Robert B. Cohen
Cassels Brock & Blackwell LLP
Suite 2100, Scotia Plaza, 40 King Street West, Toronto, Ontario, Canada M5H 3C2
416 869 5425 rcohen@casselsbrock.com
Robert (Bob) Cohen is the Chairman of Cassels Brock & Blackwell’s Advocacy Department and has been a partner at the firm since 1999. He is called to the Bar in the provinces of both Ontario (1991) and British
Columbia, Canada.
Bob’s practice focuses on a variety of commercial litigation, including international arbitrations involving complex contract disputes, as well as shareholder oppression remedies and partnership disputes. Bob often acts for boards of directors of public companies in responding to shareholder activism and in litigating mergers and acquisitions. He has appeared as successful counsel at all levels of court in Canada, including
Ontario’s trial courts, the Ontario Court of Appeal and the Supreme Court of Canada.
It should be noted that Canada, being a federation, has both a federal government and individual provincial or territorial governments for each of Canada’s ten (10) provinces (Alberta, British Columbia, Manitoba, New
Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island, Québec and
Saskatchewan) and three (3) territories (Northwest Territories, Nunavut and Yukon). Generally speaking but subject to specific areas of law over which the federal government has exclusive jurisdiction (such as trademarks, copyright, patents, First Nations, federal tax, to name a few), the legislation that pertains to the administration of civil justice in Canada is governed by the legislation of each province or territory, rather than the federal government. As such, the “discovery process” in Canadian litigation can vary from province to
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province and from territory to territory. Having said that, the discovery process in many of the provinces and the territories of Canada is quite similar and has been adapted from both English and American frameworks.
There are two (2) ways in which legal proceedings are commenced in most provinces or territories in
Canada, one being by way of action (which involves the exchange of pleadings followed by a pre-trial discovery process) and the other being by way of application (which involves the filing of affidavit material and cross-examinations, with possible cross-examinations of witnesses who have not sworn affidavits). The rules of court in each province or territory dictate which proceeding may be commenced by way of application, but this process is normally restricted to claims involving the administration of estates, the interpretation of contracts, legal instruments or laws, where a statute expressly authorizes the commencement of proceedings by way of application or any matter where it is unlikely that there will be any material facts in dispute. To the extent that the rules of court do not permit a litigant to proceed by way of application, a litigant must then proceed by way of action. Once a litigant proceeds by way of action, that party is subject to the discovery process described below.
Strategically, most counsel who prosecute litigation prefer to proceed by way of application, if permitted under the rules of court. The application process is streamlined (as evidence is led through affidavits) and requires less court time to adjudicate (as the court normally does not hear viva voce evidence from witnesses, although the judge hearing the application does retain the discretion to order a trial of an issue or convert the entire application into an action if there are credibility issues on material facts that cannot be resolved without live testimony). Consequently, counsel are typically able to obtain earlier hearing dates from the court for an application process (as opposed to trial dates for an action), leading to more efficient rulings (and settlements) in most cases.
Most jurisdictions in Canada provide for two (2) forms of pre-trial discovery in a proceeding commenced by action, namely:
(i) documentary discovery , being the exchange of relevant documents in a party’s possession, custody or control, whether favourable or unfavourable to a party’s position, which documents are to be listed in a sworn Affidavit of Documents and are to be produced to the opponent, subject to the rule that a party does not have to produce a relevant record that is “privileged”; and
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(ii) examinations for discovery of parties to the litigation to be conducted under oath , either orally or in writing. In some provinces, these examinations for discovery have maximum time limits, and these time limits and the scope of these examinations are usually addressed in a “discovery plan”, but the general rule in Ontario is that a party cannot be examined for more than seven (7) hours (for claims involving more than $100,000) without the agreement of the party or a court order to the contrary, or more than two (2) hours (for claims involving $100,000 or less).
