Beals v. Saldanha, [2003] 3 S.C.R. 416, 2003 SCC 72

Geoffrey Saldanha, Leueen Saldanha and Dominic Thivy Appellants

v.

Frederick H. Beals III and Patricia A. Beals Respondents

Indexed as: Beals v. Saldanha

Neutral citation: 2003 SCC 72.

File No.: 28829.

2003: February 20; 2003: December 18.

Present: McLachlin C.J. and Gonthier, Iacobucci, Major, Bastarache, Binnie, Arbour, LeBel and Deschamps JJ.

on appeal from the court of appeal for ontario

Conflict of laws — Foreign judgments — Enforcement — Action brought in Florida court over sale of Florida land valued at US$8,000 — Florida court entering default judgment against defendants resident in Ontario — Jury subsequently awarding US$210,000 in compensatory damages and US$50,000 in punitive damages — Defendants not properly defending action according to Florida law and not moving to have default judgment set aside or appealing jury award for damages — Whether “real and substantial connection” test for enforcing interprovincial judgments should be extended to foreign judgments — Whether defence of fraud, public policy or natural justice established so that foreign judgment should not be enforced by Canadian courts — Whether enforcing foreign judgment constitutes violation of s. 7 of Canadian Charter of Rights and Freedoms.

Constitutional law — Charter of Rights — Fundamental justice — Whether s. 7 of Canadian Charter of Rights and Freedoms can shield a Canadian defendant from enforcement of foreign judgment.

Judgments and orders — Foreign judgments — Enforcement — Rules relating to recognition and enforcement of foreign judgments by Canadian courts — Nature and scope of defences available to judgment debtor.

The appellants, residents of Ontario, sold a vacant lot situated in Florida to the respondents. A dispute arose as a result of that transaction and in 1986 the respondents sued the appellants and two other defendants in Florida. A defence was filed but the appellants chose not to defend any of the subsequent amendments to the action. Pursuant to Florida law, the failure to defend the amendments had the effect of not defending the action. The appellants were subsequently noted in default and were served with notice of a jury trial to establish damages. They did not respond to the notice nor did they attend the trial. The jury awarded the respondents US$210,000 in compensatory damages and US$50,000 in punitive damages. Upon receipt of the notice of the monetary judgment against them, the appellants sought legal advice. They were advised by an Ontario lawyer that the foreign judgment could not be enforced in Ontario. Relying on this advice, the appellants took no steps to have the judgment set aside or to appeal the judgment in Florida. The damages were not paid and an action was started in Ontario to enforce the Florida judgment. By the time of the hearing in 1998, the foreign judgment with interest had grown to approximately C$800,000. The trial judge dismissed the action for enforcement primarily on the ground that there had been fraud in relation to the assessment of damages. The Court of Appeal allowed the respondents’ appeal.

Held (Iacobucci, Binnie and LeBel JJ. dissenting): The appeal should be dismissed. The judgment of the Florida court should be enforced.

Per McLachlin C.J. and Gonthier, Major, Bastarache, Arbour and Deschamps JJ.: International comity and the prevalence of international cross-border transactions and movement call for a modernization of private international law. Subject to the legislatures adopting a different approach, the “real and substantial connection” test, which has until now only been applied to interprovincial judgments, should apply equally to the recognition and enforcement of foreign judgments. The test requires that a significant connection exist between the cause of action and the foreign court. Here, the “real and substantial connection” test is made out. The appellants entered into a property transaction in Florida when they bought and sold land. As such, there exists both a real and substantial connection between the Florida jurisdiction, the subject matter of the action and the defendants. Since the Florida court properly took jurisdiction, its judgment must be recognized and enforced by a domestic court provided that no defences bar its enforcement.

While fraud going to jurisdiction can always be raised before a domestic court to challenge the judgment, the merits of a foreign judgment can be challenged for fraud only where the allegations are new and not the subject of prior adjudication. Where material facts not previously discoverable arise that potentially challenge the evidence that was before the foreign court, the domestic court can decline recognition of the judgment. The defendant has the burden of demonstrating that the facts sought to be raised could not have been discovered by the exercise of due diligence prior to the obtaining of the foreign judgment. Here, the defence of fraud is not made out. The appellants have not claimed that there was evidence of fraud that they could not have discovered had they defended the Florida action. In the absence of such evidence, the trial judge erred in concluding that there was fraud. Although the amount of damages awarded may seem disproportionate, it was a palpable and overriding error for the trial judge to conclude on the dollar amount of the judgment alone that the Florida jury must have been misled.

The defence of natural justice is restricted to the form of the foreign procedure and to due process, and does not relate to the merits of the case. If that procedure, while valid there, is not in accordance with Canada’s concept of natural justice, the foreign judgment will be rejected. The defendant carries the burden of proof. In the circumstances of this case, the defence does not arise. The appellants failed to raise any reasonable apprehension of unfairness. They were fully informed about the Florida action, were advised of the case to meet and were granted a fair opportunity to do so. They did not defend the action. Once they received notice of the amount of the judgment, the appellants obviously had precise notice of the extent of their financial exposure. Their failure to move to set aside or appeal the Florida judgment when confronted with the size of the award of damages was not due to a lack of notice but due to their reliance upon negligent legal advice. That negligence cannot be a bar to the enforcement of the respondents’ judgment.

The public policy defence prevents the enforcement of a foreign judgment which is contrary to the Canadian concept of justice, and turns on whether a foreign law is contrary to our view of basic morality. 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 sums involved, although they have grown large, are not by themselves a basis to refuse enforcement of the foreign judgment in Canada. The public policy defence is not meant to bar enforcement of a judgment rendered by a foreign court with a real and substantial connection to the cause of action for the sole reason that the claim in that foreign jurisdiction would not yield comparable damages in Canada.

Finally, the recognition and enforcement of the Florida judgment by a Canadian court would not constitute a violation of s. 7 of the Canadian Charter of Rights and Freedoms. Given that s. 7 does not shield a Canadian resident from the financial effects of the enforcement of a judgment rendered by a Canadian court, it should not shield a Canadian defendant from the enforcement of a foreign judgment.

Per Iacobucci and Binnie JJ. (dissenting): The “real and substantial connection” test provides an appropriate conceptual basis for the enforcement of final judgments obtained in foreign jurisdictions. While there is no doubt the Florida courts had jurisdiction over the dispute since the land was located in that jurisdiction, the question is whether the appellants in this proceeding were sufficiently informed of the case against them to allow them to determine, in a reasonable way, whether to participate in the Florida action, or to let it go by default. In this case, the appellants come within the traditional limits of the natural justice defence and the Ontario courts ought not to give effect to the Florida judgment.

The suggestion that the appellants are the authors of their own misfortune on the basis that if they had hired a Florida lawyer they would have found out about subsequent developments in the action cannot be accepted. The appellants decided not to defend the case set out against them in the complaint. That case was subsequently transformed. They never had the opportunity to put their minds to the transformed case because they were never told about it.

To make an informed decision, they should have been told in general terms of the case they had to meet on liability and been given an indication of the jeopardy they faced in terms of damages. The respondents’ complaint did not adequately convey to the appellants the importance of the decision that would eventually be made in the Florida court.

Cumulatively, the events demonstrate an unfair procedure which in this particular case failed to meet the standards of natural justice. Nowhere was it brought to the appellants’ attention that, under the Florida Rules of Civil Procedure, they were required to refile their defence every time the respondents amended their complaint against other defendants. In terms of procedural fairness, the appellants were entitled to assume that in the absence of any new allegations against them there was no need to refile a defence that had already been filed in the same action. A Canadian resident is not presumed to know the law of another jurisdiction. As the basis of the respondents’ judgment is default of pleading, this lack of notification goes to the heart of the present appeal.

Furthermore, a party must be made aware of the potential jeopardy faced. The appellants received no notice of a 1987 court order striking out the claim for punitive damages against the other defendants — the realtor and the title insurers — on grounds applicable, had they known about it, to the appellants. They were also not told, after being noted in default and before the jury trial, that the respondents had made a deal with the realtor to delete claims against the realtor for treble damages, punitive damages and statutory violations (though these claims were continued on almost identical facts against the appellants). Subsequently, the respondents settled with the realtor and with the title insurers, leaving the appellants as the sole target at the damages trial. They were not told about this. Nor were the appellants served with the court order for mandatory mediation which provided that all parties were required to participate or, as required by the Florida rules, with notice of the experts the respondents proposed to call at the damages assessment. Lastly, the respondents’ complaint did not indicate that they were claiming damages on behalf of corporations, whose names appeared nowhere in the pleadings, in which they had an interest, and that they would be seeking damages for a corporation’s lost opportunity to build an undefined number of homes on land to which neither the respondents nor the corporation held title.

A judgment based on inadequate notice is violative of natural justice. A default judgment that rests on such an unfair foundation should not be enforced. The fact that the appellants did not appeal the Florida judgment or seek the indulgence of the Florida court to set the default judgment aside for “excusable neglect” is a relevant consideration, but is not necessarily fatal, and in this case does not justify the enforcement in Ontario of the flawed Florida default judgment.

Per LeBel J. (dissenting): The “real and substantial connection” test should be modified significantly when it is applied to judgments originating outside the Canadian federation. Specifically, the assessment of the propriety of the foreign court’s jurisdiction should be carried out in a way that acknowledges the additional hardship imposed on a defendant who is required to litigate in a foreign country. The purposive, principled framework should not be confined, however, to the question of jurisdiction. The impeachment defences of public policy, fraud and natural justice ought to be reformulated. Liberalizing the jurisdiction side of the analysis while retaining narrow, strictly construed categories on the defence side is not a coherent approach.

The jurisdiction test itself should be applied so that the assumption of jurisdiction will not be recognized if it is unfair to the defendant. This requires taking into account the differences between the international and interprovincial contexts. The integrated character of the Canadian federation makes a high degree of cooperation between the courts of the various provinces a practical necessity. It is also a constitutional imperative, inherent in the relationship between the units of our federal state, that each province must recognize the properly assumed jurisdiction of another, and conversely that no court in a province can intermeddle in matters that are without a constitutionally sufficient connection to that province. Comity as between sovereign nations is not an obligation in the same sense. It follows from the contextual and purpose-driven approach that the rules for recognition and enforcement of foreign-country judgments should be carefully fashioned to reflect the realities of the international context, and calibrated to further to the greatest degree possible, the ultimate objective of facilitating international interactions. However, this does not mean that they should be as liberal as the interprovincial rule. Ideally, the “real and substantial connection” test should represent a balance designed to create the optimum conditions favouring the flow of commodities and services across state lines. The connections required before foreign-country judgments will be enforced should be specified more strictly and in a manner that gives due weight to the protection of Canadian defendants without disregarding the legitimate interests of foreign claimants. This approach is consistent with both the flexible nature of international comity as a principle of enlightened self-interest rather than absolute obligation, and the practical differences between the international and interprovincial contexts.

While the test should ensure that, considering the totality of the connections between the forum and all aspects of the action, it is not unfair to expect the defendant to litigate in that forum, it does not follow that there necessarily has to be a connection between the defendant and the forum. There are situations where, given the other connections between the forum and the proceeding, it is a reasonable place for the action to be heard and the defendant can fairly be expected to go there even though he or she personally has no link at all to that jurisdiction. Under this approach, the connection must be strong enough to make it reasonable for the defendant to be expected to litigate there even though that may entail additional expense, inconvenience, and risk. If litigating in the foreign jurisdiction is very burdensome to the defendant, a stronger degree of connection would be required before the originating court’s assumption of jurisdiction should be recognized as fair and appropriate. In extreme cases, the foreign legal system itself may be inherently unfair. If the process that led to the judgment was unfair in itself, it is not fair to the defendant to enforce that judgment in any circumstance, even if the forum has very strong connections to the action and appears in every other respect to be the natural place for the action to be heard.

It follows from those propositions that the notion of interprovincial reciprocity is not equally applicable internationally. To treat a judgment from a foreign country exactly like one that originates within Canada fails to take into account the differences between the interprovincial and international contexts and fails to reflect the differences between assuming jurisdiction and enforcing a foreign judgment. Lastly, s. 7 Charter rights are not usually relevant to jurisdictional issues in civil disputes and do not arise in this case, although it is possible that there may be situations where fundamental interests of the defendant are implicated and s. 7 could come into play.

In this case, Florida was the natural place for the action to be heard because there were very strong connections between that state and every component of the action: the plaintiffs, who live there; the land, which is in Florida; and the defendants, who involved themselves in real estate transactions there.

The public policy defence should be reserved for cases where the objection is to the law of the foreign forum, rather than the way the law was applied, or the size of the award per se. It should also apply to foreign laws that offend basic tenets of our civil justice system, principles that are widely recognized as having a quality of essential fairness. Here, the defects in the judgment, while severe, do not engage the public policy defence. The enforcement of such a large award in the absence of a connection either to harm suffered by the plaintiffs and caused by the defendants or to conduct deserving of punishment on the part of the defendants would be contrary to basic Canadian ideas of justice. But there is no evidence that the law of Florida offends these principles. On the contrary, the record indicates that Florida law requires proof of damages in the usual fashion and there is no indication that punitive damages are available where the defendant’s conduct is not morally blameworthy.

In general, the rule that the defence of fraud must be based on previously undiscoverable evidence is a reasonably balanced solution. However, the possibility that a broader test should apply to default judgments in cases where the defendant’s decision not to participate was a demonstrably reasonable one should not be ruled out. If the defendant ignored what it justifiably considered to be a trivial or meritless claim, and can prove on the civil standard that the plaintiff took advantage of his absence to perpetrate a deliberate deception on the foreign court, it would be inappropriate to insist that a Canadian court asked to enforce the resulting judgment must turn a blind eye to those facts. Accordingly, a more generous version of the fraud defence ought to be available, as required, to address the dangers of abuse associated with the loosening of the jurisdiction test to admit a broad category of formerly unenforceable default judgments. In the present case, the defence of fraud is not made out. All the facts that the appellants raise in this connection were known to them or could have been discovered at the time of the Florida action. Furthermore, even though this is the kind of case for which a more lenient interpretation of the fraud defence would, in principle, be appropriate, because the appellants’ decision not to attend the Florida proceedings was a reasonable one, given the lack of evidence, the defence could not succeed even on the view that the judgment could be vitiated by proof of intentional fraud.

The defence of natural justice concerns the procedure by which the foreign court reached its decision. If a defendant can establish that the process by which the foreign judgment was obtained was contrary to the Canadian conception of natural justice, then the foreign judgment should not be enforced. Two developments should be recognized in connection with this defence: the requirements of notice and a hearing should be construed in a purposive and flexible manner, and substantive principles of justice should also be included in the scope of the defence. Notice is adequate when the defendant is given enough information to assess the extent of his or her jeopardy. This means, among other things, that the defendant should be made aware of the approximate amount sought. Adequate notice must also include alerting the defendant to the consequences of any procedural steps taken or not taken, as well as to the allegations that will be adjudicated at trial. In assessing whether the defence of natural justice has been made out, the opportunities for correcting a denial of natural justice that existed in the originating jurisdiction should be assessed in light of all the relevant factors. Here, the Ontario defendants were not given sufficient notice of the extent and nature of the claims against them in the Florida action and its potential ramifications. Furthermore, there was no notice as to the serious consequences to the defendants of failure to refile their defence in response to the plaintiffs’ repeatedly amended pleadings. As a result, the notice afforded to the defendants did not meet the requirements of natural justice. Finally, the mere fact that the appellants have received mistaken legal advice and did not avail themselves of the remedies available in Florida should not operate to relieve the respondents entirely of the consequences of a significant or substantial failure to observe the rules of natural justice, and it should not, in itself, bar the appellants from relying on this defence. In the circumstances of this case, when all the relevant factors are considered, the appellants’ apprehensiveness about going to Florida to seek relief was understandable.

Even if the natural justice defence did not apply, this judgment should not be enforced. The facts raise very serious concerns about the fairness of enforcing the Florida judgment which do not fit easily into the categories identified by the traditional impeachment defences. The circumstances of this case are such that the enforcement of this judgment would shock the conscience of Canadians and cast a negative light on our justice system. The appellants have done nothing that infringes the rights of the respondents and have certainly done nothing to deserve such harsh punishment. Nor can they be said to have sought to avoid their obligations by hiding in their own jurisdiction or to have shown disrespect for the legal system of Florida. They have acted in good faith throughout and have diligently taken all the steps that appeared to be required of them, based on the information and advice they had. The plaintiffs in Florida appear to have taken advantage of the defendants’ difficult position to pursue their interests as aggressively as possible and to secure a sizeable windfall. The Ontario court should not have to set its seal of approval on the judgment thus obtained without regard for the dubious nature of the claim, the fact that the parties did not compete on a level playing field, and the lack of transparency in the Florida proceedings. The implication of the majority position is that Canadian defendants will from now on be obliged to participate in foreign lawsuits no matter how meritless the claim or how small the amount of damages appears to be, on pain of potentially devastating consequences from which Canadian courts will be virtually powerless to protect them. Moving the law of conflicts in such a direction should be avoided.

Cases Cited

By Major J.

Applied: Morguard Investments Ltd. v. De Savoye, 1990 29 (SCC), [1990] 3 S.C.R. 1077; referred to: Moses v. Shore Boat Builders Ltd. (1993), 1993 2276 (BC CA), 106 D.L.R. (4th) 654, leave to appeal refused, [1994] 1 S.C.R. xi; United States of America v. Ivey (1996), 1996 991 (ON CA), 30 O.R. (3d) 370; Old North State Brewing Co. v. Newlands Services Inc., 1998 6512 (BC CA), [1999] 4 W.W.R. 573; Muscutt v. Courcelles (2002), 2002 44957 (ON CA), 213 D.L.R. (4th) 577; Indyka v. Indyka, [1969] 1 A.C. 33; Moran v. Pyle National (Canada) Ltd., 1973 192 (SCC), [1975] 1 S.C.R. 393; Hunt v. T&N plc, 1993 43 (SCC), [1993] 4 S.C.R. 289; Spar Aerospace Ltd. v. American Mobile Satellite Corp., [2002] 4 S.C.R. 205, 2002 SCC 78; Woodruff v. McLennan (1887), 14 O.A.R. 242; Jacobs v. Beaver (1908), 17 O.L.R. 496; Roglass Consultants Inc. v. Kennedy, Lock (1984), 1984 421 (BC CA), 65 B.C.L.R. 393; Powell v. Cockburn, 1976 29 (SCC), [1977] 2 S.C.R. 218.

By Binnie J. (dissenting)

Morguard Investments Ltd. v. De Savoye, 1990 29 (SCC), [1990] 3 S.C.R. 1077; Hunt v. T&N plc, 1993 43 (SCC), [1993] 4 S.C.R. 289; Tolofson v. Jensen, 1994 44 (SCC), [1994] 3 S.C.R. 1022; Spar Aerospace Ltd. v. American Mobile Satellite Corp., [2002] 4 S.C.R. 205, 2002 SCC 78; Baker v. Canada (Minister of Citizenship and Immigration), 1999 699 (SCC), [1999] 2 S.C.R. 817; Adams v. Cape Industries plc, [1991] 1 All E.R. 929.

By LeBel J. (dissenting)

Morguard Investments Ltd. v. De Savoye, 1990 29 (SCC), [1990] 3 S.C.R. 1077; Hunt v. T&N plc, 1993 43 (SCC), [1993] 4 S.C.R. 289; Spar Aerospace Ltd. v. American Mobile Satellite Corp., [2002] 4 S.C.R. 205, 2002 SCC 78; Hilton v. Guyot, 159 U.S. 113 (1895); Yahoo!, Inc. v. Ligue contre le racisme et l’antisémitisme, 169 F.Supp.2d 1181 (2001); Emanuel v. Symon, [1908] 1 K.B. 302; Moran v. Pyle National (Canada) Ltd., 1973 192 (SCC), [1975] 1 S.C.R. 393; Mercandino v. Devoe & Raynolds, Inc., 436 A.2d 942 (1981); United States of America v. Ivey (1995), 1995 7241 (ON SC), 26 O.R. (3d) 533; Kidron v. Grean (1996), 1996 8054 (ON SC), 48 O.R. (3d) 775; Boardwalk Regency Corp. v. Maalouf (1992), 1992 7573 (ON CA), 88 D.L.R. (4th) 612; BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996); Loewen Group, Inc. v. United States of America, International Centre for Settlement of Investment Disputes, Case No. ARB(AF)/98/3, June 26, 2003; Woodruff v. McLennan (1887), 14 O.A.R. 242; Abouloff v. Oppenheimer (1882), 10 Q.B.D. 295; Owens Bank Ltd. v. Bracco, [1992] 2 All E.R. 193; Jacobs v. Beaver (1908), 17 O.L.R. 496; Duchess of Kingston’s Case (1776), 2 Sm. L.C. (8th ed.) 784; Powell v. Cockburn, 1976 29 (SCC), [1977] 2 S.C.R. 218; Adams v. Cape Industries plc, [1991] 1 All E.R. 929; Cité de Pont Viau v. Gauthier Mfg. Ltd., 1978 4 (SCC), [1978] 2 S.C.R. 516.

Statutes and Regulations Cited

Canadian Charter of Rights and Freedoms, s. 7.

