Recently, the Ontario Court of Appeal in United States of America v. Yemec, 2010 ONCA 414 considered the following interesting issues:

1.      whether there is a fourth defence to enforcement of a foreign judgment based on the “loss of a meaningful opportunity to be heard”;

2.      whether a foreign equitable remedy (an injunction) is enforceable by courts in Ontario; and

3.      whether the Defendants’ damages inquiry relating to the U.S. government’s undertakings made to the Ontario Superior Court in support of obtaining a Mareva injunction (freezing order) and an Anton Piller order (civil seizure order) should proceed.

While addressing the first issue, the Court refused to add a fourth defence – a meaningful opportunity to be heard – to the three central defences in common law in Beals v. Saldanha, 2003 SCC 72, [2003] 3 S.C.R. 416 , namely, fraud, denial of natural justice and public policy.

The Court discussed Beals, in which the Supreme Court of Canada held that, whilst “the list of available defences is not closed” the new defence of  “loss of a meaningful opportunity to be heard” must be different in scope and content from the natural justice defence; and that it must relate not to the process and procedures of the foreign court but to some significant unfairness in the way the litigation has proceeded or has been conducted.

The Court found that the fourth defence raised in this case was indistinguishable from the natural justice defence. In addition, the Court stated that the defendants were not to be deprived of a meaningful opportunity to be heard in the U.S. court proceedings.

Whilst dealing with the second issue, the Court followed Pro Swing Inc. v. Elta Golf Inc., [2006] 2. S.C.R. 612, where the Supreme Court of Canada ruled that courts in Canada may now enforce foreign equitable orders such as foreign injunctions (not just foreign money judgments) and enumerated the following factors to consider in determining enforceability:

a.       Are the terms of the order clear and specific enough to ensure that the defendant will know what is expected from him or her?

b.      Is the order limited in its scope and did the originating court retain the power to issue further orders?

c.       Is the enforcement the least burdensome remedy for the Canadian justice system?

d.      Is the Canadian litigant exposed to unforeseen obligations?

e.       Are any third parties affected by the order?

f.       Will the use of judicial resources be consistent with what would be allowed for domestic litigants?

In considering the third issue, the Court held that the defendants’ damages inquiry should proceed. The Court stressed the “serious nature of a damages undertaking” and held that the Plaintiff “could not seek to avoid an inquiry into damages on the basis that the undertakings were worthless from the outset since there could be no damages flowing from the termination of an illegal operation”.

Indeed, the Court noted that “it may be difficult for the defendants to prove that they have suffered compensable damages” due to the illegality of the defendants’ business. Nonetheless, the Court held that the defendants should not be “denied the opportunity to present their evidence and make full argument”.

Citations:         United States of America v. Yemec, 2010 ONCA 414

Beals v. Saldanha, 2003 SCC 72, [2003] 3 S.C.R. 416

Pro Swing Inc. v. Elta Golf Inc., [2006] 2. S.C.R. 612

David Alderson, LL.B, LL.M (Lond.)

Masha Loftus, M.A., J.D

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