JGB Collateral LLC v. John Rochon and Donna Jean Hewitt Rochon, 2020 ONSC 1732

Court File No.: CV-19-00629892-00CL Date: 20200521

Superior Court of Justice – Ontario (Commercial List)

Re: JGB Collateral, LLC, as Agent, Applicant And: John Rochon and Donna Jean Hewitt Rochon, Respondents

Before: Koehnen J.

Counsel: Melanie Ouanounou and Kirby Cohen for JGB Collateral, LLC, as Agent Taayo Simmonds for John Rochon Jonathan Collings for Donna Rochon

Heard: May 21, 2020

Endorsement

[1] The Applicant, JGB Collateral, LLC (“JGB”), brings an Application to recognize and enforce a judgment issued by the state courts of New York requiring the respondents to pay the Applicant USD$6,742,197.87 (the “Judgment”). The Judgment arises out of a successful summary judgment motion to enforce personal guarantees that the Respondents granted as security for a loan from JGB to entities related to the respondents in the amount of over USD$5 million.

[2] The respondents are residents of Texas. In the underlying loan, security and guarantee documents respondents agreed to attorn to the exclusive jurisdiction of New York courts.

[3] The respondents resist the application on two grounds. First, they submit the judgment should not be recognized on grounds of public policy and natural justice. Second, they submit the application should properly be brought as an action.

[4] I cannot agree with either submission as a result of which an order will go recognizing and enforcing the judgment in Ontario.

A. Public Policy and Natural Justice

[5] Ontario courts will recognize and enforce foreign judgments where the foreign court had a real and substantial connection with either the subject matter of the action or the respondent; the judgment is final and conclusive; and the defences of fraud, public policy or lack of natural justice do not apply: Dish v. Shava, 2018 ONSC 2867 at para. 11, aff’d, 2019 ONCA 411.

[6] The jurisdiction of the New York Court is not an issue. The respondents defended the New York proceeding and did not contest jurisdiction either in New York or here. The New York judgment is final and conclusive. Summary judgment was granted on April 22, 2019. The respondents did not appeal that order. The deadline to appeal expired on May 31, 2019. The respondents do not allege fraud.

[7] The respondents submit only that public policy and natural justice preclude recognition and enforcement here. The public policy and natural justice arguments are based on the fact that the law firm that JGB used in the New York proceeding, Haynes & Boone, had also provided estate planning services to the respondents in 2007.

[8] The respondents rely on Dead End Survival, LLC v. Marhasin, 2019 ONSC 3453, at para. 31 for the proposition that, to determine whether enforcement of a foreign judgment would be contrary to public policy, the court must consider the historical and factual context of the proceedings that led to the granting of the judgment, and where there are competing public policy imperatives, whether overall, enforcement would be contrary to public policy.

[9] The respondents add to that the proposition from Beals v. Saldanha, 2003 SCC 72 at para. 61 to the effect that the enforcing court must ensure that the defendant was granted a fair process.

[10] The respondents note that Mr. Rochon raised the conflict with particular lawyers at Hayes & Boone but that we have no evidence from those lawyers to explain why Haynes & Boone could continue to act in face of the alleged conflict.

[11] The respondents submit that I need to assess the conflict issue to determine whether there has been a breach of natural justice or public policy.

[12] The fundamental problem with the respondents’ position is that they did not raise the alleged conflict of Haynes & Boone in the New York Court. Throughout the course of the New York action, the respondents knew that Haynes & Boone was acting for JGB in prosecuting the action against them. Throughout the New York action the respondents were also aware that Haynes & Boone had acted for them in 2007 and had acted for JGB in connection with the underlying loan in 2017.

[13] Although the respondents may have raised the issue of conflict with Haynes & Boone, they did not raise it with the New York Court.

[14] Absent unusual circumstances, a respondent to a recognition and enforcement proceeding should not be able to raise a defence to the recognition of the foreign judgment that it did not raise in the foreign court: Continental Casualty Co. v. Symons, 2015 ONSC 6394 at paras. 50-66; MGM Grand Hotel Inc. v. Rafih, 2002 CarswellOnt 1719 (SCJ) at paras. 8, 9.

[15] As the Supreme Court of Canada noted in Chevron Corp. v. Yaiguaje, 2015 SCC 42 at para. 44, “the purpose of an action for recognition and enforcement is not to evaluate the underlying claim that gave rise to the original dispute, but rather to assist in enforcing an already-adjudicated obligation.” That, of necessity, means that new defences should not be raised in the enforcement proceedings that could have been but were not raised in the foreign proceeding.