Civil Code of Québec, S.Q. 1991, c. 64.

Fla. Stat. Ann. R. Civ. P. § 1.190(a) (West 1967).

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, r. 19.02(3).

United States Constitution, Article IV, Amendment V, Amendment XIV.

Authors Cited

Blom, Joost. “Conflict of Laws — Enforcement of Extraprovincial Default Judgment — Real and Substantial Connection: Morguard Investments Ltd. v. De Savoye” (1991), 70 Can. Bar Rev. 733.

Blom, Joost. “The Enforcement of Foreign Judgments: Morguard Goes Forth Into the World” (1997), 28 Can. Bus. L.J. 373.

Brown, Donald J. M., and John M. Evans. Judicial Review of Administrative Action in Canada. Toronto: Canvasback, 1998 (loose-leaf updated July 2003).

Castel, Jean-Gabriel, and Janet Walker. Canadian Conflict of Laws, 5th ed. Toronto: Butterworths, 2002 (loose-leaf updated May 2003, Issue 5).

Dicey and Morris on the Conflict of Laws, vol. 1, 13th ed. Under the general editorship of Lawrence Collins. London: Sweet & Maxwell, 2000.

Nygh, P. E. Conflict of Laws in Australia, 6th ed. North Ryde: Butterworths, 1995.

Talpis, Jeffrey A., with the collaboration of Shelley L. Kath. “If I am from Grand-Mère, Why Am I Being Sued in Texas?” Responding to Inappropriate Foreign Jurisdiction in Quebec-United States Crossborder Litigation. Montréal: Thémis, 2001.

Walker, Janet. “Beals v. Saldanha: Striking the Comity Balance Anew” (2002), 5 Can. Int’l Law. 28.

Watson, Garry D., and Frank Au. “Constitutional Limits on Service Ex Juris: Unanswered Questions from Morguard” (2000), 23 Advocates’ Q. 167.

Yntema, Hessel E. “The Objectives of Private International Law” (1957), 35 Can. Bar Rev. 721.

Ziegel, Jacob S. “Enforcement of Foreign Judgments in Canada, Unlevel Playing Fields, and Beals v. Saldanha: A Consumer Perspective” (2003), 38 Can. Bus. L.J. 294.

APPEAL from a judgment of the Ontario Court of Appeal (2001), 2001 27942 (ON CA), 54 O.R. (3d) 641, 202 D.L.R. (4th) 630, 148 O.A.C. 1, 10 C.P.C. (5th) 191, [2001] O.J. No. 2586 (QL), reversing a judgment of the Ontario Court (General Division) (1998), 1998 14709 (ON SC), 42 O.R. (3d) 127, 27 C.P.C. (4th) 144, [1998] O.J. No. 4519 (QL). Appeal dismissed, Iacobucci, Binnie and LeBel JJ. dissenting.

J. Brian Casey, Janet E. Mills and Matthew J. Latella, for the appellants Geoffrey Saldanha and Leueen Saldanha.

Neal H. Roth, for the appellant Dominic Thivy.

Messod Boussidan, Larry J. Levine, Q.C., and Kevin D. Sherkin, for the respondents.

The judgment of McLachlin C.J. and Gonthier, Major, Bastarache, Arbour and Deschamps JJ. was delivered by

Major J. —

I. Introduction

[1] The rules related to the recognition and enforcement of foreign judgments by Canadian courts are the focus of this appeal. “Foreign” in the context of this case refers to a judgment rendered by a court outside Canada, as opposed to an interprovincial judgment.

[2] The appellants, residents of Ontario, were the owners of a vacant lot in Sarasota County, Florida. They sold the lot to the respondents. A dispute arose as a result of that transaction. The respondents eventually commenced two actions against the appellants in Florida. Only the second action is relevant to this appeal. The appellants received notice at all stages of the litigation and defended the first action, which was dismissed without prejudice. A defence was filed to the second action without the knowledge of the Saldanhas.

[3] The appellants chose not to defend any of the three subsequent amendments to the second action. Pursuant to Florida law, the failure to defend the amendments had the effect of not defending the second action and the appellants were subsequently noted in default. Damages of US$260,000 were awarded by a jury convened to assess damages. The damages were not paid and an action was started in Ontario to enforce the Florida judgment.

[4] We have to first determine the circumstances under which a foreign judgment shall be recognized and enforced in Canada. Next, the nature and scope of the defences available to the judgment debtor must be established. For the purposes of these reasons, I assume the laws of other Canadian provinces are substantially the same as in Ontario and for that reason, Canada and Ontario are used interchangeably. A future case involving another part of Canada will be considered in light of whatever differences, if any, exist there.

II. Facts

[5] The appellants were Ontario residents. In 1981, they and Rose Thivy, who is Dominic Thivy’s wife and no longer a party to this action, purchased a lot in Florida for US$4,000. Three years later, Rose Thivy was contacted by a real estate agent acting for the respondents as well as for William and Susanne Foody (who assigned their interest to the Bealses’ and are no longer parties to this action) enquiring about purchasing the lot. In the name of her co-owners, Mrs. Thivy advised the agent that they would sell the lot for US$8,000. The written offer erroneously referred to “Lot 1” as the lot being purchased instead of “Lot 2”. Rose Thivy advised the real estate agent of the error and subsequently changed the number of the lot on the offer to “Lot 2”. The amended offer was accepted and “Lot 2” was transferred to the respondents and the Foodys.

[6] The respondents had purchased the lot in question in order to construct a model home for their construction business. Some months later, the respondents learned that they had been building on Lot 1, a lot that they did not own. In February 1985, the respondents commenced what was the first action in Charlotte County, Florida, for “damages which exceed $5,000”. This was a customary way of pleading in Florida to give the Circuit Court monetary jurisdiction. The appellants, representing themselves, filed a defence. In September 1986, the appellants were notified that that action had been dismissed voluntarily and without prejudice because it had been brought in the wrong county.

[7] In September 1986, a second action (“Complaint”) was commenced by the respondents in the Circuit Court for Sarasota County, Florida. That Complaint was served on the appellants, in Ontario, to rescind the contract of purchase and sale and claimed damages in excess of US$5,000, treble damages and other relief authorized by statute in Florida. This Complaint was identical to that in the first action except for the addition of allegations of fraud. Shortly thereafter, an Amended Complaint, simply deleting one of the defendants, was served on the appellants. A statement of defence (a duplicate of the defence filed in the first action) was filed by Mrs. Thivy on behalf of the appellants. The trial judge accepted the evidence of the Saldanhas that they had not signed the document. Accordingly, the Saldanhas were found not to have attorned. As discussed further in these reasons, Dominic Thivy’s situation differs.

[8] In May 1987, the respondents served a Second Amended Complaint which modified allegations brought against a co-defendant who is no longer a party, but included all the earlier allegations brought against the appellants. No defence was filed. A Third Amended Complaint was served on the appellants on May 7, 1990 and again, no defence was filed. Under Florida law, the appellants were required to file a defence to each new amended complaint; otherwise, they risked being noted in default. A motion to note the appellants in default for their failure to file a defence to the Third Amended Complaint and a notice of hearing were served on the appellants in June 1990. The appellants did not respond to this notice. On July 25, 1990, a Florida court entered “default” against the appellants, the effect of which, under Florida law, was that they were deemed to have admitted the allegations contained in the Third Amended Complaint.

[9] The appellants were served with notice of a jury trial to establish damages. They did not respond to the notice nor did they attend the trial held in December 1991. Mr. Foody, the respondent Mr. Beals, and an expert witness on business losses testified at the trial. The jury awarded the respondents damages of US$210,000 in compensatory damages and US$50,000 in punitive damages, plus post-judgment interest of 12 percent per annum. Notice of the monetary judgment was received by the appellants in late December 1991.

[10] Upon receipt of the notice of the monetary judgment against them, the Saldanhas sought legal advice. They were advised by an Ontario lawyer that the foreign judgment could not be enforced in Ontario because the appellants had not attorned to the Florida court’s jurisdiction. Relying on this advice, the appellants took no steps to have the judgment set aside, as they were entitled to try and do under Florida law, or to appeal the judgment in Florida. Florida law permitted the appellants ten days to commence an appeal and up to one year to bring a motion to have the judgment obtained there set aside on the grounds of “excusable neglect”, “fraud” or “other misconduct of an adverse party”.

[11] In 1993, the respondents brought an action before the Ontario Court (General Division) seeking the enforcement of the Florida judgment. By the time of the hearing before that court, in 1998, the foreign judgment, with interest, had grown to approximately C$800,000. The trial judge dismissed the action for enforcement on the ground that there had been fraud in relation to the assessment of damages and for the additional reason of public policy. The Ontario Court of Appeal, Weiler J.A. dissenting, allowed the appeal.

III. Judgments Below

A. Ontario Court (General Division) (1998), 1998 14709 (ON SC), 42 O.R. (3d) 127

[12] The trial judge declared the Florida judgment unenforceable in Ontario. Having concluded from the verdict of the Florida jury that it had not been made aware of certain facts, the trial judge dismissed the action on the basis of fraud. He also held that the judgment was unenforceable on the grounds of public policy. The trial judge recommended that the defence of public policy be broadened to include a “judicial sniff test” which would permit a domestic court to refuse enforcement of a foreign judgment in cases where the facts did not satisfy any of the three existing defences to enforcement but were nevertheless egregious.

B. Ontario Court of Appeal (2001), 2001 27942 (ON CA), 54 O.R. (3d) 641

[13] A majority of the Ontario Court of Appeal allowed the appeal. Doherty and Catzman JJ.A. concluded that neither the defence of fraud nor of public policy had application to this case.

[14] As to the defence of fraud, Doherty J.A. held that that defence was only available where the allegations of fraud rest on “newly discovered facts”, that is, facts that a defendant could not have discovered through the exercise of reasonable diligence prior to the granting of the judgment. He concluded that the trial judge erred in relying on assumed facts that conceivably might have been uncovered by the appellants had they chosen to participate in the Florida proceedings. Even if the trial judge had correctly defined the defence of fraud, Doherty J.A. held that there was no evidence that the judgment had been obtained by fraud.

[15] On the defence of public policy, Doherty J.A. rejected the need to incorporate a “judicial sniff test” as part of that defence. Assuming a “sniff test” was required, he held that no reasons existed in this appeal for public policy to preclude the enforcement of the foreign judgment. He stated (at para. 84):

The Beals and Foodys launched a lawsuit in Florida. Florida was an entirely proper court for the determination of the allegations in that lawsuit. The Beals and Foodys complied with the procedures dictated by the Florida rules. There is no evidence that they misled the Florida court on any matter. Rather, it would seem they won what might be regarded as a very weak case because the respondents chose not to defend the action. I find nothing in the record to support the trial judge’s characterization of the conduct of the Beals and Foodys in Florida as “egregious”. They brought their allegations in the proper forum, followed the proper procedures, and were immensely successful in no small measure because the respondents chose not to participate in the proceedings.

[16] Weiler J.A., in dissent, would have dismissed the appeal. She concluded that the defences of natural justice and fraud made it inappropriate for a domestic court to enforce the Florida judgment. She stated that the appellants were deprived of natural justice by not having been given sufficient notice to permit them to appreciate the extent of their jeopardy prior to the judgment for damages against them. Weiler J.A. also held that the respondents had concealed certain facts from the Florida jury.

IV. Analysis

[17] It was properly conceded by the parties, as explained below, in both the trial court and Court of Appeal, that the Florida court had jurisdiction over the respondents’ action pursuant to the “real and substantial connection” test set out in Morguard Investments Ltd. v. De Savoye, 1990 29 (SCC), [1990] 3 S.C.R. 1077. As a result, the issues raised in this appeal were limited to the application and scope of the defences available to a domestic defendant seeking to have a Canadian court refuse enforcement of a foreign judgment.

[18] In Morguard, supra, the “real and substantial connection” test for the recognition and enforcement of interprovincial judgments was adopted. Morguard did not decide whether that test applied to foreign judgments. However, some courts have extended the application of Morguard to judgments rendered outside Canada: Moses v. Shore Boat Builders Ltd. (1993), 1993 2276 (BC CA), 106 D.L.R. (4th) 654 (B.C.C.A.), leave to appeal refused, [1994] 1 S.C.R. xi; United States of America v. Ivey (1996), 1996 991 (ON CA), 30 O.R. (3d) 370 (C.A.); Old North State Brewing Co. v. Newlands Services Inc., 1998 6512 (BC CA), [1999] 4 W.W.R. 573 (B.C.C.A.).

[19] The question arises whether the “real and substantial connection” test, which is applied to interprovincial judgments, should apply equally to the recognition of foreign judgments. For the reasons that follow, I conclude that it should. While there are compelling reasons to expand the test’s application, there does not appear to be any principled reason not to do so. In light of this, the parties’ concession on the point was appropriate.

[20] Morguard, supra, altered the old common law rules for the recognition and enforcement of interprovincial judgments. These rules, based on territoriality, sovereignty, independence and attornment, were held to be outmoded. La Forest J. concluded that it had been an error to adopt this approach “even in relation to judgments given in sister-provinces” (p. 1095). Central to the decision to modernize the common law rules was the doctrine of comity. Comity was defined as (at pp. 1095 and 1096, respectively):

. . . the deference and respect due by other states to the actions of a state

legitimately taken within its territory. . . .

. . . the recognition which one nation allows within its territory to the legislative, executive and 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. . . .

[21] Early common law rules were amended by rules intended to facilitate the flow of wealth, skills and people across boundaries, particularly boundaries of a federal state. Morguard established that the determination of the proper exercise of jurisdiction by a court depended upon two principles (relied on by the Ontario Court of Appeal in Muscutt v. Courcelles (2002), 2002 44957 (ON CA), 213 D.L.R. (4th) 577, at para. 34), the first being the need for “order and fairness”. The second was the existence of a “real and substantial connection” (see also Indyka v. Indyka, [1969] 1 A.C. 33 (H.L.); Moran v. Pyle National (Canada) Ltd., 1973 192 (SCC), [1975] 1 S.C.R. 393).

[22] Modern ideas of order and fairness require that a court must have reasonable grounds for assuming jurisdiction where the participants to the litigation are connected to multiple jurisdictions.

[23] Morguard established that the courts of one province or territory should recognize and enforce the judgments of another province or territory, if that court had properly exercised jurisdiction in the action, namely that it had a real and substantial connection with either the subject matter of the action or the defendant. A substantial connection with the subject matter of the action will satisfy the real and substantial connection test even in the absence of such a connection with the defendant to the action.

A. The “Real and Substantial Connection” Test and Foreign Judgments

[24] The question then is whether the real and substantial connection test should apply to the recognition and enforcement of foreign judgments?

[25] In Moran, supra, at p. 409, it was recognized that where individuals carry on business in another provincial jurisdiction, it is reasonable that those individuals be required to defend themselves there when an action is commenced:

By tendering his products in the market place directly or through normal distributive channels, a manufacturer ought to assume the burden of defending those products wherever they cause harm as long as the forum into which the manufacturer is taken is one that he reasonably ought to have had in his contemplation when he so tendered his goods.

That reasoning is equally compelling with respect to foreign jurisdictions.

[26] Although La Forest J. noted in Morguard that judgments from beyond Canada’s borders could raise different issues than judgments within the federation, he recognized the value of revisiting the rules related to the recognition and enforcement of foreign judgments (at p. 1098):

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. [Emphasis added.]

Although use of the word “foreign” in the above quotation referred to judgments rendered in a sister province, the need to accommodate “the flow of wealth, skills and people across state lines” is as much an imperative internationally as it is interprovincially.

[27] The importance of comity was analysed at length in Morguard, supra. This doctrine must be permitted to evolve concomitantly with international business relations, cross-border transactions, as well as mobility. The doctrine of comity is

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.

(Morguard, supra, at p. 1096)

This doctrine is of particular importance viewed internationally. The principles of order and fairness ensure security of transactions, which necessarily underlie the modern concept of private international law. Although Morguard recognized that the considerations underlying the doctrine of comity apply with greater force between the units of a federal state, the reality of international commerce and the movement of people continue to be “directly relevant to determining the appropriate response of private international law to particular issues, such as the enforcement of monetary judgments” (J. Blom, “The Enforcement of Foreign Judgments: Morguard Goes Forth Into the World” (1997), 28 Can. Bus. L.J. 373, at p. 375).

[28] International comity and the prevalence of international cross-border transactions and movement call for a modernization of private international law. The principles set out in Morguard, supra, and further discussed in Hunt v. T&N plc, 1993 43 (SCC), [1993] 4 S.C.R. 289, can and should be extended beyond the recognition of interprovincial judgments, even though their application may give rise to different considerations internationally. Subject to the legislatures adopting a different approach by statute, the “real and substantial connection” test should apply to the law with respect to the enforcement and recognition of foreign judgments.

[29] Like comity, the notion of reciprocity is equally compelling both in the international and interprovincial context. La Forest J. discussed interprovincial reciprocity in Morguard, supra. He stated (at p. 1107):

. . . if this Court thinks it inherently reasonable for a court to exercise jurisdiction under circumstances like those described, it would be odd indeed if it did not also consider it reasonable for the courts of another province to recognize and enforce that court’s judgment.

In light of the principles of international comity, La Forest J.’s discussion of reciprocity is also equally applicable to judgments made by courts outside Canada. In the absence of a different statutory approach, it is reasonable that a domestic court recognize and enforce a foreign judgment where the foreign court assumed jurisdiction on the same basis as the domestic court would, for example, on the basis of a “real and substantial connection” test.

[30] Federalism was a central concern underlying the decisions in Morguard, supra, and Hunt, supra. In the latter, La Forest J. stated that he did not think that “litigation engendered against a corporate citizen located in one province by its trading and commercial activities in another province should necessarily be subject to the same rules as those applicable to international commerce” (Hunt, supra, at p. 323). Recently, Spar Aerospace Ltd. v. American Mobile Satellite Corp., [2002] 4 S.C.R. 205, 2002 SCC 78, suggested, in obiter, that it may be necessary to afford foreign judgments a different treatment than that recognized for interprovincial judgments (per LeBel J., at para. 51):

However, it is important to emphasize that Morguard and Hunt were decided in the context of interprovincial jurisdictional disputes. In my opinion, the specific findings of these decisions cannot easily be extended beyond this context. In particular, the two cases resulted in the enhancing or even broadening of the principles of reciprocity and speak directly to the context of interprovincial comity within the structure of the Canadian federation. . . .

Although La Forest J. and LeBel J. suggested that the rules applicable to interprovincial versus foreign judgments should differ, they do not preclude the application of the “real and substantial connection” test to both types of judgments, provided that any unfairness that may arise as a result of the broadened application of that test be taken into account.

[31] The appellants submitted that the recognition of foreign judgments rendered by courts with a real and substantial connection to the action or parties is particularly troublesome in the case of foreign default judgments. If the “real and substantial connection” test is applied to the recognition of foreign judgments, they argue the test should be modified in the recognition and enforcement of default judgments. In the absence of unfairness or other equally compelling reasons which were not identified in this appeal, there is no logical reason to distinguish between a judgment after trial and a default judgment.

[32] The “real and substantial connection” test requires that a significant connection exist between the cause of action and the foreign court. Furthermore, a defendant can reasonably be brought within the embrace of a foreign jurisdiction’s law where he or she has participated in something of significance or was actively involved in that foreign jurisdiction. A fleeting or relatively unimportant connection will not be enough to give a foreign court jurisdiction. The connection to the foreign jurisdiction must be a substantial one.

[33] In the present case, the appellants purchased land in Florida, an act that represents a significant engagement with the foreign jurisdiction’s legal order. Where a party takes such positive and important steps that bring him or her within the proper jurisdiction of a foreign court, the fear of unfairness related to the duty to defend oneself is lessened. If a Canadian enters into a contract to buy land in another country, it is not unreasonable to expect the individual to enter a defence when sued in that jurisdiction with respect to the transaction.

[34] The “real and substantial connection” test is made out for all of the appellants. There exists both a real and substantial connection between the Florida jurisdiction, the subject matter of the action and the defendants. As stated in J.-G. Castel and J. Walker, Canadian Conflict of Laws (5th ed. (loose-leaf)), at p. 14-10:

For the recognition or enforcement in Canada of a foreign judgment in personam, the foreign court must have had jurisdiction according to Canadian rules of the conflict of laws.

In light of Canadian rules of conflict of laws, Dominic Thivy attorned to the jurisdiction of the Florida court when he entered a defence to the second action. His subsequent procedural failures under Florida law do not invalidate that attornment. As such, irrespective of the real and substantial connection analysis, the Florida court would have had jurisdiction over Mr. Thivy for the purposes of enforcement in Ontario.

[35] A Canadian defendant sued in a foreign jurisdiction has the ability to redress any real or apparent unfairness from the foreign proceedings and the judgment’s subsequent enforcement in Canada. The defences applicable in Ontario are natural justice, public policy and fraud. In addition, defendants sued abroad can raise the doctrine of forum non conveniens. This would apply in the usual way where it is claimed that the proceedings are not, on the basis of convenience, expense and other considerations, in the proper forum.