In Ontario and subject to limited exceptions, the parties to a proceeding commenced by way of action do not have an automatic right to “depose” non-party witnesses. Even in the case of a corporate party, counsel is only entitled to examine one (1) representative of that corporation to attend pre-trial examinations on behalf of the corporation. Only if a party can persuade a court that it would be unfair to allow a party to proceed to trial without obtaining pre-trial production of relevant documents from a non-party or conducting a pre-trial examination of a non-party witness will a court order be granted to permit extended discovery of non-parties.
Orders to allow non-party discovery are rarely obtained and require a litigant to meet a high threshold before being granted this type of relief.
As alluded to above, pre-trial discovery in Canada is limited in scope as compared to the discovery processes in other countries. This is primarily a function of, among other things, recent procedural changes which require the parties to agree upon a “discovery plan” in advance of embarking on the discovery process, which discovery plan usually addresses “e-Discovery” issues (and the scope of “e-Discovery” searches and production) and must incorporate and adhere to principles of “proportionality”, as described below.
Due to a number of factors, including the rising cost of litigation, the increasing demands on limited judicial resources in Canada and the copious amounts of electronic data and other records that are routinely created and distributed by litigants and others, various provinces have enacted new discovery rules that now place limits on the discovery process (with the objective of attempting to balance the interests of a fair, efficient, reliable and accessible court system). To this end and in January of 2010, a new rule created under the Ontario Rules of Civil
Procedure came into effect, which Rule applies to the discovery of documents and examinations for discovery, as well as cross-examinations conducted in an application process. That new Rule provides as follows:
“29.2.03 (1) In making a determination as to whether a party or other person must answer a question or produce a document, the court shall consider whether,
(a) the time required for the party or other person to answer the question or produce the document would be unreasonable;
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(b) the expense associated with answering the question or producing the document would be unjustified;
(c) requiring the party or other person to answer the question or produce the document would cause him or her undue prejudice;
(d) requiring the party or other person to answer the question or produce the document would unduly interfere with the orderly progress of the action; and
(e) the information or the document is readily available to the party requesting it from another source.
(2) In addition to the considerations listed in subrule (1), in determining whether to order a party or other person to produce one or more documents, the court shall consider whether such an order would result in an excessive volume of documents required to be produced by the party or other person”.
As one might expect, there are often robust and heated debates about whether a request for certain documents or for answers to specific questions are “proportionate”. In each case, a Canadian court must weigh the importance of that evidence and its accessibility in order to resolve those debates.
For the most part, the obligation to produce records and answer questions as part of the discovery process in
Canada is governed by an assessment of relevance. Subject to various categories of “privilege” and principles of proportionality, a party is obligated to produce relevant records and answer relevant questions, even if those records and answers would be considered by a layman to be “private”, embarrassing or the like. Consequently, a party to a Canadian proceeding is often required to produce all sorts of private records, including excerpts from a party’s personal diary, medical records and home videos, and must similarly answer relevant questions relating to private records, so long as they are relevant to the litigation in question.
On occasion, Canadian courts have restricted access of confidential records to a party’s counsel and the party’s expert where there is a real concern of misuse of such confidential information for non-litigation purposes (e.g. in the case of the disclosure of trade secrets or business-sensitive information to a competitor in the litigation process). However and subject to documentary or oral evidence being subject to a
“privilege”, a litigant in Canadian civil proceedings must provide relevant and “private” evidence to its opponent in the pre-trial discovery process.
There are a number of categories of “privilege” recognized by Canadian law, which permit a party to withhold disclosure of relevant documentation or information, including:
(i) privilege for documents prepared in anticipation of litigation ;
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(ii) lawyer-and-client privilege ;
(iii) privilege regarding settlement negotiations ; and
(iv) privilege based on confidentiality (which has, on occasion, been held to apply to a psychiatristpatient relationship but not to a priest-parishioner relationship, depending on the province in question).
In Ontario, the court does not recognize “arbitration privilege”. Accordingly and to the extent that documents in a foreign arbitration are relevant and proportionate, such documents must be produced in
Ontario litigation.
