ENFORCEMENT OF FOREIGN JUDGMENTS
What should happen when a foreign judgment against
an Ontario resident is (1) valid under the law of the jurisdiction
it was obtained; (2) was obtained in a jurisdiction with which Ontario
has reciprocal enforcement of judgments legislation; (3) relates
to conduct in Ontario and which could not have been obtained in
Ontario because the conduct was illegal; and (4) is brought to Ontario
for enforcement? Should Ontario courts refuse to permit the enforcement
of the judgment. That was the issue that the Ontario Court of Appeal
dealt with in the case now reported as Lloyd's v. Saunders,
 O. J. No. 3403 (C.A.) (released August 28, 2001, court docket
The result of the case is set out in the caption to
this note. Lloyd's was permitted to enforce, in Ontario, judgments
obtained in England against "Names" who owed Lloyd's money.
The Names were people who had invested in Lloyd's and then had not
paid the their calls when the investments went sour. The trial court
permitted this, and the Court of Appeal affirmed the decision, even
though the contracts under which the Names had invested in Lloyd's,
which were contracts made in Ontario, were held to be illegal, in
Ontario (by securities law), and it was held that this illegality
would have prevented Lloyd's from obtaining the judgments in Ontario.
Modern commercial transactions, of all sorts, frequently
involve more than one jurisdiction. The goods may come from a different
jurisdiction. The goods may travel through a number of jurisdictions
to get to their destination. The parties maybe in different jurisdictions.
The parties may agree that the governing law is that of yet another
jurisdiction. It is more likely than not that the laws of each jurisdiction
will vary in some fashion. That variance may not be significant.
Or it may.
In order to recognize and promote extra-local commerce,
whether within one country or internationally, modern legal systems
tend to have provisions under which qualifying foreign judgments
may be enforced in the domestic jurisdiction as if the judgments
had been obtained in the domestic jurisdiction. Ontario has statutory
provisions of this sort.
So, Ontario enforcement of foreign judgment legislation
allows parties to deal with Ontario residents with the knowledge
that, should something go wrong in the transaction, the aggrieved
party will not be limited to suing in Ontario. The aggrieved party
will know that, in appropriate cases, it will be able will be able
to obtain a judgment against the Ontario resident in another jurisdiction,
and then enforce that judgment in Ontario as if it had been obtained
One hidden difficulty in multi-jurisdictional transaction
is that the laws of the jurisdictions will probably be different.
The difference may be significant. Conduct which is legal in one
jurisdiction involved in the transaction may not be legal in another.
In Ontario, the Reciprocal Enforcement of Judgments (UK) Act, R.S.O., permits the registration of qualifying UK judgments.
Once registered, the judgment may be enforced as if it were a judgment
of an Ontario Court. The judgment must satisfy a number of specific
criteria in order to qualify; however, the legislation provides
the Court with residual discretion to refuse to register a judgment
even when the judgment satisfies the specific criteria . The ultimate
issue facing the Court of Appeal in Saunders was whether
to invoke this residual discretion and reject Lloyd's request for
registration on the basis of the illegality, in Ontario, of the
Lloyd's actions and the investment contracts.
Lloyd's had been successful at first instance in obtaining
the order permitting registration of the judgments against the various
Names. The Names appealed. (A few of the cases were used as test
cases. Lloyd's and the Names involved in their separate law suits
with Lloyd's had agreed that the results in the test cases would
apply to all.) The crux of the reasons the Court of Appeal gave
for affirming the lower court decision and allowing the registration
of the UK judgment(s), and the enforcement of the UK judgments in
Ontario, was (1) comity between the UK and Ontario in the sense
of what refusing to allow enforcement would mean to business relationships
-- this was a backhanded way of using the poorly regarded floodgates
argument without admitting one is doing so and (2) regarding comity
as the key factor was appropriate, here, because while the conduct
of Lloyd's was illegal it was not too illegal.
