Marcus Food Co. v. DiPanfilo

109 O.R. (3d) 535
2012 ONSC 1505

Ontario Superior Court of Justice,
K.L. Campbell J.

March 5, 2012

Conflict of laws -- Foreign judgments -- Enforcement -- Applicant obtaining default judgment against respondent in Kansas and applying to enforce judgment in Ontario -- Application granted -- Applicant's failure to disclose insurance payment that partially compensated it for loss caused by respondent not amounting to fraud on Kansas court -- Facts that respondent had less time to file response in Kansas than he would have under Ontario Rules of Civil Procedure , that applicant was not required to prove unliquidated damages on default judgment motion and that rules associated with setting aside default judgment in Kansas are less generous than Ontario rules not meaning that foreign judgment was obtained in violation of rules of natural justice. [page536]

The applicant sued the Ontario-resident respondent in Kansas for breach of contract, fraud, breach of fiduciary duty and liability for net sales losses. The respondent was served personally in Ontario with a copy of the complaint and a court summons. The summons advised him that an answer to the complaint had to be served within 20 days after the service of the summons. The respondent did nothing, and default judgment was entered. More than five months later, the respondent moved unsuccessfully to set aside the default judgment. The motion judge found that the Kansas court had jurisdiction and that the respondent had not established "excusable neglect" in failing to defend the claim. That decision was affirmed on appeal. The applicant brought an application seeking enforcement of the judgment in Ontario. The respondent resisted enforcement of the foreign judgment on the grounds that the judgment was obtained by fraud and that the foreign proceedings were conducted in violation of the rules of natural justice.

Held, the application should be granted.

There was a real and substantial connection between the Kansas court and both the cause of action and the respondent.

The applicant's failure to disclose the details surrounding an alleged payment of private insurance proceeds to compensate it for the respondent's actions did not amount to a fraud on the Kansas court. As a matter of law, the fact that the applicant may have been privately insured against the business losses it incurred through the respondent's actions had no impact upon the respondent's civil liability or upon the damages that he was obliged to pay to the applicant. Even if the law were otherwise, as the insurance payment was made approximately one month after the default judgment was obtained, the applicant could not be faulted for failing to disclose it in its complaint. The respondent's argument that the applicant obtained default judgment by falsely claiming damages that were not provable amounted to an attempt to relitigate the merits of the action. The fraud defence to enforcement of the foreign judgment was not made out.

The facts that the respondent had less time to respond to the complaint than he would have had under the Ontario Rules of Civil Procedure, R.R.O. 1990, Reg. 194 , that the applicant was not required to prove unliquidated damages on the motion for default judgment and that the rules associated with setting aside a default judgment in Kansas are less generous than the Ontario rules did not mean that the foreign judgment was not obtained in accordance with the rules of natural justice. Compliance with the principles of natural justice may be secured by a wide range of procedural rules. The process in the Kansas courts that led to the default judgment complied fully with the principles of natural justice.

APPLICATION to enforce a foreign judgment.

Cases referred to
Beals v. Saldanha, [2003] 3 S.C.R. 416, [2003] S.C.J. No. 77, 2003 SCC 72 , 234 D.L.R. (4th) 1, 314 N.R. 209, J.E. 2004-127, 182 O.A.C. 201, 39 B.L.R. (3d) 1, 39 C.P.C. (5th) 1, 113 C.R.R. (2d) 189, 127 A.C.W.S. (3d) 648;
Boarelli v. Flannigan, 1973 690 (ON CA) , [1973] 3 O.R. 69, [1973] O.J. No. 1989, 36 D.L.R. (3d) 4 (C.A.);
Bradburn v. Great Western Railway, [1874- 1880] All E.R. Rep. 195 (Ex. Div.) ;
Cooper v. Miller, 1994 120 (SCC) , [1994] 1 S.C.R. 359, [1994] S.C.J. No. 19, 113 D.L.R. (4th) 1, 164 N.R. 81, [1994] 4 W.W.R. 153, J.E. 94-496, 41 B.C.A.C. 1, 88 B.C.L.R. (2d) 273, 23 C.C.L.I. (2d) 205, 20 C.C.L.T. (2d) 1, 2 C.C.P.B. 217, 46 A.C.W.S. (3d) 863;
Hussain v. New Taplow Paper Mills Ltd., [1988] 1 All E.R. 541, [1988] 1 A.C. 514, [1988] 2 W.L.R. 266, [1988] 1 C.R. 259 (H.L.) ;
Krawchuk v. Scherbak (2011), 106 O.R. (3d) 598, [2011] O.J. No. 2064, 2011 ONCA 352 , 279 O.A.C. 109, 82 C.C.L.T. (3d) 179, 332 D.L.R. (4th) 310, 5 R.P.R. (5th) 173, 4 C.L.R. (4th) 1, 201 A.C.W.S. (3d) 848;
Monte Cristo Investments v. Hydroslotter Corp., [2011] O.J. No. 4452, 2011 ONSC 6011 ;
Morguard Investments Ltd. v. De Savoye, 1990 29 (SCC) , [1990] 3 S.C.R. 1077, [1990] S.C.J. No. 135, 76 D.L.R. (4th) 256, 122 N.R. 81, [1991] 2 W.W.R. 217, J.E. 91-123, 52 B.C.L.R. (2d) 160, 46 C.P.C. (2d) 1, 15 R.P.R. (2d) 1, 24 A.C.W.S. (3d) 478;
Parry v. Cleaver, [1969] 1 All E.R. 555, [1970] A.C. 1, [1969] W.L.R. 821 (H.L.) ;
United States of America v. Yemec (2010), 100 O.R. (3d) 321, [2010] O.J. No. 2411, 2010 ONCA 414 , 270 O.A.C. 219, 320 D.L.R. (4th) 96, 87 C.P.C. (6th) 1

