In the Matter of an Application by Cavell Insurance Company Limited under the Reciprocal Enforcement of Judgments (U.K.) Act, R.S.O. 1990, c. R.6, Section 106 of the Courts of Justice Act, R.S.O. 1990, c. C.43 and Rule 73 of the Rules of Civil Procedure (Ontario), R.R.O. 1990, Reg. 194, in Respect of a Scheme of Arrangement of Cavell Insurance Company Limited Pursuant to Section 425 of The Companies Act 1985 of Great Britain [Indexed as: Cavell Insurance Co. Ltd. (Re)]
80 O.R. (3d) 500
Court of Appeal for Ontario,
Rosenberg, Goudge and Simmons JJ.A.
May 23, 2006
Conflict of laws -- Foreign judgments -- Enforcement -- Respondent bringing application in U.K. court for approval of scheme of arrangement with its policy holders -- Order granted -- Ontario motion judge properly granting application for order recognizing and implementing U.K. order -- Reciprocal Enforcement of Judgments (U.K.) Act not providing basis for recognition of order as notice of U.K. proceedings had not been served on appellant and as order was not final and conclusive -- Motion judge not erring in resting recognition order on rules of private international law -- Lack of finality of order not constituting barrier to recognition in circumstances -- Reciprocal Enforcement of Judgments (U.K.) Act, R.S.O. 1990, c. R.6.
Cavell was incorporated in 1919 under the laws of England and was in the reinsurance business. It proposed to implement a scheme of arrangement with its policy holders that would bring to an end its contracts of reinsurance with them. Cavell brought an application in the Chancery Division of the High Court of Justice in the United Kingdom for approval of a scheme of arrangement under s. 425 of the Companies Act, 1985 (U.K.), 1985, c. 6. Canadian policy holders received no notice of this application and did not appear in the U.K. court, although they were alerted by letter the month before the hearing of the application that Cavell was proposing to proceed by way of a scheme of arrangement. The U.K. court granted an initial order in the application, ordering Cavell to convene a meeting of its creditors affected by the scheme, and providing for the location and notice to be given for the meeting. Cavell then applied to the Ontario Superior Court of Justice for an order recognizing and implementing the U.K. order. It served its Canadian creditors with the material for this application. The appellant, like many of those creditors, did not attend before the motion judge. The motion judge granted the order sought, relying on the Reciprocal Enforcement of Judgments (U.K.) Act ("REJUKA") [page501] and the rules of private international law. He subsequently issued a second order continuing his earlier order with several further conditions. The appellant appealed.
Held, the appeal should be dismissed.
The motion judge erred in relying on REJUKA and Rule 73 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. The application of Rule 73 is limited to judgments that can be registered under REJUKA. Judgments that can be registered under REJUKA are judgments for the payment of a sum of money. The recognition order could not be based on Part V, Art. VIII of REJUKA. Under Part V, Art. VIII, Cavell was entitled to an order recognizing the U.K. order if that order could be registered under REJUKA, had it been a judgment for the payment of a sum of money. The requirements for registration under REJUKA were not met as there was no proof of service on the appellant of the originating process in the U.K. court, and as the judgment was not final and conclusive.
The motion judge did not err in basing his recognition order on the common law rules of private international law. The fact that the order was not final was not a bar to its recognition in the circumstances of this case. The order was clear and certain. The meeting, its location and the notice requirements for it were clearly spelled out. Thus, the Ontario court knew what it was recognizing. Recognition of the U.K. order presented little if any risk of injustice to the appellant. The order did not require the appellant to pay money, or indeed to do anything. Finally, because of the nature of the order and the terms of its recognition, there was little risk of undermining public confidence if the procedure initiated by the U.K. order was changed following its recognition by the Ontario court. The U.K. order merely commenced a procedure that was supervised by that court. It would be unsurprising for that court to issue subsequent orders providing further guidance for that procedure. Moreover, a term of the recognition order was that the Ontario court must be kept advised of any such changes and that Cavell must seek such further orders of the Ontario court as are necessary as a result. The Ontario court was therefore not put in the position of issuing a recognition order whose foreign foundation might disappear. Moreover, there were strong policy reasons for recognizing the U.K. order. The doctrine of comity was well served by an Ontario recognition order. In addition, fairness to those who were to be affected by recognition was enhanced rather than diminished if the Ontario recognition order was granted. In an age where the rules of private international law are evolving to accommodate the increasingly transnational nature of commerce, there was no reason why this result should be precluded by those rules just because the foreign order to be recognized was not final. While the appellant was not served with notice of the U.K. proceeding, the motion judge found that it had been accorded a fair process, and that finding was entitled to deference and was, in fact, entirely reasonable. The appellant was alerted by letter that Cavell was proposing to proceed by way of a scheme of arrangement, but did not appear to have sought further details. It was also served with the full application record for the proceedings before the motion judge, but chose not to appear. Finally, the motion judge did not err in finding that the real and substantial connection test was met.