[36] Here, the appellants entered into a property transaction in Florida when they bought and sold land. Having taken this positive step to bring themselves within the jurisdiction of Florida law, the appellants could reasonably have been expected to defend themselves when the respondents started an action against them in Florida. The appellants failed to defend the claim pursuant to the Florida rules. Nonetheless, they were still entitled, within ten days, to appeal the Florida default judgment, which they did not. In addition, the appellants did not avail themselves of the additional one-year period to have the Florida judgment for damages set aside. While their failure to move to set aside or appeal the Florida judgment was due to their reliance upon negligent legal advice, that negligence cannot be a bar to the enforcement of the respondents’ judgment.

[37] There are conditions to be met before a domestic court will enforce a judgment from a foreign jurisdiction. The enforcing court, in this case Ontario, must determine whether the foreign court had a real and substantial connection to the action or the parties, at least to the level established in Morguard, supra. A real and substantial connection is the overriding factor in the determination of jurisdiction. The presence of more of the traditional indicia of jurisdiction (attornment, agreement to submit, residence and presence in the foreign jurisdiction) will serve to bolster the real and substantial connection to the action or parties. Although such a connection is an important factor, parties to an action continue to be free to select or accept the jurisdiction in which their dispute is to be resolved by attorning or agreeing to the jurisdiction of a foreign court.

[38] If a foreign court did not properly take jurisdiction, its judgment will not be enforced. Here, it was correctly conceded by the litigants that the Florida court had a real and substantial connection to the action and parties.

B. Defences to the Enforcement of Judgments

[39] Once the “real and substantial connection” test is found to apply to a foreign judgment, the court should then examine the scope of the defences available to a domestic defendant in contesting the recognition of such a judgment.

[40] The defences of fraud, public policy and lack of natural justice were developed before Morguard, supra, and still pertain. This Court has to consider whether those defences, when applied internationally, are able to strike the balance required by comity, the balance between order and fairness as well as the real and substantial connection, in respect of enforcing default judgments obtained in foreign courts.

[41] These defences were developed by the common law courts to guard against potential unfairness unforeseen in the drafting of the test for the recognition and enforcement of judgments. The existing defences are narrow in application. They are the most recognizable situations in which an injustice may arise but are not exhaustive.

[42] Unusual situations may arise that might require the creation of a new defence to the enforcement of a foreign judgment. However, the facts of this case do not justify speculating on that possibility. Should the evolution of private international law require the creation of a new defence, the courts will need to ensure that any new defences continue to be narrow in scope, address specific facts and raise issues not covered by the existing defences.

(1) The Defence of Fraud

[43] As a general but qualified statement, neither foreign nor domestic judgments will be enforced if obtained by fraud.

[44] Inherent to the defence of fraud is the concern that defendants may try to use this defence as a means of relitigating an action previously decided and so thwart the finality sought in litigation. The desire to avoid the relitigation of issues previously tried and decided has led the courts to treat the defence of fraud narrowly. It limits the type of evidence of fraud which can be pleaded in response to a judgment. If this Court were to widen the scope of the fraud defence, domestic courts would be increasingly drawn into a re-examination of the merits of foreign judgments. That result would obviously be contrary to the quest for finality.

[45] Courts have drawn a distinction between “intrinsic fraud” and “extrinsic fraud” in an attempt to clarify the types of fraud that can vitiate the judgment of a foreign court. Extrinsic fraud is identified as fraud going to the jurisdiction of the issuing court or the kind of fraud that misleads the court, foreign or domestic, into believing that it has jurisdiction over the cause of action. Evidence of this kind of fraud, if accepted, will justify setting aside the judgment. On the other hand, intrinsic fraud is fraud which goes to the merits of the case and to the existence of a cause of action. The extent to which evidence of intrinsic fraud can act as a defence to the recognition of a judgment has not been as clear as that of extrinsic fraud.

[46] A restrictive application of the defence of fraud was endorsed in Woodruff v. McLennan (1887), 14 O.A.R. 242. The Ontario Court of Appeal stated, at pp. 254-55, that the defence could be raised where

the recovery was collusive, [the] defendant had never been served with process, . . . the suit had been undefended without defendant’s default, . . . the defendant had been fraudulently persuaded by plaintiff to let judgment go by default . . . or some fraud to defendant’s prejudice committed or allowed in the proceedings of the other Court. . . .

Woodruff established that evidence of fraud that went to the merits of the case (intrinsic) was inadmissible. Only evidence of fraud which misled a court into taking jurisdiction (extrinsic) was admissible and could bar the enforcement of the judgment.

[47] Woodruff, supra, was subsequently modified by the Ontario Court of Appeal. See Jacobs v. Beaver (1908), 17 O.L.R. 496, at p. 506:

. . . the fraud relied on must be something collateral or extraneous, and not merely the fraud which is imputed from alleged false statements made at the trial, which were met by counter-statements by the other side, and the whole adjudicated upon by the Court and so passed on into the limbo of estoppel by the judgment. This estoppel cannot, in my opinion, be disturbed except upon the allegation and proof of new and material facts, or newly discovered and material facts which were not before the former Court and from which are to be deduced the new proposition that the former judgment was obtained by fraud. The burden of that issue is upon the defendant, and until he at least gives prima facie evidence in support of it, the estoppel stands. And it may be, as I have before stated, that when such evidence is given, and in order to fully prove this new issue, the whole case should be re-opened. [Emphasis added.]

The court, in Jacobs, acknowledged that in addition to evidence of extrinsic fraud, evidence of intrinsic fraud was admissible where the defendant could establish “proof of new and material facts” that, not being available at the time of trial, were not before the issuing court and demonstrate that the judgment sought to be enforced was obtained by fraud.

[48] Contrary to the decision of the Ontario Court of Appeal in Jacobs, the courts of British Columbia take a different view. In Roglass Consultants Inc. v. Kennedy, Lock (1984), 1984 421 (BC CA), 65 B.C.L.R. 393, the British Columbia Court of Appeal maintained the strict approach to the fraud defence set out in Woodruff. It held that only extrinsic fraud could be raised in defence of the enforcement of a foreign judgment.

[49] In Powell v. Cockburn, 1976 29 (SCC), [1977] 2 S.C.R. 218, it was clear that the aim in refusing recognition of a judgment because of fraud “is to prevent abuse of the judicial process” (p. 234). In that case, the Court did not address fraud going to the merits of a judgment but did confirm that fraud going to jurisdiction (extrinsic fraud) is always open to impeachment.

[50] What should be the scope of the defence of fraud in relation to foreign judgments? Jacobs, supra, represents a reasonable approach to that defence. It effectively balances the need to guard against fraudulently obtained judgments with the need to treat foreign judgments as final. I agree with Doherty J.A. for the majority in the Court of Appeal that the “new and material facts” discussed in Jacobs must be limited to those facts that a defendant could not have discovered and brought to the attention of the foreign court through the exercise of reasonable diligence.

[51] The historic description of and the distinction between intrinsic and extrinsic fraud are of no apparent value and, because of their ability to both complicate and confuse, should be discontinued. It is simpler to say that fraud going to jurisdiction can always be raised before a domestic court to challenge the judgment. On the other hand, the merits of a foreign judgment can be challenged for fraud only where the allegations are new and not the subject of prior adjudication. Where material facts not previously discoverable arise that potentially challenge the evidence that was before the foreign court, the domestic court can decline recognition of the judgment.

[52] Where a foreign judgment was obtained by fraud that was undetectable by the foreign court, it will not be enforced domestically. “Evidence of fraud undetectable by the foreign court” and the mention of “new and material facts” in Jacobs, supra, demand an element of reasonable diligence on the part of a defendant. To repeat Doherty J.A.’s ruling, in order to raise the defence of fraud, a defendant has the burden of demonstrating that the facts sought to be raised could not have been discovered by the exercise of due diligence prior to the obtaining of the foreign judgment. See para. 43:

A due diligence requirement is consistent with the policy underlying the recognition and enforcement of foreign judgments. In the modern global village, decisions made by foreign courts acting within Canadian concepts of jurisdiction and in accordance with fundamental principles of fairness should be respected and enforced. That policy does not, however, extend to protect decisions which are based on fraud that could not, through the exercise of reasonable diligence, have been brought to the attention of the foreign court. Respect for the foreign court does not diminish when a refusal to enforce its judgment is based on material that could not, through the exercise of reasonable diligence, have been placed before that court. [Emphasis added.]

Such an approach represents a fair balance between the countervailing goals of comity and fairness to the defendant.

[53] Although Jacobs, supra, was a contested foreign action, the test used is equally applicable to default judgments. Where the foreign default proceedings are not inherently unfair, failing to defend the action, by itself, should prohibit the defendant from claiming that any of the evidence adduced or steps taken in the foreign proceedings was evidence of fraud just discovered. But if there is evidence of fraud before the foreign court that could not have been discovered by reasonable diligence, that will justify a domestic court’s refusal to enforce the judgment.

[54] In the present case, the appellants made a conscious decision not to defend the Florida action against them. The pleadings of the respondents then became the facts that were the basis for the Florida judgment. As a result, the appellants are barred from attacking the evidence presented to the Florida judge and jury as being fraudulent.

[55] The appellants have not claimed that there was evidence of fraud that they could not have discovered had they defended the Florida action. In the absence of newly discovered evidence of fraud, I agree with the Court of Appeal that the trial judge erred in admitting evidence he found established fraud. He erred in law by failing to limit “new and material facts” to facts which could not have been discovered by the appellants by the exercise of reasonable diligence.

[56] There was no evidence before the trial judge to support fraud. In fact, the trial judge, himself, stated (at p. 131):

No record of the damage assessment proceedings exists, and the evidence heard by the jury is unknown. There is similarly no record of the instructions given to the jury by the trial judge.

In the absence of such evidence, the trial judge erred in concluding that there was fraud. It is impossible to know whether the evidence now sought to be adduced by the appellants had been previously considered by the jury. The respondent Mr. Beals and an expert on business losses both testified before the Florida jury and gave uncontradicted evidence. Before the Ontario court, Mr. Beals was available for questioning but was not called upon by the appellants to address the allegations of fraud. Similarly, the respondents’ counsel in the Florida action testified but no questions of fraud were raised with him.

[57] No evidence was led to show that the jury was misled (deliberately or not) on the extent of the damages. The admitted facts presented to the jury included allegations of fraudulent misrepresentations and loss of profits. The claim by the respondents was for damages to recoup the purchase price of the land, loss of profits and punitive damages. The nature of the damages sought, as well as the admitted facts presented to the Florida jury, was evidence upon which that jury could reasonably reach the damages that it did. I agree with the majority in the Court of Appeal that, although the amount of damages awarded may seem disproportionate, it was a palpable and overriding error for the trial judge to conclude on the dollar amount of the judgment alone that the Florida jury must have been misled.

[58] As the appellants did not provide any evidence of new and previously undiscoverable facts suggestive of fraud, the defence of fraud cannot form the basis of a valid challenge to the application for enforcement of the respondents’ judgment.

(2) The Defence of Natural Justice

[59] As previously stated, the denial of natural justice can be the basis of a challenge to a foreign judgment and, if proven, will allow the domestic court to refuse enforcement. A condition precedent to that defence is that the party seeking to impugn the judgment prove, to the civil standard, that the foreign proceedings were contrary to Canadian notions of fundamental justice.

[60] A domestic court enforcing a judgment has a heightened duty to protect the interests of defendants when the judgment to be enforced is a foreign one. The domestic court must be satisfied that minimum standards of fairness have been applied to the Ontario defendants by the foreign court.

[61] The enforcing court must ensure that the defendant was granted a fair process. Contrary to the position taken by my colleague LeBel J., it is not the duty of the plaintiff in the foreign action to establish that the legal system from which the judgment originates is a fair one in order to seek enforcement. The burden of alleging unfairness in the foreign legal system rests with the defendant in the foreign action.

[62] Fair process is one that, in the system from which the judgment originates, reasonably guarantees basic procedural safeguards such as judicial independence and fair ethical rules governing the participants in the judicial system. This determination will need to be made for all foreign judgments. Obviously, it is simpler for domestic courts to assess the fairness afforded to a Canadian defendant in another province in Canada. In the case of judgments made by courts outside Canada, the review may be more difficult but is mandatory and the enforcing court must be satisfied that fair process was used in awarding the judgment. This assessment is easier when the foreign legal system is either similar to or familiar to Canadian courts.

[63] In the present case, the Florida judgment is from a legal system similar, but not identical, to our own. If the foreign state’s principles of justice, court procedures and judicial protections are not similar to ours, the domestic enforcing court will need to ensure that the minimum Canadian standards of fairness were applied. If fair process was not provided to the defendant, recognition and enforcement of the judgment may be denied.

[64] The defence of natural justice is restricted to the form of the foreign procedure, to due process, and does not relate to the merits of the case. The defence is limited to the procedure by which the foreign court arrived at its judgment. However, if that procedure, while valid there, is not in accordance with Canada’s concept of natural justice, the foreign judgment will be rejected. The defendant carries the burden of proof and, in this case, failed to raise any reasonable apprehension of unfairness.

[65] In Canada, natural justice has frequently been viewed to include, but is not limited to, the necessity that a defendant be given adequate notice of the claim made against him and that he be granted an opportunity to defend. The Florida proceedings were not contrary to the Canadian concept of natural justice. The appellants concede that they received notice of all the legal procedure taken in the Florida action and that the judge of the foreign court respected the procedure of that jurisdiction. The appellants submit, however, that they were denied natural justice because they were not given sufficient notice to enable them to discover the extent of their financial jeopardy.

[66] The appellants claim to have been denied the opportunity to assess the extent of their financial jeopardy because the respondents’ claim failed to specify the exact dollar amount of damages and types of damages they were seeking. The Florida claims, particularly the Third Amended Complaint, made it clear that the damages sought were potentially significant. The complaints filed in Florida raised allegations of fraud and sought punitive damages, both of which allow for the possibility of a substantial award of damages. Treble damages were sought. Repayment of the purchase price, the amount lost by the respondents due to their inability to construct a model home on the lot, the expenses incurred in preparing that lot and lost revenue due to the respondents’ inability to construct a model home to be used in their construction business were all sought in the Third Amended Complaint. In light of knowing the types of damages claimed, not being provided with a specific dollar value of the amount of damages sought cannot constitute a denial of natural justice. The appellants were mistaken when they presumed that the damages award would be approximately US$8,000.

[67] The respondents did not give notice that an expert on the assessment of business losses would testify before the Florida jury. The failure to disclose witnesses in a notice of assessment is not a denial of natural justice.

[68] LeBel J. would expand the defence of natural justice by interpreting the right to receive notice of a foreign action to include notice of the legal steps to be taken by the defendant where the legal system differs from that of Canada’s and of the consequences flowing from a decision to defend, or not defend, the foreign action. Where such notice was not given, he would deny enforcement of the resulting judgment. No such burden should rest with the foreign plaintiff. Within Canada, defendants are presumed to know the law of the jurisdiction seized with an action against them. Plaintiffs are not required to expressly or implicitly notify defendants of the steps that they must take when notified of a claim against them. This approach is equally appropriate in the context of international litigation. To find otherwise would unduly complicate cross-border transactions and hamper trade with Canadian parties. A defendant to a foreign action instituted in a jurisdiction with a real and substantial connection to the action or parties can reasonably be expected to research the law of the foreign jurisdiction. The Saldanhas and Thivys owned land in the State of Florida and entered into a real estate transaction in that state. When served with notice of an action against them in the State of Florida, the appellants were responsible for gaining knowledge of Florida procedure in order to discover the particularities of that legal system.

[69] My interpretation of the Florida legal system differs from that of LeBel J. in that I am of the opinion that the appellants were fully informed about the Florida action. They were advised of the case to meet and were granted a fair opportunity to do so. They did not defend the action. Once they received notice of the amount of the judgment, the appellants obviously had precise notice of the extent of their financial exposure. Their failure to act when confronted with the size of the award of damages was not due to a lack of notice but due to relying on the mistaken advice of their lawyer.

[70] For these reasons, the defence of natural justice does not arise.

(3) The Defence of Public Policy

[71] The third and final defence is that of public policy. This defence prevents the enforcement of a foreign judgment which is contrary to the Canadian concept of justice. The public policy defence turns on whether the foreign law is contrary to our view of basic morality. As stated in Castel and Walker, supra, at p. 14-28:

. . . the traditional public policy defence appears to be directed at the concept of repugnant laws and not repugnant facts. . . .

[72] How is this defence of assistance to a defendant seeking to block the enforcement of a foreign judgment? It would, for example, prohibit the enforcement of a foreign judgment that is founded on a law contrary to the fundamental morality of the Canadian legal system. Similarly, the public policy defence guards against the enforcement of a judgment rendered by a foreign court proven to be corrupt or biassed.

[73] The appellants submitted that the defence of public policy should be broadened to include the case where neither the defence of natural justice nor the current defence of public policy would apply but where the outcome is so egregious that it justifies a domestic court’s refusal to enforce the foreign judgment. The appellants argued that, as a matter of Canadian public policy, a foreign judgment should not be enforced if the award is excessive, would shock the conscience of, or would be unacceptable to, reasonable Canadians. The appellants claimed that the public policy defence provides a remedy where the judgment, by its amount alone, would shock the conscience of the reasonable Canadian. It was argued that, if the respondents and their witnesses were truthful in the Florida proceeding, it must follow that the laws in Florida permit a grossly excessive award for lost profits absent a causal connection between the acts giving rise to liability and the damages suffered. Such a result, the appellants submitted, would shock the conscience of the reasonable Canadian. I do not agree.

[74] Blom, supra, predicted the appellants’ request for the expansion of the public policy defence (at p. 400):

The only change that the Morguard approach to recognition may bring in its wake is a greater temptation to expand the notion of public policy, so as to justify refusing a foreign default judgment that meets the Morguard criteria, but whose enforcement nevertheless appears to impose a severe hardship on the defendant.

[75] The use of the defence of public policy to challenge the enforcement of a foreign judgment involves impeachment of that judgment by condemning the foreign law on which the judgment is based. It is not a remedy to be used lightly. The expansion of this defence to include perceived injustices that do not offend our sense of morality is unwarranted. The defence of public policy should continue to have a narrow application.

[76] The award of damages by the Florida jury does not violate our principles of morality. The sums involved, although they have grown large, are not by themselves a basis to refuse enforcement of the foreign judgment in Canada. Even if it could be argued in another case that the arbitrariness of the award can properly fit into a public policy argument, the record here does not provide any basis allowing the Canadian court to re-evaluate the amount of the award. The public policy defence is not meant to bar enforcement of a judgment rendered by a foreign court with a real and substantial connection to the cause of action for the sole reason that the claim in that foreign jurisdiction would not yield comparable damages in Canada.

[77] There was no evidence that the Florida procedure would offend the Canadian concept of justice. I disagree for the foregoing reasons that enforcement of the Florida monetary judgement would shock the conscience of the reasonable Canadian.

C. Section 7 of the Canadian Charter of Rights and Freedoms

[78] The appellants submitted that the Florida judgment cannot be enforced because its enforcement would force them into bankruptcy. It was argued that the recognition and enforcement of that judgment by a Canadian court would constitute a violation of s. 7 of the Charter. The appellants submitted that a Charter remedy should be recognized to the effect that, before a domestic court enforces a foreign judgment which would result in the defendant’s bankruptcy, the court must be satisfied that the foreign judgment has been rendered in accordance with the principles of fundamental justice. No authority is offered for that proposition with which I disagree but, in any event, the Florida proceedings were conducted in conformity with fundamental justice. The obligation of a domestic court to recognize and enforce a foreign judgment cannot depend on the financial ability of the defendant to pay that judgment. As s. 7 of the Charter does not shield a Canadian resident from the financial effects of the enforcement of a judgment rendered by a Canadian court, I have difficulty accepting that s. 7 should shield a Canadian defendant from the enforcement of a foreign judgment.

V. Disposition

[79] The parties agreed that the Florida court had a real and substantial connection to the action launched by the respondents. Having properly taken jurisdiction, the judgment of that court must be recognized and enforced by a domestic court, provided that no defences bar its enforcement. None of the existing defences of fraud, natural justice or public policy have been supported by the evidence. Although the damage award may appear disproportionate to the original value of the land in question, that cannot be determinative. The judgment of the Florida court should be enforced.

[80] The appeal is dismissed with costs.

The reasons of Iacobucci and Binnie JJ. were delivered by

[81] Binnie J. (dissenting) — The question raised by this appeal is the sufficiency of the notice provided to Ontario defendants (the appellants) of Florida proceedings against them by two Sarasota County real estate developers over the sale of an empty residential building lot in 1984 for US$8,000. The subject matter of their contract turned out to be the wrong lot. The respondents kept the lot (they say they did not intend to purchase) and sued the appellants for damages.

[82] The Florida default judgment now commands payment of over C$1,000,000, an award described by the Ontario trial judge as “breathtaking”. The damages were assessed by a Florida jury in less than half a day.