Rules and regulations referred to
Federal Rules of Civil Procedure (United States), rules 55(a), 60(b)
Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 14.05(3) (h), 18.01 (b), 19.05 , 19.08 , 49.10(1) , 49.13

Authorities referred to
Castel, Jean-Gabriel, and Janet Walker, Canadian Conflict of Laws, looseleaf, 6th ed., vol. 1 (Markham, Ont.: LexisNexis Butterworths, 2005)

Jeff Van Bakel, for applicant Marcus Food Co.
Darren Smith, for respondent Robert DiPanfilo.

K.L. CAMPBELL J.: -- A. Introduction

[ 1 ] The applicant, Marcus Food Co. ("Marcus Food"), is a Kansas corporation conducting its business principally from its head office in Wichita, Kansas. The respondent, Robert DiPanfilo, is a Canadian citizen living in Toronto, Ontario. On October 14, 2009, Marcus Food obtained a default judgment against Mr. DiPanfilo in the Kansas District Court, in the amount of US$207,585 for damages due to an alleged breach of contract, fraud, breach of fiduciary duty and liability for net sales losses. For over a decade prior to their dispute, Mr. DiPanfilo had been in the employ of Marcus Food as an agent and independent contractor, selling the applicant's food products internationally.

[ 2 ] Marcus Food has now brought an application under rule 14.05(3) (h) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 , seeking the enforcement of this foreign judgment in Ontario. Mr. DiPanfilo resists the enforcement of the foreign default judgment on, essentially, two bases, namely, (1) that the foreign judgment was obtained by fraud and/or (2) that the foreign proceedings were conducted in violation of the rules of natural justice. For the following reasons, I agree with Marcus Food that the default judgment from the Kansas District Court should be recognized and enforced in Ontario. [page538]

B. The Proceedings in the Kansas Courts

1. The details of the foreign claim by Marcus Food

[ 3 ] On August 28, 2009, Marcus Food filed a complaint in the United States District Court for the District of Kansas seeking judgment against the respondent in the total amount of US$207,585 plus interest. In this complaint, Marcus Food alleged that Mr. DiPanfilo breached their contract, engaged in fraud and breached the fiduciary duty he owed to Marcus Food. More particularly, Marcus Food alleged, among other things, the following:

-- In 1999, the parties entered into an agreement whereby Mr. DiPanfilo would become an agent for Marcus Food for the purchase and sale of food products. The discussions that led to this agreement were initiated by Mr. DiPanfilo. The parties agreed, more particularly, that the respondent would share in 45 per cent of the net profits from his sales and 45 per cent of the net losses (after all of his expenses had been paid by Marcus Food). Marcus Food paid Mr. DiPanfilo his share of the revenues from his sales transactions.

-- Pursuant to this agreement between the parties, Marcus Food agreed to provide, and did provide, financial capital to Mr. DiPanfilo for the purchase of products, support services and for processing and monitoring sales orders. As the parties agreed, during the course of their agreement, Marcus Food provided sales support services in payables, receivables, information technology and general technical support for the business transactions undertaken by Mr. DiPanfilo.

-- On some three separate occasions, Mr. DiPanfilo travelled to the applicant's head office in Wichita, Kansas for purposes of securing advice and training in sales, management, information technology and problem solving.

-- In July and August of 2009, Marcus Food incurred net losses in sales transactions by Mr. DiPanfilo. The respondent's 45 per cent share of those losses amounted to a total of $194,811. Marcus Food claimed that Mr. DiPanfilo had breached his contract in failing to pay this amount to Marcus Food.

-- Mr. DiPanfilo stood in a fiduciary relationship with Marcus Food. He breached that relationship by purchasing food products through his Marcus Food account, storing the products in a location in Quebec and subsequently transferring [page539] the products in an unauthorized manner without the requisite notice to Marcus Food or properly accounting for the transfer to Marcus Food. This resulted in a loss to the applicant of $12,774.