Court File and Parties

COURT FILE NO.: CV-15-00532471 DATE: 20170214 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: AAA Entertainment B.V., Plaintiff AND: Cinemavault Releasing International Inc., Defendant

BEFORE: Stewart J.

COUNSEL: Peter I. Waldman, for the Plaintiff Glenn R. Solomon, for the Defendant

HEARD: October 6, 2016

Endorsement

Nature of the motion

[1] AAA Entertainment B.V. (“AAA”) moves for summary judgment against Cinemavault Releasing International Inc. (“Cinemavault”) based upon a foreign judgment issued by the Amsterdam District Court on December 2, 2013.

[2] At the hearing of this motion, it was agreed by the parties that AAA is entitled to judgment for the full principal amount of the judgment, with the exception of the court-imposed forfeiture/penalty provision. Partial summary judgment was granted accordingly.

[3] The balance of the amount sought on the motion for judgment is a court-imposed penalty of approximately EUR 320,000. This amount was added to the principal amount claimed as a result of the alleged delay by Cinemavault in complying with the mandatory terms of the judgment.

[4] Liability to pay this amount is contested by Cinemavault on the basis of absence of proof of required notice of the judgment to it in accordance with the Hague Convention Treaty for Service Abroad. Alternatively, Cinemavault submits that this balance of the judgment, which greatly exceeds the amount owing under the principal amount of the judgment for which summary judgment was granted, represents the imposition of a penalty and is unenforceable in Ontario on public policy grounds.

[5] The parties agree that this is a proper matter for summary judgment based solely upon the record they have created. No party has suggested that any issue has been raised that requires a trial to determine.

Background

[6] In May 2009, AAA and Cinemavault entered into an agreement for distribution of a movie titled “The Seven of Daran – The Battle of Pareo Rock”.

[7] In 2011, AAA terminated the agreement. There is no issue on this motion with respect to the lawfulness of the termination.

[8] On November 13, 2013, AAA commenced proceedings against Cinemavault in the Amsterdam District Court. In those proceedings AAA sought damages for breach of contract from Cinemavault and return by it of all marketing materials relating to the distribution of the movie by Cinemavault.

[9] On December 2, 2013, judgment in favour of AAA was issued by the Amsterdam District Court. The judgment ordered that:

(a) (Paragraph 5.1) Cinemavault was to discontinue distributing the film and collecting license payments;

(b) (Paragraph 5.2) Cinemavault, within 14 days of notification of the judgment, was to return to the AAA all marketing, advertisement and promotional material including Digital Betacam NTSC Leterbox Master in the original aspect of the file w/QC report; digital Betacam NTSC 16:0 Anamorphic Master w/QC report; Digital Betacam PAL 16.9 Anamorphic Master w/QC report; and One Feature 35 mm English subtitled Release Print;

(c) (Paragraph 5.3) Cinemavault was to forfeit a lump sum penalty of EUR€50,000 (fifty thousand Euros) for every instance that Cinemavault did not comply, did not comply in time or did not fully comply with the orders under 5.1 and 5.2 or (optional to AAA) Cinemavault was to forfeit a penalty of EUR €10,000 for every day or part of a day that Cinemavault acted contrary to the orders stated under 5.1 and 5.2;

(d) (Paragraph 5.4) Cinemavault was to pay to AAA $55,585.50 (USD) plus statutory commercial interest from October 27, 2012 until the date of settlement;

(e) (Paragraph 5.5) Cinemavault was to pay to AAA EUR €1,193.72 in extrajudicial costs;

(f) (Paragraph 5.6) Cinemavault was to pay to AAA costs in the amounts of EUR 76.71 for the summons, EUR €3,715 in court fees and EUR €816 in lawyer’s salary fees (totaling EUR €4,622.711).

[10] The agreement between the parties contains no provision for payment by Cinemavault of any penalty for non-performance of the agreement.

[11] There was no evidence that AAA suffered any actual damages as a result of Cinemavault’s breach of the agreement beyond the US$55,585.50 claimed and recovered by it in the action.

[12] Cinemavault took no steps in the Netherlands to attempt to set aside any part of the judgment or to commence any appeal.

[13] Cinemavault was represented by counsel in the Amsterdam action who made it clear to AAA that he did not have authority from Cinemavault to accept actual service of the judgment on its behalf. However, Cinemavault asserts that it instructed its Dutch lawyer to return the materials to AAA no later than 14 days after notice of the judgment was received by him.

[14] AAA then attempted to provide Cinemavault with formal notification of the judgment pursuant to Dutch law.

[15] On December 20, 2013, AAA delivered the judgment to the Public Prosecutor and Bailiff. AAA submits that service of the judgment upon Cinemavault was thereby effected by way of delivery to the Public Prosecutor and Bailiff on December 20, 2013. AAA relies on the affidavit evidence of Dutch counsel filed on this motion to prove that such service is in compliance with legal requirements for service under Dutch law and the Hague Convention.

[16] As a result, AAA takes the position that the time for compliance with paragraphs 5.1 and 5.2 of the judgment began to run on December 20, 2013.

[17] It is not disputed by Cinemavault that AAA did not receive return of the materials until February 4, 2014. AAA therefore maintains that, at its election, it is entitled by the judgment to payment by Cinemavault of the forfeiture penalty as set out therein.