Judgments, particularly appellate judgments are supposed
to provide persons interested in the consequences with some useful
direction as to what will be permissible conduct. The Court of Appeal
has now told parties to commercial transactions that it is permissible
to flout Ontario law provided one does not go too far. How far is
too far? How much illegality is too much illegality?
The Court did not say. What it did say, in essence,
was that what was good enough for the mother country would, in this
case, be good enough for the daughter Canada. Lloyd's could collect.
"When I use a word," Humpty Dumpty said
in a rather scornful tone, "it means just what I choose it
to mean -- neither more nor less."
"The question is," said Alice, "whether you can
make words mean so many different things."
"The question is," said Humpty Dumpty, "which is
to be master, that's all."
Carroll, Through The Looking Glass,
Now, as to whether the decision was fair. Some of
the Names had done very well for themselves in the beginning. Some,
unfortunately, had joined the game too late in the day. Ask yourself:
should the Names have been able to rely on the illegality of Lloyd's
conduct as a defence? Or putting it more broadly, should the Ontario
Court of Appeal have ruled that comity of nations was so important
that it could, in exercising the discretion given the courts, by
the legislation, as to whether to permit enforcement of the UK judgment,
ignore Ontario law and allow Lloyd's to enforce judgments Lloyd's
would never have been able to obtain in Canada? Does that not seem,
quite reasonably, to be the sort of decision that should be left
to the Legislature?
Warsaw Convention, Limits of Liability -- Articles
22 and 25: DSS Trading Limited v. Swiss Air Transport Company Limited,
High Court of Hong Kong, Commercial Action No. 248 of 1995, 24 May
The plaintiff shipped a consignment of expensive
Swiss watches from Switzerland to a consignee in Hong Kong. The
freight forwarder issued house airway bills confirming its receipt
of the cargo for carriage and its responsibility for same. There
was no declared valuation for the cargo, nor was there any request
that the cargo be provided valuable cargo handling care during transit.
Either would have involved a freight surcharge. The shipper opted
to ship this shipment as a general consolidation.
The goods were stolen. The plaintiff sued various
parties including the freight forwarder, one JM. It was conceded
that the theft took place while the goods were still "in transit"
for the purposes of the freight forwarder's carriage undertaking
so that it was liable. The issue was quantum: whether the limits
of liability under the Warsaw Convention (as amended by the Hague
Protocol) governed or whether the plaintiff could "break"
the limits. The plaintiff asserted that the limits of liability
in Article 22 of the Protocol did not apply if was proved that the
damage resulted from an act or omission of the carrier, his servants
or agents, done with intent to cause damage or recklessly knowing
that damage would probably result. (It should be remembered that
Article 25 imposes an additional further requirement when the act
or omission of a servant or agent is an issue. It requires proof
that the servant or agent was acting within the scope of employment.)
The goods arrived at the Hong Kong airport; however,
they were stolen before they could be picked up by the consignee.
They were picked up by a carrier who had been provided false paperwork
and so was duped into delivering them to the thief. The thief had
obtained a special form, referred to as "SRF," which was
used at the Hong Kong cargo terminal facility as a pick-up document.
The SRF is a document which entitles the bearer, upon presentation
of the SRF at the warehouse, to take delivery of the goods referred
to in the document.
The question at trial was how the thief acquired the
SRF. The trial focused on the purpose of and handling of the SRF
document and whether the freight forwarder or its servants or agents
were involved with the theft of the goods, or acted in such a reckless
fashion, that the limits of liability might be broken.
The evidence was that when the load arrived at the
Hong Kong terminal, it was "deconsolidated" and stored
in the terminal warehouse. The terminal produced the SRF which was
provided to the freight forwarder together with other documents
relating to the goods. The freight forwarder who received the documents,
including the SRF, separated the documents in order to extract documents,
such as the SRF, which would have to be presented at the warehouse
to pickup goods. Once separated, the SRF document was placed in
a drawer specifically assigned for that purpose in the freight forwarder's
office. The drawer was left unlocked, did not have a lock, and nothing
was ever done to secure it in any fashion. The trial judge held
that the security system for the documents was very poor.