[83] If the notice had been sufficient, I would have agreed reluctantly with the majority of my colleagues that the default judgment against them would be enforceable in Ontario despite the fact the foreign court never got to hear the Ontario defendants’ side of the story. Their failure to participate using the procedures open to them in Florida would have bound them to the result. However, in my view, the appellants’ inactivity in the face of their mushrooming legal problem is explained by the fact they were kept in the dark about the true nature and extent of their jeopardy. They were not served with some of the more important documents on liability filed in the Florida proceeding before they were noted in default, nor were they served with other important documents relevant to the assessment of damages filed after default but prior to the trial at which judgment was entered against them. Proper notice is a function of the particular circumstances of the case giving rise to the foreign default judgment. In this case, in my view, there was a failure of notification amounting to a breach of natural justice. In these circumstances, the Ontario courts ought not to give effect to the Florida judgment.

I. Real and Substantial Connection

[84] I agree with Major J. that the “real and substantial connection” test developed in Morguard Investments Ltd. v. De Savoye, 1990 29 (SCC), [1990] 3 S.C.R. 1077, Hunt v. T&N plc, 1993 43 (SCC), [1993] 4 S.C.R. 289, at p. 325, and Tolofson v. Jensen, 1994 44 (SCC), [1994] 3 S.C.R. 1022, at p. 1058, provides an appropriate conceptual basis for the enforcement in Canada of final judgments obtained in foreign jurisdictions as it does for final judgments obtained in other provinces.

[85] That said, I recognize that there are significant differences between enforcement of a foreign judgment and enforcement of judgments from one province or territory to another within the Canadian federation. As La Forest J. observed in Morguard (at p. 1098):

The considerations underlying the rules of comity apply with much greater force between the units of a federal state. . . .

Morguard went on to refer to “[t]he integrating character of our constitutional arrangements” (p. 1100), including (1) common citizenship, (2) interprovincial mobility of citizens, (3) the common market among the provinces envisaged by our Constitution, and (4) the essentially unitary structure of our judicial system presided over by the Supreme Court of Canada. The constitutional flavour of the Morguard analysis was picked up and emphasized in Hunt, supra, and again in Spar Aerospace Ltd. v. American Mobile Satellite Corp., [2002] 4 S.C.R. 205, 2002 SCC 78, at para. 53. We should not backtrack on the importance of that distinction.

[86] It stands to reason that if the issues posed by the enforcement of foreign judgments differ from the issues encountered in the enforcement of judgments among the provinces and the territories, the legal rules are not going to be identical. Accordingly, while I accept that the Morguard test (“real and substantial connection”) provides a framework for the enforcement of foreign judgments, it would be prudent at this stage not to be overly rigid in staking out a position on available defences beyond what the facts of this case require. Both Major J. (paras. 39-41) and LeBel J. (paras. 217-18) acknowledge (with varying degrees of enthusiasm) that a greater measure of flexibility may be called for in considering defences to the enforcement of foreign judgments as distinguished from interprovincial judgments. The time will come when such a re-examination of available defences will be necessary. The need for such a re-examination does not arise in this case. The appellants come within the traditional limits of the natural justice defence, and their appeal should be allowed on that ground.

II. The Foreign Judgment

[87] In 1981, the appellants bought an empty lot in a Florida real estate subdivision near Sarasota for US$4,000. It was described as Lot 2. They did not build. They did not even visit it. They just paid the municipal taxes. In 1983, they thought they had sold it to the respondents for US$8,000. Despite the fact that all of the closing documentation referred to Lot 2, the respondents (who say they did not “catch” the reference to Lot 2 in the closing document) eventually claimed that they had intended to purchase the lot next door — Lot 1 — and that they had been falsely and fraudulently induced to buy Lot 2 by the appellants and a Florida real estate agent called O’Neill.

[88] No doubt the Florida courts had jurisdiction over the ensuing dispute. The land was located in that jurisdiction. The appellants ought to have anticipated, and probably did anticipate, that disputes over Florida land would be decided by Florida courts. However, they could not fairly have anticipated that this pedestrian real estate deal gone sour would eventually explode into a Florida judgment against them said to be worth in excess of C$800,000 at the time of the trial in Ontario in November 1998 with interest continuing to run for the past five years at 12 percent per annum, producing an ultimate Kafka-esque judgment with an apparent value of over C$1,000,000.

[89] It appears that soon after being served with the respondents’ Complaint, the appellants decided to tell their story to the Florida court by filing a Statement of Defence, but to forgo the further expense of hiring a Florida lawyer to represent their interests. The costs would likely have exceeded the amount they thought was in issue. As the trial judge in Ontario put it, based on what was disclosed in the Complaint, litigation of an US$8,000 real estate transaction in Florida hardly seemed to be “worth the candle”. The fact this evaluation proved to be disastrously wrong is a measure of the inadequacy of what they were told about the Florida proceedings.

[90] My colleague Major J. holds, in effect, that the appellants are largely the victims of what he considers to be some ostrich-like inactivity and some poor legal advice from their Ontario solicitor. There is some truth to this, but such a bizarre outcome nevertheless invites close scrutiny of how the Florida proceedings transformed a minor real estate transaction into a major financial bonanza for the respondents.

[91] While the notification procedures under the Florida rules may be considered in Florida to be quite adequate for Florida residents with easy access to advice and counsel from Florida lawyers (and there is no doubt that Florida procedures in general conform to a reasonable standard of fairness), nevertheless the question here is whether the appellants in this proceeding were sufficiently informed of the case against them, both with respect to liability and the potential financial consequences, to allow them to determine in a reasonable way whether or not to participate in the Florida action, or to let it go by default.

III. The Initial Aborted Proceedings

[92] The Florida action was initially commenced on February 15, 1985 by the two respondents and their then partners (who will collectively be referred to as the respondents) in the Twentieth Judicial Circuit in and for Charlotte County, Florida. The appellants duly filed a defence. Eventually, this first action was “voluntarily dismiss[ed] . . . without prejudice” by the Florida court, apparently on the basis that the respondents had commenced their action in the wrong Circuit. The respondents immediately started a second action in the Twelfth Judicial Circuit and again the appellants filed a defence. This suggests that when the appellants were notified of what pleading had to be done, they did it.

IV. The Nature of the Complaint Against the Appellants

[93] The original plaintiffs, two real estate developers and their wives (including the present respondents), alleged that the appellants misrepresented that they owned building Lot 1, whereas they owned building Lot 2, and that this misrepresentation was “willfully false and fraudulent”. The respondents said “they” (i.e., the individual respondents) began building on Lot 1, discovered the error, and “immediately ceased construction”. As a result, the respondents incurred the expenses of preparing the lot for construction and lost revenue because they were unable to construct a model home on Lot 1, which was a corner lot.

[94] It is not our function to get into the merits of the Florida case but I note the respondent, Frederick Beals III, eventually acknowledged in the Florida proceedings that work terminated in October 1984 not because of an error in the legal description of the lot but because of a falling out among the respondents. At that time, a “Johnny Quick toilet” had been delivered to the work site but the floor slab had not yet been poured. The error with regard to Lot 1 and Lot 2 was not discovered by the respondents until three months later in January 1985.

[95] The total expenditures on the project, including the purchase price, the building permits, the survey tests, trusses and some other materials were about US$14,000. The respondent Beals later testified that the average profit experienced on the houses he built in 1984 was about US$5,000 per home. The respondents’ eventual award on account of loss of profit was more than ten times that figure.

[96] The Complaint, and each subsequent “as amended” Complaint, simply refers to the respondents’ damages on “a model home” (emphasis added). “A” model home is expressed in the singular and would not normally be understood, I think, to encompass an undisclosed and unbuilt residential subdivision which the respondents now say they had in mind.

[97] The respondents claimed treble damages, rescission, punitive damages and costs. In the end, the jury seems to have ordered reimbursement of the actual expenditures (about US$14,000) plus loss of profit (about US$56,000), all of which was trebled to make the total of US$210,000, plus punitive damages of US$50,000. The balance of the current million dollar claim consists of accumulated post-judgment interest compounding at the rate of 12 percent, plus the effect of a less favourable U.S. currency exchange rate.

V. The Complaint Against Other Parties

[98] The respondents also alleged in their Complaint that, in August 1984, they — the developers — had initiated contact with a Sarasota real estate firm, O’Neill’s Realty, who showed them Lot 1. The respondents go on to state in their Complaint that the realtor was only authorized by the appellants to sell Lot 2 (para. 25). Nevertheless, the realtor (both the corporation and James O’Neill personally), “knowingly and falsely” misrepresented that the appellants owned Lot 1 (para. 27) and “fraudulently” failed to stop the closing of the sale of the wrong lot (paras. 33 and 51). The respondents claimed the same relief against the realtor as they had against the appellants (para. 37). As will be seen, the respondents’ allegation in their Complaint against the realtor O’Neill more or less corresponded with the appellants’ version of events set out in their Statement of Defence.

[99] The respondents subsequently added a complaint against a new defendant, the Commonwealth Land Title Insurance Company, alleging that the title insurer knew or should have known that all of the closing documentation erroneously referred to the appellants’ Lot 2, instead of the desired Lot 1, and by “remaining silent” breached its corporate duty of disclosure.

[100] With respect to the issue of notice, Florida rules require the written Complaint to expressly warn that “[e]ach defendant is hereby required to serve written defenses . . . within 20 days. . . . If a defendant fails to do so, a default [judgment] will be entered against that defendant for the relief demanded . . . .” This is what the appellants were told. The logical implication of this statement, it seems to me, is that if a written defence were served, the defendants would not be in default of the pleading. This also turned out not to be true.

VI. The Statement of Defence

[101] The appellants filed, then refiled in the different judicial circuit, a Statement of Defence which pleaded in the relevant part, as follows:

2. The facts are as follows:

a) At no time did the Sellers engage the services of O’Neill’s Realty, Inc., and/or James O’Neill to sell the property above-referred to or any other property whatsoever.

b) On or about 1984, the Defendant, James O’Neill, contacted the Sellers and informed them that he had a client who wished to purchase the above-referred to property. As there had been no previous communication of any kind whatsoever between the Sellers and James O’Neill, the Sellers believed that he, the said James O’Neill, represented the Plaintiffs.

c) During subsequent telephone conversations in or about August, 1984, the Sellers advised James O’Neill that they had never been in Port Charlotte, Florida, and that the only information in their possession with respect to the above-referred to property was the number allocated to same, that is to say: Lot 2, Block 3694 of Port Charlotte Subdivision, Section 65.

d) James O’Neill assured the Sellers that they were the owners of the lands that his client wished to purchase as he, the said James O’Neill, had perused the Public Records for the property in which his client was interested, and the names of the Sellers appeared thereon as owners. The Sellers were satisfied with his representations and therefore proceeded on that basis.

3. On or about August, 1984, the Sellers received a Contract for Sale of Real Estate which said Contract described the above-referred to property as being Lot 1. The Sellers contacted James O’Neill to advise him of the discrepancy.

4. James O’Neill once again assured the Sellers that they did own the property in which his client was interested and therefore the requisite change to the Contract was made. James O’Neill did not indicate to the Sellers that the change had to be initialled.

5. The Contract was returned to James O’Neill and on or about September 20th, 1984, the Sellers received a Warranty Deed which indicated that the property being sold was Lot 2.

6. As the discrepancy had been discussed with and pointed out to James O’Neill, and as the Warranty Deed specified Lot 2, Block 3694 of Port Charlotte Subdivision, Section 65, the Sellers had no reason to believe that the discrepancy in the Lot Number, that is to say Lot 2 as opposed to Lot 1, had not been discussed with the Plaintiffs and that the matter had not been efficiently and legally resolved. [Emphasis in original.]

[102] The respondents never amended their Complaint against the appellants even though, as we will see, there was a good deal of activity in relation to the other defendants (before and after default was noted against the appellants) prior to the Florida court’s final judgment against the appellants dated December 13, 1991.

VII. The Appellants’ Dilemma

[103] The appellants had to decide how to respond to the Complaint. To make an informed decision, they should have been told in general terms of the case they had to meet on liability and, more importantly on these facts, an indication of the jeopardy they faced in terms of damages. This is not a case where the plaintiffs were satisfied with the damages implicit in a failed minor real estate transaction. The Complaint, in my view, did not adequately convey to the appellants the importance of the decision that would eventually be made in the Florida court. The appellants were merely told, unhelpfully, that the claim exceeded US$5,000.

[104] The appellants were entitled to draw some comfort from the fact that the respondents’ guns were trained not on them alone, but on the real estate agent and the title insurer as well. Moreover, the respondent developers’ allegations against the realtor O’Neill coincided with their own Statement of Defence, particularly the allegation that the appellants authorized the realtor to sell only Lot 2 — not Lot 1. On September 12, 1991, prior to the damages trial, the respondents settled with the realtor and the title insurer for US$10,750. This radically transformed the potential jeopardy of the appellants. They were never told of the settlement.

VIII. The Florida Pleadings Rule

[105] Under Rule 1.190(a) of the Florida Rules of Civil Procedure (Fla. Stat. Ann. R. Civ. P. § 1.190(a)), the appellants were required to refile their Defence every time the respondents amended their Complaint, even if the amendments were solely directed at other defendants. This was nowhere brought to the appellants’ attention. As mentioned earlier, I think the appellants could fairly understand from the “warning” in the original Complaint that only if no defence were filed would there be a pleadings default in the action. Otherwise there would be no pleadings default. The respondents never amended their Complaint against the appellants. There was therefore nothing further for the appellants “to answer”. They were nevertheless noted in default for failing to file a defence.

[106] The respondents’ Amended Complaint, Second Amended Complaint, Third Amended Complaint and ultimately Fourth Amended Complaint modified the allegations against other parties. In terms of procedural fairness, I think the appellants were entitled to assume that in the absence of any new allegations against them there was no need to refile a defence that had already been filed in the same action. To non-lawyers, a requirement for such apparently useless duplication would come as a surprise.

[107] Yet we are told that:

Under Florida law Dominic Thivy, Rose Thivy, Geoffrey Saldanha and Leueen Saldanha were under a mandatory obligation to deliver a defence to each of the new amended complaints. [Emphasis added.]

It seems to me the appellants were entitled to be told from the outset that their defence would be treated as non-existent if the Complaint were thereafter amended against other defendants.

[108] When a Canadian resident is served with a legal process from within his or her own jurisdiction, he or she is presumed to know the law and the risks attendant with the notice. There can be no such presumption across different legal systems.

[109] As the basis of the respondents’ judgment is default of pleading, this lack of notification goes to the heart of the present appeal.

IX. Other Information the Appellants Did not Know

[110] It is to be remembered that although the appellants had decided not to have a Florida lawyer, they were very much part of the liability phase of the action until noted in default on July 25, 1990, and very much interested in the assessment of damages phase of the action which did not take place until December 11, 1991. Even a defendant who concedes liability (as opposed to one who merely defaults) might want to contest what may appear to be “breathtaking” damages claimed by the successful party. Liability and assessment of damages are two distinct and separate issues. A defendant may choose to concede the one but contest the other.

[111] In administrative law, where issues of notification have been extensively canvassed, albeit in a different context, it is well established that a party must be made aware of “the potential jeopardy faced”: D. J. M. Brown and J. M. Evans, Judicial Review of Administrative Action in Canada (loose-leaf ed.), at para. 9:5222. One of the criteria determining the stringency of natural justice requirements in particular circumstances is “the importance of the decision to the individual or individuals affected”: Baker v. Canada (Minister of Citizenship and Immigration), 1999 699 (SCC), [1999] 2 S.C.R. 817, at para. 25. There is a difference in “importance” between a minor real estate transaction whose defence is “not worth the candle” and a major claim which the respondents have successfully orchestrated into a million dollar liability.

(a) During the Liability Phase which Concluded July 25, 1990

[112] The appellants received no notice of the court order dated November 6, 1987, striking out the claim for punitive damages against the realtor and the title insurance defendant on the basis, apparently, that treble damages are themselves intended to be punitive, and an additional claim for punitive damages is not permitted under Florida law. Despite this ruling, the appellants, as defaulters, were subsequently held liable for treble damages of US$210,000 plus punitive damages of US$50,000. The punitive damages issue went very much to the appellants’ potential jeopardy, yet it seems they were not kept in the picture about court orders made in the same action as between the other parties relevant to the same head of damage alleged against them. This event predated being noted in default. If the appellants had received the advantage of this ruling, it would potentially have reduced the eventual damages against them by almost 20 percent. In other words, the oversight, if that is what it was, related to what is now claimed to be worth about a quarter of a million dollars.

[113] On June 19, 1990, the appellants were sent a notice that an application would be made to the Florida court to note them in default for failure to file a defence to the Third Amended Complaint or “serve any pleading or other paper as required by law”. The appellants had no reason to think that the defence they had already filed was not applicable to the Third Amended Complaint. (Indeed, there apparently was a Fourth Amended Complaint but it is not in the record before us.) Unless the appellants were made aware of the Florida pleadings rule, which they were not, such a notice would simply add to their confusion. It may be obvious to a Florida lawyer that every amended Complaint requires a fresh defence even if there are no changes relevant to the defendant called upon to plead, but such a requirement would not be obvious to an Ontario lawyer, still less to self-represented litigants such as the appellants.

[114] The appellants were noted in default on July 25, 1990.

(b) After Being Noted in Default but Prior to the Jury Trial on December 11, 1991

[115] In some cases, a court making an assessment of unliquidated damages might think it unnecessary to notify the defaulters of the ongoing proceedings. It would depend on the circumstances. For example, in Ontario, Rule 19.02(3) leaves notice in the discretion of the court (Rules of Civil Procedure, R.R.O. 1990, Reg. 194). Whatever may be the minimum requirements in some cases, I believe the circumstances here cried out for notice of the subsequent proceedings because in the period between the noting of default on July 25, 1990, and the damages trial on December 11, 1991, the potential jeopardy changed radically to the appellants’ disadvantage.

[116] The appellants were not told that by Stipulation dated October 31, 1990, the respondents and realtor (both corporate and individual) made a deal “to delete claims against [the realtor] for treble damages, punitive damages, and statutory violations”, leaving the respondents’ claim against the realtor (who had been the only contact between the respondents and the appellants) to proceed in simple negligence. The appellants were now the only parties against whom treble damages and punitive damages were sought, but they were not told of that fact. Had they been so advised, they would have been able to consider cross-proceedings against the realtor for indemnification in respect of the more substantial claims now asserted against them alone.

[117] Nor were the appellants served with the court order dated March 27, 1991, striking out as improper the respondents’ claim for attorney’s costs against the realtor and the title insurance company. By way of contrast, the final judgment against the appellants dated December 13, 1991, specifically “reserves jurisdiction to tax costs, prejudgment interest, and attorney’s fees” against the appellants.

[118] Nor were the appellants served with an order dated June 17, 1991 for mandatory mediation which provided that “[a]ll parties are required to participate” (emphasis added). Even defendants who consider it uneconomical to litigate a US$8,000 building lot deal in a foreign country might well consider it to be in their best interest to participate in a mediation. The respondents say that the appellants were not entitled to notice of the order for mediation but it seems wholly incongruous to have a mediation order requiring “[a]ll parties” to participate when the only parties who were now the respondents’ target for treble and punitive damages were not even told about it.

[119] Nor were the appellants told that on September 12, 1991, the respondents settled with the realtor for US$8,250 and subsequently settled with the title insurers for US$2,500 while still retaining title to Lot 2. This left the appellants as the sole target at the damages trial. According to the documents they had received, the appellants were still entitled to believe that the respondents continued to make against the realtor essentially the same points as those the appellants themselves had set out in their Statement of Defence. This was no longer true. The appellants did not know that they were now on their own.

[120] Nor were the appellants served, as required by the Florida rules, with notice of the experts the respondents proposed to call at the damages assessment. This too might have operated as a wake-up call to the appellants, who at this late stage were drifting obliviously toward financial disaster.

[121] As mentioned above, the Third Amended Complaint claimed the respondents’ damages on a model home. It is true that by their default, the appellants admitted the allegations of fact in the Complaint, but the facts thus admitted were specific to the respondents and to a single model home. There is surely a significant difference between damages on a single home (even a “model” home) and damages on a theory of lost profit from the construction of a non-existent residential subdivision. Yet it is a judgment largely based on the latter allegation, not the allegation in the Complaint, that is the basis of the bulk of the million dollar judgment now sought to be enforced against the appellants in Ontario.

[122] On December 11, 1991, the Florida court entered a directed verdict for unliquidated damages against the appellants, and assessed the damages at US$210,000 plus US$50,000 punitive damages. It now appears that the out-of-pocket construction costs which formed a substantial part of the award of compensatory damages against the appellants were not incurred by the respondents, as had been alleged in their Complaint, but by Fox Chase Homes of Sarasota, Inc. or Fox Chase Homes of Charlotte County, Inc., whose names appeared nowhere in the pleadings. In the Ontario action, the trial judge found that under Florida law “causes of action of a corporation such as Fox Chase are the property of the corporation and cannot be passed through to its shareholders. Dissolved corporations cannot maintain actions except through their last directors with appropriate description in the Style of Cause not present in this matter.” There was no such “appropriate description” in the Florida style of cause. In my view, the intervention of one or two corporate entities could raise a number of potential defences not otherwise available in the assessment of damages. The purpose of a pleading is to give notice. It is certainly not implicit in anything said in the Complaint that the respondents were claiming damages on behalf of corporations in which they had an interest.

[123] The appellants had not even been told that the respondents would be seeking damages for the corporation’s lost opportunity to build an undefined number of homes on land to which neither the respondents nor the corporation held title.

