COURT FILE NO.: CV-18-595742
DATE: 20180615
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Zashko Entertainment Inc., Applicant
AND:
Touchgate Global Inc. and Sonia Ahmed, Respondents
BEFORE: H. McArthur, J.
COUNSEL: Matthew Stroh appearing for the Applicant
Sonia Ahmed appearing self-represented for the Respondents
HEARD: June 13, 2018
ENDORSEMENT
H. McARthur J.:
Introduction
[1] The Applicant, Zashko Entertainment Inc., brings an application for an order recognizing and enforcing a final judgment obtained in a Texas court against the Respondents, Touchgate Global Inc. and Sonia Ahmed.
[2] Ms. Ahmed represented herself at this hearing. It was clear to me that she feels that she has been treated unfairly by Zashko. She argued against the order sought on that basis.
[3] For the reasons set out below, however, I find that the law surrounding the recognition and enforcement of foreign judgments leads to the inevitable conclusion that Zashko must prevail in this application. I intend to very briefly outline the relevant facts before turning to my analysis as to why the order sought should be granted.
Brief Overview of the Facts
i. The Parties
[4] Zashko is a Texas corporation. Its principal place of business is in Houston. Touchgate is incorporated under the Canada Business Corporations Act, R.S.C., 1985, c. C-44. Its principal place of business is in Toronto. Ms. Ahmed, who lives in Toronto, is the sole registered director of Touchgate.
ii. The Production Agreement
[5] In August, 2016, Zashko entered into a contract with Ms. Ahmed and Touchgate in relation to a Pakistani film entitled “Na Baand Na Baraati”. The contract provided that Zashko would invest up to USD $325,000 in, and co-produce, the film. Ms. Ahmed executed the Production Agreement on August 13, 2016. The Agreement became binding when Zain Farooqi executed the Production Agreement on behalf of Zashko in Houston, Texas on August 17, 2016.
[6] The Production Agreement stipulated that it was governed by Texas law. In particular, paragraph 27 specified that, “This Agreement shall be interpreted in accordance with the laws of Texas, where this agreement was negotiated and executed by the Film Studio [Zashko]”.
iii. The Litigation in Texas and Notice to Ms. Ahmed and Touchgate
[7] For reasons that I do not need to delve into for the purposes of these reasons, Zashko took the position that Ms. Ahmed and Touchgate fundamentally breached the Production Agreement. As a result, on November 29, 2016, Zashko started an action in Texas against Ms. Ahmed and Touchgate. On November 30, 2016, Ms. Ahmed and Touchgate were provided with a copy of the materials in support and were told that Zashko would be seeking a temporary restraining order against them. Ms. Ahmed and Touchgate did not attend at the hearing and the order was granted. This order from the Texas court immediately enjoined Ms. Ahmed and Touchgate from the following:
a) Claiming association with or ownership of the film;
b) Posting on social media or online any comments, videos or audio files related to the film;
c) Discussing the film in interviews or on the internet;
d) Distributing any photos, videos or audio files from the film or its production;
e) Revealing any information about the film including plots, story lines or musical scores;
f) Destroying any photos, videos or audio files from the film or its production in their possession.
[8] Ms. Ahmed and Touchgate were provided with a copy of the Temporary Restraining Order on December 1, 2016. This order expired on December 12. On December 13, the Texas court granted an extension of the Temporary Restraining Order for a further 14 days, expiring on December 26.
[9] On December 27, 2016, the Texas court issued an Order Setting Show Cause Hearing and a Notice of Hearing, returnable on January 9, 2017 at the Texas court. This was in relation to Zashko’s application for a temporary injunction against Ms. Ahmed and Touchgate, both of whom were served on December 28.
[10] Ms. Ahmed and Touchgate did not appear at the January 9 hearing, and the Texas court did not grant the temporary injunction sought by Zashko. On January 13, 2017, Zashko applied with the U.S. Department of Justice- United States Marshals Service under the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters, 15 November 1965, (entered into force 10 February 1969, accession by Canada 1 May 1989), to effect service on Ms. Ahmed and Touchgate. On February 1, 2017, Ms. Ahmed and Touchgate were personally served in Toronto, pursuant to Article 6 of the convention. Although properly served, Ms. Ahmed and Touchgate failed to appear before the court, challenge the jurisdiction of the court or file an answer to the Petition with the Texas court.
[11] On March 24, 2017, Zashko brought two motions before the Texas court for no-answer default judgment against Ms. Ahmed and Touchgate. On that date, the Texas court set the hearing date for Zashko’s motions for no-answer default judgment against Ms. Ahmed and Touchgate for April 17, 2017. Ms. Ahmed and Touchgate were served with a Notice of Hearing for these motions, but chose not to participate in the hearing.
iv. The Texas Judgment
[12] On May 12, 2017, the presiding judge granted Zashko’s motions for no-answer default judgment against Ms. Ahmed and Touchgate and issued the Texas judgment. The Texas judgment permanently enjoined Ms. Ahmed and Touchgate from:
a) Claiming association with or ownership of the film;
b) Posting on social media or online any comments, videos or audio files related to the film;
c) Discussing the film in interviews or on the internet;
d) Distributing any photos, videos or audio files from the film or its production;
e) Revealing any information about the film including plots, story lines or musical scores;
f) Destroying any photos, videos or audio files from the film or its production in their possession.