There were five employees working in the freight forwarder's
office. The freight forwarder dismissed one supervisor immediately
following the disappearance of the goods,. A regional director of
the freight forwarder wrote in correspondence that "we have
most likely hired some staff with criminal backgrounds and intentions".
The trial judge held the plaintiff was not bound by
the Warsaw-Hague limits. The plaintiff was able to recover all of
its losses. The Court found that the freight forwarder was reckless
in the manner in which the freight fowarder handled the SRF. The
freight forwarder argued that it lacked the subjective knowledge
that "damage would likely result" and, therefore, could
not be said to have been reckless. The forwarder called evidence
from various employees as to their mistaken belief that the SRF
was but one of the several requirements that had to met to obtain
cargo from the warehouse so that merely the SRF falling into the
wrong hands would not be enough to put the cargo at peril. The trial
judge rejected this evidence. He did not believe the witnesses.
He found that the SRF was known throughout the industry to be a
bearer document and that it had to be closely guarded. Accordingly,
the Court found that the loss has occurred from acts or omissions
done "recklessly and with knowledge that damage would probably
The judge also considered the argument that the limits
should not apply on the basis that the cause of the loss had been
established to be theft on the part of the freight forwarder, or
involving servants or agents of the freight forwarder. In what may
be regarded as important clarification of the relevant tests under
the Warsaw-Hague regime, the judge held that the plaintiff had established
on a balance of probability that there had been theft by one or
more of the staff of the freight forwarder, who, in making the SRF
document available to the third party thief, actually participated
in the theft. The judge did not point a specific finger at any one
employee or group of employees nor did the judge suggest that that
was necessary for the purposes of Article 25. The judge simply found,
as a fact, that the SRF document had initially been placed into
a drawer, and that others similarly so placed were never altered
or removed. These facts created sufficient basis for the inference
and conclusion that the an employee of the freight forwarder was
involved in the process by which the thief acquired the SRF.
The judge held that here was simply too short a time,
too narrow a window of opportunity, between the time when the forwarder's
office was supposed to have been locked, with the SRF still in the
office in the drawer, and when the goods were picked up at the warehouse,
for anyone unconnected with the freight forwarder's operation be
able to remove the SRF and get it to the thief in time for him or
her to make the various arrangements (including "setting up"
the carrier) that were required to for the pick up of the goods.
The judge held that the plaintiff simply had to prove
an "inside job." The plaintiff would not be placed in
the "evidential straight jacket" of having to specifically
prove which employee was responsible. This ruling is significant
as Article 25 requires proof the person involved was "acting
within the scope of his employment". No evidence was specifically
led on this point and the judge did not comment on it, so we are
left to assume the judge made the necessary inferences or thought
it self-evident on the facts.
There are similar Canadian decisions -- one Federal
Court, one Ontario Superior Court of Justice -- holding that the
there is no need, under Article 25, to identify the specific employee
or agent so long as the evidence establishes that it was an agent
The freight forwarded argued that there was contributory negligence
on the cargo interests in shipping the cargo as general cargo and
not as valued cargo, since the latter had better security procedures.
The court rejected this argument on the basis of uncontradicted
evidence that the widespread industry practice was that most goods
of the type involved were shipped as general cargo.
Ontario Insurance Act, s.132 "direct action"
rights are limited by the provisions of the liability policy upon
against which the claim is made
The rights of a subrogating insurer as a judgment
creditor suing under the direct action provisions of the Insurance
Act are subject to the provisions in liability policy issued to
the judgment debtor: Tai Foong International Ltd. v. Lombard
Canada Ltd. (2001), 53 O.R. (3d) 595 (Ont. Sup. Ct.)
The defendant Lombard issued a comprehensive business
policy to Rothmar Manufacturing Ltd. Rothmar was in
the business of maintaining refrigeration systems. It contracted
to do so with the plaintiff, Tai Foong. The plaintiff's refrigeration
system failed June 4, 1989. Tai Foong sustained losses as a result.