[124] I do not accept the suggestion that the appellants are the authors of their own misfortune on the basis that if they had hired a Florida lawyer they would have found out about all of these developments. The appellants decided not to defend the case set out against them in the Complaint. That case was subsequently transformed. They never had the opportunity to put their minds to the transformed case because they were never told about it.

[125] I do not suggest that any one of the foregoing omissions of notice would necessarily have been fatal to enforcement of the respondents’ default judgment in Ontario. Cumulatively, at all events, these continuing omissions seem to me to demonstrate an unfair procedure which in this particular case failed to meet the standards of natural justice.

X. Availability of an Appeal

[126] The appellants had ten days to appeal the default judgment. They did not do so, apparently based on advice from their Ontario solicitor. I agree with Major J. that the appellants cannot be relieved of the consequences of their failure to appeal simply because they acted on legal advice.

[127] The failure to exhaust local remedies in the foreign court is ordinarily a factor to be taken into account in determining whether a foreign judgment is enforceable in Ontario, but I do not think it is fatal here. We are dealing with a default judgment obtained, in my view, without compliance with the rules of natural justice. Morever, even if the appellants had appealed, we are told that no record of the damage assessment proceedings exists. There is no transcript of the evidence heard by the jury. There is similarly no record of the instructions given to the jury by the trial judge. If the respondents complied with the letter of the Florida rules, as they say they did, a Florida appellate court might well uphold the default judgment. The Ontario court is faced with a different issue than that which would have confronted a Florida appellate court. Was the notice, notwithstanding presumed compliance with Florida court rules, sufficient to alert the foreign defendants to the case they had to meet, and the potential jeopardy they faced?

[128] I agree in this respect with the view of the English Court of Appeal in Adams v. Cape Industries plc, [1991] 1 All E.R. 929, at pp. 1052-53, that the availability of an appeal in the foreign jurisdiction is not necessarily determinative. Cape Industries was also a case of a default judgment.

[129] I would also reject the argument that the appeal should be dismissed because the appellants ought to have moved “promptly” to set aside the default judgment for “excusable neglect”. Such relief is normally available to a defendant who has formed an intention to defend but for some “excusable” reason had “delayed” in taking appropriate steps. The problem here is that the appellants had in fact filed a Statement of Defence but had decided, based on what they were told about the respondents’ action, not to defend it further. The appellants’ problem was not that they failed to implement an intention to defend, but that their intention not to further defend was based on a different case.

[130] In these circumstances, I would not enforce a judgment based on (in my view) inadequate notice — and thus violative of natural justice — just because the appellants did not appeal the Florida judgment to the Florida appellate court, or seek the indulgence of the Florida court to set aside for “excusable neglect” a default judgment that rests on such a flawed foundation.

XI. Disposition

[131] I would allow the appeal to dismiss the action, with costs throughout to the appellants.

The following are the reasons delivered by

LeBel J. (dissenting) —

I. Introduction

[132] The enforcement of this judgment, which has its origins in a straightforward sale of land for US$8,000 and has now grown to well over C$800,000, is unusually harsh. In my view, our law should be flexible enough to recognize and avoid such harshness in circumstances like these, where the respondents’ original claim was dubious in the extreme and the appellants are guilty of little more than bad luck. To hold that the appellants are the sole authors of their own misfortune, it seems to me, is to rely heavily on the benefit of hindsight; and to characterize the respondents’ case in the original action as merely weak is something of an understatement. The implication of the position of the majority is that Canadian defendants will from now on be obliged to participate in foreign lawsuits no matter how meritless the claim or how small the amount of damages in issue reasonably appears to be, on pain of potentially devastating consequences from which Canadian courts will be virtually powerless to protect them.

[133] In my opinion, this Court should avoid moving the law of conflicts in such a direction. Thus, I respectfully disagree with the reasons of the majority on two points. I would hold that this judgment should not be enforced because a breach of natural justice occurred in the process by which it was obtained. I also have concerns about the way the “real and substantial connection” test, in its application to foreign‑country judgments, is articulated by the majority.

[134] Although I agree both that the “real and substantial connection” test should be extended to judgments from outside Canada and that the Florida court properly took jurisdiction over the defendants in this particular case, in my view the test should be modified significantly when it is applied to judgments originating outside the Canadian federation. Specifically, the assessment of the propriety of the foreign court’s jurisdiction should be carried out in a way that acknowledges the additional hardship imposed on a defendant who is required to litigate in a foreign country.

[135] Furthermore, the philosophy of Morguard Investments Ltd. v. De Savoye, 1990 29 (SCC), [1990] 3 S.C.R. 1077, which replaces traditional categories with a purposive, principled framework, should not be confined to the question of jurisdiction, but should also be extended to the defences. In my view, liberalizing the jurisdiction side of the analysis while retaining narrow, strictly construed categories on the defence side is not a coherent approach. I would adopt a more flexible approach to the defences than the majority, and on that approach it is my view that the appellants have made out the defence of natural justice.

[136] The solution that the majority sets out to the question of recognition and enforcement of foreign judgments appears to go further than courts have gone in other Commonwealth jurisdictions or in the United States (as I will discuss below). This discrepancy may place Canadian defendants in a disadvantageous position in international litigation against foreign plaintiffs. As a result, the risks and thus the transaction costs to our citizens of cross-border ventures will be increased, in some cases beyond what commercially reasonable people would consider acceptable. Canadian residents may consequently be deterred from entering into international transactions — an outcome that frustrates, rather than furthers, the purpose of private international law.

II. Background

[137] I agree with Major J.’s outline of the facts. I would, however, place additional emphasis on a number of details that emerge from the record.

[138] The Saldanhas and the Thivys (to whom I will refer collectively as the “Sellers”) purchased the lot in Florida thinking that they might eventually build a vacation home on it. In the meantime, they had little to do with it. They purchased it without having visited it, and they never saw it. They did not think seriously about selling the land until they received the unsolicited offer from the Bealses and Foodys (the “Buyers”) in 1984. This was a relatively small investment from which they anticipated no more than modest returns and on which, it seems reasonable to infer, they did not expect to expend much energy.

[139] The Sellers received the Buyers’ offer to purchase from a Florida real estate agent, a Mr. O’Neill, in August 1984. They had had no prior dealings with Mr. O’Neill. Mrs. Rose Thivy, who worked in a law office and had done some work as a law clerk as well as some title searching and conveyancing, dealt with Mr. O’Neill on behalf of the group. She testified that she asked Mr. O’Neill how he found her telephone number, and he told her that he had searched the County records to find the owners of the lot his clients wanted to buy.

[140] The Buyers’ written offer was sent to Mrs. Thivy. She noticed that it erroneously referred to “Lot 1”. She assumed that the Buyers were not interested in buying the Sellers’ property and that the deal would not proceed. The Sellers did not pursue the matter. Mr. O’Neill then contacted Mrs. Thivy to ask why there had been no response to the offer. Mrs. Thivy pointed out the misidentification of the lot to Mr. O’Neill, who insisted that the Sellers were the registered owners of the lot the Buyers wanted. Mrs. Thivy changed the number on the document to “Lot 2”. The Buyers accepted this counteroffer. Subsequently, the Sellers received a deed and other closing documents in the mail. All the documents referred to Lot 2 and not to Lot 1.

[141] In January 1985, Mr. Beals telephoned Mrs. Thivy and complained that he had been sold the wrong lot. Mrs. Thivy told him about her conversation with Mr. O’Neill, and suggested that Mr. Beals resolve the problem with him.

[142] In March 1985, the Sellers received a copy of a pleading initiating an action by the Buyers in a Florida Circuit Court (the “Complaint”). The Complaint stated that it related to “an action for damages which exceeds $5,000”, as was required to give the Circuit Court monetary jurisdiction over the matter, but otherwise did not specify the quantum of damages claimed.

[143] The Complaint alleged that the Sellers had fraudulently induced the Buyers to purchase the wrong lot. The Buyers claimed damages based on the purchase price of the lot, the expenses they had incurred in preparing the lot for construction, and revenue they had lost because they had been unable to build a model home on Lot 1. There were also claims against two other defendants, O’Neill’s Realty and the Buyers’ title insurance company. Attached to the Complaint was the original offer to purchase referring to Lot 1. The contract of purchase and sale referring to Lot 2 was not attached.

[144] Mrs. Thivy and Mr. Saldanha both testified that the Sellers had hoped to “rectify the situation” with the Buyers, perhaps by rescinding the transaction and refunding the Buyers’ money. When they received the Complaint, however, they decided to defend the lawsuit. Mrs. Thivy telephoned the Florida court for instructions on procedure and form. She then drafted a defence for all the Sellers to sign, and sent it to the court in Florida. In the defence, the Sellers denied that they had ever represented that they owned Lot 1.

[145] In the fall of 1986, the Sellers received notice that the action in Florida had been voluntarily dismissed, without prejudice. Mr. Saldanha testified that he thought the reason the action had been dismissed was that the facts the Sellers had set out in their defence were dispositive. As he put it, “when it went away I said, ‘Okay, people know the facts, it’s over’.”

[146] But it was not over. A short time later, the Buyers commenced a second action in the Florida court, and the Sellers received a new Complaint in the mail (the “Amended Complaint”). The Amended Complaint set out essentially the same allegations as the previous one. A claim for treble damages was added against the Sellers, and the language was somewhat different, alleging that “wilfully false and fraudulent” misrepresentations were made by the Sellers both directly and through Mr. O’Neill. The Amended Complaint also said that the Sellers had “willingly and wilfully” changed the contract of purchase and sale to read “Lot 2”, without informing the Buyers. The damages claimed were spelled out in more detail than before; the Buyers claimed three times the amount they had paid for the land, three times their construction expenses and business losses, rescission of the contract and return of the purchase price, punitive damages, attorney’s fees and court costs. Again, the original offer referring to Lot 1, without the Sellers’ signatures, was attached, but the contract of purchase and sale, and the other closing documents which identified Lot 2 as the property being transferred, were not.

[147] Mrs. Thivy prepared a new defence, which was simply a copy of the old one, and sent it to the Florida court purportedly on behalf of all four defendants. The trial judge accepted the evidence of the Saldanhas, which differed from that of the Thivys on this point, that the Saldanhas chose not to defend the second action and that Mrs. Thivy signed their names to the new defence without their authorization. The Saldanhas therefore did not attorn to the reinstated action, although the Thivys did.

[148] Mr. Saldanha testified that when he and his wife learned of the Amended Complaint, they discussed the matter, and decided that “we were not going to respond to this, because we had already responded”. Mr. Saldanha thought that the resurrection of the action was an error of some kind, because the new complaint “seemed to be the same thing regurgitated again” and, in his view, the Sellers had already informed the Florida court of facts that disproved the regurgitated allegations. At this point, as the trial judge put it, “[g]iven their share of the amount at issue, which they assumed to be one-half of $8,000 US, [the Saldanhas] decided the game was not worth the candle, and they would participate no further” ((1998), 1998 14709 (ON SC), 42 O.R. (3d) 127, at p. 130).

[149] The Thivys seem to have come to the same conclusion not long afterwards. After the action was relaunched, the Amended Complaint was amended three times, and the Sellers duly received copies of each new version. The Thivys sent their initial defence to the Florida court, but did not respond to any of the new versions of the Amended Complaint. Mrs. Thivy testified that they decided “just to forget about it” because defending the action would probably cost them just as much as the lawsuit was worth, and because they thought that the Florida courts had no jurisdiction over them.

[150] The successive versions of the Amended Complaint did not change the allegations against the Sellers in any way. The only changes were to claims against other defendants. Mr. Richard Groner, who acted for the respondents in the litigation in Florida, testified at the Ontario trial as an expert in Florida civil procedure. He testified that, under the applicable rules, each amendment to a complaint requires a response from all the parties on whom it is served, even parties to whom the changes in the pleading have no relevance. Such a party may simply resubmit a copy of his or her earlier defence, or may seek the court’s permission to let the earlier defence stand over, but if these steps are not taken the defence that has already been filed ceases to have any legal effect. Therefore, the result of the Sellers’ failure to respond to new versions of the Amended Complaint was that they were viewed under the Florida rules as not having raised any defence at all. There was nothing in the documents served on the Sellers to notify them that this was a potential consequence of failure to refile their defence.

[151] The Sellers received notice of a default hearing on July 25, 1990, but did not attend or respond. In due course, they were noted in default. As a result, they were deemed to have admitted all the allegations in the Amended Complaint so far as they related to liability. Damages were still a live issue. A hearing was held before a judge and a jury in Florida to assess damages. The Sellers received notice of this hearing, too, but again they did not respond.

[152] We do not know much about what was said in the damages hearing. There is no transcript of that proceeding. Mr. Groner testified that in Florida courts transcripts are not mandatory for civil trials; a reporter is provided at the option of and at the expense of the litigants. In this case, he decided not to incur the expense. There is no record of the judge’s instructions to the jury. An expert witness testified on the valuation of the Buyers’ business losses. No expert’s report was filed. Mr. Groner testified that it is usual in civil litigation in Florida for parties to obtain information about an expert witness’s qualifications and proposed testimony through the discovery process. Expert reports are generally not submitted to the court. All that survives to provide some clue as to how a simple $8,000 land transaction turned into the extraordinary amount now at stake in this appeal is a “Memorandum of Lost Profits Damage” prepared by Mr. Groner, which he submitted to the trial judge in Florida to support his submissions on jury instructions.

[153] In late December 1991, the Sellers received the judgment of the Florida court in the mail. The total amount of the judgment was slightly over $270,000, of which $50,000 was punitive damages, with interest set at 12 percent per annum from the date of the judgment, December 12, 1991 (there seems some confusion in the record over the amount awarded, which the trial judge said was $260,000; the copy of the Florida court’s judgment filed in the record is for two amounts which together total $270,886.57). The Sellers were surprised and dismayed at the size of this amount. Mr. Saldanha testified that at first he thought it was a joke. Mrs. Saldanha testified that when she read the number in print “it was like a real blow to the stomach”.

[154] The Sellers realized only at this point that the Florida action was not, as they had assumed, a minor dispute that would be more expensive to defend than to lose. They recognized that they needed to seek legal advice immediately. The Thivys and the Saldanhas separately consulted lawyers. They were advised that the judgment would not be enforced in Ontario because the Florida court did not have jurisdiction over them. Acting on this advice, the Sellers did not avail themselves of the various means available to them in the Florida system to challenge the judgment.

[155] Mr. Beals was examined for discovery in the proceedings in Ontario, and his testimony was read in. His deposition in the Florida proceedings was also an exhibit in the Ontario trial. Based on that evidence, the trial judge made findings of fact that included the following:

Mr. Beals signed all the closing documents referring to Lot 2 without reading them.

Construction of the model home on Lot 1 stopped before the Buyers learned that they had bought the wrong lot. Mr. Beals and Mr. Foody decided to discontinue their business relationship for unrelated reasons, and Mr. Beals bought out his partner’s interest in the company.

Mr. Beals’s company, Fox Chase Homes, was dissolved before the Florida action was commenced.

There is no suggestion that these factual findings were in error.

[156] Mr. David Mulock, a Florida litigator, testified for the appellants as an expert on Florida procedural and substantive law. He testified that justifiable reliance is one of the essential components of a fraud claim in Florida law. He stated his opinion that reliance by the Buyers on misrepresentations that they were buying Lot 1 could not have been reasonable, because the ownership of land is a matter of public record which can easily be checked, and routinely is checked in any real estate transaction. Mr. Mulock said that the allegations in the Complaint, even if true, were therefore insufficient to support damages for fraud.

[157] Mr. Mulock also testified that when a corporation that has a claim for damages is dissolved, its last directors can pursue the cause of action as long as they indicate in the pleadings that they do so in the capacity of representatives of the corporation. None of the many versions of the Complaint in the Florida action made any reference to Fox Chase Homes.

[158] The trial judge inferred from the contents of the Memorandum of Lost Profits Damage and from the verdict reached by the Florida jury that the jury had not been informed of several key facts: that the decision to stop construction and the winding-up of Fox Chase Homes were unrelated to the mistake in the land transaction; that the corporation that had allegedly suffered business losses was not a party to the action; and that there was a contract of purchase and sale signed by both the Buyers and the Sellers referring to Lot 2. This was the basis for his finding that the jury was deliberately misled and the defence of fraud was made out.

III. The Extension of the “Real and Substantial Connection” Test to Foreign-Country Judgments

A. The Need for Clarification

[159] The parties agreed before the trial judge that the Florida court had properly assumed jurisdiction. As a result, it is not strictly necessary to deal with the application of the “real and substantial connection” test to foreign-country judgments to dispose of this appeal. Although the issue is moot between these parties, the Court asked for additional submissions on it. My discussion of the jurisdiction question is more extensive than would ordinarily be necessary in light of the appellants’ concession of this point and of my agreement with Major J. on what the result of the jurisdiction analysis should be in this case. I have set out my views on this issue in detail because the principles that ought to shape the jurisdiction analysis should also inform the interpretation of the defences, on which I disagree with the majority.

[160] I will follow Major J. in assuming that the relevant laws of other Canadian provinces are substantially the same as those of Ontario. I will be referring to Canada and Ontario interchangeably, except where the context indicates otherwise.

[161] Morguard, supra, marked the beginning of a new era in Canadian conflicts law, and set out the basic principles and policy objectives underlying that new legal framework. At a practical level, however, it left many questions unanswered. Among them are whether the “real and substantial connection” test applies in international situations, and the precise nature of the connections that support the recognition of jurisdiction. The present appeal is a suitable occasion within which to clarify some of the implications of Morguard and to develop its ramifications in the international context. For these reasons, this Court decided to hear submissions on the international application of the test, in the hope of providing some guidance to lower courts on the issues that this case raises although those issues are no longer live between the parties.

[162] Under the approach adopted by the majority, the “real and substantial connection” test applies in the international context just as it does within Canada, and if any unfairness results it may be dealt with only by arguing forum non conveniens in the foreign forum or invoking defences to the enforcement of the final judgment. My view is different. The jurisdiction test itself should be applied so that the assumption of jurisdiction will not be recognized if it is unfair to the defendant. To do so requires taking into account the differences between the international and interprovincial contexts as well as between the rationales that structure our conflicts law in these two spheres.

B. Constitutional Imperatives Versus International Comity

[163] The adoption in Morguard of new, liberal and purposive rules governing recognition and enforcement of judgments from one province by the courts of another was based on two underlying rationales: constitutional considerations, particularly the intention of the framers of the Constitution to create an integrated national economy; and considerations of international comity, which La Forest J. held should be evaluated anew “in the light of a changing world order” (p. 1097). While the latter rationale extends to foreign-country judgments, the former does not.

[164] In Morguard, La Forest J. emphasized that the integrated character of the Canadian federation makes a high degree of cooperation between the courts of the various provinces a practical necessity. As this Court later confirmed in Hunt v. T&N plc, 1993 43 (SCC), [1993] 4 S.C.R. 289, it is a “constitutional imperative”, inherent in the relationship between the units of our federal state, that each province must recognize the properly assumed jurisdiction of another, and conversely that no court in a province can intermeddle in matters that are without a constitutionally sufficient connection to that province. Provided that a court’s assumption of jurisdiction is based on a real and substantial connection to the forum, the matter is within the sphere of provincial authority, and the resulting judgment is entitled to “full faith and credit”, to borrow the language of the United States Constitution (Article IV), in all the other provinces.

[165] As I observed in Spar Aerospace Ltd. v. American Mobile Satellite Corp., [2002] 4 S.C.R. 205, 2002 SCC 78, at para. 53, it is clear from the reasoning in both Morguard and in Hunt, supra, “that federalism was the central concern underlying both decisions”. At the same time, Morguard left little doubt that the old common law rules were as outdated in the international sphere as they were inappropriate in the interprovincial context. La Forest J. noted that international borders are far more permeable, and international travel and communications much easier, than was the case when the traditional rules were developed in the nineteenth century. Business dealings with residents of other states are both commonplace and essential for any sophisticated modern economy. It is contrary to the interests of a modern state to retain rules of private international law that impede its citizens’ participation in the increasingly integrated world economy. La Forest J. endorsed the view of H. E. Yntema that the rules of private international law ought to “promote suitable conditions of interstate and international commerce” (“The Objectives of Private International Law” (1957), 35 Can. Bar Rev. 721, at p. 741, cited in Morguard, at p. 1097).

[166] Morguard thus strongly suggested that the recognition and enforcement of foreign-country judgments should be subject to a more liberal test informed by an updated understanding of international comity. It is equally clear from a reading of Morguard and its progeny that the considerations informing the application of the test to foreign-country judgments are not identical to those that shape conflict rules within Canada. As I observed in Spar, supra, at para. 51, “it is important to emphasize that Morguard and Hunt were decided in the context of interprovincial jurisdictional disputes . . . [and that] the specific findings of these decisions cannot easily be extended beyond this context”. See also Hunt, supra, at p. 328. Although constitutional considerations and considerations of international comity both point towards a more liberal jurisdiction test, important differences remain between them.