[18] As no payment of any part of the judgment had been received by it from Cinemavault, AAA started an action in Ontario to enforce the judgment. Its claim includes the forfeiture penalty for delay of return of its materials by Cinemavault.

Issues and Discussion

[19] The principles of comity recognized by the Ontario courts and the Supreme Court of Canada establish the routine enforcement of final foreign judgments in Ontario. A party may oppose the enforcement of a foreign judgment if it can establish that the foreign court lacked jurisdiction, that the judgment was obtained through fraud, that principles of natural justice were breached, or that it is against public policy in Ontario to enforce such a judgment (see: Beals v. Saldanha, 2003 SCC 17; Chevron Corp. v. Yaiguaje, 2015 SCC 42).

[20] An Ontario court will not re-examine the merits of the case upon which a foreign judgment was obtained. Neither party is asking that this be done.

[21] Cinemavault does not dispute that the judgment is final or that the Amsterdam District Court had jurisdiction over the subject matter of the action. Further, Cinemavault does not allege there was fraud involved in obtaining the judgment.

[22] Cinemavault raises two issues on this motion. First, it claims that proper service upon it of the judgment was not carried out upon it and this constitutes a breach of the principles of natural justice.

[23] Canada and the Netherlands are signatories to the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters. Cinemavault submits that the onus is upon AAA to show that service of the judgment upon Cinemavault was made in accordance with the Convention.

[24] Cinemavault states that it had discontinued distributing the movie and collecting the licence payments from third parties prior to the date of issuance of the judgment. No issue is taken by AAA with this assertion.

[25] As noted, Cinemavault also asserts that it delivered all of the marketing, advertisement and promotion materials referred to in the judgment to its Dutch lawyer “shortly after the date of the judgment” with instructions to return same to AAA no later than 14 days following the date on which service of the judgment was made on him. These materials were not returned to AAA until February 4, 2014.

[26] The facts as admitted by Cinemavault confirm that Cinemavault and its counsel were made aware of the judgment and its provisions very soon after it was pronounced.

[27] The only opinion evidence as to the provisions of Dutch law for formal notice and service of a judgment and compliance with the Convention is that tendered by AAA by means of an affidavit from its Dutch counsel. Cinemavault has tendered no opinion evidence to the contrary from its Dutch counsel in the proceedings or any other expert in Dutch law.

[28] Consequently, I find that Cinemavault not only had actual notice of the judgment shortly after its pronouncement, it also was served with proper notice of it under Dutch law and the Hague Convention on December 20, 2013. Accordingly, there has been no denial of natural justice to Cinemavault in these circumstances.

[29] Secondly, Cinemavault argues that the amount sought by AAA is not any actual or pre-estimate of damages. Cinemavault characterizes the judicially-imposed penalty as a purely coercive measure to punish a party failing to comply with a judicial order.

[30] Cinemavault therefore submits that penalty should not be enforced in these circumstances by this Court as it contravenes public policy in Ontario.

[31] The public policy bar to enforcement of a foreign judgment in Canada was addressed by the Supreme Court of Canada in its decision in Beals v. Saldanha, supra.

[32] The defence of public policy 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.

[33] Canadian courts will not enforce a foreign penal provision, such as a contempt of court order. However, the rationale of not enforcing a foreign penal or revenue statute does not apply to a claim that is in substance of a commercial or private law character. This judgment does not create a penal obligation to the foreign state, but is designed to encourage compliance with it and not to exact punishment (see: United States of America v. Ivey, [1996] O.J. No. 3360).

[34] This judgment does not find the defendant guilty of any offence or contempt. It merely prescribes a consequence for delay in compliance. The consequence is designed to be compensation to the plaintiff for delay in receiving return of its property and an incentive to the defendant to comply.

[35] The award therefore imposed by the Amsterdam District Court on Cinemavault is, in essence, a conditional payment imposed at the request of a party in order to make the debtor comply strictly with the judgment.

[36] AAA requested the Amsterdam District Court to impose this consequence for every day Cinemavault failed to comply with the Court orders, and the request was granted. This was not a contempt of court order but, rather, a prospective order made within the provisions of the civil procedure of the Dutch court.

[37] The Defendant did not return the materials promptly, nor did it seek to vary or appeal any aspect of the judgment. It chose, rather, to ignore it.

[38] Cinemavault was represented by counsel in the Netherlands. The facts permit an inference to be drawn that it was advised of the requirements of Dutch law and the terms of the judgment. If it was not, that is a matter between Cinemavault and its counsel.

[39] This judicially-imposed award for delay in compliance therefore merely secures compensation for a plaintiff who is entitled to return of its property. It is an element of the rules and civil procedures of the Dutch court which deserve comity and enforcement in Ontario.

[40] I do not consider this aspect of the law of the Dutch court to be “contrary to our view of basic morality” such that it should not be enforced in Ontario.

Conclusion

[41] Accordingly, the Plaintiff shall have summary judgment for the balance of the amount claimed. If there is any dispute as to the exact amount of the judgment, I may be spoken to.

Costs

[42] If the issue of costs cannot by agreed, written submissions may be delivered by the Plaintiff within 20 days of the date of this decision, and by the Defendant within 15 days thereafter.

Stewart J. Date: February 14, 2017