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The Fifth Time’s the Charm? The Court of Appeal Closes the Door on the Recognition and Enforcement of Ricochet Judgments

8 minute read

The recent Court of Appeal for Ontario ruling in H.M.B. Holdings Limited v. Antigua and Barbuda[1] is the latest chapter in a long-running land dispute with roots in a 1995 hurricane.

Background

H.M.B. Holdings Limited (“HMB”) is a private company incorporated in Antigua. It owned Half Moon Bay, a waterfront resort property that sustained serious damage during Hurricane Luis in 1995. The 108-acre property sat unused for many years as HMB tried to secure financing to restore it. When no redevelopment occurred, the Antiguan government expropriated the land in 2007 pursuant to the Land Acquisition Act, 1958, c. 233.

Years of litigation followed the expropriation, resulting in a 2014 order that the Government of Antigua pay HMB approximately USD$26.6 million, plus interest (“the Privy Council Judgment”). Antigua paid part of the judgment; however, a dispute arose with respect to the amount that remained outstanding.

In October 2016, HMB sought to have the Privy Council Judgment recognized and enforced in British Columbia pursuant to the Court Jurisdiction and Proceedings Transfer Act, SBC 2003, c. 28 (“CJPT”). Antigua did not respond to this action, and the BC Supreme Court issued a default judgment in favour of HMB for approximately CAD$30 million in 2017 (“the BC Judgment”). Antigua maintained its silence and did not take any steps in response to the BC Judgment. It neither attorned to the BC jurisdiction nor appealed the BC Judgment.

Antigua → BC → Ontario?

By this point, you are probably wondering about the connection between an Antiguan holding company and a Canadian province. Whether Antigua was “carrying on business” in BC at any point in time was explored in a line of decisions concerning the same set of facts with a different argument.

Previously, HMB tried to argue that the Privy Council Judgment ought to be recognized and enforced in Ontario based on the Reciprocal Enforcement of Judgments Act (“REJA”); in other words, a BC judgment with respect to an Antigua judgment ought to be recognized and made an Ontario judgment. This is also known as a “ricochet judgment,” a “derivative judgment,” or perhaps most simply, a “judgment on a judgment.”

HMB made this argument to three levels of Canadian courts, losing all three times. The decisions turned on whether Antigua was “carrying on business” in BC. The BC Judgment could not be registered in Ontario unless this was found to be the case.

HMB argued that the presence of four “authorized representatives” who had contracts with the Government of Antigua equalled “carrying on business” in BC. Justice Perell at the Superior Court level disagreed:

At the time of the action in British Columbia, the Antiguan Government has no physical presence in the province. It does not have a consulate, an office, or any premises in the province. It has no employees or agents in the province and does not direct any marketing specifically for residents of British Columbia. The Antiguan Government denies that it carries on business or that it has any commercial activities of any recurring or sustained nature in the province.[2]

What the Antiguan Government did have were contracts with four “authorized representatives” in BC who were paid “finder’s fees” for facilitating the acquisition of Antiguan citizenship in exchange for financial investment in the country.[3]

Notably, BC’s 2016 action was timely given the province’s ten-year limitation period. A similar action brought in Ontario would likely have been dismissed, as that province’s limitation period is only two years.

Losing the REJA all the way up to the Supreme Court of Canada[4] did not deter HMB, which brought a new argument forth last year: the BC Judgment ought to be recognized and enforced under the common law, which “expressly allows for the recognition of judgments from courts of competent jurisdiction.”[5] HMB submitted that it should be allowed to seek recognition and enforcement of the BC Judgment in Ontario since its BC effort had not uncovered assets sufficient to satisfy the judgment. Antigua did oppose this action.

The Common Law Argument

HMB was unsuccessful in making its “common law” argument to Justice Pollak in the Ontario Superior Court last year. His Honour noted,

There is no jurisprudence where a Canadian court has been asked to recognize and enforce another enforcement judgment instead of seeking to enforce the original judgment giving rise to the debt obligation...enforcement decisions are intended to apply only within the local jurisdiction. Further, as there was no real and substantial connection between [Antigua] and BC, this action must be dismissed.[6]

The Court of Appeal for Ontario agreed that it should not recognize and enforce the BC judgment in Ontario at common law, but it took a different route to arrive at its conclusion. It opined that Justice Pollak had erroneously focused on the insubstantial connection between Antigua and BC. The key issue in the BC Judgment was whether the Antiguan Privy Council Judgment should have been recognized and enforced in BC. That analysis involved questions relating to BC’s Court Jurisdiction and Proceedings Transfer Act, the proper service of the claim on the Antiguan Attorney General, and whether Antigua had any defences to a BC Judgment. The issue of comity as it related to BC and Ontario was a red herring:

The decision of a court in one jurisdiction about whether to recognize and enforce a foreign judgment is local in scope; the decision includes consideration of local legislation, for example, limitation periods, to determine whether assets in that jurisdiction should be made available to satisfy the foreign judgment. When the court in British Columbia granted the BC Judgment, it decided that the Privy Council Judgment should be recognized and enforced in British Columbia in accordance with the laws of British Columbia; it did not decide whether the Privy Council Judgment should be enforced in any other jurisdiction.[7]

The court also expressed concerns about possible skirting of limitation periods if this ricochet judgment was to be recognized and enforced at common law:

Notably, approaching recognition and enforcement judgments in the same way as original foreign judgments may deprive defendants of valid defences that would have otherwise been available if recognition and enforcement of the original foreign judgment were sought in Ontario. This case is a prime example. The limitation periods in British Columbia and Ontario are very different. Permitting H.M.B. to obtain recognition and enforcement of the BC Judgment in Ontario for the purpose of recognizing and enforcing the underlying Privy Council Judgment may allow H.M.B. to avoid the application of the two-year limitation period that would apply in Ontario if H.M.B. brought a direct action in Ontario at common law to recognize and enforce the Privy Council Judgment.[8]

After reviewing the general principles applicable to the recognition and enforcement of foreign judgments, the court considered whether those principles favoured Ontario recognizing and enforcing the BC Judgment. It also considered submissions on precedents, noting

There are no decisions in Ontario that have directly addressed the issue of the availability of ricochet judgments, other than the previous decisions of the Superior Court and this court dealing with the registration of the BC Judgment under the REJA. There are a few decisions by Canadian courts dealing with the issue of ricochet judgments, but none of them arises under the common law.[9]

The court concluded that the common law test for recognition and enforcement of foreign judgments was inapplicable to a ricochet judgment.

Takeaway

The Court of Appeal for Ontario’s ruling appears to have definitively closed the door on the option of having ricochet judgements recognized and enforced pursuant to the common law. It remains to be seen if HMB will find the court’s reasoning sufficiently compelling to give up its border crossing fight for compensation.

[1] H.M.B. Holdings Limited v. Antigua and Barbuda, 2022 ONCA 630 (CanLII).

[2] H.M.B. Holdings Limited v. The Attorney General of Antigua and Barbuda, 2019 ONSC 1445 (CanLII) at paras 42-43.

[3] The courts’ reluctance to construe this as a connection between the two jurisdictions might be inconsistent with Club Resorts Ltd. v. Van Breda, 2012 SCC 17, but that is a post for another time.

[4] H.M.B. Holdings Ltd. v. Antigua and Barbuda, 2021 SCC 44.

[5] H.M.B. Holdings Ltd. v. Attorney General of Antigua and Barbuda, 2021 ONSC 2307 (CanLII) at para 1.

[6] Ibid at para 26.

[7] Supra, note 1 at para 33.

[8] Supra, note 1 at para 40.

[9] Supra, note 1 at para 54.

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