It was insured by Chubb. It recovered under the policy issued to
by Chubb. Chubb then advanced a subrogated claim against Rothmar,
in the name of Tai Foong, and obtained a judgment February 12, 1997
in excessive of $1.28 million.
Rothmar did not have money to pay. The solicitors
for Chubb issued writs of seizure and sale more than one and a half
years later: on November 27, 1998. These were returned unsatisfied.
Chubb then commenced a subrogated action in the name of Tai Foong against Lombard. The action was brought under s. 132 of the Insurance Act. That section is the provision of the Insurance
Act which gives a person who is a judgment creditor the right
to sue the liability insurer of the judgment debtor, directly, where
the judgment is one to which the liability policy applies. Without
that provision, a judgment creditor has no right to sue the insurer
on the policy because the judgment creditor is not a party to the
policy. Without that provision, a liability insurer which was not
concerned about its insured paying the judgment and seeking indemnity
from the insurer -- for instance, in case where the insured had
gone bankrupt and had no assets -- could deny coverage with impunity,
even in cases where the policy clearly applied. Then, so long as
the insurer was not a risk of the insured assigning its rights on
the policy to the judgment creditor, the insurer would be able to
To avoid that, section 132 provides:
" Where a person incurs a liability for injury
or damage to the person or property of another, and is insured against
such liability, and fails to satisfy a judgment awarding damages
against the person in respect of his liability, and an execution
against the person in respect thereof is returned unsatisfied, the
person entitled to the damages may recover by action against the
insurer he amount of the judgment up to the face value of the policy,
but subject to the same equities as the insurer would have if the
judgment had been satisfied."
The language and grammar of the section are awkward;
however, the meaning is clear: the judgment creditor has the right
to sue the liability insurer of the judgment debtor to force the
liability insurer to pay the judgment, up to policy limits; however
the liability insurer has the same defences in this action as it
would have if the insured had paid the judgment and then sought
indemnity. In simple terms: the insurer has to pay the judgment
debtor only if it would have had to pay the insured, had the insured
satisfied paid the judgment and then sought indemnity on the policy.
Lombard refused to pay the judgment. Chubb commenced
an action in the name of its insured against Lombard, as permitted
by the Act. Lombard's defence was that the claim on the policy
was out of time. The Lombard policy contained a one year
limitation period for actions on the policy by Rothmar.
Lombard argued that meant the action had to be commenced
within one year after the date of judgment against Rothmar,
because the date of the judgment was Rothmar's right to claim on
the indemnity provision of the policy arose. The action against Lombard had been commenced outside of that one-year period.
Chubb conceded that the limitation period was one
year but argued that it did not start to run until the writs of
seizure and sale against Rothmar came back, since that was a precondition
to success under section 132. Chubb, therefore, argued that holding
that limitation period that Chubb had to satisfy began to run on
the date of the judgment was inconsistent with the statutory remedy
since the right of Tai Foong to sue Lombard did not arise until after that date, that is, until the writs of seizure and sale
came back unsatisfied. Obviously writs of seizure and sale could
not have gone out until after the judgment unsatisfied. Obviously
writs of seizure and sale could not have gone out until after the
The court was sympathetic, but did not accept Chubb's
argument. It held the provisions of section 132 are clear. Chubb's
insured had no higher rights under the Lombard policy than Rothmar would have had had it paid the judgment and then
commenced an action on the policy on the date the Tai Foong action
was commenced. Lombard had the same defences against Tai Foong as
it would have had against Rothmar; that is, the claim by Tai Foong
was subject to the same equities as a claim by Rothmar would have
been. As of November, 1998, a Rothmar action would have been out
of time. Hence, the Tai Fong action had to fail. Rothmar and Lombard had agreed to a one-year limitation period. That
provision would have defeated a Rothmar claim and, so, defeated
the Tai Foong claim or, more precisely, Chubb subrogating through
This decision is not new and not novel. It affirms
long standing law, including, for example, the 1996 decision in Ontario Housing Corporation: Ontario Housing Corporation
v. Canadian General insurance Co. (1996), 36 C.C.L.I. (2d) 52 (Gen.