APPEAL from the orders of Farley J., 2004 48709 (ON SC), [2004] O.J. No. 5166, 6 C.B.R. (5th) 11 (S.C.J.) and 2005 4094 (ON SC), [2005] O.J. No. 645, 25 C.C.L.I. (4th) 230 (S.C.J.), recognizing and implementing a foreign order.
Cases referred to Beals v. Saldanha, [2003] 3 S.C.R. 416, [2003] S.C.J. No. 77, 234 D.L.R. (4th) 1, 314 N.R. 209, 113 C.R.R. (2d) 189, 2003 SCC 72, 39 B.L.R. (3d) 1, 39 C.P.C. (5th) 1; Currie v. McDonald's Restaurants of Canada Ltd. (2005), 2005 3360 (ON CA), 74 O.R. (3d) 321, [2005] O.J. No. 506, 195 O.A.C. 244, 250 D.L.R. (4th) 224, 7 C.P.C. (6th) 60 (C.A.); Four Embarcadero Center Venture v. Kalen (1988), 1988 4828 (ON SC), 65 O.R. (2d) 551, [1988] O.J. No. 411, 27 C.P.C. (2d) 260 (H.C.J.); [page502] Morguard Investments Ltd. v. De Savoye, 1990 29 (SCC), [1990] 3 S.C.R. 1077, [1990] S.C.J. No. 135, 52 B.C.L.R. (2d) 160, 76 D.L.R. (4th) 256, 122 N.R. 81, [1991] 2 W.W.R. 217, 46 C.P.C. (2d) 1, 15 R.P.R. (2d) 1; Pro Swing Inc. v. ELTA Golf Inc. (2004), 2004 870 (ON CA), 71 O.R. (3d) 566, [2004] O.J. No. 2801 (C.A.) Statutes referred to Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 Business Corporations Act, R.S.O. 1990, c. B.16 Canada Business Corporations Act, R.S.C. 1985, c. C-44 Companies Act, 1985 (U.K.), 1985, c. 6, s. 425 [as am.] Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36 Reciprocal Enforcement of Judgements (U.K.) Act, R.S.O. 1990, c. R.6 Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 73, 73.02 Treaties and conventions referred to Convention between the Government of Canada and the Government of the United Kingdom of Great Britain and Northern Ireland providing for the Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters, 24 April 1984, Can. T.S. 1987 No. 29 (entered into force 1 January 1987), Part II, Art. II, ss. 3, 4, Part III, Art. III, Part IV, Art. VI, s. 4(c), Part V, Art. VIII Authorities referred to Castel, Jean-Gabriel and Janet Walker, Canadian Conflict of Laws, 5th ed. (Markham, Ont.: Butterworths, 2002- )
David Hager, for appellant Pilot Insurance Company. Graham D. Smith, for respondent Reliance Insurance Company. Elizabeth Pillon, for respondent Cavell Insurance Company Limited.
The judgment of the court was delivered by
GOUDGE J.A.: --
Introduction
[1] On December 10, 2004, the respondent, Cavell Insurance Company Limited, brought an application in the Chancery Division of the High Court of Justice in the United Kingdom for approval of a scheme of arrangement under s. 425 of the Companies Act, 1985 (U.K.), 1985, c. 6. On December 20, 2004, that [page503] court granted an initial order in the application, ordering Cavell to convene a meeting of its creditors affected by the scheme, and providing for the location and notice to be given for the meeting.
[2] The fundamental question in this proceeding is whether that initial order can properly be recognized in Ontario.
[3] On December 21, 2004, Farley J. issued an order recognizing the U.K. order and adding a number of terms to "implement" that order. On February 17, 2005, he issued a second order continuing his earlier order with several further conditions. This is the appeal from those orders.
