Ottawa, Ontario, March 22, 2006
PRESENT: The Honourable Mr. Justice Hugessen
BETWEEN:
KONA CONCEPT INC.
and
REASONS FOR ORDER AND ORDER
[1] The plaintiff moves by way of summary judgment for:
a declaration from this Honourable Court that the judgment of the United States District Court for the District of Hawaii, entered on July 26, 2004, as amended on January 26, 2005, in favour of the Plaintiff against the Defendant Guimond Boats Limited in the amount of U.S. $402,213.48, as well as the award of attorneys' fees and costs in the amount of U.S. $28,183.45, be recognized and enforced as a final judgment of this Court for the equivalent amount in Canadian dollars.
[2] The plaintiff is a resident of the State of Hawaii. He read defendant's advertisement in a magazine, travelled to the defendant's premises at Escuminac N.B. and in due course contracted (using the apparently corporate name which appears in the style of cause herein) with the defendant, a New Brunswick corporation, for the construction and delivery of an ocean fishing boat to be used in the waters off the plaintiff's home state.
[3] The boat was built, delivered and paid for in New Brunswick. After delivery the plaintiff then took the boat to Hawaii. A dispute having arisen over the boat's seaworthiness and compliance with the contract of sale, the plaintiff, again using the corporate name, sued in the U.S. District Court in Hawaii. The defendant appeared through counsel and moved to dismiss the action on the grounds of lack of jurisdiction. The motion was dismissed and no appeal was taken from that order. The defendant then first instructed his Hawaiian counsel to appear and defend but subsequently changed tactics and instructed him to withdraw from the case, which the latter did while making it clear that his client intended to contest any attempt to enforce the judgment of the U.S. Court in this country. In due course, default judgment was rendered in the District Court and that judgment was later amended to add the name of the plaintiff personally.
[4] The defendant has raised a number of technical objections, none of which do I consider to be well-founded. The fact that the motion is supported by an affidavit subscribed by a member of plaintiff's counsel's law firm which attests to purely formal matters and annexes certain documents (the authenticity of which is not contested) does not, in my view, justify either my striking out the affidavit or disqualifying plaintiff's counsel; if necessary, I would in any event grant leave under Rule 82. The fact that the corporate plaintiff had been dissolved under Hawaiian law prior to the U.S. judgment and that the latter was subsequently amended to substitute the name of the personal plaintiff are not matters which should concern this Court but are peculiarly within the purview of the courts of Hawaii. It is likewise with the defendant's allegation that the judgment is an attempted fraud on the State of Hawaii's policy regarding ocean mooring spaces; even assuming that policy to be properly proved, it is not something that this Court either could or should enforce. Finally, I reject defendant's counsel's attempt to impeach the credit of plaintiff through selected extracts from various documents; counsel had not availed himself of the opportunity to cross-examine plaintiff on his affidavit and, in those circumstances, it would be both improper and unjust to allow him to attack the honesty of a witness to whom he has not given the opportunity to either explain or defend himself.
[5] The defendant does raise two points of substance. Both go to the question of jurisdiction: it is said that this Court does not have the jurisdiction to give executory force to the District Court judgment, and it is further said that there is a genuine issue for trial on the question of the latter Court's jurisdiction to give the original judgment. The question of the jurisdiction of the Federal Court to give the relief now sought was raised earlier by a preliminary motion which was heard by my brother Justice Phelan. He dismissed the motion and his reasons are reported (2005 FC 214). I reproduce here the core paragraphs of that decision:
14 In this application, the Defendant seeks to strike out the whole of the Statement of Claim on the basis that one of the remedies requested is outside this Court's jurisdiction. This is not an application to strike certain paragraphs in a pleading.
15 The Defendant refers this Court to Mr. Justice Dubé's decision in Eurobulk Ltd. v. Wood Preservation Industries, [1980] 2 F.C. 245. However, this case must be applied with caution. It was decided before the latest Rule 326. It was also decided before the Supreme Court of Canada's decision in Antares Shipping Corp. v. The Capricorn et al, [1980] 1 S.C.R. 553 where the Court rejected the American approach to maritime law and where the Court adopted a more expansive view of the Federal Court's maritime jurisdiction under section 22 of the Federal Court Act. I do not see that this jurisdiction issue turns on either the 1879 City of Mecca case or the 1608 Weir's case.
