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Family must pay Florida
bill
By KIRK MAKIN, Globe
and Mail, Dec. 18, 2003
A $4,000 purchase of a vacant
Florida building lot by two Ontario couples turned into a million-dollar
nightmare Thursday after the Supreme Court of Canada ruled that
a U.S. jury award against them must be paid.
"The award of damages
by the Florida jury does not violate our principles of morality
such that enforcement of the monetary judgment would shock the
conscience of the reasonable Canadian," the court majority
said.
The 6-3 ruling is a sharp warning
to corporations that court judgments from any foreign jurisdiction
will be enforced as long as fair legal procedures are followed
in that jurisdiction.
"The lesson here is that
Canadians shouldn't ignore a US lawsuit, and Americans should
not ignore Canadian lawsuits," said Steve Schoenfeld, a
New York City-based lawyer with the Canadian firm of Torys.
"Even a small lawsuit
could fester into a big problem. It is always better to hire
a local lawyer and deal with the problem early."
Fortunately for the Saldanha
and Thivy families, an Ontario insurer that covers the province's
legal profession - LAWPRO - will pay their legal bill because
they received bad advice from local lawyers many years ago.
"LAWPRO stepped up to
the plate and said: 'We will take over, because we want to find
out the real answer for lawyers,'" said Brian Casey, a lawyer
for the insurer. "Everybody does business in foreign jurisdictions
nowadays, and this ruling makes them aware of their jeopardy
in foreign courts."
The families purchased their
modest building lot in Sarasota in 1981. Three years later, they
jumped when a Florida company offered to purchase it at double
the price they had paid. The families temporarily put aside their
plans for a retirement home in favour of reaping a profit.
Only after the buyers had begun
building did it become clear that the lot had been misidentified
in documents of sale. They were building on the wrong lot. The
purchasers cried fraud, saying they had been deprived of considerable
lost profit.
The Saldanhas sought the help
of an Ontario lawyer. Based partly on his erroneous advice, they
responded to the litigation in a perfunctory way - on the occasions
they bothered to respond at all. They felt they could simply
agree to reverse the sale and forget the dispute.
"They were fully informed
about the Florida action, were advised of the case to meet and
were granted a fair opportunity to do so," Mr. Justice Jack
Major wrote for the Supreme Court majority. "They did not
defend the action."
While the families averted
their eyes, a Florida jury went ahead and made an award that,
coupled with interest and mounting legal bills, comes to about
$1-million.
In 1993, the plaintiffs asked
an Ontario Superior Court judge to enforce the judgment. They
produced documents to prove the families had been given every
opportunity to learn the details of the litigation and contest
it. The families contended that the plaintiffs had fraudulently
misled the Florida court and that the entire case was a denial
of natural justice.
A trial judge declared the
order unenforceable in Canada, but the Ontario Court of Appeal
overturned that in a 2-1 ruling that said the families could
have discovered all relevant facts had they bothered to show
due diligence.
Thursday's decision extends
the reasoning of a major 1990 decision - the Morguard ruling
- involving interprovincial enforcement of judgments in foreign
jurisdictions.
Mr. Casey said the Supreme
Court has also made it clear that Canadians trying to thwart
foreign judgments in our courts will have stiff obstacles to
surmount. For example, it will be difficult for a Canadian to
mount a defence based on an unaware of legal requirements in
the foreign jurisdiction, he said.
Mr. Casey said it will also
be difficult to argue that a foreign judgment involved such "egregious"
domestic procedures or laws that it should be set aside.
©
2003 Bell Globemedia Publishing Inc. All Rights Reserved.
When American justice
hits home
Case points
out need to determine how foreign rulings can apply here, justice
reporter KIRK MAKIN writes
By KIRK MAKIN, Mar.
3, 2003
There were no discernible clouds
on the horizon when two Ontario families -- the Saldanhas and
the Thivys -- plunked down $4,000 for a modest building lot in
sunny Sarasota.
Neither Ontario family could
have dreamed that their dirt-cheap Florida lot would end up costing
a million dollars and engaging the services of the Supreme Court
of Canada to sort out an important area of law.
When the court rules on Beals
v. Saldanha later this year, it will complete a 20-year running
tutorial in how wrong things can go when defendants take a foreign
justice system too lightly.
"I think the case is a
bit of a sleeper," says J. Brian Casey, a lawyer at Baker
& McKenzie LLP who represents the defendants in Beals v.
Saldanha. "The ramifications of this case are really quite
broad. In the 21st century, you cannot run and hide. This case
will set the test for Canadian response to foreign judgments."
The Supreme Court must reconcile
the right of Canadians to be treated fairly with the need to
respect foreign courts. Along the way, it will need to delve
into public policy, natural justice and the use of fraud as a
defence.