[4] He rested his orders on both the Reciprocal Enforcement of Judgements (U.K.) Act, R.S.O. 1990, c. R.6 ("REJUKA") and the rules of private international law. For the reasons that follow, I would sustain his orders. I would do so not on the basis of REJUKA, but on the basis of private international law.
Background to the Appeal
[5] Cavell was incorporated in 1919 under the laws of England, with the principal object of carrying on the business of reinsurance. Over the years, it wrote reinsurance policies in the London market, and overseas, through branches in South Africa, Australia, New Zealand and Canada.
[6] In Canada, Cavell primarily reinsured insurers writing casualty policies covering claims such as those arising from pollution, asbestos, sexual abuse, tobacco and tainted blood. These types of claims are sometimes referred to as "long tail" claims because they may come to light many years after the policies are written, and may take many more years for coverage and quantum issues to be resolved.
[7] In December 2004, Cavell's business in Canada represented approximately 7.5 per cent of its total, estimated on the basis of claims to be paid. As of the fall of 2004, in addition to its contracts of reinsurance with Canadian insurers, Cavell had total assets in Canada of approximately $23,149,000, of which $20,849,000 were held in trust, as required by the relevant insurance company legislation.
[8] In the mid-1990s, Cavell stopped writing new reinsurance business but continued to administer the "run-off" of its existing reinsurance business, paying the insurers it had reinsured from its reserves as claims arose.
[9] In 2004, Cavell decided to bring an end to its reinsurance run-off business. It proposed to implement a scheme of arrangement with its policy holders that would, in effect, bring to an end its contracts of reinsurance with them. The scheme provided for [page504] the valuation as of December 31, 2004 of all present, future and contingent claims of the policy holders against Cavell, and for the immediate payment of those claims in full without discount for present valuing. Since Cavell is a solvent company, this is known as a solvent scheme of arrangement.
[10] Cavell proposed to implement the scheme by way of the procedure provided by s. 425 of the U.K. Companies Act, 1985. For the scheme to be binding on the company and its creditors, that section requires that a majority of the relevant creditors, in number representing not less than 75 per cent in value of those creditors present and voting in person or by proxy, vote in favour of the scheme at a meeting convened with the permission of the court. The U.K. court must then sanction the scheme.
[11] Cavell took the first step in this process by obtaining the order of December 20, 2004 from the High Court of Justice in the U.K. That order authorized the company to convene a meeting of creditors to consider, and if thought fit, approve the scheme with or without modification. It fixed a location for the meeting, provided for the giving of notice of the meeting, required details of the scheme to be made accessible to the creditors, and appointed a chair of the meeting who was ordered to report the results to the court.
[12] The Canadian policy holders were not served with the papers for the December 20 proceeding, received no notice of it and did not appear in the U.K. court. However, in mid-November, Cavell had circulated a letter to them advising that it would be applying for leave to hold a meeting of creditors and that a court application was expected to take place in early to mid- December.
[13] In obtaining the December 20 order, Cavell filed with the U.K. court an explanatory statement indicating that it would apply in Canada for an order recognizing the U.K. proceedings and the U.K. order of December 20, and confirming the directions given by the U.K. court in relation to the convening of the meeting of creditors. The purpose of doing so was to ensure that the Canadian court would recognize the scheme as binding on Cavell's Canadian creditors.
[14] Cavell proceeded with this step by applying to the Ontario Superior Court of Justice on December 21, 2004 for an order recognizing the U.K. proceedings and recognizing and implementing the U.K. order of December 20. It also sought a stay of proceedings in respect of its Canadian property, and advice or direction in connection with Cavell's application to approve the scheme and the meeting ordered to consider the scheme.
[15] Cavell served its Canadian creditors with the material for this application. The appellant, like many of those creditors, did not attend before the motion judge on December 21. However, [page505] counsel for one Canadian insurer and for the office of the Superintendent of Financial Institutions ("OSFI") did appear.
[16] Farley J. heard the Cavell application on December 21, 2004, and granted the order sought. In brief reasons, he found that there was a real and substantial connection between the subject matter of the proceeding under s. 425 of the U.K. Companies Act, 1985 and the U.K. court, and that it was appropriate to recognize the December 20 order of that court. In doing so, he relied on REJUKA (together with Rule 73 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194) and the inherent jurisdiction of the Ontario Superior Court.