Further, a party may be deemed to waive privilege and be forced to produce relevant records and answer relevant questions that would otherwise be exempt from disclosure in litigation. For example, if a party puts the quality of legal advice in issue in the litigation, lawyer-and-client privilege of related documents and information will be deemed to be waived. Further, if a party discloses privileged documentation inadvertently and does not immediately take reasonable steps to retrieve same, privilege may be deemed to be waived as well.
There are a number of decisions that have been rendered by Canada’s highest court, the Supreme Court of
Canada, which set out the applicable principles of when a Canadian court will “recognize” a foreign judgment. Over and above those principles, many provinces have enacted legislation which may pertain, depending upon whether the judgment is rendered by a foreign court or an arbitrator.
The leading cases from the Supreme Court of Canada dealing with the recognition of foreign judgments are
Beals v. Saldanha , 2003 SCC 72 and Pro Swing Inc. v. Elta Golf Inc.
, 2006 SCC 52. A number of principles arise from those cases, as recently summarized in the Ontario Court of Appeal decision of Yaiguaje v.
Chevron Canada , 2013 ONCA 758 (which involved an action to seek the recognition and enforcement of an
Ecuadorian judgment for $18 billion under Canadian law as against both Chevron Corporation, the judgment debtor, and Chevron’s Canadian subsidiary, Chevron Canada Limited). The basic principles of whether a
Canadian court will recognize a foreign judgment include the following:
(i) before a Canadian court will recognize and enforce a judgment from a foreign jurisdiction, the
Canadian court must determine whether the foreign court had a “real and substantial connection” to the action or the parties;
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(ii) the presence of traditional indicia of jurisdiction (such as attornment, agreement to submit, residence, location of the cause of action or presence in the foreign jurisdiction) will typically serve to satisfy the “real and substantial connection” requirement; and
(iii) based on the principle of comity and to ensure that a Canadian court’s constitutional authority is not exceeded, the exclusive focus of the “real and substantial connection” test is on the foreign jurisdiction such that there is no need to undertake an analysis of whether there is a “real and substantial connection” between the Canadian court and the subject matter of the foreign judgment.
Interestingly, an appeal of the Yaiguaje v. Chevron case will be heard by the Supreme Court of Canada in the coming months. Accordingly, there is some likelihood that the legal principles pertaining to the recognition and enforcement of foreign judgments in Canada may be modified over the ensuing years.
It should be noted that many provincial courts will recognize and enforce not only foreign monetary judgments but also foreign non-monetary judgments (for injunctive relief, for example), provided that such orders are not quasi-criminal or penal in nature (such as a foreign contempt order). However, a Canadian court being asked to enforce such a foreign judgment will also consider other factors beyond the “real and substantial connection” test referenced above. As was stated in Pro Swing Inc. v. Elta Golf Inc.
(which involved the request of the Canadian court to recognize and enforce a trademark injunction obtained in
Ohio):
“The recognition and enforcement of equitable orders will require a balanced measure of restraint and involvement by the domestic court that is otherwise unnecessary when the court merely agrees to use its enforcement mechanism to collect a debt”.
In that same decision, the Supreme Court of Canada listed a number of possible considerations or questions as to whether a Canadian court should enforce a foreign equitable (non-monetary) judgment, posed as follows:
 Are the terms of the foreign order clear and specific enough to ensure that the defendant will know what is expected from him or her?
 Is the order limited in its scope and did the originating court retain the power to issue further orders?
 Is the enforcement of the foreign equitable order the least burdensome remedy for the Canadian justice system?
 Is the Canadian litigant exposed to unforeseen obligations?
 Are any third parties affected by the order?
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 Will the use of judicial resources be consistent with what would be allowed for domestic litigants?
In United States of America v. Yemec , 2010 ONCA 414, the Ontario Court of Appeal applied the foregoing principles in considering whether to enforce a Mareva injunction and Anton Piller order obtained by the
United States government against persons operating a cross-border telemarketing business selling Canadian and foreign lottery tickets to consumers in the United States. Similarly and in Blizzard Entertainment Inc. v.