For the Saldanhas and the Thivys,
matters began to go downhill in 1984. Enticed by an offer that
came out of the blue to purchase their lot at double the price
they had paid, the families temporarily put aside their plans
for a retirement home in favour of reaping a profit.
It soon emerged that the documents
of the sale by the Ontarians had misidentified the lot -- a mishap
that came to light only after the new owners had begun construction
on a model home for a planned subdivision.
The precise stage at which
the error was discovered and its impact on the project is a matter
of dispute. Suffice to say, the purchasers cried fraud, saying
they had been deprived of considerable lost profit.
The Saldanhas sought the help
of an Ontario lawyer. Based partly on his erroneous advice, they
responded to the litigation in a perfunctory way -- on the occasions
they bothered to respond at all. Nor did they attend the eventual
trial.
"They made a conscious
decision not to go," Mr. Casey said. He said that given
the cost of travelling and retaining legal representation, the
two families quite reasonably felt they could simply agree to
reverse the sale and forget the whole schmozzle.
They had obviously not heard
enough scare stories about Florida juries. The ultimate jury
award -- coupled with interest and mounting legal bills -- now
nets out at around a million dollars.
When the Saldanhas and Thivys
learned of the jury award, they were aghast.
Then the families booted the
ball again. They failed to set off promptly for Florida, hats
in hand, to plead that the judgment be set aside under the doctrine
of "excusable neglect."
The battle now began in earnest.
In 1993, the plaintiffs took steps to enforce the judgment before
Ontario Superior Court Judge John Jennings.
Lawyers for the families argued
that they had been denied natural justice, that the plaintiffs
fraudulently misled the Florida court. The plaintiffs -- now
represented by lawyers Messod Boussidan and Larry J. Levine --
insisted the families had been given every opportunity to learn
the details of the litigation and contest it.
Citing 26 documents served
between 1985 and 1991, the plaintiffs said it was absurd for
the defendants to suggest they were unaware of what was happening.
They added that it was enormously damaging to the plaintiffs
and their solicitors to be accused of perpetrating a legal fraud.
The barrage of indignation
wafting up on the Florida breezes failed to impress Judge Jennings.
He ruled that the default judgment had been fraudulently obtained
-- a ruling that was overturned 2-1 by the Ontario Court of Appeal.
The appellate judges found that the families could have discovered
all relevant facts had they bothered to show due diligence in
the case. They also said Judge Jennings had broadened the doctrine
of public policy to an unwarranted extent.
For the Saldanhas and Thivys,
the worst would soon be over. On account of the advice they took
from their Ontario lawyer, LAWPRO -- the province's liability
insurance company -- took over the defence and retained Mr. Casey
to fight the case.
Their move also served to eliminate
an intangible, emotive factor that can creep in and distort cases
where decent people are devastated by an adverse and unexpected
decision.
At the centre of the Supreme
Court appeal is the legal reach of its 1990 ruling in Morguard
Investments Ltd. v. De Savoy.
Morguard changed the landscape
for Canadians sued in other provinces and abroad. Before the
ruling, they could blithely ignore most judgments rendered in
another province or a "truly foreign" domain (provided
they hadn't been legally served in that jurisdiction and had
not submitted voluntarily to the foreign court, that is).
Morguard set a test for evaluating
the validity of a judgment from a foreign jurisdiction: whether
the foreign court had "a real and substantial" connection
to the subject matter of the litigation.
Philosophically, Morguard stood
for the notion that a global economic system cannot operate in
an environment of mutual suspicion and non-co-operation. Strictly
speaking, it pertained to judgments from other provinces, but
the courts quickly began applying it to truly foreign jurisdictions
as well.
The arguments for respecting
offshore judgments are compelling -- at least, when the nation
involved has demonstrated a consistent respect for justice. It
seems wrong that Canadian defendants can drag out a case or simply
wait to relitigate the whole affair in a Canadian court -- assuming
the plaintiff even has the resources and energy to undertake
a domestic enforcement proceeding.
At the same time, it would
be wrong to leave Canadian citizens vulnerable to suspect legal
procedures in other jurisdictions. As Mr. Casey puts it: "Canadians
would like to know there are defences available, that Canadian
courts don't just rubber stamp something for a foreign court."
After hearing arguments in
Beals v. Saldanha two weeks ago, the Supreme Court took the unusual
course of asking counsel on both sides to submit further written
arguments on how Morguard ought to apply outside Canada.
The request enhances a belief
that when its ruling comes, the court will provide a solid blueprint
for the circumstances where judgments from foreign courts can
be enforced in Canada.
All most lawyers want from
the court is a sense of legal certainty -- a commodity that was
in short supply so many years ago, when the Saldanha and Thivy
families decided to close their eyes and shut out the world.
kmakin@globeandmail.ca
© 2003 Bell Globemedia
Interactive Inc. All Rights Reserved.
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Truth can never be
told so as to be understood, and not be believ'd. William Blake, The Proverbs of Hell