[17] As issued, Farley J.'s order of December 21, 2004 recited in its preamble the need to recognize and co-ordinate the actions before the U.K. court and the application brought in Ontario. In addition to ordering that the U.K. order of December 20 be recognized, the Ontario order contained a number of additional terms which may be grouped as follows:
(a) an order that the U.K. proceedings be recognized;
(b) corollary provisions for the purposes of recognizing the U.K. proceedings and implementing the U.K. order of December 20 and any further relevant orders of the U.K. court in that proceeding, including
(i) that Cavell keep the Ontario court advised of any material developments in the U.K. proceeding and any further orders of the U.K. court, and seek any further orders from the Ontario court needed to co-ordinate the two proceedings;
(ii) that a video link to the creditors meeting be provided in the offices of Cavell's counsel in Toronto;
(iii) that notice of the meeting and access to documents be provided to Canadian creditors;
(c) an order banning other proceedings against Cavell or its Canadian property in connection with the scheme of arrangement except with leave of the Ontario court;
(d) a "comeback" provision entitling any interested party to return to the court for further order, or to amend or vary the December 21 order.
[18] On February 17, 2005, 15 of the Canadian insurers, including the appellant, utilized the "comeback" provision and sought to [page506] set aside or vary the December 21 order. In reasons issued on February 21, Farley J. dismissed their motions and continued the recognition order, but added four conditions to it. He described the three principal ones as follows [at paras. 17 and 18]:
The UK Scheme Adjudicator is to reach a commutation valuation based on the OSFI rules ...
Given the uniqueness of the OSFI rules to be only applicable to Canadian carriers being reinsured by Cavell, there is to be a further right of appeal to this court on this point, recognizing that the Scheme Adjudicator would lose jurisdiction completely if he did not truly apply the OSFI rules.
There is to be a videotape taken of a meeting on February 23rd and a transcript made. . .
[19] In his reasons, Farley J. reviewed the notification that had been provided in several ways of the December 21 application and found that it was "not insufficient" [at para. 3]. He confirmed his view that a basis existed under either REJUKA and Rule 73, or the inherent jurisdiction of the court to make the recognition order of December 21. He also held that the U.K. order of December 20, although not for the payment of money, was sufficiently precise to be enforceable in Ontario. Finally, he made it clear that the provisions of s. 425 of the U.K. Companies Act, 1985 are neither foreign nor repugnant to the Canadian court and that an order facilitating access to that process for those in Canada affected by it, was desirable and consistent with the requirements of comity.
[20] Following the hearing on February 17, a dispute arose over the form of the order to be taken out, resulting in a re- attendance before Farley J. In reasons released April 22, 2005, he clarified two things. First, the OSFI rules to which he had referred in the recognition order are Canadian Generally Accepted Actuarial Principles. Second, he made clear that his primary intention in his February 21 reasons was to ensure that an appeal was available if the valuation done in the U.K. proceedings was not conducted by applying the OSFI rules. He stated that his reference to the appeal being to the Ontario court was a very peripheral point, and that it would be appropriate for the right of appeal to be to the U.K. court as an alternative. With this clarification, the order of February 17, 2005 was issued.
Analysis
[21] The appellant raises three issues in this appeal:
(a) Did Farley J. err in relying on REJUKA and Rule 73 as a basis for recognizing and enforcing the U.K. order of December 20, 2004? [page507]
(b) Did Farley J. err in relying on the inherent jurisdiction of the court and the principle of comity as a basis for recognizing the U.K. order of December 20, 2004?
(c) Did Farley J. err in varying his February 21, 2005 reasons by removing the right of appeal to the Ontario court?
First issue: REJUKA and Rule 73
[22] REJUKA is the Ontario statute that brings into force in Ontario the Convention between Canada and the United Kingdom providing for the reciprocal recognition and enforcement of judgments in civil and commercial matters [Convention between the Government of Canada and the Government of the United Kingdom of Great Britain and Northern Ireland providing for the Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters, 24 April 1984, Can. T.S. 1987 No. 29 (entered into force 1 January 1987)].
[23] The Convention is designed on the basis of reciprocity. Its purpose is to facilitate the recognition and enforcement of civil and commercial judgments granted by the courts of one country in the courts of the other. It defines "judgment" very broadly, to mean any decision given by a court in a civil or commercial matter. The person in whose favour the judgment is given is described as the "judgment creditor".
