Renvoi: Lex Situs Conflictus

Canadian Conflict of Laws Blawg by Seva Batkin

When All Else Fails…Say You Didn’t Get It

Posted by Seva on April 8, 2008

Here is yet another enforcement of foreign judgment case where the defence of “I did not receive it” was given considerable weight: CE Design Ltd. v. Saskatchewan Mutual Insurance Company, 2008 SKQB 12. However, unlike the B.C. case discussed in the previous post, this time the defence was successful.

CE Design is a somewhat unusual case because the plaintiff CE (representative of a class) was trying to collect a judgment not from the defendant in the underlying Illinois class action (Homegrown), but from the Homegrown’s liability insurer (SMI), who was not a party to that original action.

Homegrown was hired by a US company to do some marketing in Illinois and was sued for sending unwanted taxes. A class action suit brought against it in 2005 was settled in 2007 for $5M, provided that this amount would only be satisfied from Homegrown’s insurance policies. In 2006, before the settlement, SMI denied coverage on the basis that the claim did not fall within Homegrown’s policy.

After the settlement was approved by the Illinois court, SMI was served with a citation advising it that a judgment for $5M was entered against Homegrown and requiring SMI to provide details of Homegrown’s policies and claims. SMI’s only response was to indicate that it had denied coverage to Homegrown.

After the citation was returned, CE filed a motion directed at SMI for turnover of insurance proceeds. Unlike the citation which was served personally on SMI’s VP of claims, the motion was served (in accordance with Illinois law) by sending it by ordinary mail to SMI’s business address – not even the address of its solicitor who had responded to the citation. SMI claimed that it did not receive this motion. Because the motion went unanswered, Illinois court entered a $5M default judgment against SMI. CE then commenced an application in Saskatchewan to register the judgment against SMI under The Enforcement of Foreign Judgments Act, S.S. 2005, c. E-9.121, which allows for registration of a foreign judgment from any state. SMI argued a number of defences to registration, but the question ultimately boiled down to s. 4(d), lack of proper service:

4 A foreign judgment cannot be enforced in Saskatchewan if:

. . .

(d) the judgment debtor was not lawfully served in accordance with the laws of the state of origin or did not receive notice of the commencement of the proceeding in sufficient time to present a defence, and the judgment was allowed by default.

Dealing with the first part of (d), lawful service, the court generously accepted the somewhat circular argument that under Illinois law, service of a motion on SMI had made it a party to the proceeding and thus complied with Illinois rules of court authorizing service onto a party by regular mail.

However, dealing with the second part of (d), the court concluded that the relevant proceeding was the one commenced by motion against SMI in 2007 and not the class action against Homegrown, which SMI was aware of. Because SMI did not receive notice of the proceeding, s. 4(d) prevented registration of the judgment.

The court also offered the following words on deemed receipt of notice:

[20]    To interpret s. 4(d) of the Act to mean that so long as service was carried out in accordance with the foreign jurisdiction requirement, notice could be deemed to have been received in accordance with the foreign rules, would still not assist the applicant in this case. Firstly, it appears to me that the legislation requires actual notice if it is to have any relevance to the objective behind the section. Deemed notice would not allow SMI an opportunity to respond. Secondly, deemed notice could not occur until after April 26. That would not be in my opinion sufficient time to respond to this application by May 3 in any meaningful fashion as contemplated by s. 4(d).

In essence, while willing to generally defer to foreign rules in terms of the type and timing of notice, the court held that the reasonableness of such notice, measured via “sufficient time to present a defence”, was still to be judged in under lex fori. In other words, it had to be determined if the notice complied with the principles of procedural fairness and natural justice. Of course, this conclusion is logical and apposite to the decisions from other provinces. However, given that s. 4(f) specifically addresses issues of procedural fairness and natural justice, it is interesting to consider whether s. 4(d) was really designed to incorporate those principles as well:

4 A foreign judgment cannot be enforced in Saskatchewan if:

(f) the judgment was rendered in a proceeding that was conducted contrary to the principles of procedural fairness and natural justice;

Mutatis mutandi?

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One Response to “When All Else Fails…Say You Didn’t Get It”

  1. Although not expressly referenced as an impeachment defence by the Supreme Court of Canada in Beals v. Saldanha http://www.canlii.org/en/ca/scc/doc/2003/2003scc72/2003scc72.html , the defence that the defendant was not a party to the foreign suit was cited by Henry, J. in Four Embarcadero Center Venture v. Kalen, (1988), 65 O.R. (2d) 551 at 571:

    “My understanding of the common law position is that the general rule as I have stated it is subject to the exceptions that a foreign judgment made by a court having jurisdiction in the international sense may be impeached or defended in Ontario on the grounds:

    (a)the court actually had no jurisdiction over the subject-matter and the parties in which case this judgment is a nullity (this of course negates the fundamental criterion of competence in the inter-national sense);

    (b)lack of identity of the defendant, that is the defendant was not a party to the foreign suit;

    (c)the judgment was procured by a fraud on the court;

    (d)a failure of natural justice which relates to procedural matters — the mode by which the judgment was reached, and

    (e)to enforce the judgment would be contrary to public policy in Ontario. (p. 571)

    Antonin I. Pribetic

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