[13] The Texas judgment also required Ms. Ahmed and Touchgate to produce the following documents:
a) Copies of all contracts and releases with vendors and/or talent associated with the film;
b) Copies of the final mastered music score for the film;
c) Photos, video or other media related to the film or its production; and
d) Correspondence with vendors or talent regarding the film.
[14] The Texas judgment also required Ms. Ahmed and Touchgate to remove and/or delete any comments, photos, videos or audio recordings that they had previously posted online or on social medial related to the film.
[15] Finally, the Texas judgment required Ms. Ahmed and Touchgate to pay USD $53,250 for damages to Zashko for breach of the Production Agreement, USD $6,385.14 for attorney’s fees and USD $903.65 for court costs. The court ordered interest at the rate of 5% per year on the total judgment from the date of judgment until paid.
[16] Ms. Ahmed and Touchgate did not appeal the Texas Judgment, nor did they file a motion to vary it or set it aside. The time for filing an appeal has now expired.
[17] I turn now to my analysis as to whether the Texas judgment should be recognized and enforced by this court.
Analysis
[18] Canadian courts have taken a “generous and liberal” approach to the recognition and enforcement of foreign judgments. The purpose of an application for recognition and enforcement is to allow a pre-existing obligation to be fulfilled. The application is not based on the original claim that the plaintiff brought against the defendant in the foreign jurisdiction, but rather on the obligation created by the foreign judgment. The facts underlying the original judgment are irrelevant except as they relate to any potential defences to enforcement: Chevron Corp. v. Yaiguaje, 2015 SCC 42, at paras. 27,43,45.
[19] In order for this court to recognize and enforce the Texas judgment, Zashko must establish that there was a real and substantial connection between the foreign court and the underlying dispute and that the judgment was final and conclusive. Once that has been established, Ms. Ahmed bears the onus of establishing any applicable defences, which include, fraud, denial of natural justice or public policy: Beals v. Saldanha, 2003 SCC 72; Chevron Corp.
[20] I will address each in turn.
a) Has Zashko established a real and substantial connection between the foreign court and the underlying dispute?
[21] In Chevron Corp., at para. 34, the court confirmed that in the recognition and enforcement context, the real and substantial connection test operates to ensure that the foreign court which issued the judgment properly assumed jurisdiction. Once a real and substantial connection is demonstrated between the foreign court and the underlying dispute, the burden shifts to the other party to prove an existing defence to the recognition and enforcement of a foreign judgment.
[22] The party seeking to establish a real and substantial connection bears the onus of identifying one or more presumptive connecting factors that link the subject matter of the dispute to the foreign forum. These factors include, but are not limited to the following:
i. The defendant’s presence (domicile or resident) in the jurisdiction;
ii. The defendant carries on businesses in the jurisdiction;
iii. A tort was committed in the jurisdiction; or
iv. A contract connected with the dispute was made in the jurisdiction.
(See Club Resorts Ltd. v. Van Breda, 2012 SCC 17, at. Para. 90.)
[23] Recently, in Lapointe Rosenstein Marchand Malancon LLP v Cassels Brock & Blackwell LLP, 2016 SCC 30, Abella J. explained at paras. 34-35, that the real and substantial test has never been concerned with showing the strongest possible connection between the claim and the forum where jurisdiction is sought to be assumed, nor does the fact that another forum may also be connected with the dispute undermine the existence of a real and substantial connection.
[24] As it relates to the fourth factor set out above, Abella J. explained at para. 40, that where the contracting parties are located in different jurisdictions, the contract will be formed in the jurisdiction where the last essential act of contract formation, such as acceptance, took place.
[25] Based on the law set out above, I find that the Texas court properly assumed jurisdiction. The agreement was completed in Texas, when it was signed by a representative for Zashko. Thus, there was a real and substantial connection between the Texas court and the dispute.
[26] I turn now to consider whether the Texas judgment is final.
b) Is the Texas Judgment final?
[27] To be enforced in Ontario, a foreign judgment must be final. In Texas, a defendant can attack a default judgment by filing a motion for a new trial or by filing a restricted appeal. A motion for a new trial must be filed within 30 days of the judgment. A restricted appeal must be filed within six months of the judgment.
[28] Here, Ms. Ahmed and Touchgate failed to file for a new trial or a restricted appeal. No motion to set aside or vary the Texas judgment was filed. Ms. Ahmed and Touchgate are well past the time-limits to appeal or to bring a motion.
[29] Thus, it seems clear that the Texas judgment is final.
