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jeudi 7 août 2014

Recognition and Enforcement of a Foreign Judgment in Quebec: the Real and Substantial Connection between the Defendant and the Foreign State is Required

By Diana Draganova
Ferland Marois Lanctôt, n.p.

In Zimmermann Inc. c. Barer, 2014 QCCS 3404, the Plaintiffs were seeking to enforce a judgment rendered by default against Barer Engineering Company (“BEC”) and the Defendant, David Barer,  by the United States District Court, District of Vermont on June 19, 2012 (“Vermont judgment”) and introduce a Motion to recognize and declare enforceable the Vermont judgment in Quebec (“Plaintiffs’ motion”). The portion of the Vermont judgment against the Defendant personally was based on his extra-contractual liability related to the alleged unpaid equipment and services ordered by BEC, a company for which he was the Secretary. The Quebec Superior Court had to determine whether the Vermont Court had jurisdiction with respect to the Defendant in accordance with the provisions of Quebec law pertaining to the recognition and enforcement of foreign judgments in Quebec.

Context
In 2007 and 2008, BEC, a company based in Vermont, ordered certain equipment and services from the Plaintiffs, being based in Michigan, for a United States’ military project at Hill Air Force Base in Utah.  The equipment purchased was properly delivered by the Plaintiffs and they issued a total of five invoices for the latter. The Vermont Judgment, (rendered against BEC and the Defendant personally) was therefore based on a claim of US$687,081.70 by the Plaintiffs for, inter alia, outstanding invoices.

The reason for which the Defendant was held responsible for the unpaid equipment and services purchased by BEC was because the Plaintiffs’ alleged, very tersely in their Complaint filed in the Vermont Court docket, that BEC was acting as the alter ego of the Defendant. According to them, the Defendant was personally liable for the obligations of BEC as a result of his failure to maintain a clear separation between the legal personalities of his corporations.

For his part, the Defendant argued that the Plaintiffs’ Motion should be dismissed and raised several arguments in support thereof. The main argument was that Plaintiffs’ Motion to recognize the Vermont judgment was not based on facts that might ground jurisdiction of the Quebec Courts according to Articles 3155 (1) and 3168 C.C.Q. Subsidiarily, the Defendant alleged that such a personal condemnation required proof justifying the lifting of the corporate veil. Further, the Defendant advanced that the Vermont judgment against him personally for the debts of BEC would be equivalent to a confiscation of his personal assets without justification. Lastly, the Defendant argued that Quebec Courts should decline jurisdiction pursuant to well-known doctrines in private international law (i.e. the doctrine of real and substantial connection, the “mirror” doctrine, and the doctrine of forum non conveniens).

Decision
The guiding principle for the recognition of foreign judgments, as confirmed by the Quebec Court of Appeal, is that a foreign judgment, such as the Vermont judgment in this instance, is presumed valid under Article 3155 C.C.Q. unless it falls under one of the exceptions stated in that same article.

In the case at bar, the Defendant mainly purported the exception found in first paragraph of Article 3155 C.C.Q.; that being that Vermont, the State where the decision was rendered, had no jurisdiction under the provisions of the applicable title in the Civil Code of Quebec. Accordingly, Justice Eva Petras J.S.C. continued her analysis under Articles 3164 and 3168 C.C.Q.:
« [50]   Article 3164 C.C.Q. provides that in order to determine whether the Vermont Court has jurisdiction, this Court must apply the rules of international jurisdiction of Quebec authorities. This mirror principle has also been affirmed by the Supreme Court of Canada: the same rules that are applied to determine the jurisdictional competence of the Quebec courts must also be used to determine the competence of foreign authorities in the context of a request for the recognition and enforcement of a foreign judgment.

[51]   The exception against recognition and enforcement of foreign judgments for lack of jurisdiction is set out in article 3155(1) C.C.Q. and 3155(1) refers us to article 3168 C.C.Q.


[52]   The Court must therefore examine and apply article 3168 C.C.Q. which states that in personal actions of a patrimonial nature, the jurisdiction of a foreign authority is recognized only if it falls under one of the six conditions enumerated therein. »
Consequently, the examination of the factual and legal requirements set forth in article 3168 C.C.Q. led Justice Petras to conclude that: (i) the Defendant was not domiciled in Vermont, the State where the decision was rendered (3168 (1) C.C.Q.); (ii) the Defendant did not possess an establishment in Vermont (3168 (2) C.C.Q.); (iii) the criterion based on the location of the injury suffered or fault committed was not relevant in the present case and both parties agreed that Article 3168 (3) C.C.Q. was not applicable; (iv) the contractual obligations only existed between the Plaintiffs and BEC; the Defendant was not a party thereto (3168 (4) C.C.Q.); (v) although the Defendant may have signed the Settlement Agreement that was filed in the Vermont Court docket, he did so solely on behalf of BEC and did not personally bind himself to anything (3168 (5) C.C.Q); and lastly (vi) the Defendant did not submit to the jurisdiction of the Vermont Court because no appearance was filed on his personal behalf in the Vermont proceedings. (3168 (6) C.C.Q).

In sum, the aforementioned analysis showed that:
« [83] The Vermont Judgment was rendered on evidence concerning the contractual relationship between the Plaintiffs and BEC, the invoices, the Settlement Agreement and the letter of credit document. This evidence, that concerned only BEC and the Plaintiffs, resulted in the Vermont Judgment and is sufficient to confirm the jurisdiction of the Vermont Court with respect to BEC.
[84]   Under articles 3155 and 3168 C.C.Q., a judgement rendered by the Vermont Court against BEC would have been recognized and declared enforceable in Quebec, had BEC had its head office in Quebec.

[85]   There is no such evidence conferring jurisdiction to Vermont or the Vermont Court with respect to the Defendant.
[86]   The mere unproven and unsupported allegations in paragraphs 79 to 84 of the Complaint are not sufficient to trigger even one of the criteria set out in article 3168 C.C.Q. against the Defendant. »
Justice Petras finished her analysis by pointing out the lack of evidence in the file that would satisfy the criteria needed, pursuant to article 317 C.C.Q., to lift the corporate veil and render the Defendant personally liable for BEC’s debts: .
« [112]   In other words, serious allegations and serious evidence is required to establish the extra-contractual liability of the sole director or shareholder of a company.

 [113]    The mere allegations that BEC is the alter ego of the Defendant is not sufficient. To lift the corporate veil would require evidence of bad faith, abuse of right or an intention to act fraudulently or in fraud of Plaintiffs’ rights. No such evidence appears in the Vermont Complaint.
[114]    Had the Defendant been sued in Montreal, the Plaintiffs would have had to meet the criteria of article 317 C.C.Q. before any judgment, even by default, could have been rendered against the Defendant. »
The Plaintiffs’ Motion was dismissed with costs because there was no real and substantial connection between the Defendant and the State of Vermont.

The full judgment can be read here.

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