[167] One of those differences is that the rules that apply within the Canadian federation are “constitutional imperatives”. Comity as between sovereign nations is not an obligation in the same sense, although it is more than a matter of mere discretion or preference. In Morguard, La Forest J. adopted the definition of comity stated by the United States Supreme Court in Hilton v. Guyot, 159 U.S. 113 (1895), at pp. 163‑64 (cited in Morguard, at p. 1096):

“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.

[168] The phrase “international duty and convenience” does not refer to a legally enforceable duty. No super-national legal authority can impose on sovereign states the obligation to honour the principle of comity. Rather, states choose to cooperate with other states out of self-interest, because it is convenient to do so, and out of “duty” in the sense that it is fair and sensible for State A to recognize the acts of State B if it expects State B to recognize its own acts.

[169] The provinces, on the other hand, are constitutionally bound both to observe the limits on their own power to assert jurisdiction over defendants outside the province, and to recognize the properly assumed jurisdiction of courts in sister provinces; for them, this is “a matter of absolute obligation”. This obligation reflects the unity in diversity that is characteristic of our federal state. In Morguard, supra, this Court acknowledged the shared values of the Canadian justice system which, as we know, fully accepts the relevance and importance of its two great legal systems, common law and civil law. The Morguard rule was designed in full awareness that Canada shares two legal systems.

[170] A further point is that there are significant factual differences between the international and interprovincial contexts that should be reflected in the private international law rules applicable to each. These contextual differences are important because the doctrine of comity should be applied in a context-sensitive manner. The ultimate purpose of rules based on the idea of comity is to “facilitate the flow of wealth, skills and people across state lines in a fair and orderly manner” (Morguard, supra, at p. 1096). How this purpose is best to be achieved depends on the context in which the rules operate.

[171] A context-sensitive jurisdiction test ought to take into account the difficulty of defending in a foreign jurisdiction and the possibility that the quality of justice there may not meet Canadian standards. Judgments should travel more easily across provincial borders than across international ones, both because of the relative ease of mobility between the provinces and because of the consistent nationwide standards of the Canadian justice system. When a judgment comes from a foreign country, the logistical difficulties of defending in the originating forum may be much greater, and the foreign legal system may be different from those with which Canadians are familiar. Canada is a single country with a fully integrated economy, but the world is not. In Morguard, at p. 1095, this Court rightly emphasized that “[m]odern states . . . cannot live in splendid isolation.” But we still do not live in a borderless global village; our modern world is “home to widely varied cultures with radically divergent value systems” (Yahoo!, Inc. v. Ligue contre le racisme et l’antisémitisme, 169 F.Supp.2d 1181 (N.D. Cal. 2001), at p. 1186).

[172] In my view, it follows from the contextual and purpose-driven approach adopted in Morguard that the rules for recognition and enforcement of foreign-country judgments should be carefully fashioned to reflect the realities of the international context, and calibrated to further to the greatest degree possible, the ultimate objective of facilitating international interactions. This means that the rule should be far more liberal than the categorical approach that was followed before Morguard (and most influentially stated in Emanuel v. Symon, [1908] 1 K.B. 302 (C.A.)), but by no means does it follow that it should be as liberal as the interprovincial rule.

[173] The traditional rules impeded cross-border commerce by making it difficult for judgment creditors to obtain effective remedies against defendants resident in other countries, thus undermining the security of transactions. But an excessively generous test would be unduly burdensome for defendants and might discourage persons with assets in Canada from entering into transactions that could eventually get them involved in international disputes. This result, too, would frustrate the purpose of private international law. Ideally, the test should represent a balance designed to create the optimum conditions favouring the flow of commodities and services across state lines. In our enthusiasm to advance beyond the parochialism of the past, we should be careful not to overshoot this goal.

[174] I would conclude that the “real and substantial connection” test should apply to foreign-country judgments, but the connections required before such judgments will be enforced should be specified more strictly and in a manner that gives due weight to the protection of Canadian defendants without disregarding the legitimate interests of foreign claimants. In my view, this approach is consistent with both the flexible nature of international comity as a principle of enlightened self‑interest rather than absolute obligation and the practical differences between the international and interprovincial contexts.

C. The Nature of the Requisite Connecting Factors

[175] The “real and substantial connection” test is simply a way of asking whether it was appropriate for the originating forum to take jurisdiction over the matter. If the originating court is an appropriate forum, then it is reasonable to expect the defendant to defend his interests there and to live with the consequences if he decides not to do so. Conversely, if it is not reasonable in the circumstances to expect the defendant to go to the originating court, then it was probably not appropriate for it to take jurisdiction. I would also emphasize at the outset that the requirement that the originating court act “with properly restrained jurisdiction” was expressly recognized by La Forest J. as a means of ensuring fairness to the defendant (Morguard, supra, at p. 1103).

[176] In my view, it is important to take into account the burdens that defending in the foreign forum would impose on a defendant, in order to determine whether it is reasonable to expect the defendant to accept them. Among the factors that affect the onerousness of defending in a foreign forum are the difficulty and expense of travelling there and the juridical disadvantage that the defendant may face as a result of differences between the foreign legal system and our own. In Morguard, supra, this Court recognized the unfairness of forcing a plaintiff to bring an action in the place where the defendant now resides, “whatever the inconvenience and costs this may bring” (p. 1103). Correlatively, defendants should not be compelled to defend in the jurisdiction of the plaintiff’s choosing regardless of the inconvenience and expense entailed; all of these factors should be taken into account by the court in arriving at a solution that justly accommodates the legitimate interests of both parties.

[177] One question left open in Morguard was exactly what must be connected to the forum to satisfy the “real and substantial connection” test. At various points, La Forest J. refers to “significant contacts with the subject-matter of the action” (p. 1103), “contacts . . . to the defendant or the subject-matter of the suit” (p. 1103), “a nexus . . . between the subject-matter of the action and the territory where the action is brought” (p. 1104), a “connection between the damages suffered and the jurisdiction”, and a “connection with the transaction or the parties” (p. 1108) (see J. Blom, “Conflict of Laws — Enforcement of Extraprovincial Default Judgment — Real and Substantial Connection: Morguard Investments Ltd. v. De Savoye” (1991), 70 Can. Bar Rev. 733; G. D. Watson and F. Au, “Constitutional Limits on Service Ex Juris: Unanswered Questions from Morguard” (2000), 23 Advocates’ Q. 167, at p. 200).

[178] The justification for requiring a defendant to go to the foreign forum is generally strongest when there is a link to the defendant. If the defendant has become involved in activities in the jurisdiction, or in activities with foreseeable effects in the jurisdiction, it is hardly reasonable for her to claim that she should be shielded from the process of that jurisdiction’s courts. This reasoning is reflected in Moran v. Pyle National (Canada) Ltd., 1973 192 (SCC), [1975] 1 S.C.R. 393, a case relied on in Morguard. In Moran it was held that, in a products liability tort case, the place where the victim suffered damages could assume jurisdiction over a foreign defendant manufacturer who knew or ought to have known that the defective product “would be used or consumed where the plaintiff used or consumed it” — i.e., if there was an indirect but substantial connection between the defendant and the forum (Moran, supra, at p. 409, cited in Morguard, at p. 1106).

[179] But there may be good reasons why jurisdiction should be recognized even where there is little or no connection to the defendant, particularly when other considerations, such as fairness to the plaintiff and the importance of administering the justice system in an efficient manner, are taken into account along with the interests of the defendant. It is not unusual for cross-border litigation to arise out of complex transactions involving a number of parties with connections to several jurisdictions. Watson and Au, supra, point out, at p. 200, that when litigation involves “multiple defendants in different jurisdictions, insisting on a substantial connection between each defendant and the forum can lead to a multiplicity of actions and inconsistent findings”. In such circumstances, a test that recognizes jurisdiction based on a connection to the subject matter of the action seems better suited to identifying whether the forum is a reasonable place for the action to be heard.

[180] Moreover, the Canadian Constitution does not mandate that the jurisdiction test provide a minimum level of procedural protection to the defendant, regardless of other factors (see Watson and Au, supra, at p. 180). In this respect, Canada’s Constitution can be contrasted with that of the United States. In the U.S., defendants are protected by the due process clauses of the Fifth and Fourteenth Amendments, which expressly provide that a person cannot be deprived of property without due process of law. Because the defendant in a civil case stands to be deprived of property by an adverse judgment, the court’s jurisdiction will not be recognized unless it accords with the defendant’s due process rights — a requirement which has been interpreted to mean that there must be certain minimum connections between the defendant and the forum. By contrast, in the Canadian Charter of Rights and Freedoms, due process is enshrined in s. 7, which protects “life, liberty and security of the person”, but not property rights. As a general rule, the defendant’s life, liberty and security of the person are unaffected by the outcome of civil litigation. In Canada, therefore, the defendant’s individual constitutional rights are not the starting point for jurisdictional analysis as they are in the U.S. — nor, indeed, would s. 7 rights usually be relevant to jurisdictional issues in civil disputes, although it is possible that there may be situations where fundamental interests of the defendant are implicated and s. 7 could come into play.

[181] A broad interpretation of the “real and substantial connection” test, whereby the test may be satisfied even in the absence of a connection to the defendant, seems appropriate given both our constitutional arrangements and the ultimate objective of facilitating the flow of goods and services across borders. Jurisdiction should be acknowledged as proper where the forum was a reasonable place to hear the action, taking into account all the circumstances, including judicial efficiency and the legitimate interests of both parties. At the same time, it should not be forgotten that the jurisdiction test is a safeguard of fairness to the defendant.

[182] The test should ensure that, considering the totality of the connections between the forum and all aspects of the action, it is not unfair to expect the defendant to litigate in that forum. It does not follow that there necessarily has to be a connection between the defendant and the forum. There are situations where, given the other connections between the forum and the proceeding, it is a reasonable place for the action to be heard and the defendant can fairly be expected to go there even though he personally has no link at all to that jurisdiction.

D. Balancing Hardship to the Defendant Against the Strength of the Connections

[183] The approach outlined above suggests that when a court is asked to recognize and enforce a foreign judgment, and questions whether the originating court’s jurisdiction was properly restrained, it should inquire into the connections between the forum and all aspects of the action, on the one hand, and the hardship that litigation in the foreign forum would impose on the defendant, on the other. The question is how real and how substantial a connection has to be to support the conclusion that the originating court was a reasonable place for the action to be heard. The answer is that the connection must be strong enough to make it reasonable for the defendant to be expected to litigate there even though that may entail additional expense, inconvenience and risk. If litigating in the foreign jurisdiction is very burdensome to the defendant, a stronger degree of connection would be required before the originating court’s assumption of jurisdiction should be recognized as fair and appropriate.

[184] In some respects, this formulation of the jurisdiction test might overlap with the doctrine of forum non conveniens, although it is not exactly the same. Certain considerations, such as juridical disadvantage to a defendant required to litigate in the foreign forum, are relevant to both inquiries. When the issue is jurisdiction, however, the court should restrict itself to asking whether the forum was a reasonable place for the action to be heard, and should not inquire into whether another place would have been more reasonable.

[185] There is an important difference between the inquiry conducted by a court assuming jurisdiction at the outset of the action and the test applied by a court asked to recognize and enforce a judgment at the end. In the former case, two steps are involved: the court must first determine that it has a basis for jurisdiction, and if it does it must go on to decide whether it should nevertheless decline to exercise that jurisdiction because another forum is clearly more appropriate for the hearing of the action. In the latter case of a receiving court, only the first step in this inquiry is relevant. Provided that the originating court had a reasonable basis for jurisdiction, the defendant had its chance to appear there and argue forum non conveniens, and cannot question the originating court’s decision on that issue in the receiving court.

[186] Nevertheless, the receiving court is not bound to agree with the originating court’s opinion that it had a reasonable basis on which to assume jurisdiction. If the connections to the originating forum are tenuous or greatly outweighed by the hardship imposed on the defendant forced to litigate there, the receiving court may conclude that it was not even a reasonable place for the action to be heard. It is no good to say that the defendant should have raised the question of hardship by arguing forum non conveniens before the foreign court. If it is unfair to expect the defendant to litigate on the merits in the foreign jurisdiction, it is probably unfair to expect the defendant to appear there to argue forum non conveniens.

E. The Application of the Test in the Canadian and International Contexts

[187] A test which balances hardship to the defendant (with due regard to the interests of the plaintiff) against the factors connecting the action to the forum — including links to either party or any other aspect of the action — leads to a very generous approach to the recognition and enforcement of judgments originating in other Canadian provinces. The reason for this is that the hardship imposed on a defendant who has to appear in another province within the Canadian federation will generally be minimal and will usually be outweighed by a genuine connection between the forum and the defendant, the subject-matter of the action or the damages suffered — all of which are invoked as bases of jurisdiction in provincial service ex juris statutes and in the Civil Code of Québec, S.Q. 1991, c. 64, and each of which, as I noted in Spar, supra, at para. 56, appears to be an example of a real and substantial connection.

[188] Litigation outside the defendant’s home forum may entail a number of burdens, which vary depending on the context. Those burdens potentially include the expense and inconvenience of travelling, the need to obtain legal advice in the foreign jurisdiction, the perils of navigating an unfamiliar legal system whose substantive and procedural rules may be quite different from those that apply in the defendant’s home jurisdiction, and even the possibility that the foreign court may be biassed against foreign defendants or generally corrupt.

[189] Within Canada, most of these problems do not arise. It is true that physical distances within this country can be significant, and the expense and inconvenience to a defendant in Newfoundland who is required to litigate in British Columbia, for example, would not be inconsiderable. As a rule, however, the distances involved are manageable for citizens of a modern country with an efficient transportation infrastructure. In any event, it may not be necessary for the defendant to go to the jurisdiction in person. Given the relative ease of travel and communications today, it is usually not an extraordinary burden to litigate in another Canadian province.

[190] More importantly, there is very little concern that the defendant will be at a disadvantage because she is not familiar with the legal system in the other province, and still less that the legal systems applied in Canada will actually treat her unfairly. As La Forest J. pointed out in Morguard, supra, there can be no genuine concern about “differential quality of justice among the provinces” (p. 1100). Indeed, Morguard establishes that the Canadian justice system should be understood as an integrated whole. Differences exist in both procedural and substantive matters, but the same basic values apply across the country, and our judicial system is basically unitary. Excessive discrepancies between the provinces will tend to become harmonized under the guidance of the federally appointed judiciary and the overall superintending authority of the Supreme Court of Canada. Furthermore, interprovincial law firms have become commonplace and lawyers across the country are required to abide by the same ethical standards (Morguard, at p. 1100).

[191] It follows that the assumption of jurisdiction by a sister province, provided that it does not exceed the province’s constitutional authority over property, civil rights and the administration of justice in the province and is not prompted by unfair forum‑shopping tactics on the plaintiff’s part, should be entitled to full recognition and enforcement throughout Canada. A connection to the subject matter of the action should usually suffice to meet the “real and substantial connection” test.

[192] Exceptions may arise in cases where litigation away from home would involve travel of a particularly arduous nature for the defendant (which might arise, for example, where the defendant resides in the far north) and, at the same time, the connections to the forum are not especially strong (an example might be a case where all the facts giving rise to the cause of action took place outside the jurisdiction and the only connection is that the plaintiff has suffered damages there). Absent such exceptional circumstances, grounds such as a wrong committed in the jurisdiction or damages suffered there would probably support the assumption of jurisdiction by the province in accordance with the requirements of order and fairness.

[193] A judgment which comes to a Canadian court from beyond our international borders is another matter altogether. The distances involved and the difficulty of travelling can be considerably greater when litigation is in a foreign country, and a Canadian defendant faced with a lawsuit outside this country will have to deal with an unfamiliar, and in some cases a very different, legal system.

[194] In extreme cases, the foreign legal system itself may be inherently unfair. It is an unfortunate fact that not every country’s courts are free of official corruption or systemic bias. In my opinion, it is to this possibility that La Forest J. alluded when he specified that “fairness to the defendant requires that the judgment be issued by a court acting through fair process and with properly restrained jurisdiction” (Morguard, at p. 1103 (emphasis added)). If the process that led to the judgment was unfair in itself, it is not fair to the defendant to enforce that judgment in any circumstance, even if the forum has very strong connections to the action and appears in every other respect to be the natural place for the action to be heard.

[195] It should therefore be part of the plaintiff’s burden in establishing a prima facie case of enforceability to prove that the system from which the judgment came is basically fair. When the originating jurisdiction is another democratic country with fair institutions, this burden will be easily met and may call for nothing more than reliance on judicial notice that the judgment emanates from a legitimate and respected legal system.

[196] A less troubling but more common situation arises when there is nothing inherently wrong with the foreign legal system, but it is different enough from ours that a Canadian defendant may encounter considerable difficulties understanding her rights and obligations and the steps she needs to take to defend herself. To take a simple example, a defendant from a Canadian common law province may find a civilian system such as that of France or Germany quite unfamiliar. Continental legal systems are, of course, just as fair and sophisticated as the legal system of Ontario. The fact remains that an Ontario defendant who is used to a very different system may suffer prejudice as a result of the foreign system’s unfamiliarity. Such a defendant cannot hope to protect herself unless she retains local counsel who can both negotiate the process on her behalf and explain it to her in a language she knows. It is not a simple thing to find trustworthy, competent, bilingual counsel in a foreign country; nor is it cheap. The plaintiff, who chose the forum, will presumably not face these difficulties, and therefore the parties will not be on a level playing field. (Conversely, the plaintiff would face the same kind of disadvantage if required to come to Ontario to pursue his case; it is in the nature of international litigation that one party or the other must accept the hardship of litigation in a foreign jurisdiction. The touchstone for an enforcing court in reaching a fair decision as to which of them should bear this burden is the strength of the connections between the action and the originating jurisdiction.)

[197] Even legal systems that are relatively similar to Canada’s can differ from our system significantly, and in ways that affect a Canadian defendant’s ability to make his case effectively and to understand the strengths and weaknesses of his position. The common law system in the United States remains very close in many respects to that of Canada. Yet this action itself provides numerous examples of substantive and procedural differences between the legal system in Florida and that of Ontario which created unforeseen perils for the Ontario defendants. Those differences include the following:

– Discovery in Florida is even broader in scope than it is in Ontario, and some of the functions of pleadings in Ontario are left to the discovery process. The record in this case indicates that it is standard practice for pleadings to disclose no more than a rough outline of the plaintiff’s claim and for the defendant to find out the specifics through discovery. Thus, the Amended Complaint did not set out the amount of damages claimed, but simply stated a minimum amount necessary to support the monetary jurisdiction of the Circuit Court. The expert witness, Mr. Groner, testified that the Ontario defendants were expected to ascertain the actual amount being sought through the discovery process. This would, of course, involve expense and would probably necessitate retaining local counsel in Florida.

– Under Florida’s procedural rules, the defence filed by the appellants ceased to have any effect once a new version of the Amended Complaint was filed, in spite of the fact that the allegations concerning the appellants were unchanged and the lack of any notification to the appellants that they were supposed to file a new defence.

– Even in cases where significant sums of money are at stake, transcripts are not produced in the Florida courts as a matter of course, but at the option and expense of the litigants. In a default case, this effectively means the plaintiff has complete control over whether there will be a record of what is said in the proceedings.

– Punitive damages appear to be available in a wider range of cases and in much larger amounts under Florida law than they are under Ontario law. An Ontario defendant sued in Florida may therefore be at risk of a far higher damage award than would be contemplated in Ontario.

[198] These differences illustrate that for an Ontario defendant, litigation in Florida entails greater hardship and risk than litigation in another Canadian province — and of all ‘truly foreign’ jurisdictions, Florida, which is not very far away and has a legal system essentially similar to Ontario’s, is one of the least foreign. In my opinion, therefore, fairness to defendants requires a stronger degree of connection to support Florida’s assumption of jurisdiction than would be the case if the originating court were in a sister province. Furthermore, if the judgment had originated from a more ‘foreign’ jurisdiction which involved greater difficulties for the defendant, the requisite degree of connection would be even higher.

[199] In this case, the jurisdictional point is easily dealt with, not only because of the appellants’ concession, but also because there were very strong connections between Florida and every component of the action: the plaintiffs, who live there; the land, which is in Florida; and the defendants, who involved themselves in real estate transactions there. Florida was the natural place for the action to be heard. If the connections were less robust, however, the conclusion might be different. For example, in a case where the only connection to Florida is that the plaintiffs are Florida residents and suffer damages there, it would, as a rule, be unfair to Canadian defendants to expect them to face the expense and risks of litigation in Florida.

F. Should the Test for Jurisdiction Be Based on “Reciprocity”?

[200] It follows from the propositions set out above that I do not agree with the majority that the notion of “interprovincial reciprocity” is “equally applicable to judgments made by courts outside Canada” (Major J., at para. 29). The argument is that if the circumstances are such that an Ontario court could reasonably take jurisdiction based on equivalent connecting factors to Ontario, then the Ontario court should recognize the jurisdiction of the foreign court. Although there is some initial appeal to this idea, ultimately I do not agree with it. Its effect is to treat a judgment from a foreign country exactly like one that originates within Canada. This approach, in my view, fails to take into account the very real differences between the interprovincial and international contexts.