Div). In Ontario Housing, although the Writ of Seizure and
Sale was issued within six months of the judgment, it was not returned
unsatisfied until over a year after judgment. When the plaintiff
then commenced a subrogated action, it found that it was barred
by the limitation provision contained in the insurance policy. This
and other decisions to the same effect emphasize, for subrogating
insurers, the need to take immediate action when a judgment is obtained.
Accordingly, a subrogating insurer must commence an
action under section 132 of the Insurance Act on the assumption
that the policy likely contains a limitation period. The insurer
should not wait. In practice, that means the insurer will have at
least 1 year from the date of the judgment against the defendant
since most liability policies, in Ontario, provide a limitation
period of at least one year from the date the insured's right to
sue on the policy first arose. The case law establishes that the
subrogating insurer's ability to recover from the liability insurer
will be lost if the limitation period in the liability policy, for
action by the insured (judgment debtor) on the policy expires before
the commencement of the action under section 132. The action may
have to be commenced even though writs of seizure and sale returned
unsatisfied as required by the Act. That is not contrary
to section 132. That section does not deal with when the action
against the liability insurer may be commenced. It deals with what
must be shown for the action to succeed.
100% Case Management Comes to Toronto
Effective July 3, 2001, the civil courts in Toronto
have moved to 100% case management for "ordinary" civil
actions commenced in Toronto. The expression "100% Case Management"
is a bit of a misnomer. Cases in Estates, Construction Liens, Family,
Bankruptcy, Simplified Rules, and on the Commercial List are not
caught in the new case management regime..
Cases will be assigned to either a normal or fast
track. The track is chosen by the party filing the claim. The case
will then be assigned to a team of judges and a Case Management
Master who will assist in coordinating movement of the matter through
case management procedure. All motions and other interlocutory events
within the jurisdiction of the Master will be dealt with by the
Master assigned to the case.
In certain cases, generally ones involving complicated
multi-party issues, a single Case Management Judge may be assigned
to handle a case. This will only be done on application by the parties
to the Regional Senior Judge.
The Case Management Rules require the parties to file,
within 100 days of commencing the proceedings, a timetable setting
out a time for completion of discovery and related motions. If the
parties can not agree a timetable will be imposed. Failure to comply
with the obligation to set up the timetable will result in various
consequences, the more serious of which include having pleadings
struck, the action dismissed, or costs sanctions imposed.
Claims that are issued but not forced along by the
plaintiff requiring a defence or taking default proceedings will
be dismissed as abandoned after 180 days. The intent is to prevent
the current situation where cases sit, abandoned, and clog the system.
All case managed actions are subject to mandatory
mediation. This is to take place generally within 90 days of the
first defence being filed. The reference to the first "defence"
is misleading as the rules define "defence" to include
a notice of defence. It can be postponed by agreement for a further
60 days. If the parties fail to choose a mediator on their own within
30 days of the first "defence" being filed, the system
will assign one without regard to the parties wishes. There is a
list of approved mediators. The result may be a mediator who is
unsuited for the matter. "Firing" a mediator is not difficult
but can be time-consuming. It will require a motion if the mediator
does not consent.
The Rules require that the settlement conference take
place within 150 days of the first "defence" being filed
in matters that are on the fast track and within 240 days of the
first defence on standard track matters. All discoveries and related
motions, documents production and expert reports are to be completed
at least 10 days before the settlement conference. For actions on
the fast track, a trial date will be set at the settlement conference.
In connection with the move to Case Management, the
court has also instituted a "Call-Over Court". The purpose
of this court is to attempt to clean up old "stale" cases.
These older, non-case management cases will come before the Call-Over
Court where the courts will begin to manage the cases in much the
same way that the case management actions are being handled. The
Court may set timetables and trial dates. It may also deal with
certain motions such as motions to have a solicitor removed from
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