Renvoi: Lex Situs Conflictus

Canadian Conflict of Laws Blawg by Seva Batkin

Charter and Defences to the Enforcement of Foreign Judgments

Posted by Seva on August 7, 2008

Enforcement of foreign judgments is prima facie concerned with foreign civil judgments. Enforceable foreign judgments, while no longer necessarily pecuniary, still exclude penal judgments and thus arise out of private disputes between parties. In this context, it is difficult to see how the Charter, imposing constraints on our government’s actions, particularly in criminal matters, would have any application. However, the duty of tenacious representation (and billable hours) relentlessly drives the lawyers’ search for loopholes. Thus, in King v. Drabinsky, 2008 ONCA 566, the defendants argued that the difference between the US and Canadian constitutional protections against self-incrimination, in the situation where the defendants were sued in a civil action in the US, and charged with a related criminal offence in Canada, resulted in a breach of natural justice and thus a defence to the recognition and enforcement of the judgment. Holding that s. 13 of the Charter “would likely protect” the defendants and prevent the use of the testimony from the US civil proceedings in a Canadian criminal trial, the court upheld the trial judge’s decision to recognize the foreign judgment.

This case arose from the infamous Livent saga, which culminated in US (1999) and Canadian (2002) criminal fraud charges against the defendants, and a $37M civil judgment. At the depositions for the civil suit (conducted in Canada), the defendants refused to answer questions by asserting their Fifth Amendment rights against self-incrimination. In the absence of direct evidence from the defendants, but without drawing an adverse inference from their failure to provide such evidence, a US judge granted the plaintiffs’ summary judgment motion. The defendants’ subsequent appeals were unsuccessful and the plaintiffs successfully brought an application for recognition of the US judgment in Ontario. The application judge rejected the defences raised by the defendants, including the natural justice and “new” defences (on the basis of Beals). He rejected the assertion that the difference between the US and Canadian approaches to self-incrimination constituted a valid defence to the recognition and enforcement of the judgment.

On appeal, the defendants mainly argued that they were denied an opportunity to properly defend the US civil action because the evidence given therein could be used against them in the Canadian criminal proceedings as the Charter does not have an extraterritorial application. This fell either under the natural justice defence or a new defence of a “loss of a meaningful opportunity to be heard”. Because this case involved concurrent charges in Canada, the defendants distinguished the situation from the one in U.S.A. v. Levy (2002), 1 C.P.C. (6th) 386 (Ont. S.C.J.), aff’d [2003] O.J. No. 56 (C.A.), where defendants unsuccessfully asserted the natural justice and public policy defence on the basis that an adverse influence drawn in the US civil action from their Fifth Amendment refusal to testify violated their Canadian constitutional right to silence.

To address these arguments, the court had to determine whether the Charter protections were in fact unavailable to the defendants in respect of their testimony in the US civil proceedings. To do so, the court applied R. v. Hape to distinguish between the conclusion that the Charter is not applicable to collection of evidence abroad, and the issue of “extraterritorial adjudicative jurisdiction” – i.e., the use of evidence obtained abroad in domestic criminal proceedings. Thus, the court distinguished R. v. Harrer (S.C.C.) and U.S.A. v. Shull (B.C.S.C.), where courts found that the Charter did not apply to an interrogation in the US, or the admissibility of US deposition evidence in an extradition hearing.

Considering the language of s. 13, and drawing on R. v. Stratton (1978), 21 O.R. (2d) 258 (C.A.), R. v. Dubois (S.C.C.), and Hape, the court concluded that “any proceedings” likely includes US civil proceedings, and whether the statement is “incriminatory” is judged “at the time of the attempted introduction of the statements at the Canadian criminal trial”. Thus, rights of an accused in Canada are respected at the trial stage.

Moreover, the court also found that other sections of the Charter, particularly ss. 7 and 11, with their included protections against self-incrimination, and s. 24, dealing with exclusion of evidence in the interest of fairness, may have been invoked by the defendants in their Canadian criminal trial to exclude their US testimony. Naturally, the exclusion would not be automatic as under s. 13, and the trial judge would have to determine whether the evidence actually compromised trial fairness.

With these conclusions in hand, the court rejected the defendants’ natural justice defence, and further held that their suggested “new” defence was the same as the natural justice defence. Finally, having given the legal basis for the decision, the court stated the most intuitive reason, one that no doubt most people thought of when they first heard of this case:

It cannot be that individuals such as the appellants can avoid civil liability for their misdeeds simply because they also face criminal charges in both jurisdictions.  Such a result would be contrary to the principles of order and fairness.

However, despite the solid legal and intuitive basis for the court’s decision, there are still some issues that concern me. Clearly, for recognition and enforcement actions, this decision is unequivocal that a defendant’s failure to testify in a foreign proceeding because of a different self-incrimination regime does not by itself constitute a valid defence. But what is the effect of this case on the broader issue of the interpretation of s. 13 of the Charter? Is the decision in this case, particularly the evidentiary record on which it was based, and the legal reasoning by which the decision was reached, sufficient to conclusively interpret this section? In this respect, I note two things:

1. There was no mention of a notice to the A.G. of Canada or Ontario, even though s. 109(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43, provides that such notice should be given when the question concerns inter alia constitutional applicability of a common law rule:

The constitutional validity or constitutional applicability of an Act of the Parliament of Canada or the Legislature, of a regulation or by-law made under such an Act or of a rule of common law is in question.

Arguably, the question of the effect of s. 13 of the Charter on the common law rules for recognition and enforcement of foreign judgments, falls within the ambit of this section.

2. In this case, the court was concerned with whether the defendants had made out their defence on the civil standard of balance of probabilities. Can this standard really apply to a question of statutory interpretation, particularly interpretation of a constitutional protection? It seems somewhat paradoxical that a court, having the intrinsic jurisdiction to interpret and explain the law, reaches a conclusion that it is more likely than not that the law works as the court thinks it does. Moreover, it brings the ultimate value of that conclusion in some question.

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