[16] There are several good reasons for this. First, it offends the principal of judicial finality. Defendants are expected to raise all defences in the proceeding in which they are sued. They are not permitted to raise some defences and, if unsuccessful, raise additional defences in a subsequent proceeding. Second, it offends the principle of judicial comity. Comity involves the principle of respect for foreign courts and their proceedings. By allowing new defences to be raised during the enforcement proceeding, we would essentially be taking the view that the foreign proceeding was inadequate without giving the foreign court the opportunity to address the issue. Third, we would be applying foreign law when it is unnecessary to do so. An evaluation of the extent to which Haynes & Boone was in a position of conflict, would call on an Ontario court to adjudicate on New York law and ethical obligations of American lawyers. It would be preferable for American courts to adjudicate upon those issues rather than have Ontario courts do so. Finally, in this regard I note that neither respondent has introduced any expert evidence to suggest that Haynes & Boone was in fact in a position of conflict under New York law or under ethical principles governing American lawyers. The record before me has only a bald allegation to that effect unsupported by evidence or authority.

B. Application or Action?

[17] The respondents submit that this proceeding should proceed by way of action for two reasons: First, they submit that this court has “conclusively determined” that enforcement of a foreign judgment is proper only through the mechanism of an action. Second, they submit that the proceeding involves facts that are in dispute as a result of which an application is inappropriate.

[18] In support of the proposition that this court has “conclusively determined” that enforcement of a judgment is proper only by way of an action, the respondents rely on Noel et Associes, S.E.N.C.R.L. v. Sincennes, 2012 ONSC 3770.

[19] The application in Noel involved a request to recognize and enforce a Quebec judgment in the amount of approximately $7,000. The court noted that there were other mechanisms for the more rapid and proportional enforcement of debts of that amount, including the simplified rules and the Small Claims Court. The court went on for several paragraphs about the need to keep claims under $25,000 in the Small Claims Court: see paras. 27-34. There are good policy reasons for that approach. The claim here is for well over $6,000,000 U.S. to which the reasoning in Noel does not apply.

[20] I recognize that there are other passages in Noel that could be read as more definitive statements to the effect that requests to recognize and enforce judgments from non-reciprocating states should be commenced by way of action, not by way of application, see for example at paras. 15-16 and 20-26.

[21] The respondents have advanced no principled reason why a proceeding to recognize and enforce foreign judgment should not be capable of the same procedural choices as any other claim. Where there are no material facts in dispute, there is no reason why the relief sought should not proceed by way of application. Even if the proceeding were commenced by way of action, it would still be open to the plaintiff to move for summary judgment, a procedure largely similar to an application.

[22] Many other cases use the application procedure to recognize and enforce foreign judgments: Nuvex Ingredients Inc. v. Snack Crafters Inc. (2005), 74 O.R. (3d) 397 (SCJ) at paras. 11-18; Québec (Commission de la Construction) v. Access Rigging Services Inc., 2010 ONSC 5897 at para. 14; Hartzog v. McGriskin, 2010 ONSC 5618 at para. 21; Zashko v. Touchgate and Ahmed, 2018 ONSC 3734 at paras. 1 and 3. To the extent that Noel does purport to set out a conclusive rule to the effect that claims for the recognition and enforcement of a foreign judgement must be commenced by way of action, I respectfully disagree with it for the reasons set out above.

[23] Are there material facts in dispute here that would warrant converting the application into an action? In my view there are not.

[24] The respondents submit that there is credible evidence that Haynes & Boone acted in a conflict of interest. This is the issue in respect of which the defendants say there may be conflicting evidence and in respect of which a trial is necessary. In addition, the respondents say there is conflicting evidence about when the respondents brought the conflict to the attention of Haynes & Boone and what the response of Haynes & Boone was.

[25] That, however, misses the point. The question that is material to the recognition and enforcement of the New York action is why the conflict issue was not raised in New York and whether the reason for failing to raise it in New York would allow the respondents to raise it in Ontario. I have been given no explanation for the failure to raise the conflict issue in the New York proceeding. On that record, all I have before me as a respondent who wishes to raise a new defence to an action after judgment has already been rendered and the appeal period has expired without advancing any reason for having failed to raise the defence earlier. That would not be permissible in a domestic action. There is nothing about the enforcement of the New York action in the circumstances of this case that should make the response any different.

[26] While the respondents may be able to point to facts about which they and the applicants differ, those facts are not material to the question before me. In the circumstances, I grant an order recognizing and enforcing the New York judgment and order the respondents to pay JGB an amount in Canadian currency sufficient to purchase the amount of USD$6,742,197.87.

Costs

[27] The applicant delivered a bill of costs at the end of today’s hearing. At the respondents’ request, submissions on costs will be heard by video conference on Tuesday, June 9, at 4 PM. The respondents are to advise the applicants by June 4, 2020 of any authorities they will rely on during their cost submissions.

Koehnen J. Date: May 21, 2020