16 The Federal Court has jurisdiction in respect of "any claim arising out of a contract relating to the construction, repairs or equipping of a ship." (Federal Court Act section 22(2)(n). The Plaintiff has pleaded sufficient facts to arguably engage this Court's jurisdiction. For these purposes, the issue is not whether the US District Court was exercising maritime jurisdiction but whether this claim under Canadian law falls under Canadian maritime law. I find that, on the basis of the Federal Court Act provision and the facts pleaded, at least arguably, it does.
[6] It will be noted that Justice Phelan limited himself, as he had to on a motion to strike, to finding that the matter was only "arguably" within this Court's jurisdiction. However, nothing has happened in this file since that time, and nothing produced on the present motion for summary judgment, has served to cast any doubt on his tentative conclusions or to indicate that there is a genuine issue for trial on the question of this Court's jurisdiction. In particular, his view that the question herein is one of Canadian maritime law and that the obiter remarks of Justice Dubé in the earlier cited case must now be treated with caution in light of recent developments in the case law of the Supreme Court of Canada appears to me, with respect, to be unassailable. To the cases cited by him I would add: ITO--International Terminal Operators Ltd. v. Miida Electronics Inc., [1986] 1 S.C.R. 752; Whitbread v. Walley, [1990] 3 S.C.R. 1273; Monk Corp. v. Island Fertilizers Ltd., [1991] 1 S.C.R. 779; and Ordon Estate v. Grail, [1998] 3 S.C.R.437.
[7] Even though it is clear that the U.S. District Court assumed jurisdiction solely on the basis of its "diversity" rule and that shipbuilding contracts are not a part of U.S. maritime law, the characterization of the subject matter of this case in Canada is, in my view, for this Court to make and is properly that of Canadian maritime law. As such, it falls squarely within this Court's sphere of competence.
[8] This brings me to the much more troubling question of the jurisdiction of the U.S. District Court to render the judgment now sought to be enforced. Plaintiff has the burden of establishing that that court's jurisdiction does not raise a triable issue. The law in Canada with respect to the enforcement of foreign judgments has recently been reviewed and dramatically revised by the Supreme Court of Canada in Beals v. Saldanha [2003] 3 S.C.R. 416. In that case the defendants had been sued in Florida over a real estate deal in that state and had allowed judgment to go by default. The Court adopted the "real and substantial connection" test, previously limited to inter-provincial enforcement of judgments. Justice Major for the majority of the Court said as follows:
31 The appellants submitted that the recognition of foreign judgments rendered by courts with a real and substantial connection to the action or parties is particularly troublesome in the case of foreign default judgments. If the "real and substantial connection" test is applied to the recognition of foreign judgments, they argue the test should be modified in the recognition and enforcement of default judgments. In the absence of unfairness or other equally compelling reasons which were not identified in this appeal, there is no logical reason to distinguish between a judgment after trial and a default judgment.
32 The "real and substantial connection" test requires that a significant connection exist between the cause of action and the foreign court. Furthermore, a defendant can reasonably be brought within the embrace of a foreign jurisdiction's law where he or she has participated in something of significance or was actively involved in that foreign jurisdiction. A fleeting or relatively unimportant connection will not be enough to give a foreign court jurisdiction. The connection to the foreign jurisdiction must be a substantial one.
33 In the present case, the appellants purchased land in Florida, an act that represents a significant engagement with the foreign jurisdiction's legal order. Where a party takes such positive and important steps that bring him or her within the proper jurisdiction of a foreign court, the fear of unfairness related to the duty to defend oneself is lessened. If a Canadian enters into a contract to buy land in another country, it is not unreasonable to expect the individual to enter a defence when sued in that jurisdiction with respect to the transaction.
34 The "real and substantial connection" test is made out for all of the appellants. There exists both a real and substantial connection between the Florida jurisdiction, the subject matter of the action and the defendants. As stated in J.-G. Castel and J. Walker, Canadian Conflict of Laws (5th ed. (loose-leaf)), at p. 14-10:
For the recognition or enforcement in Canada of a foreign judgment in personam, the foreign court must have had jurisdiction according to Canadian rules of the conflict of laws.