[24] Part II, Art. II, s. 4 of the Convention demonstrates that it is intended as a more convenient method of recognizing certain judgments, not as a code that precludes resort to the rules of private international law:
- This Convention is without prejudice to any other remedy available to a judgment creditor for the recognition and enforcement in one Contracting State of a judgment given by a court of the other Contracting State.
[25] Part III, Art. III provides for the registration of judgments. Part II, Art. II, s. 3 limits registration only to judgments whereby a sum of money is made payable.
[26] Part IV, Art. VI, s. 4(c) provides that the registering court may require that an application for registration be accompanied by proof of the notice given to the defendant in the original proceedings, unless this appears from the judgment. Rule 73.02 of the Rules of Civil Procedure makes that a requirement for the Ontario court. It establishes the form required for notice of application for registration of a U.K. judgment under REJUKA. It requires that proof of service of the originating process of the U.K. court accompany the affidavit in support of the application. [page508]
[27] Finally, in addition to this expeditious process for registering a U.K. judgment, Part V, Art. VIII provides for the recognition of a judgment, whether it is one for the payment of the money or not, and whether it has been registered or not. It reads:
Any judgment given by a court of one Contracting State for the payment of a sum of money which could be registered under this Convention, whether or not the judgment has been registered, and any other judgment given by such a court, which if it were a judgment for the payment of a sum of money could be registered under this Convention, shall, unless registration has been or would be refused or set aside on any ground other than that the judgment has been satisfied or could not be enforced in the territory of origin, be recognised in a court of the other Contracting State as conclusive between the parties thereto in all proceedings founded on the same cause of action.
(Emphasis added)
[28] In making his recognition order of December 21, 2004, Farley J. relied in part on Rule 73. The appellant argues that he was wrong to do so because its application is limited to judgments that can be registered under REJUKA and these must be judgments that make payable a sum of money. The U.K. order of December 20, 2004 is clearly not that.
[29] I agree. The procedure under Rule 73 is simply not available here.
[30] In his reasons of February 21, 2005, Farley J. focused much more on Part V, Art. VIII as the provision that permitted REJUKA to serve as a basis for his recognition order. The appellant contests this for two reasons: (a) Cavell did not serve it with the originating process in the U.K. court that led to the December 20 order; and (b) that order is not a final order.
[31] Again I agree with the appellant. Under Part V, Art. VIII, Cavell is entitled to an order recognizing the U.K. order of December 20 if that order could be registered under REJUKA, had it been a judgment for the payment of a sum of money. Part IV, Art. VI, s. 4(c) together with Rule 73 require that for a money judgment to be registered, Cavell would have to show proof of service on the appellant of the originating process in the U.K. court. There was no such service, and hence if the U.K. order of December 20 had been a judgment for the payment of money it could not have been registered under REJUKA. Even if the Ontario court could be said to have a discretion to dispense with this service, Farley J. made no finding that he would have done so had this been a money judgment. The respondent's inability to prove service thus bars the recognition of the U.K. order of December 20 under Art. VIII of the Convention and REJUKA.
[32] As well, I think Art. VIII requires a judgment to be final and conclusive before it can be recognized under that Article. Article [page509] VIII provides that where a judgment is recognized thereunder, it is "recognized in a court of the other contracting state as conclusive between the parties thereto in all proceedings founded on the same cause of action" (emphasis added). It would be illogical if the Convention required a judgment that was not final and therefore conclusive in the issuing state to be treated as conclusive in the other state. Rather, I conclude that a judgment must be final in the issuing state to be recognized under Art. VIII. All agree that the U.K. order of December 20, 2004 was not a final order for this purpose. For this reason as well it could not be recognized under Art. VIII.
[33] I would therefore conclude that REJUKA and Rule 73 cannot serve as a basis for the recognition in Ontario of the U.K. order of December 20, 2004.
Second issue: Private international law
[34] Farley J. also based his recognition order of December 21, 2004 on the common law rules of private international law, which he referred to as the inherent jurisdiction of the court and the principle of comity.
[35] The appellant argues that the recognition of the U.K. order of December 20 on this basis was in error because:
-- the order is not a final order;
-- the appellant was not served with the originating process in the U.K. proceedings; and
-- the real and substantial connection test is not met in these circumstances.