Simpson , 2012 ONSC 4312, the Ontario Superior Court of Justice recognized and enforced a California judgment which granted an injunction to stop Simpson from infringing Blizzard’s copyrights and other rights in the computer game “Star Craft II” as a consequence of Simpson’s online sale of unauthorized “map hacks”, which were designed to alter and impair the online, multiplayer functionality of “Star Craft II”.
In order for a Canadian court to recognize a foreign judgment (which would then enable the judgment creditor to use various enforcement remedies prescribed by Canadian law, as discussed below), not only must the foreign judgment be final (and not be subject to a pending appeal), it must also withstand the scrutiny of potential defences that may be raised by a judgment debtor. However, the Canadian courts have made it clear that it is not within the mandate of the Canadian court to re-litigate the underlying claims or substantive defences giving rise to the foreign judgment (in part, based on the principle of comity). On the contrary, the common law defences that may be raised in opposition to a proceeding to recognize and enforce a foreign judgment are limited to:
(i) fraud – being a fraud on the foreign court that was undetectable and could not have been discovered by the exercise of reasonable diligence prior to the issuance of the foreign judgment;
(ii) denial of natural justice – being a foreign process which violates Canadian principles of procedural justice (the hallmarks of natural justice in Canada include unbiased and independent adjudicators and a fair opportunity to present one’s position and defend the claim); and
(iii) public policy – being a foreign judgment which is based on foreign law which offends the Canadian view of basic morality or where the foreign court is proven to be corrupt.
The foregoing limited defences were outlined in Beals v. Saldanha and have been confirmed in numerous decisions from most of the provinces throughout Canada. As such, most foreign judgments issued from common law jurisdictions with litigation processes similar to those in Canada (such as England, Australia and the United States of America) are not normally opposed in a Canadian proceeding seeking to recognize and enforce such a foreign judgment.
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In Canada, the courts have welcomed the increasing adjudication of commercial disputes by private arbitrators (especially because resolution by such method relieves the heavy burden on Canada’s public judicial system). Accordingly, it is not surprising that many provinces in Canada have enacted legislation providing for the recognition and enforcement of both domestic and foreign arbitral awards. For example and in Ontario, section 50 of the Arbitration Act, 1991 expressly provides that a person who is entitled to the enforcement of a domestic arbitral award “may make an application to the court to that effect”. Similarly, section 11 of the International Commercial Arbitration Act (which is provincial legislation that applies to international arbitral awards) states that “an (international) arbitral award recognized by the court is enforceable in the same manner as a judgment or order of the court”.
In a proceeding to recognize and enforce a foreign arbitral award, a respondent may raise any of the common law defences referenced above (fraud, denial of natural justice and public policy). However, the
Ontario International Commercial Arbitration Act expressly provides overlapping and additional statutory grounds to oppose the enforcement of international arbitral awards by virtue of its adoption of the
UNCITRAL Model Law on International Commercial Arbitration (as adopted by the United Nations
Commission on International Trade Law on 21 June, 1985). More specifically, Article 36 of the Model Law provides that recognition or enforcement of a foreign arbitral award, irrespective of the country in which it was made, may be refused only if the objecting party can furnish proof that:
(i) a party to the arbitration agreement was under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law
(ii) of the country where the award was made; the party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or the arbitral proceedings or was otherwise unable to present his case;
(iii) the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration;
(iv) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or
(v) the subject matter of the dispute is not capable of settlement by arbitration under Canadian law or the recognition or enforcement thereof would be contrary to the public policy of Canada.
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In short and subject to a few additional statutory grounds to oppose the recognition and enforcement of foreign arbitral awards, as reflected in the Model Law, foreign arbitral awards are subject to the same legal principles of recognition and enforcement as foreign judicial judgments and orders.