In light of Canadian rules of conflict of laws, Dominic Thivy attorned to the jurisdiction of the Florida court when he entered a defence to the second action. His subsequent procedural failures under Florida law do not invalidate that attornment. As such, irrespective of the real and substantial connection analysis, the Florida court would have had jurisdiction over Mr. Thivy for the purposes of enforcement in Ontario.
35 A Canadian defendant sued in a foreign jurisdiction has the ability to redress any real or apparent unfairness from the foreign proceedings and the judgment's subsequent enforcement in Canada. The defences applicable in Ontario are natural justice, public policy and fraud. In addition, defendants sued abroad can raise the doctrine of forum non conveniens. This would apply in the usual way where it is claimed that the proceedings are not, on the basis of convenience, expense and other considerations, in the proper forum.
36 Here, the appellants entered into a property transaction in Florida when they bought and sold land. Having taken this positive step to bring themselves within the jurisdiction of Florida law, the appellants could reasonably have been expected to defend themselves when the respondents started an action against them in Florida. The appellants failed to defend the claim pursuant to the Florida rules. Nonetheless, they were still entitled, within ten days, to appeal the Florida default judgment, which they did not. In addition, the appellants did not avail themselves of the additional one-year period to have the Florida judgment for damages set aside. While their failure to move to set aside or appeal the Florida judgment was due to their reliance upon negligent legal advice, that negligence cannot be a bar to the enforcement of the respondents' judgment.
37 There are conditions to be met before a domestic court will enforce a judgment from a foreign jurisdiction. The enforcing court, in this case Ontario, must determine whether the foreign court had a real and substantial connection to the action or the parties, at least to the level established in Morguard, supra. A real and substantial connection is the overriding factor in the determination of jurisdiction. The presence of more of the traditional indicia of jurisdiction (attornment, agreement to submit, residence and presence in the foreign jurisdiction) will serve to bolster the real and substantial connection to the action or parties. Although such a connection is an important factor, parties to an action continue to be free to select or accept the jurisdiction in which their dispute is to be resolved by attorning or agreeing to the jurisdiction of a foreign court.
38 If a foreign court did not properly take jurisdiction, its judgment will not be enforced. Here, it was correctly conceded by the litigants that the Florida court had a real and substantial connection to the action and parties.
[9] Counsel for the plaintiff does not strenuously argue that the present case has a real and substantial connection to Hawaii and I have no doubt that the proper law of the contract between the parties is the law of New Brunswick. Whether or not the contract, reached by an exchange of faxes, was concluded in that province is of minor importance when one considers that the preliminary negotiations, the execution of the work, the delivery of the finished product and payment therefor all took place at the defendant's place of business in Escuminac N.B. The defendant's principal connection with Hawaii was that it apparently advertised in a magazine which was widely distributed in the United States, including Hawaii. I would characterize such connection in the words of Justice Major in Ordon above as "fleeting or relatively unimportant." Even the U.S. District Court in asserting its own jurisdiction and applying the relevant "long arm" statute could find no more to say than:
Although Guimond may not have had any intention of soliciting business in Hawaii when it advertised in a national magazine, Kona Concept nevertheless saw the advertisement and contacted, negotiated with, and contracted with Guimond for the design and construction of a commercial fishing vessel for use in Hawaii's waters. Guimond's contacts with Hawaii went beyond merely contracting with Kona Concept. Guimond affirmatively sent Kona Concept promotional materials and followed up with a phone call to attempt to convince Kona Concept to contract with Guimond to build the Vessel. This solicitation, the continued negotiations by fax and telephone, and Guimond's sending of proposed contracts to Kona Concept in Hawaii are sufficient...
[10] The fact that the contract is governed by New Brunswick law does not, of course, do anything to diminish the application to it of Canadian maritime law for the latter is necessarily a component of the former and is, as already indicated, the source of this Court's jurisdiction.
[11] The plaintiff supports the exercise of U.S. jurisdiction by an allegation that the defendant attorned to the District Court by appearing in the action in Hawaii, failing to appeal the order of that Court dismissing the challenge to its jurisdiction and then filing a defence to the merits (called an Answer under the applicable U.S. federal Rules). I have considerable doubt about the correctness of this submission.