In my view, none of these arguments can succeed.
[36] Any consideration of the recognition and enforcement of a foreign judgment pursuant to the rules of private international law must begin with the groundbreaking judgment in Morguard Investments Ltd. v. De Savoye, 1990 29 (SCC), [1990] 3 S.C.R. 1077, [1990] S.C.J. No. 135. Speaking for the court, LaForest J. recognized the pressing need to modernize these rules to accommodate the increasingly transnational nature of commercial transactions that accompanies the inexorable evolution towards a global economy. He put it this way at p. 1098 S.C.R.:
The business community operates in a world economy and we correctly speak of a world community even in the face of decentralized political and legal power. Accommodating the flow of wealth, skills and people across state lines has now become imperative. Under these circumstances, our approach to the recognition and enforcement of foreign judgments would appear ripe for reappraisal. [page510]
[37] Of central importance in this task of reappraisal is the doctrine of comity, a doctrine "grounded in the need in modern times to facilitate the flow of wealth, skills and people across state lines in a fair and orderly manner". See Morguard, supra, at p. 1096 S.C.R. At the same page, the doctrine was defined as follows:
"Comity" in the legal sense, is neither a matter of absolute obligation, on the one hand, nor of mere courtesy and good will, upon the other. But it is the recognition which one nation allows within its territory to the legislative, executive or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens or of other persons who are under the protection of its laws . . .
[38] La Forest J. went on to identify the principles of "real and substantial connection" and "order and fairness" as fundamental considerations for a court to properly determine whether to recognize a foreign judgment pursuant to private international law. These principles allow the domestic court to assess whether the foreign court took jurisdiction and issued the judgment in a way that the domestic court should recognize.
[39] The first of these, the real and substantial connection principle, is now clearly applicable both to the recognition of foreign judgments and interprovincial judgments. This was established in Beals v. Saldanha, 2003 SCC 72, [2003] 3 S.C.R. 416, [2003] S.C.J. No. 77 where, at p. 436 S.C.R., the court made it clear that "the need to accommodate 'the flow of wealth, skills and people across state lines' is as much an imperative internationally as it is interprovincially".
[40] The second principle, order and fairness, recognizes the importance of both the security of international transactions and as well the need for fairness to those against whom recognition and enforcement is sought, and the need to balance the two.
[41] Traditionally, to recognize and enforce a foreign judgment in Ontario, the court has required that it be both a final judgment and for a definite sum of money. In this proceeding, while the appellant argues the finality requirement, it does not raise as an issue the fact that the foreign judgment, the U.K. order of December 20, 2004, is not for a fixed sum of money. The appellant appears to accept the need, in the modern world of international commerce, to revisit this requirement. This need has been recognized by Castel and Walker in Canadian Conflict of Laws, 5th ed. (Markham, Ont.: Butterworths, 2002- ) at 14-21 and by this court in obiter in [page511] Pro Swing Inc. v. ELTA Golf Inc. (2004), 2004 870 (ON CA), 71 O.R. (3d) 566, [2004] O.J. No. 2801 (C.A.), at p. 570 O.R. It should be noted that this judgment has been appealed to the Supreme Court of Canada which reserved its decision on December 15, 2005. Because this issue has not been argued by the appellant here, and because of the views expressed by this court in Pro Swing, supra, I will proceed on the basis that the non-monetary nature of the U.K. order of December 20 is not an impediment to its recognition in Ontario.
[42] However, the appellant does assert that Farley J. erred by recognizing a foreign order that is not final, although it would appear that this argument was not put to him and he did not deal with it in his reasons. Four Embarcadero Center Venture v. Kalen (1988), 1988 4828 (ON SC), 65 O.R. (2d) 551, [1988] O.J. No. 411 (H.C.J.) is a frequently cited articulation of this requirement where Henry J. said this at p. 563 O.R.:
The foreign money judgment must be final and res judicata in the foreign jurisdiction. This occurs when the judgment of the foreign court is final in the sense that the court that made it no longer has the power to rescind or vary it[.]