[201] A few preliminary words should be said about the concept of “reciprocity”. Some ambiguity is associated with this term. It is sometimes used to refer to the idea that State A should recognize the jurisdiction of State B’s courts if State B would do the same for State A in the same circumstances. On the other hand, “reciprocity” sometimes refers to the quite different notion (invoked by the majority here) that State A should recognize the jurisdiction of State B if State A would have assumed jurisdiction in the same circumstances (see Dicey and Morris on the Conflict of Laws (13th ed. 2000), vol. 1, at p. 501). Blom has suggested that the latter approach is more properly one of “equivalence of jurisdiction” rather than “reciprocity” (Blom, supra, at p. 735).

[202] I would note that in Morguard, supra, La Forest J. rejected reciprocity in the latter sense (equivalence of jurisdiction) as the basis for a new jurisdiction test in the interprovincial context, and also questioned its usefulness on the international plane (see Morguard, at p. 1104; Blom, supra, at p. 735). Instead, he espoused an approach whereby the assumption of jurisdiction by a court in a province would be governed by the same principles of order and fairness that guide a court in another province when it determines whether to recognize the first court’s jurisdiction. Within Canada, the bases for assuming jurisdiction and the bases for recognizing it should be correlative; as La Forest J. pointed out, “[i]f it is fair and reasonable for the courts of one province to exercise jurisdiction over a subject-matter, it should as a general principle be reasonable for the courts of another province to enforce the resultant judgment” (p. 1094). The logic underlying this statement is not that the forum should recognize a jurisdiction that it claims for itself, but rather that the same principles define when it is reasonable to assume jurisdiction and when it is reasonable to recognize it.

[203] It makes sense that the jurisdictional rules on assumption and recognition should dovetail together in a federal state where the justice systems of the various provinces are interconnected parts of a harmonized whole. This reasoning does not extend to the international setting.

[204] Nor does the concept of reciprocity in the sense of equivalence of jurisdiction serve the purposes of private international law well. This idea fails to reflect the differences between assuming jurisdiction and enforcing a foreign judgment. When a Canadian court takes jurisdiction over a foreign defendant, it need not inquire into the fairness of its own process, which can be taken for granted. Potential hardship to the defendant can be dealt with under forum non conveniens. The ultimate practical effect of the court’s judgment will not be determined by its own decision to take jurisdiction, but by the decision of the courts in the defendant’s home jurisdiction whether or not to recognize and enforce the Canadian judgment based on that jurisdiction’s own domestic law and policy. Conversely, when a foreign judgment arrives in Canada, the enforcing court is the last line of defence for the Canadian defendant. The court should have a discretion to decide that it is not fair to the defendant to recognize the jurisdiction of the foreign court, even if the Canadian court would have decided it was fair to take jurisdiction itself based on the same connecting factors.

G. Conclusion on Jurisdiction

[205] In conclusion, I agree with Major J. that considerations of comity, order and fairness support the application of the “real and substantial connection” test to the recognition and enforcement of judgments originating in foreign countries. In my view, however, the application of the test should be purpose-driven and contextual. What constitutes a connection sufficient to meet the test will not be the same in every context. The jurisdiction test should reflect the difference between the international and interprovincial contexts and the greater hardship that litigation in a foreign country can entail. There is no good reason why Ontario courts should have to treat a judgment from Florida — or one from China, Turkmenistan or Sierra Leone — exactly like a judgment from another Canadian province.

[206] I would also question whether international comity requires us to move as far as the majority does in the direction of openness to foreign judgments when the position of jurisdictions with which we tend to compare ourselves is less generous. In England and Australia, for example, the Emanuel v. Symon, supra, framework remains substantially unchanged and the jurisdiction of a foreign court must be based on the presence or residence of the defendant in the foreign jurisdiction or on the defendant’s voluntary submission (see, e.g., Dicey and Morris on the Conflict of Laws, supra, at pp. 487 and 503; P. E. Nygh, Conflict of Laws in Australia (6th ed. 1995), at p. 138). The U.S. position is more liberal, but still does not go as far as the majority does in this case. Generally, U.S. states will apply the “minimum contact test” to foreign-country judgments as they do to judgments of sister states. This test is made out when a non‑resident defendant seeking to avail himself of some benefit within a state affirmatively acts in a manner which he knows or should know will result in a significant impact within the forum state (see, e.g., Mercandino v. Devoe & Raynolds, Inc., 436 A.2d 942 (N.J. Super. App. Div. 1981), at p. 943). Thus, a connection between the foreign jurisdiction and the cause of action alone, in the absence of purposive conduct by the defendant establishing a connection between himself and the forum, would be insufficient as a basis for jurisdiction and enforceability in the U.S. In such a case, however, the “real and substantial connection” test as it is interpreted by the majority would always be satisfied.

[207] Finally, I would note that the logic on which the Morguard test is founded suggests that it should supersede, rather than complement, the traditional common law bases of jurisdiction. In my view, it is not necessary to ask whether any of the traditional grounds are present and then go on to ask whether there is a real and substantial connection (as the majority reasons suggest, at para. 37). There should be just one question: is the “real and substantial connection” test made out?

[208] This Court noted in Hunt, supra, that the traditional grounds were generally sound bases of jurisdiction and were “a good place to start”, but also observed that “some of these may well require reconsideration in light of Morguard” (p. 325). Such factors as contractual agreement to accept jurisdiction and habitual residence in the foreign forum are usually very clear examples of the kind of connection that reasonably supports the assumption of jurisdiction. Attornment by actively defending the action in the foreign jurisdiction is a slightly different kind of connection; because the defendant has chosen to have his day in court in the foreign forum, no unfairness results from the enforcement of the foreign court’s judgment.

[209] In some cases, however, the traditional grounds may be more arbitrary and formalistic than they are fair and reasonable. Under the traditional rules, for example, jurisdiction could be acquired by serving a defendant who was present in the jurisdiction, even if her presence was only fleeting and was completely unconnected to the action, and in the absence of any other factor supporting jurisdiction. Another example is the common law rule that an appearance solely for the purpose of challenging the jurisdiction of the foreign court was an attornment to its jurisdiction, which was argued (but not commented on by the court) in United States of America v. Ivey (1995), 1995 7241 (ON SC), 26 O.R. (3d) 533 (Gen. Div.). Circumstances such as these may not amount to a real and substantial connection, and in my view they should not continue to be recognized as bases for jurisdiction just because they were under the traditional rules.

IV. The Impeachment Defences

A. The Principle Behind the Defences

[210] Claimants who seek to have foreign judgments recognized or enforced in this country ask for the support and cooperation of Canadian courts. They thus face the initial burden of showing that the judgment is valid on its face and was issued by a court acting through fair process and with properly restrained jurisdiction based on a real and substantial connection to the action. The petitioner must convince the receiving court that the values of international comity require it to exercise its power in favour of enforcing the judgment. Once this burden has been met, the judgment is prima facie enforceable by a Canadian court. The common law has long recognized, however, that the defendant can still establish that the judgment should not be enforced by showing that one of a number of defences to recognition and enforcement applies. The defences relevant to this appeal are commonly grouped under the heading of “impeachment” defences, since all are based on the notion that the way the foreign judgment was obtained was in some way tainted or contrary to Canadian notions of justice. (Other potential defences, such as the foreign public law exception to enforceability in Canada, which might apply, for example, to a tax claim, are not implicated by the facts of this case.)

[211] A foreign judgment may be impeached on the basis that its recognition or enforcement would be contrary to public policy, that it was obtained by fraud, or that the foreign proceedings were contrary to natural justice. The burden is on the party raising one of these defences to prove that it applies; the foreign judgment is presumed to be valid, and there is a basic principle that the domestic court will not permit relitigation of matters tried before the foreign court (J.-G. Castel and J. Walker, Canadian Conflict of Laws (5th ed. (loose-leaf)), at p. 14-24). At the same time, the receiving court has both the authority and the responsibility to uphold the essential values of the domestic legal system and to protect citizens under the protection of its laws from unfairness. The three impeachment defences are established situations where the domestic court will intervene and refuse to enforce the judgment because the law on which it is based or the way it was obtained is simply too offensive to local notions of what is just and reasonable.

B. The Need to Reconsider the Impeachment Defences as a Result of the Change in the Jurisdiction Test

[212] An intrinsic tension arises between the impeachment defences and the principle that the law and facts on which the foreign judgment is based cannot be reargued. Acknowledging the foreign court’s jurisdiction would mean very little if the defences could be routinely used to discredit the legal, factual or procedural basis of its judgment. On the other hand, the principle of finality of judgments has its limits; it does not and should not mean that the enforcing court can do no more than rubber‑stamp the foreign judgment while turning a blind eye to unfairness or impropriety in its provenance.

[213] The impeachment defences represent the balance that the courts have found to be appropriate between security of transactions, on the one hand, and fairness in the individual case, on the other. Traditionally, they have been narrow in scope. The old, strict approach to these defences struck a balance appropriate to the requirements of international comity under the pre-Morguard common law, when the jurisdiction test was a difficult threshold for foreign plaintiffs to cross. Nearly all judgments that passed it did so because the defendant had either participated in the action in the foreign forum or selected it by agreement. As J. Walker notes in a comment on this case:

Under such conditions, defendants resisting the enforcement of foreign judgments could be presumed to have defended the actions against them and to have benefited from the procedural safeguards available in the foreign legal systems. Alternatively, defendants could be presumed to have chosen, on the strength of some familiarity with the foreign legal systems, to let their matters be decided in default.

(“Beals v. Saldanha: Striking the Comity Balance Anew” (2002), 5 Can. Int’l Law. 28, at p. 30)

In short, the potential for unfairness to the defendant was minimal, and accordingly there was no need for courts to be concerned with shortcomings in the way the judgment was obtained absent “some egregiously bad feature of the process or the result” (Walker, supra, at p. 30).

[214] The balance that existed under the traditional approach is lacking in the new test set out by the majority. The category of foreign judgments that are prima facie enforceable in this country has been greatly expanded by virtue of the adoption of the Morguard test for foreign-country judgments. The law as it now stands will admit a default judgment emanating from a forum that the defendant did not consent to and may have been connected to only indirectly or not at all. This is a salutary development in our law on jurisdiction; if there are sufficient connections between the action and the forum, the judgment should not be shut out on the basis that the forum was inappropriate. But the possibility that the judgment should be unenforceable for some other reason should be considered anew in light of this new context. Castel and Walker, supra, have commented that if this Court confirms the application of the Morguard test to foreign judgments, “it would seem necessary to revise the defences . . . so as to protect persons in Canada who have been sued in foreign courts from the particular kinds of unfairness that can arise in crossborder litigation, and so as to prevent abuse from occurring as a result of liberal rules for the enforcement of foreign default judgments” (p. 14-26).

[215] One example of the kind of unfairness Castel and Walker refer to is the increased vulnerability of Canadian residents to nuisance lawsuits in other countries. A defendant may be confronted with a claim that he knows to be frivolous brought by an overseas claimant. His choices are to defend, to settle, or to ignore the claim. Defending in a foreign country is often expensive and difficult. Many foreign jurisdictions do not award costs to the successful party, so that the defendant will have to bear the expenses of litigation even if his position is fully vindicated. On the other hand, failure to defend brings with it considerable risk. The defendant may have little or no knowledge of the legal system and may be unable to predict with confidence that the foreign court will not be persuaded, or required by the operation of its own rules, to uphold a meritless claim.

[216] A defendant faced with this dilemma ought to be afforded some protection by Canadian courts against foreign judgments that are clearly flawed, even if the flaws do not meet the stringent tests that traditionally defined the impeachment defences. If no such protection is available, in many cases the only safe option for defendants will be to settle with the claimant despite the fact that the claim is baseless. If the position of the Canadian courts is to be that defendants who fail to defend in the foreign forum do so entirely at their peril, regardless of whether the decision not to defend was based on a rational cost-benefit analysis and irrespective of the frivolousness of the claim and of the use of improper means to persuade the foreign court that it should succeed, Canadian residents may become attractive targets for opportunistic plaintiffs’ lawyers in other jurisdictions.

[217] In my opinion, the impeachment defences, particularly the defences of fraud and natural justice, ought to be reformulated. The law of conflicts needs to take these new possibilities for abuse into account and to ensure an appropriate recalibration of the balance between respect for the finality of foreign judgments and protection of the rights of Canadian defendants.

[218] Furthermore, the nominate defences should be looked at as examples of a single underlying principle governing the exercise of the receiving court’s power to recognize and enforce a foreign judgment. The claimant must come before the Canadian court with clean hands, and the court will not accept a judgment whose enforcement would amount to an abuse of its process or bring the administration of justice in Canada into disrepute. Serious consideration should be given to the possibility of a residual category of judgments, beyond those addressed by the defences of public policy, fraud and natural justice, that should not be enforced because they, too, engage this principle — in short, because their enforcement would shock the conscience of Canadians.

C. Reformulation of the Nominate Defences

(1) Public Policy

[219] If the enforcement of a foreign judgment in Canada would be contrary to Canadian public policy, the judgment will not be enforced here. This defence addresses objections to the foreign law on which the judgment was based. It will be engaged if the foreign law is either contrary to basic morality or contrary to the fundamental tenets of justice recognized by our legal system.

[220] The trial judge held that the public policy defence should be expanded to incorporate a “judicial sniff test” that would allow enforcing courts to reject foreign judgments obtained through questionable or egregious conduct (Jennings J., at p. 144). It has also been suggested that excessively high punitive damage awards should be unenforceable in whole or in part as a matter of public policy; see, e.g., J. S. Ziegel, “Enforcement of Foreign Judgments in Canada, Unlevel Playing Fields, and Beals v. Saldanha: A Consumer Perspective” (2003), 38 Can. Bus. L.J. 294, at pp. 306-7; Kidron v. Grean (1996), 1996 8054 (ON SC), 48 O.R. (3d) 775 (Gen. Div.) (where the court refused to enforce on summary judgment a foreign judgment for $15 million for emotional distress based on evidence of “hurt feelings”). Ziegel notes that the Preliminary Draft Convention on Jurisdiction and Foreign Judgments in Civil and Commercial Matters adopted in October 1999, and revised in June 2001, by the Special Commission of the Hague Conference on Private International Law, provides that a court asked to enforce an award of non-compensatory damages may, if satisfied that the amount awarded is “grossly excessive”, limit enforcement to a lesser amount (Article 33(2)). The Draft Convention may reflect an international consensus that large punitive damage awards can raise serious concerns, although this idea does not rise to the level of a customary norm.

[221] In my view, the better approach is to continue to reserve the public policy defence for cases where the objection is to the law of the foreign forum, rather than the way the law was applied, or the size of the award per se. In other words, this defence should continue to be, as the trial judge put it, “directed at the concept of repugnant laws, not repugnant facts” (p. 144 (emphasis in original)). Public policy is potentially an expansive enough concept to subsume the other two defences; it is, of course, contrary to public policy in a broad sense to enforce a judgment that was fraudulently or unfairly obtained. But it is useful to maintain an analytical distinction between the three defences. Furthermore, the defence of public policy has long been associated with condemnation of the foreign jurisdiction’s law. To extend it to cover situations where there is nothing objectionable about the foreign law but, rather, a defect in the way the law was applied might send the wrong message, one that conflicts with the norms of international cooperation and respect for other legal systems underlying the doctrine of comity.

[222] In Boardwalk Regency Corp. v. Maalouf (1992), 1992 7573 (ON CA), 88 D.L.R. (4th) 612, the Ontario Court of Appeal held that the public policy defence applies to laws that violate “conceptions of essential justice and morality” (p. 615). As an example, the court cited a contract relating to the corruption of children (p. 622). It emphasized that a mere difference between the policy choices reflected in the foreign law and those that prevail in Canada is not enough to engage the defence (pp. 615-16). This approach reflects the principle that diversity among the legal systems of the world should be respected, while at the same time establishing the limits of that principle. A law that offends fundamental or essential moral precepts will not be enforced. While the question is always whether the foreign law violates Canadian ideas of essential justice and morality, the relevant precepts of morality and justice are so basic that they can be said to have a universal character and will generally be respected by all fair legal systems.

[223] The defence of public policy should not, however, be reserved for such shockingly immoral laws that one would be hard-pressed to find a non-hypothetical example of the kind of law that would engage it. In my opinion, there is more work for this defence to do. It should also apply to foreign laws that offend basic tenets of our civil justice system, principles that are widely recognized as having a quality of essential fairness. Among these, I would include the idea that civil damages should only be awarded when the defendant is responsible for harm to the plaintiff, and the rule that punitive damages are available when the defendant’s conduct goes beyond mere negligence and is morally blameworthy in some way. These are basic principles of justice that are reflected in some form in most developed legal systems, although the particular form in which they are expressed may vary.

[224] A law which violates these basic tenets of justice would be fundamentally unfair and worthy of condemnation. A Canadian court presented with a judgment from a jurisdiction whose law provides, for example, that punitive damages can be awarded on the basis of simple negligence or strict liability ought to have a discretion to deny or limit the enforceability of the judgment on grounds of public policy.

[225] This does not dispose of all the difficulties raised by large punitive damage awards, which in practice seldom result from the application of unjust laws. The most common source of punitive damage awards that are unusually high by international standards is the United States. In that country, it is more common to use punitive damages as an instrument of social engineering than it is in Canada, and American law tends to permit larger awards as a way of modifying the behaviour of well-funded defendants. There is nothing about that approach that is inherently offensive to Canadian ideas of basic fairness; it is simply a different policy choice, and it affords U.S. plaintiffs a level of protection of which they ought not necessarily to be deprived just because the defendant’s assets are here. As far as I know, U.S. federal and state law generally allows for punitive damages only when the defendant’s behaviour is morally blameworthy in some way. In this sense, their policy is similar in principle to ours even though the amounts awarded are sometimes startlingly high to Canadian eyes.

[226] Serious problems can, however, arise when an exorbitant damage award is granted against a defendant whose actions were merely careless, rather than reprehensible, or where the defendant’s actions were blameworthy enough to merit punitive damages in some amount but the amount awarded is so unimaginably large that it would only be justified as a response to the most heinous and despicable conduct. In many such cases, the applicable law does not, in theory at least, support the size of the damage award. Such awards may be fixed by juries or judges who may not apply the law with the utmost scrupulousness, and they are often overturned on appeal.

[227] Some very large judgments of this kind have gained a certain level of notoriety and are probably the first to come to mind when concerns about the size of punitive damage awards are raised. A well-known example is BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996), where the United States Supreme Court overturned a judgment of the Alabama Supreme Court which had awarded $2 million against BMW because they had sold the defendant a car without revealing that it had been repainted.

[228] Another example is the Loewen case, where a Mississippi jury awarded $500 million (including punitive damages of $400 million) against a funeral company based in British Columbia for anti-competitive behaviour. The Mississippi court rules made the defendant’s right to appeal conditional on the posting of a bond worth 125 percent of the damages owed. The defendants settled the case in 1996, and went on to file a NAFTA claim against the United States, arguing that the verdict amounted to an uncompensated appropriation of foreign investors’ assets. This claim was ultimately unsuccessful, but the NAFTA tribunal remarked on the unfairness of the verdict and the appearance that improper considerations had played a part in inflating it; the trial judge had allowed the plaintiff’s attorney to make irrelevant and prejudicial references to matters of race and class and to the fact that the defendants were foreign nationals (Loewen Group, Inc. v. United States of America, International Centre for Settlement of Investment Disputes, Case No. ARB(AF)/98/3, June 26, 2003, at para. 4). See also J. A. Talpis, “If I am from Grand-Mère, Why Am I Being Sued in Texas?” Responding to Inappropriate Foreign Jurisdiction in Quebec-United States Crossborder Litigation (2001).

[229] In cases like those referred to above, the problem is not that the law of the foreign jurisdiction conflicts with Canadian public policy, but that the facts of the case do not really justify the size of the award even under the foreign law. These are issues that, in my view, engage the defence of natural justice rather than that of public policy.

(2) Fraud

[230] Fraud perpetrated on the court that issued the foreign judgment is a defence to its enforcement in Canada. The defence of fraud is hard to reconcile with the principle that the original court’s findings of fact are final and binding. As Castel and Walker, supra, observe, “[t]he difficulty lies in defining the extent to which the defence of fraud can be considered without reviewing the deliberations of the foreign court or reconsidering the merits of the claims or defences adjudicated in the foreign proceeding” (pp. 14-24 and 14-25).

[231] Courts have attempted to resolve this conflict by distinguishing between the kind of fraud of which evidence will be admitted by the domestic court, and allegations of fraud which are considered to have been directly or impliedly disposed of by the foreign judgment and cannot be raised again. Different courts have drawn the line in different places. At one end of the spectrum is the very strict rule followed in Woodruff v. McLennan (1887), 14 O.A.R. 242, admitting only evidence of “extrinsic fraud” (fraud going to the jurisdiction of the court that issued the judgment, or affecting the defendant’s opportunity to present her case). At the other is the liberal rule followed by the English courts in Abouloff v. Oppenheimer (1882), 10 Q.B.D. 295 (C.A.), and recently affirmed by the House of Lords in Owens Bank Ltd. v. Bracco, [1992] 2 All E.R. 193, whereby the judgment will be vitiated by evidence that the foreign court was deliberately deceived on any matter, including on the merits of the case. A middle position was taken by the Ontario Court of Appeal in Jacobs v. Beaver (1908), 17 O.L.R. 496, and in this case, where it was held that fraud can only be argued on the basis of fresh evidence that was not known, and could not have been discovered with reasonable effort, at the time of the original decision.