[12] The question of whether or not a party has attorned to the jurisdiction of a foreign court is one that involves issues of fact (what actually happened in the foreign jurisdiction?) as well as consideration of the applicable foreign law (what measures were available to the party to contest the jurisdiction and did it do so?) and of course the present state of Canadian maritime law on attornment. The evidence before me indicates that the defendant did indeed file a motion in District Court to decline jurisdiction which was dismissed. It then filed a defence to the merits but later withdrew from any further participation and the judgment now sought to be enforced was rendered by default which I assume means that no consideration was given to the defence. The evidence as to the applicable U.S. law is unclear. It seems that an objection to jurisdiction once made by motion is not waived by the filing of a defence and even if it were held that such filing was a submission to jurisdiction it is not clear what was the effect of counsel's subsequent withdrawal. It is also not clear to me from the materials produced on this motion whether the general reservation of other defences in the final paragraph (#51) of the defendant's Answer preserved its objection to jurisdiction.
[13] The law of Canada on the subject of attornment is also in my view in a state of flux. The old law that any appearance in a foreign court, even if only made for the express purpose of contesting jurisdiction, has been criticized and now largely altered by legislation in many places, and has been cast into doubt by the judgment of the New Brunswick Court Of Appeal, approved without calling on the respondent and with only short oral reasons by the Supreme Court of Canada, in the case of Dovenmuehle Inc. v. Rocca Group Ltd., [1981] N.B.J. No. 102; 34 N.B.R.(2d) 444; affirmed [1982] 2 S.C.R. 534.
[14] More significant still is the recent adoption of the "real and substantial connection" test detailed above. Its effect on the rules relating to attornment in Canadian maritime law remains to be determined. If the only connecting factor between the defendant and the foreign court is an alleged attornment, a somewhat more flexible approach to that rule would appear to be in order. Again quoting Justice Major, the "traditional indicia", specifically including attornment, will serve only to "bolster" a real and substantial connection. In my view and on the evidence presently available to me, the test has not been met here. Obviously, if that is the case, there is nothing to bolster and no jurisdiction in the foreign court.
[15] On this aspect of the motion defendant relies entirely on the Rocca case and the New Brunswick Foreign Judgments Act, R.S.N.B. 1973, c. F-19 to argue that it did not submit without protest to the District Court. I accept, however, plaintiff's submission that that Act, being a provincial statute can have no application to a question of Canadian maritime law, even in the absence of applicable federal legislation, (see Ordon above), I am reluctant, however, to accept the further submission that Rocca should be read narrowly as having turned solely on the interpretation of the wording of that statute, which uses the words "submitted... without protest" in place of the more traditional word "attorned". Read in context, the two expressions would appear to me to have identical meanings and, especially considering Beals v. Saldanha above, Rocca, is persuasive authority for the proposition that appearance in a foreign court merely to contest its jurisdiction is not attornment to that court. That of course still leaves open the questions as to whether the defendant's "Answer" did contest such jurisdiction and, even if it did not, whether it was or could be subsequently withdrawn.
[16] In my view this is not an appropriate case for summary judgment. The plaintiff has not discharged its burden of proof. There are issues of fact on which the affidavit evidence is unsatisfactory. There are also complex issues of law which cannot be properly resolved without a clear picture of the underlying jurisdictional facts. I propose to dismiss the motion but, in the circumstances, without costs.
[17] In its written materials defendant indicates that it wants an order for security for costs. It would appear to be so entitled but the request is inappropriately made in a reply to a summary judgment motion. If the parties cannot agree on an appropriate security, defendant should bring a motion (preferably pursuant to Rule 369) to that end.
ORDER
The motion for summary judgment is dismissed without costs.
FEDERAL COURT
NAME OF COUNSELS AND SOLICITORS OF RECORD
DOCKET: T-1694-04
STYLE OF CAUSE: ROBERT MORGAN, d.b.a. KONA CONCEPT INC. v. GUIMOND BOATS LIMITED
PLACE OF HEARING: Montreal, Quebec
DATE OF HEARING: March 2, 2006
REASONS FOR ORDER: Hugessen J.
APPEARANCES:
| Mr. John G. O'Connor
|
|
| Mr. Richard J. Scott, Q.C.
|
SOLICITORS OF RECORD:
| Langlois Gaudreau O'Connor Quebec, Quebec
|
|
| Allen Dixon Smith Barristers and Solicitors Fredericton, New Brunswick
|