November 12, 2021
On November 4, 2021, the Supreme Court of Canada clarified the law regarding when a judgment debtor “carries on business” for the purpose of the recognition and enforcement of foreign judgments in Canada. In H.M.B. Holdings Limited v. Antigua and Barbuda, the Court decided that a default judgment given in B.C. in an action to enforce a judgment originally issued in Antigua could not be registered in Ontario because the judgment debtor didn’t carry on business in B.C. at the time of the B.C. legal action.
As more businesses and entities globalize operations and (particularly in the wake of the COVID-19 Pandemic) grow their online presence, their exposure to foreign judgments will increase. Although the term “carry on business” is still broad and slightly uncertain, the Court’s decision makes it easier to discern when a business or entity is “carrying on business” in Canada for the purposes of enforcing a foreign judgment against it in Canada. The decision suggests that operating partially online in Canada likely isn’t enough to expose it to the enforcement of a foreign judgment in Canada. However, the maintenance of physical business premises is consistently regarded as a compelling factor in determining whether a party is “carrying on business” in a jurisdiction. Businesses and entities with even a moderate physical presence in Canada will be a target for foreign judgment enforcement. Such businesses and entities are wise to consider ways to structure their business operations to mitigate their exposure to foreign judgments.
Here’s a recap of how foreign judgments can be enforced in Canada and the Court’s decision in H.M.B. Holdings Limited v. Antigua and Barbuda.
The Enforcement of Foreign Judgments
A court can issue a monetary judgment against the unsuccessful party (the judgment debtor) at the end of legal proceedings. However, the issuance of a judgment doesn’t mean the successful party (the judgment creditor) automatically receives monies; it must still enforce the judgment against the judgment debtor’s assets. This is a more complex and difficult task when the judgment debtor’s assets are located in a foreign jurisdiction. In Canada, there are two main options to enforce a foreign judgment:
The Case
Antigua, a Caribbean country, expropriated property owned by H.M.B. Holdings Limited, an Antigua corporation. H.M.B. sued Antigua in Antigua for compensation. The Antiguan Court ordered Antigua to compensate H.M.B. Subsequently, H.M.B. sued Antigua in British Columbia to enforce the Antiguan judgment, and obtained a default judgment against Antigua. A year later, H.M.B. applied to enforce that B.C. judgment in Ontario pursuant to Ontario’s REJA. Antigua opposed this application, arguing it didn’t carry on business in B.C. at the time of the B.C. legal action. Antigua didn’t have a physical presence in B.C.: there was no consulate, office, employees, or direct marketing within the province. However, Antigua did have contracts with representatives for a citizenship investment program (CIP). The Ontario Superior Court and the Ontario Court of Appeal sided with Antigua, and dismissed H.M.B.’s REJA application. At the Supreme Court of Canada the issue was whether Antigua “carried on business” in B.C. at the time of the B.C. legal action. The Supreme Court of Canada agreed it did not, and as a result H.M.B. couldn’t register the B.C. judgment under Ontario’s REJA:
The Presence Test. To determine if a judgment debtor is carrying on business in a jurisdiction, a court must assess whether the judgment debtor has some actual direct or indirect presence in the jurisdiction accompanied by a degree of activity that is sustained for a period.
Application of the Test. The Court concluded Antigua was not “carrying on business” in B.C. during the B.C. legal action: it had no physical presence in B.C., it didn’t carry on any sustained business activity in B.C., and the CIP representatives weren’t agents of Antigua (they carried on their own business independent of Antigua), and the CIP had no particular focus on attracting investors from B.C.
Please contact your McInnes Cooper lawyer or any member of our Litigation Team @ McInnes Cooper to discuss how we can help you mitigate your exposure to foreign judgments in Canada.
McInnes Cooper has prepared this document for information only; it is not intended to be legal advice. You should consult McInnes Cooper about your unique circumstances before acting on this information. McInnes Cooper excludes all liability for anything contained in this document and any use you make of it.
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