[43] Such a requirement serves at least three purposes. First, the domestic court knows precisely what it is agreeing to recognize and enforce. The importance of the foreign judgment being clear and certain was emphasized by this court in Pro Swing, supra. Second, finality removes the risk of the injustice that would be done to the party against whom the foreign order is enforced if that order is subsequently changed. This is particularly germane where the foreign order is for the payment of money. Third, finality removes the risk of undermining public confidence that might arise if the domestic court were to issue a recognition order and permit its enforcement, only to have the foundation of that order, namely the foreign order, disappear.
[44] In my view, if the U.K. order of December 20, 2004 is recognized, each of these purposes will nonetheless be served. That order obviously does not finally decide the substantive issue affecting the appellant and the respondent Cavell, because it does not approve the scheme of arrangement. It merely commences the procedure which may lead to the U.K. court ultimately doing so. There is no doubt that subsequent orders of the U.K. court may affect the course of that court procedure. However, the initiating order of December 20 is undoubtedly clear and certain. The meeting, its location and the notice requirements for it are clearly spelled out. Thus the Ontario court knows what it is recognizing.
[45] Second, recognition of the U.K. order presents little if any risk of injustice to the appellant. The order does not require the appellant to pay money, or indeed to do anything. If it is subsequently amended, even to the point of cancelling the meeting altogether, this does not infringe on the appellant in any meaningful way. [page512]
[46] Finally, because of the nature of the order and the terms of its recognition, I think there is little risk of undermining public confidence if the procedure initiated by the U.K. order is changed following its recognition by the Ontario court. The U.K. order merely commences a procedure that is supervised by that court. It would be unsurprising for that court to issue subsequent orders providing further guidance for that procedure. Moreover, a term of the recognition order is that the Ontario court must be kept advised of any such changes and that Cavell must seek such further orders of the Ontario Court as are necessary as a result. The Ontario court is therefore not put in the position of issuing a recognition order whose foreign foundation may disappear.
[47] Moreover, not only can recognition of the U.K. order of December 20 satisfy the purposes served by finality, but there are also strong policy reasons for doing so.
[48] The doctrine of comity is well served by an Ontario recognition order. The U.K. court has long been accorded respect in this jurisdiction and the statutory process it initiated with the December 20 order is one familiar to the courts of Ontario. Various pieces of commercial legislation in this province provide for analogous procedures. In each case, it is important that parties ultimately affected by the scheme be permitted to participate effectively from the beginning. A recognition order facilitates this where, as here, the statutory procedure must reach across national boundaries.
[49] The related notion of reciprocity is also well served by a recognition order. Each of the Canada Business Corporations Act, R.S.C. 1985, c. C-44 and the Ontario Business Corporations Act, R.S.O. 1990, c. B.16 provide court procedures for the approval of solvent schemes of arrangement. If an Ontario court were administering such a scheme, and it affected interests in the United Kingdom, the court would hope for the same recognition of its orders as is sought in this case.
[50] In addition, fairness to those who are to be affected by recognition is enhanced rather than diminished if the Ontario recognition order is granted. The conditions attached to the recognition order such as the added notice provisions and the required video link make participation in the U.K. statutory procedure by the appellant and others in the same position that much easier. Put another way, if a recognition order were denied at this stage, an attempt to recognize any U.K. order finally approving the scheme of arrangement might be met with a complaint that those in Canada affected by the final order were afforded no satisfactory way to participate in the U.K. process leading to that order. The recognition order avoids that risk. [page513]
[51] The conditions of the recognition order that entitle an affected party to come back to the Ontario court to seek the further assistance of the court and that require the U.K. evaluator to reach a commutation value based on the OSFI rules also serve the objective of fairness to those affected by the order.
[52] I recognize that because of the conditions attached to it, the recognition order of December 21, 2004 does not just recognize the U.K. order of December 20. It also in effect declares that the Ontario court accepts the jurisdiction of the U.K. court to carry on the statutory procedure authorized by s. 425 of the U.K. Companies Act, 1985 and provides that the Ontario court will co-ordinate with and support that procedure to the extent it affects interests in Ontario.
[53] Clearly this result could have been achieved by domestic legislation as it has been in both the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 and the Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36 for foreign proceedings brought under bankruptcy or insolvency legislation. Neither Act applies to this circumstance, because of the legislation used in the U.K.
[54] However, in an age where the rules of private international law are evolving to accommodate the increasingly transnational nature of commerce, I see no reason why this result should be precluded by those rules just because the foreign order to be recognized is not final. In my view, the want of finality carries with it no substantive effect that should deny recognition. I would therefore conclude that the appellant's finality argument fails.
