Tuesday, 24 July 2012

Enforcing Canadian Judgments - Original Court to Decide Whether Judgment Debtor "Took Part" in the Proceeding

Prior to 2006, enforcement of Canadian judgments in B.C. was governed by Part 2 of the Court Order Enforcement Act: the judgment creditor had to apply to register a Canadian judgment and a number of jurisdictional and semi-substantive defences were available to the judgment debtor.  In 2006, the Enforcement of Canadian Judgment and Decrees Act ("ECJDA") implemented the "full faith and credit" doctrine and made registration of Canadian judgments a simple administrative act, unless the judgment was obtained without notice (see s. 6(4)).  The ECJDA also generally removed the court's supervisory role: although s. 6(2) allows a judgment debtor to apply for a stay of enforcement of a registered Canadian judgment, s. 6(3) precludes a B.C. court from inquiring into the substantive, procedural or jurisdictional validity of the judgment.  The only ground of inquiry left to a B.C. court is whether the judgment "is contrary to public policy in British Columbia."

Because the ECJDA presents such a dramatic shift from the previous COEA enforcement process, it includes a transitional provision in s. 10, which provides that the ECJDA applies only to two types of Canadian judgments:
(a) a Canadian judgment made in a proceeding commenced after this Act comes into force, and
(b) a Canadian judgment made in a proceeding commenced before this Act comes into force and in which the party against whom enforcement is sought took part.
In Apollo Real Estate Limited v. Streambank Funding Inc., 2012 BCSC 1088, the court considered the rules applicable to determining whether a judgment creditor "took part" in a proceeding.  The court held that taking part means any participation in a proceeding at any point time.  A withdrawal part way through the proceeding, even if judgment is taken without proper notice afterwards, does not mean that a person did not take part in the proceedings for the purpose of s. 10(b).

However, the court also found that to determine whether a person took part in the proceeding would in effect require the court to determine "whether or not there was a defect in the [other province's] proceeding" in which judgment was granted, and the ECJDA "is designed to remove from B.C. such a supervisory role."  The court held that the proper procedure is for the judgment creditor to apply to the original court to set aside the judgment and for the judgment to be stayed in B.C. meanwhile.

On the one hand, the court's logic is attractively simple.  The ECJDA is in fact designed to ensure that judgments are only attacked in the courts where they are made.  The principles of judicial comity and full faith and credit discourage courts from different provinces from second guessing each other.  On the other hand, the court's conclusion appears to render s. 10(b) moot - setting aside a judgment in the original jurisdiction, including on the basis of lack of proper notice, would eliminate the very judgment to which ECJDA is sought to be applied.  Presumably, this leaves s. 10(b) for those unlikely situations where a judgment can be sustained in the originating court despite the fact that the judgment debtor did not take part in the proceeding under B.C. principles.