Ontario Court of Appeal confirms Two-Year Limitation Period to Enforce American Judgments in Ontario
According to the United States Census Bureau, Canada is the USA’s second largest trading partner, only slightly behind China, with over $500 billion in two-way trade goods annually.
The industrial economies of Canada and the USA are highly integrated, with manufacturing plants in each country sending millions of components back and forth over the boarder every day.
It is not surprising that there may be disputes between businesses that end up in courts south of the boarder that need to be enforced north of the boarder. On January 18, 2017, Ontario’s highest Court, the Ontario Court of Appeal, released a decision clarifying the limitation period that applies to enforcing an American Court judgment in Ontario and when that limitation period starts to run.
In Independence Plaza 1 Associates, L.L.C. v. Figliolini, 2017 ONCA 44 (“Independent Plaza”), the plaintiff (respondent) had obtained a judgment against the defendant (appellant) in the New Jersey Superior Court for a monetary judgment of just over $115,000 USD. The appeal to the Appellate Division was dismissed on July 17, 2014. On May 1, 2015, more than two years after the New Jersey judgement but less than two years after the dismissal of the appeal, the plaintiff brought a proceeding in Ontario to enforce its foreign judgment.
The Ontario Court of Appeal confirmed the importance of the principles of comity with respect to American judgments; however, because there is no inter-jurisdictional agreement regarding reciprocal enforcement such judgments are “foreign judgements” and must be enforced by commencing a proceeding in the Ontario Courts. In that proceeding the foreign creditor must show that the foreign court had jurisdiction, that the judgment is final, and is for the payment of money. (In some cases, it is also possible to argue that it is appropriate for the Ontario Court to enforce an interlocutory or declaratory order.)
A defendant in an Ontario proceeding to enforce a foreign judgment can raise defences such as fraud, denial of natural justice and public policy, but the comity principle prevents a rehearing on the merits. The defendant can also raise an Ontario limitations defence, which the defendant did in Independence Plaza, taking the position that the proceeding in Ontario to enforce the judgment was time-barred because it was commenced more than two years from the date of the New Jersey trial judgment.
The Court of Appeal held that Ontario’s basic two-year limitation period applies to foreign judgments. It rejected the defendant’s position the time began to run from the date of the New Jersey trial judgment, and found that time does not begin to run until the time to appeal the judgment in the home jurisdiction has expired or until all appeal remedies have been exhausted. This avoids both the risk of multiple proceedings as well as the risk of unnecessary litigation that may otherwise result from commencing an Ontario proceeding on a foreign judgment that is subsequently overturned.
The Court also noted that Ontario’s limitations legislation incorporates the concept of “discoverability” and the possibility in some cases that the time may not begin until the judgment creditor could reasonably discover that the judgment debtor had assets in Ontario. However, the law of discoverability is subject to much judicial debate in Ontario, and a cautious creditor would be wise to move to enforce the judgment promptly if it is possible the debtor has assets in Ontario.
It is also important to note that the Court also rejected the plaintiff’s main argument that no limitation period at all applied to the New Jersey trial judgment. The plaintiff relied on section 16(1)(b) of the Ontario’s limitation legislation, the Limitations Act, 2002, SO 2002, c 24, Sch. B, which states that there is no limitation period in respect of a proceeding to enforce an order of the court. The Court of Appeal held that this section applies only to an order of an Ontario (domestic) court. However, if a proceeding to enforce a foreign judgment is successful, it then results in an Ontario judgment which is subject to no limitation period.
In the decision, the Court of Appeal recognized that each province of Canada has its own limitation law and that the limitation periods are different. A Canadian USLAW partner can help your clients navigate the potential limitations landmines.