appellants received notice at all stages of the litigation and defended the first action, which was dismissed without prejudice. A defence was filed to the second action without the knowledge of the Saldanhas.
3 The appellants chose not to defend any of the three subsequent amendments to the second action. Pursuant to Florida law, the failure to defend the amendments had the effect of not defending the second action and the appellants were subsequently noted in default. Damages of US$260,000 were awarded by a jury convened to assess damages. The damages were not paid and an action was started in Ontario to enforce the Florida judgment.
4 We have to first determine the circumstances under which a foreign judgment shall be recognized and enforced in Canada. Next, the nature and scope of the defences available to the judgment debtor must be established. For the purposes of these reasons, I assume the laws of other Canadian provinces are substantially the same as in Ontario and for that reason, Canada and Ontario are used interchangeably. A future case involving another part of Canada will be considered in light of whatever differences, if any, exist there.
II. Facts
5 The appellants were Ontario residents. In 1981, they and Rose Thivy, who is Dominic Thivy’s wife and no longer a party to this action, purchased a lot in Florida for US$4,000. Three years later, Rose Thivy was contacted by a real estate agent acting for the respondents as well as for William and Susanne Foody (who assigned their interest to the Bealses’ and are no longer parties to this action) enquiring about purchasing the lot. In the name of her co-owners, Mrs. Thivy advised the agent that they would sell the lot for US$8,000. The written offer erroneously referred to “Lot 1” as the lot being purchased instead of “Lot 2”. Rose Thivy advised the real estate agent of the error and subsequently changed the number of the lot on the offer to “Lot 2”. The amended offer was accepted and “Lot 2” was transferred to the respondents and the Foodys.
6 The respondents had purchased the lot in question in order to construct a model home for their construction business. Some months later, the respondents learned that they had been building on Lot 1, a lot that they did not own. In February 1985, the respondents commenced what was the first action in Charlotte County, Florida, for “damages which exceed $5,000”. This was a customary way of pleading in Florida to give the Circuit Court monetary jurisdiction. The appellants, representing themselves, filed a defence. In September 1986, the appellants were notified that that action had been dismissed voluntarily and without prejudice because it had been brought in the wrong county.
7 In September 1986, a second action (“Complaint”) was commenced by the respondents in the Circuit Court for Sarasota County, Florida. That Complaint was served on the appellants, in Ontario, to rescind the contract of purchase and sale and claimed damages in excess of US$5,000, treble damages and other relief authorized by statute in Florida. This Complaint was identical to that in the first action except for the addition of allegations of fraud. Shortly thereafter, an Amended Complaint, simply deleting one of the defendants, was served on the appellants. A statement of defence (a duplicate of the defence filed in the first action) was filed by Mrs. Thivy on behalf of the appellants. The trial judge accepted the evidence of the Saldanhas that they had not signed the document. Accordingly, the Saldanhas were found not to have attorned. As discussed further in these reasons, Dominic Thivy’s situation differs.
8 In May 1987, the respondents served a Second Amended Complaint which modified allegations brought against a co-defendant who is no longer a party, but included all the earlier allegations brought against the appellants. No defence was filed. A Third Amended Complaint was served on the appellants on May 7, 1990 and again, no defence was filed. Under Florida law, the appellants were required to file a defence to each new amended complaint; otherwise, they risked being noted in default. A motion to note the appellants in default for their failure to file a defence to the Third Amended Complaint and a notice of hearing were served on the appellants in June 1990. The appellants did not respond to this notice. On July 25, 1990, a Florida court entered “default” against the appellants, the effect of which, under Florida law, was that they were deemed to have admitted the allegations contained in the Third Amended Complaint.
9 The appellants were served with notice of a jury trial to establish damages. They did not respond to the notice nor did they attend the trial held in December 1991. Mr. Foody, the respondent Mr. Beals, and an expert witness on business losses testified at the trial. The jury awarded the respondents damages of US$210,000 in compensatory damages and US$50,000 in punitive damages, plus post-judgment interest of 12 percent per annum. Notice of the monetary judgment was received by the appellants in late December 1991.