As intimated above, the first step in enforcing foreign judgments or arbitral awards in Canada is having them
“recognized” (or converted into a formal judgment) by the Canadian court. Some express provisions of provincial legislation permit a party to “apply” to the court (and therefore be entitled to proceed by the more expeditious route of application rather than by action). To assist in that respect, the Ontario Rules of Civil
Procedure also expressly authorize a party to effect service of a proceeding relating to “a judgment of a court outside of Ontario” without a court order.
Once the foreign judgment or arbitral award is “recognized” and converted into a Canadian judgment, a party seeking to enforce the Canadian judgment has a variety of remedies to assist with the enforcement thereof, including:
(i) a writ of seizure and sale – by filing this document in the district where a judgment debtor has assets, a court officer is permitted to seize and sell the judgment debtor’s property, including personal property and real estate, subject to certain property which is exempt from seizure and sale (such as clothes not exceeding $5,000 in value, household furniture, utensils, food or fuel not exceeding
(ii)
$10,000 in value and a motor vehicle not exceeding $5,000 in value); garnishment of bank accounts, receivables and wages – by filing affidavit material to explain why the judgment creditor expects that the judgment debtor has funds in a bank account or is entitled to receive funds from a third party, the court will issue an order requiring the bank or the third party to pay a court officer, who will then direct the payment of these funds, on a pro rata basis, to the creditors who have filed a writ of seizure and sale with the court officer, subject to provincial legislation which provides that only a portion of a judgment debtor’s ongoing wages may be seized or garnished;
(iii) writs of sequestration and possession – by filing these documents, a court officer is directed to take possession of the judgment debtor’s property and to collect and hold any income from that property until the debtor complies with any outstanding order of the court;
(iv) the appointment of a receiver or receiver-manager – in the case of ongoing businesses or where the court is satisfied that there is a real risk that the judgment debtor’s property will be concealed or diverted to defeat a judgment creditor, the court may appoint a receiver or receiver-manager over the affairs or assets of the judgment debtor; and
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(v) triggering the oppression remedy – to the extent that officers or directors of corporate debtors have orchestrated the affairs of the corporate debtor in a fashion designed to frustrate creditors or in a manner that has the effect of being “oppressive”, “unfairly prejudicial” or “unfairly disregards the interests” of a creditor, officers and directors may become personally liable to compensate a creditor of the corporation or the court may order a host of other relief to rectify such improper conduct.
There are various rules that apply to each of these processes as well as other processes that may be engaged to assist with attempts to collect on a Canadian judgment. For example, a judgment creditor in Ontario is entitled to examine a judgment debtor under oath every twelve (12) months to review the financial records and affairs of a judgment debtor (with a view to locating exigible property to satisfy outstanding judgments).
However and as one might expect, judgment debtors are often not forthright in producing documents and answering questions about their financial circumstances such that private investigators are sometimes engaged to try and locate hidden or diverted assets.
Additionally, debtors often transfer assets to non-arm’s length parties in an attempt to impair the collection efforts of creditors, or debtors sometimes pay certain unsecured creditors in priority to other unsecured creditors. Canada has provincial legislation which allows the court to set aside “fraudulent conveyances” and
“fraudulent preferences” so that efforts by debtors (whether a formal judgment debtor or otherwise) to defeat creditors in this fashion may be addressed effectively by the Canadian courts.
The Canadian litigation process has a variety of pre-trial tools that are routinely engaged to enable the parties to “discover” the case they each have themselves and the case that they each have to meet. In recent years, the Canadian litigation system has adopted modifications to these tools so that litigation may be conducted in a more cost-effective and efficient manner.
Canadian courts have a long tradition of respecting foreign judgments and foreign arbitral awards. To that end, the Canadian courts will recognize and assist with their enforcement within Canada’s borders through a variety of aggressive remedies, provided that the foreign judgments or foreign arbitral awards were obtained in a bona fide and fair fashion and the recognition and enforcement thereof does not violate Canada’s own sense of morality and public policy.
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