[30] I turn next to consider whether Ms. Ahmed or Touchgate can rely on any of the available defences to the enforcement of the Texas judgment in Ontario.
c) Can Ms. Ahmed or Touchgate rely on any of the available defences to the enforcement of the Texas judgment in Ontario?
[31] There are four recognized defences to a proceeding to enforce a foreign judgment. The defences are: i) the foreign judgment was obtained by fraud; ii) the foreign judgment involved a denial of natural justice; iii) the enforcement of the foreign judgment is contrary to public policy; or iv) the action to enforce the foreign judgment involves a defendant who was not a party to the foreign suit. I will address each defence in turn.
i. Was the Texas Judgment obtained by fraud?
[32] The defence of fraud is narrow in scope. The defence is not intended to provide a mechanism to re-litigate in our courts, the merits of a foreign judgment. Fraud going to the jurisdiction of the foreign court can always be raised. But the merits of a foreign judgment can only be challenged for fraud where the allegations are new, not the subject of prior adjudication, and based on materials facts not previously discoverable through the exercise of due diligence prior to the issuance of the foreign judgment: Beals, at paras. 51-52.
[33] The record fails to reveal any evidence that that the Texas judgment was obtained by fraud. This defence is thus not open.
ii. Did the Texas judgment involve a denial of natural justice?
[34] Natural justice entails being given notice and being given an opportunity to be heard. Natural justice also requires that 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: Beals, at para. 62.
[35] There is no suggestion that the judicial system in Texas was unfair or systemically denied natural justice. Moreover, Ms. Ahmed and Touchgate were provided notice and given an opportunity to be heard. That Ms. Ahmed and Touchgate declined to take the opportunity provided to them to file an answer to the Petition or otherwise participate in the Texas matter does not amount to a denial of natural justice. Ms. Ahmed and Touchgate were afforded natural justice.
iii. Is the enforcement of the Texas judgment contrary to public policy?
[36] The defence of public policy is a narrow one; courts should be cautious before allowing this defence. In order for the defence to be made out, the court should be satisfied that the law underlying the foreign judgment is contrary to domestic conceptions of essential justice and morality: Beals, at. para. 71-72.
[37] The Texas judgment arose out of an action for breach of the production agreement. There is nothing in the monetary or injunctive relief granted by the Texas court that violates Canadian concepts of justice and morality.
iv. Does the action to enforce the Texas judgment involve a defendant who was not a party to the Texas suit?
[38] Ms. Ahmed and Touchgate were parties to the foreign suit. Thus, this defence is not open to them.
[39] I turn now to consider the last issue, which is whether the injunctive relief provided for in the Texas judgment should be enforced.
d) Should the injunctive relief provided for in the Texas Judgment be enforced?
[40] When considering whether to enforce a foreign equitable order, the court should scrutinize the impact of the order. As explained by the Supreme Court in Pro Swing Inc. v. Elta Golf Inc., 2006 SCC 52, at para. 30:
Relevant considerations may thus include the criteria that guide Canadian courts in crafting domestic orders, such as: Are the terms of the order clear and specific enough to ensure that the defendant will know what is expected from him or her? Is the order limited in its scope and did the originating court retain power to issue further orders? Is the enforcement the least burdensome remedy for the Canadian justice system? Is the Canadian litigant exposed to unforeseen obligations? Are any third parties affected by the order? Will the use of judicial resources be consistent with what would be allowed for domestic litigants?
[41] The present case is similar to United States of America v. Yemec, 2010 ONCA 414. Here, as there, the factors set out above line up almost entirely in favour of enforcing the equitable relief provided for in the Texas judgment. The terms of the injunction are simple, clear and specific. It would be obvious to Ms. Ahmed and Touchgate what they cannot do. Further, the enforcement of the Texas judgment does not place an undue burden on the Canadian justice system, nor does it create any unforeseen obligations on Ms. Ahmed or Touchgate. The relief does not impact any third parties and it is entirely consistent with the types of orders that would be allowed for domestic litigants.
[42] Thus, I find that the injunctive relief provided for in the Texas judgment should be recognized and enforced.
Conclusion
[43] I am satisfied that the Texas court had jurisdiction. There was a real and substantial connection between the Texas court and the underlying dispute. I am also satisfied that the judgment rendered by the Texas court is final: the time for an appeal has expired. The respondents have failed to establish any of the applicable defences, such as fraud, denial of natural justice or contravention of public policy. The injunction issued by the Texas court was simple, clear and specific. It does not place a burden on our system, nor does it create any unforeseen obligations on Ms. Ahmed and Touchgate. For all of these reasons, the application is allowed. The Texas judgment should be recognized and enforced.
Costs
[44] I encourage the parties to see if they can agree on costs. If the parties are unable to agree on costs, Zashko shall serve and file with my office written costs submissions within 15 days. Ms. Ahmed shall serve and file with my office any responding costs submissions within 15 days thereafter. The written submission shall not exceed three pages in length, excluding the Costs Outline
Justice Heather McArthur