10 Upon receipt of the notice of the monetary judgment against them, the Saldanhas sought legal advice. They were advised by an Ontario lawyer that the foreign judgment could not be enforced in Ontario because the appellants had not attorned to the Florida court’s jurisdiction. Relying on this advice, the appellants took no steps to have the judgment set aside, as they were entitled to try and do under Florida law, or to appeal the judgment in Florida. Florida law permitted the appellants ten days to commence an appeal and up to one year to bring a motion to have the judgment obtained there set aside on the grounds of “excusable neglect”, “fraud” or “other misconduct of an adverse party”.
11 In 1993, the respondents brought an action before the Ontario Court (General Division) seeking the enforcement of the Florida judgment. By the time of the hearing before that court, in 1998, the foreign judgment, with interest, had grown to approximately C$800,000. The trial judge dismissed the action for enforcement on the ground that there had been fraud in relation to the assessment of damages and for the additional reason of public policy. The Ontario Court of Appeal, Weiler J.A. dissenting, allowed the appeal.
III. Judgments Below
A. Ontario Court (General Division) (1998), 42 O.R. (3d) 127
12 The trial judge declared the Florida judgment unenforceable in Ontario. Having concluded from the verdict of the Florida jury that it had not been made aware of certain facts, the trial judge dismissed the action on the basis of fraud. He also held that the judgment was unenforceable on the grounds of public policy. The trial judge recommended that the defence of public policy be broadened to include a “judicial sniff test” which would permit a domestic court to refuse enforcement of a foreign judgment in cases where the facts did not satisfy any of the three existing defences to enforcement but were nevertheless egregious.
B. Ontario Court of Appeal (2001), 54 O.R. (3d) 641
13 A majority of the Ontario Court of Appeal allowed the appeal. Doherty and Catzman JJ.A. concluded that neither the defence of fraud nor of public policy had application to this case.
14 As to the defence of fraud, Doherty J.A. held that that defence was only available where the allegations of fraud rest on “newly discovered facts”, that is, facts that a defendant could not have discovered through the exercise of reasonable diligence prior to the granting of the judgment. He concluded that the trial judge erred in relying on assumed facts that conceivably might have been uncovered by the appellants had they chosen to participate in the Florida proceedings. Even if the trial judge had correctly defined the defence of fraud, Doherty J.A. held that there was no evidence that the judgment had been obtained by fraud.
15 On the defence of public policy, Doherty J.A. rejected the need to incorporate a “judicial sniff test” as part of that defence. Assuming a “sniff test” was required, he held that no reasons existed in this appeal for public policy to preclude the enforcement of the foreign judgment. He stated (at para. 84):
The Beals and Foodys launched a lawsuit in Florida. Florida was an entirely proper court for the determination of the allegations in that lawsuit. The Beals and Foodys complied with the procedures dictated by the Florida rules. There is no evidence that they misled the Florida court on any matter. Rather, it would seem they won what might be regarded as a very weak case because the respondents chose not to defend the action. I find nothing in the record to support the trial judge’s characterization of the conduct of the Beals and Foodys in Florida as “egregious”. They brought their allegations in the proper forum, followed the proper procedures, and were immensely successful in no small measure because the respondents chose not to participate in the proceedings.
16 Weiler J.A., in dissent, would have dismissed the appeal. She concluded that the defences of natural justice and fraud made it inappropriate for a domestic court to enforce the Florida judgment. She stated that the appellants were deprived of natural justice by not having been given sufficient notice to permit them to appreciate the extent of their jeopardy prior to the judgment for damages against them. Weiler J.A. also held that the respondents had concealed certain facts from the Florida jury.
IV. Analysis
17 It was properly conceded by the parties, as explained below, in both the trial court and Court of Appeal, that the Florida court had jurisdiction over the respondents’ action pursuant to the “real and substantial connection” test set out in Morguard Investments Ltd. v. De Savoye, [1990] 3 S.C.R. 1077. As a result, the issues raised in this appeal were limited to the application and scope of the defences available to a domestic defendant seeking to have a Canadian court refuse enforcement of a foreign judgment.
18 In Morguard, supra, the “real and substantial connection” test for the recognition and enforcement of interprovincial judgments was adopted. Morguard did not decide whether that test applied to foreign judgments. However, some courts have extended the application of Morguard to judgments rendered