[55] The appellant's second argument is that the U.K. order of December 20, 2004 ought not to have been recognized because the appellant was not served with the originating papers in the U.K. and did not appear or otherwise submit to the jurisdiction of the U.K. court.
[56] In my view, this argument must also fail. There is no doubt that the appellant was not served with notice of the December 20 proceeding. However, whether that is viewed as bearing upon the jurisdiction of the U.K. court to issue the order (as in Currie v. McDonald's Restaurants of Canada Ltd. (2005), 2005 3360 (ON CA), 74 O.R. (3d) 321, [2005] O.J. No. 506 (C.A.)) or as bearing upon natural justice and therefore raising a possible defence to the enforcement of the U.K. order (as in Beals, supra), the ultimate question is whether in the circumstances the appellant has been accorded a fair process.
[57] Farley J. answered that question in the affirmative and I see no basis to interfere with his finding. As my colleague, Sharpe J.A., said about the analogous finding in Currie, supra, it is essentially a finding of fact that is entitled to deference in this court. Moreover, in the circumstances, it is entirely reasonable. [page514] The appellant was alerted by letter in mid-November that Cavell was proposing to proceed by way of a scheme of arrangement, but it does not appear to have sought further details. It was also served with the full application record for the proceedings before Farley J. but chose not to appear. The order in the proceeding of which the appellant says it received no notice, namely the U.K. order of December 20, merely initiates the statutory procedure in the U.K. court in which the appellant will have the full opportunity to participate before its rights are determined. Given the letter notification given to the appellant, the nature of the order made, and the appellant's right to be heard in the U.K. proceeding when it matters, I find entirely reasonable the conclusion that the appellant received a fair process.
[58] The appellant's third argument is that Farley J. erred in finding that the real and substantial connection test was met here. Again, I disagree with the appellant.
[59] The argument can be disposed of briefly. Farley J. found a connection between the U.K. jurisdiction and the subject matter of the proceedings that was sufficient to meet the test. I agree. The subject matter is a scheme of arrangement proposed by a U.K. company under U.K. legislation. It would affect all the creditors of the company, only a small percentage of which are in Canada. The meeting authorized by the December 20 order will take place in the U.K. It is not required that there be any particular linkage with those like the appellant who may be among those worldwide to be affected by the proceedings. All this, in my view, is more than enough to warrant rejection of this argument.
[60] I would therefore conclude that all of the appellant's challenges to the use of the rules of private international law as a basis for recognition of the U.K. order of the December 20, 2004 must fail.
Third issue: Removal of the right to appeal to the Ontario Court
[61] In his reasons of February 21, 2005, Farley J. added a condition to his recognition order of December 21, 2004. That condition gave a right of appeal "to this Court" [at para. 17] concerning the evaluation, using OSFI rules, of the commuted value of the claims of Canadian creditors of Cavell. Those reasons recite Farley J.'s concern about the absence from the scheme of arrangement of a meaningful right of appeal from these evaluations. The reasons say nothing about why this should be to the Ontario court rather than the U.K. court.
[62] When asked to settle the terms of the order flowing from his reasons, Farley J. released a further brief endorsement on [page515] April 22, 2005. He said that his primary concern was the right of appeal, and that the question of the appeal being heard "in the Ontario court" was "a very peripheral point". He made it clear that the draft order providing for the appeal to go to the U.K. court captured his true intention. It also avoided the risk that if the reference to the Ontario court remained, his order would determine whether the Canadian creditors should constitute a separate class for voting on the scheme of arrangement, something which was not his intention and which was clearly a question for the U.K. court. He therefore approved the draft order as presented by Cavell.
[63] The appellant, supported by the respondent Reliance Insurance Company, a second Canadian creditor of Cavell, argues that Farley J. erred in making this change. I disagree. In my view, it was entirely within his discretion to make the clarification of April 22, 2005. The order from the February hearing had not yet been issued. The draft order as he approved it captures his fundamental intention. The change in court was peripheral to that intention and was necessary to avoid an outcome he did not intend. By proceeding as he did, Farley J. ensured that the order reflected his true decision. He had the discretion to do so.
[64] In summary, the appeal must be dismissed. No party seeks costs and none are ordered.
Appeal dismissed.