[232] It should be noted that each of these approaches represents a compromise between the conflicting propositions that the original judgment is conclusive and that a judgment obtained by deception or based on false facts should not be enforced. Even under the permissive English rule, the foreign court’s factual conclusions can only be displaced by proof of conscious and intentional deception; it is not enough to argue that the foreign court drew the wrong conclusion from the evidence. In the Duchess of Kingston’s Case (1776), 2 Sm. L.C. (8th ed.) 784 (cited in Abouloff, supra, at p. 300), de Grey C.J. remarked that “although it is not permitted to show that the [foreign] Court was mistaken, it may be shown that they were misled” (p. 794). None of these compromises has an absolute claim to be the correct solution to the conundrum. What is the best approach depends on the context in which the rule is applied, and the most appropriate rule will be the one that is most conducive in the circumstances to furthering the objectives of private international law.

[233] I agree with Major J. that in general the rule that the defence of fraud must be based on previously undiscoverable evidence is a reasonably balanced solution. The distinction between extrinsic and intrinsic fraud is, as Major J. says, an obscure one which creates uncertainty. It is also unduly strict; as Jennings J. noted in the court below, it leaves space for the fraud defence that is not already occupied by a principled jurisdiction test and by the defence of natural justice (p. 140). On the other hand, defendants usually should not be allowed to reargue matters that they already raised before the foreign court, or chose not to raise there. These considerations suggest that the “extrinsic fraud” approach is too narrow and the “intentional fraud” approach too broad; the rule that only fresh evidence of fraud can be looked at by the enforcing court is, generally speaking, a good compromise.

[234] I would not, however, rule out the possibility that a broader test should apply to default judgments in cases where the defendant’s decision not to participate was a demonstrably reasonable one. If the defendant ignored what it justifiably considered to be a trivial or meritless claim, and can prove on the civil standard that the plaintiff took advantage of his absence to perpetrate a deliberate deception on the foreign court, it would be inappropriate to insist that a Canadian court asked to enforce the resulting judgment must turn a blind eye to those facts. In Powell v. Cockburn, 1976 29 (SCC), [1977] 2 S.C.R. 218, at p. 234, Dickson J. (as he then was) observed that “[t]he aim of the Courts, in refusing recognition because of fraud, is to prevent abuse of the judicial process.” In my opinion, enforcement of a judgment that was obtained by intentionally misleading the foreign court in the kind of circumstances I have outlined could well amount to an abuse of the judicial process. In my opinion, a more generous version of the fraud defence ought to be available, as required, to address the dangers of abuse associated with the loosening of the jurisdiction test to admit a broad category of formerly unenforceable default judgments.

(3) Natural Justice

[235] A foreign judgment will not be enforced in Canada if the foreign proceedings were contrary to natural justice. The defence concerns the procedure by which the foreign court reached its decision. The clearest examples of a deprivation of natural justice occur when the defendant lacks notice of the foreign proceedings or an opportunity to present his case to the court.

[236] In my opinion, two developments should be recognized in connection with this defence. First, the requirements of notice and a hearing should be construed in a purposive and flexible manner. Secondly, substantive principles of justice should also be included in the scope of the defence. The ultimate inquiry is always whether the foreign judgment was obtained in a manner that was fair to the defendant and consistent with basic Canadian notions of justice.

[237] The purposive interpretation of the notice requirement was addressed in some detail by Weiler J.A. in her dissenting opinion in the court below ((2001), 2001 27942 (ON CA), 54 O.R. (3d) 641). The notice requirement is based on “the underlying fundamental principle of justice that defendants have a right to know the case against them and to make an informed decision as to whether or not to present a defence” (pp. 675-76).

[238] Notice is adequate when the defendant is given enough information to assess the extent of his or her jeopardy. This means, among other things, that the defendant should be made aware of the approximate amount sought. Canadian procedural rules require that the amount of damages claimed be stated in the pleadings (Weiler J.A., at p. 676). This is not the rule in all jurisdictions, and notice will still be adequate even where the pleadings do not conform to Canadian standards as long as the defendant is informed in some other way of the amount in issue.

[239] A requirement of particular relevance to this appeal is that adequate notice must include alerting the defendant to the consequences of any procedural steps taken or not taken, to the extent that those consequences would not be reasonably apparent to someone in the defendant’s position. The claimant bears a certain responsibility for ensuring that a defendant who is not reasonably in a position to understand the particular workings of the foreign process does not inadvertently give up defences or waive rights as a result.

[240] Proper notice also requires alerting the defendant to the allegations that will be adjudicated at trial. The defendant must be informed, by the pleadings or otherwise, of the basis on which damages are sought and the case to be answered. As Weiler J.A. noted, if in fact damages are assessed “beyond the pleadings”, then the defendant will not have had true notice of what would take place in the proceedings and will have been deprived of the opportunity to make an informed decision as to whether to participate (p. 676).

[241] Authority for the proposition that natural justice comprises substantive principles of justice, as well as minimum procedural standards, is to be found in the judgment of the English Court of Appeal in Adams v. Cape Industries plc, [1991] 1 All E.R. 929, the leading English case on the enforcement of foreign judgments. The judgment sought to be enforced in that case originated in Texas and arose from a complex asbestos-poisoning action involving numerous plaintiffs and defendants. Damages were assessed in a rather unconventional way. On the suggestion of plaintiffs’ counsel, the judge arrived at a global amount of damages to be distributed among the plaintiffs in fixed amounts which were not based on proof of the damages suffered by each individual plaintiff. This method of calculating damages was held by the English court to be contrary to natural justice because it was “not the result of a judicial assessment of the individual entitlements of the respective plaintiffs” and because no proper judicial hearing had been held on the quantum of damages (Adams, supra, at p. 1042). Slade L.J. held that it was a principle of substantive justice that unliquidated damages must be assessed “objectively by the independent judge on proof by the plaintiff of the relevant facts” (p. 1050).

[242] Adams sets out a flexible and pragmatic approach to the natural justice defence which is appropriate for the Canadian context following Morguard. I agree with the English Court of Appeal that the defence can be triggered by principles of substantive justice, such as the proposition that damages should be based on objective proof and judicial assessment. In Weiler J.A.’s words, “the ultimate guidepost in deciding whether the defence of natural justice may be raised is procedural fairness based on underlying fundamental principles of justice” (p. 675). The category is not closed. If a defendant can establish that the process by which the foreign judgment was obtained was contrary to the Canadian conception of natural justice — because the process itself is flawed, by reason of the way the plaintiff manipulated the process, or both — then the foreign judgment should not be enforced.

[243] Weiler J.A. understood La Forest J.’s allusion to “fair process” in Morguard to refer to the rules of natural justice (p. 671). My colleague Major J. also appears to be of this opinion when he states, under the heading of “The Defence of Natural Justice”, that the enforcing court must ensure that the judgment originates from a fair legal system (para. 61). While these concepts are certainly related, in my view there is a meaningful distinction between the fairness of the legal system from which the judgment came and the fairness of the procedure followed in the particular case. Slade L.J. underlined this distinction in Adams, supra, when he observed that the Texas judgment originated from “an unimpeachable system of justice within one of the great common law jurisdictions of the world” (p. 1048). The defendants in Adams argued not that the judgment was a product of an unfair system of justice, but that the judge’s method of assessing damages did not comply with the rules of that system.

[244] I would also note that La Forest J. expressly stated, in Morguard, supra, at p. 1103, that “fair process is not an issue within the Canadian federation”. I would not take this to mean that the defence of natural justice can never be available against enforcement of a Canadian judgment. Although the justice system in Canada is fair, it is possible for failures of the system to occur in individual cases. For these reasons, I would hold that the “fair process” referred to in Morguard means a legal system that is free from corruption and bias — a requirement which, it seems to me, is relevant to the questions of whether the foreign court’s jurisdiction should be recognized at all. The defence of natural justice, on the other hand, is concerned with whether the procedural steps followed in the particular case ensured that the defendant was treated with basic fairness.

[245] Finally, the obligation of a defendant to pursue remedies available in the originating jurisdiction must be addressed. In Adams, supra, Slade L.J. held that opportunities for correcting a denial of natural justice that existed in the originating jurisdiction should be taken into account in assessing whether the defence of natural justice has been made out. It does not follow that the existence of such remedies automatically cures a failure of natural justice. Slade L.J. also recognized that the significance and weight of the fact that remedies were available in the originating forum must be assessed in light of all the relevant factors, including “the reasonableness in the circumstances of requiring or expecting that [the defendants] made use of the remedy in all the particular circumstances” (pp. 1052-53).

D. Application of the Impeachment Defences to the Facts of this Case

(1) Public Policy

[246] If the defence of public policy is understood as a bar to enforcing immoral or unjust foreign laws, it is not met here. The enforcement of such a large award in the absence of a connection either to harm suffered by the plaintiffs and caused by the defendants or to conduct deserving of punishment on the part of the defendants would be contrary to basic Canadian ideas of justice. But there is no evidence that the law of Florida offends these principles. On the contrary, the record indicates that Florida law requires proof of damages in the usual fashion. Treble damages are only available by statute to victims of crimes. There is no indication that punitive damages are available where the defendant’s conduct is not morally blameworthy.

[247] In my view, the defects in the judgment, while severe, do not engage the public policy defence.

(2) Fraud

[248] Under the rule that an allegation of fraud can only be considered if based on fresh evidence, the defence of fraud is not made out. All the facts that the appellants raise in this connection were known to them or could have been discovered at the time of the Florida action.

[249] A further issue arises as to whether evidence of deliberate deception would be enough to vitiate the judgment. In my opinion, this is the kind of case for which a more lenient interpretation of the fraud defence would, in principle, be appropriate, because the appellants’ decision not to attend the Florida proceedings was a reasonable one. Full participation in the Florida action would have been expensive, time‑consuming and difficult. The appellants’ own knowledge of the facts convinced them that the claim was frivolous, to say the least; they were amazed that it even resulted in a lawsuit. They thought, and they had every reason to think, that even if the claim succeeded they would be liable for no more than about US$8,000. Their conclusion that “the game was not worth the candle” was reasonable in the circumstances. Mr. Mulock testified that the defendants’ non-participation might well have qualified as “excusable neglect” under Florida law due to the weakness of the claim and the fact that the defendants were foreign residents, among other factors. I see no reason why our law should deem these factors to be irrelevant.

[250] If, in these circumstances, the plaintiffs took advantage of the opportunity to deceive the court by putting forward perjured or misleading evidence in order to obtain a higher award of damages, it would be unfair and contrary to the interests of the Canadian justice system for our courts to be obliged to enforce the judgment in spite of the fact that it was obtained by deception. Such conduct by counsel for the Florida plaintiffs would be contrary to the ethical obligations of Ontario lawyers to pursue their clients’ interests by fair and honourable means and without misrepresentation of the facts, and Ontario courts should not be put in the position of having to reward that conduct handsomely when the perpetrator is a lawyer in another jurisdiction.

[251] The difficulty the appellants face is that there is no evidence that anything of this kind happened, because no record exists of the evidence and arguments put forward in the Florida damages hearing. Given the jury’s findings, it is certainly a possibility, perhaps a strong possibility, that they were deliberately misled, but there are other possible explanations — for example, the plaintiffs may have presented only true facts and the jury might have misunderstood how the law applied to those facts. The allegation of fraud is a serious one, and the onus remains on the appellants to support it. It is significant that the appellants did not use their opportunity to question Mr. Beals or Mr. Groner, either in discovery or at trial, as to what was said in the damages hearing. Given the lack of evidence, even on the view that this judgment could be vitiated by proof of intentional fraud, the defence has not been made out. I agree with Major J. that the trial judge’s findings of fact that the plaintiffs deliberately misled the jury are unsupported by the evidence and should not be upheld. The defence of fraud therefore does not apply. Natural justice, though, is a different matter.

(3) Natural Justice

[252] The Ontario defendants were not given sufficient notice of the extent and nature of the claims against them in the Florida action. The claimants failed to give the defendants proper notice of the true nature of their claim and its potential ramifications. Furthermore, there was no notice as to the serious consequences to the defendants of failure to refile their defence in response to the claimant’s repeatedly amended pleadings. As a result, the notice afforded to the defendants did not meet the requirements of natural justice.

[253] The amount of damages claimed was not stated in the Amended Complaint. The only mention of a monetary amount was the formulaic reference to damages over $5,000 required to give the Florida Circuit Court monetary jurisdiction. This form of pleading did not give the defendants a clear picture of what was at stake. Indeed, Mr. Groner testified that as a matter of Florida practice they were expected to find out exactly what was being claimed through discovery.

[254] Nor did the Amended Complaint set out with any precision the allegations on the basis of which damages, beyond the sale price of the land, were claimed. There is reference to construction costs and lost revenue, but none to the plaintiffs’ assertion that the planned model home was to be rented to their company, Fox Chase Homes, and used to obtain further construction contracts. In fact, there is no mention at all of Fox Chase Homes. As Weiler J.A. noted, the plaintiffs could easily have provided the defendants with a copy of Mr. Beals’s deposition, where he explained these matters, and thus ensured that the defendants were aware that significant business losses were being claimed (p. 677). But the plaintiffs failed to alert the defendants to the peril they faced in this or any other way.

[255] Perhaps the most important failure of natural justice in this case is the fact that the defendants were not given notice of the consequences of failing to continue to file new defences to the repeated changes to the Amended Complaint. There was nothing on the face of the Amended Complaint that would alert them to the need to refile, especially since the allegations against them remained unaltered. The annulment of their defence resulted from a technicality of Florida procedure of which defendants from a foreign jurisdiction could hardly be expected to be aware. Again, the plaintiffs could easily have advised them that a new defence was required, but they did not. The defendants had no warning of the danger in which they placed themselves simply by assuming that their initial defence was, as it appeared to be, an adequate response to the Amended Complaint. Not only did they lack the information they needed to assess whether or not they should defend; their failure to defend was not in any genuine sense a product of their own volition.

[256] A foreign plaintiff who expects to have a judgment in his or her favour enforced by a Canadian court has a responsibility to ensure that the defendant is in a position to make an informed decision about how to respond. If the defendant can show that the plaintiff failed to discharge that responsibility, the court should refuse to enforce the judgment on the basis that the defendant was deprived of proper notice, a basic condition of natural justice. In this case, the Florida claimants should have notified the appellants of the steps they could take after new versions of the Amended Complaint were filed and, more importantly, of the consequences of not taking those steps. Because they failed to do so, the appellants were unaware of the danger that their defence would lapse.

[257] I would also note that in this case it appears that the judgment may have offended substantive principles of natural justice of the kind addressed in Adams, supra. It seems likely that the quantum of damages was fixed without proof that damages flowed from harm suffered by the plaintiffs as a result of the defendants’ actions, and that punitive damages were awarded without demonstration of conduct on the defendants’ part that was deserving of punishment. The problem, again, is that we do not know what was offered in evidence in the damages hearing in Florida. The conclusion seems all but inescapable that one of two things happened: either the Florida court was presented with false evidence on the damages issue, or it reached its conclusion without a proper judicial assessment of the conditions required, both by Florida law and as a matter of natural justice, to support an award of unliquidated damages. But because there is no transcript of the damages hearing and no other clear evidence of what took place there, neither scenario has been proven.

[258] A deficiency in the fairness of the procedure by which the Florida court reached its decision having been established, the availability of remedies for that deficiency in Florida falls to be considered. The defendants did have options for correcting the problem in Florida. They could have moved for relief based on excusable neglect, or appealed. They did not avail themselves of those remedies.

[259] What this means for the appellants’ entitlement to rely on the natural justice defence must be ascertained by considering the reasonableness in all the circumstances of requiring them to make use of the remedies available in Florida. We must look at the reasons why they decided not to go to Florida to attack the judgment, but chose instead to trust that the Ontario courts would not enforce it.

[260] The defendants’ main reason for deciding as they did was that they were following the advice (which turned out to be erroneous) of legal counsel. They were told that if they went to Florida to challenge the judgment, Ontario courts would regard them as having attorned to Florida’s jurisdiction and would be more likely to enforce the judgment against them. Given the information they had, the decision not to take steps in Florida was not only understandable but the only sensible option.

[261] The majority appears to be of the view that the appellants are not entitled to any relief from the consequences of relying on mistaken legal advice. In my view, the mere fact that a defendant has received mistaken legal advice should not operate to relieve the claimant entirely of the consequences of a significant or substantial failure to observe the rules of natural justice, and it should not, in itself, bar the appellants from relying on this defence. I agree with Weiler J.A. that the reasonableness of expecting a defendant to use a remedy in a foreign jurisdiction must be assessed from that person’s point of view. If the defendants were under a misapprehension as a result of reasonable reliance on the advice of counsel as to the relative risks of the options open to them, their assessment of the risks should not for that reason be discounted. This Court recognized in Cité de Pont Viau v. Gauthier Mfg. Ltd., 1978 4 (SCC), [1978] 2 S.C.R. 516, that a party should not be penalized for an error which is solely that of counsel, where the party itself has acted with diligence. This is not to say that a lawyer’s mistake will always be an excuse for not participating in foreign proceedings. The totality of the circumstances must be examined. In this case, the appellants did their best to deal with the dispute conscientiously. In retrospect, it seems that applying for relief in the Florida court would have been a wiser choice, but no reasonable person in their position would have thought so at the time the choice was made.

[262] A second factor relevant to the appellants’ decision not to make use of remedies in Florida is their knowledge of the circumstances that would entitle them to such a remedy. In Adams, supra, the defendants’ failure to appeal the judgment in Texas was not dispositive, because the procedural irregularities that would have formed the basis of an appeal were not apparent on the face of the judgment. The only way that the defendants could have known about those defects was if they had participated in the proceedings. The court did not consider it fair to charge the defendants with knowledge of procedural irregularities that they would have known about had they attended the proceedings. The plaintiffs had the responsibility of avoiding procedural errors that would prevent enforcement in England. I agree with this reasoning, which in my view is also applicable to the present case. When the appellants received the Florida judgment, all they knew was the amount awarded against them. There was nothing to inform them of the method by which the Florida court reached its conclusion or to alert them to problems with that method that might form the basis of an appeal or a motion to set the judgment aside.

[263] Finally, the appellants’ perception of the quality of justice they were likely to receive in Florida must be taken into consideration. The evidence at trial was that Florida’s legal system provides all the appropriate protections for judgment debtors in the appellants’ position, and probably would have afforded them a remedy in these circumstances. But at the relevant time the appellants did not know this; they only knew that Florida’s legal system had produced a judgment against them for an astronomical amount, a verdict that was difficult to reconcile with the simple facts they had set out in their defence. Their apprehensiveness about going back to that very legal system to seek relief was, in the circumstances, understandable.

(4) Residual Concerns

[264] The facts of this appeal raise very serious concerns about the fairness of enforcing the Florida judgment which do not fit easily into the categories identified by the traditional impeachment defences. I have stated my conclusion that the facts do trigger the defence of natural justice, if it is interpreted in a purposive and flexible manner. Even if the natural justice defence did not apply, however, I would hold that this judgment should not be enforced.

[265] The circumstances of this case are such that the enforcement of this judgment would shock the conscience of Canadians and cast a negative light on our justice system. The appellants have done nothing that infringes the rights of the respondents and have certainly done nothing to deserve such harsh punishment. Nor can they be said to have sought to avoid their obligations by hiding in their own jurisdiction or to have shown disrespect for the legal system of Florida. They have acted in good faith throughout and have diligently taken all the steps that appeared to be required of them, based on the information and advice they had. The plaintiffs in Florida appear to have taken advantage of the defendants’ difficult position to pursue their interests as aggressively as possible and to secure a sizeable windfall. In an adversarial legal system, it was, of course, open to them to do so, but the Ontario court should not have to set its seal of approval on the judgment thus obtained without regard for the dubious nature of the claim, the fact that the parties did not compete on a level playing field and the lack of transparency in the Florida proceedings.

[266] On this last point, I would add that their failure to obtain a record of the proceedings in the Florida court does not reflect well on the respondents. In this case, the appellants, who had the burden of proving that one of the impeachment defences applied, failed to pursue their opportunity to investigate what transpired in the damages hearing by questioning those who were there. As a result, it would be inappropriate to draw any negative inference in their favour from the lack of evidence about the Florida proceedings. But defendants will not always have such an opportunity. When one party entirely controls whether there will be a transcript of the proceedings in the foreign court and chooses not to get one, thus depriving the enforcing court of a full record of what happened and an opportunity to verify that there was no fraud and no procedural irregularities, Canadian courts should be highly circumspect about giving effect to the judgment.

V. Conclusion

[267] In my view, this judgment should not be enforced in Canada. I would allow the appeal with costs to the appellants.

Appeal dismissed with costs, Iacobucci, Binnie and LeBel JJ. dissenting.

Solicitors for the appellants Geoffrey Saldanha and Leueen Saldanha: Baker & McKenzie, Toronto.

Solicitor for the appellant Dominic Thivy: Neal H. Roth, Toronto.

Solicitors for the respondents: Levine, Sherkin, Boussidan, North York.