Private International Law – Prof. Walsh Summer 2005

Facts

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  Appellants are Names of Lloyd’s (ppl who agree to be personally liable to pay out claims to insured if Lloyd’s cannot cover its claims, in exchange for participation in Lloyd’s profits if and when they exist) who claim that Lloyd’s acted fraudulently and against Cdn securities legislation.
  
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  The Names initially brought motion for injunction in Ontario to prevent Lloyd’s from drawing on letters of credit and banks from paying out on letters of credit.
  
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  Lloyd’s successfully moved to stay the action on basis of forum non conveniens.
  
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  Proper forum was determined to be Eng courts b/c choice of jur’n clause and more substantial connection with UK.
  
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  Series of judgments were pronounced in favour of Lloyd’s, who sought to register them for enforcement in Ontario under the Reciprocal Enforcement of Judgments (U.K.) Act, which incorporates Can-UK convention.
  
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  Art. IV(1)(e) of convention provides that registration of judgment shall be refused or set aside if enforcement of judgment would be contrary to public policy in territory of registering court.
  
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  Appellants submit that judgments are against public policy b/c (1) there was denial of natural justice: allegations of fraud against Lloyd’s were not litigated and (2) Lloyd’s contravened Ont Securities Act by not filing prospectus; contravening the act is against public policy of Ontario.
  

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  Natural justice ground for non-enforcement does not appear in UK-Can convention. Based on Common Law (Four Embarcadero), and for purposes of analysis, it was assumed that denial of natural justice is included in public policy ground for non-enforcement contained in convention b/w UK and Can. Natural justice means notice and right to be heard. Here, there was no denial of natural justice in English court b/c court gave full consideration to the fraud defence by assuming the appellants would be able to prove the frauds they alleged.
  
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  Public policy means fundamental principles of law and justice in substantive and procedural respects- includes fraud, bribery, coercion, incontestable harm to public (Lord Atkin in Fender) etc. Connotes more than local policy in internal affairs; fundamental values must be at stake. Public policy has been construed narrowly in Common Law provinces, and has seldom been invoked with success for non-enforcement (in the name of comity - Morguard and Tolofson).
  
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  Taken on its own, to condone a breach of the full, true and plain disclosure obligations and the anti-fraud measures contained in securities legislation would be contrary to public policy of Ontario.
  
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  It is not against public policy to register and enforce these judgments in this situation b/c (1) proper forum was England (confirmed by Ont CA). This is equivalent to a decision that if England did not determine Ontario law to be the proper law, the judgment cannot be contrary to Ontario’s public policy; (2) the public policy of enforcing the rules of comity where justice, necessity and convenience all favour enforcement, outweighs the concerns that might otherwise exist where there was a breach of the prospectus requirements. Non-enforcement of UK judgments would create economic chaos, unfairness, and affect the viability of this very important worldwide insurance market.
  

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  SCC denied leave for appeal
  

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  Ont investors were induced to invest in Lloyd’s of London.
  
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  London company comes to Ont and makes presentation that induces Ont customers to invest but were made to be sacrificial investor’s for upcoming loss at Lloyd’s. They went to colonies to bear loss of their scheme.
  
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  Choice of law clause gave exclusive jur’n to english courts and rules exclusively by english law.
  
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  The background came with sentencing of first Can, US and Australian defendants. Lloyd’s came to sue them for their investment. Canadian defendants applied to Can court to sue for fraud. Lloyd’s sued back saying English courts had exclusive jur’n. Df didn’t want that bc there was law that prohibited accusing Lloyd’s for fraud. English courts offered no substantive remedies.
  
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  Could foresee that to protect Lloyd’s and up to 40% of English economy with it there was settlement agreement that took away day in court and did not allow accusing of fraud. People at Lloyd’s who ringed fraud were long gone. But for investors it was still Lloyds and its same structure. To protect it, the English courts took away private remedies and disallowed fraud.
  
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  So English court would not apply the Ontario securities act that says that if investment contract doesn’t apply with rules of land then it’s not valid. Statute was breached and going to English courts would let that all slip.
  
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  Where does public policy defense fit in all this? Most important part of case for our purposes. Cant enforce this foreign judgment bc it would be undermining Ontario Securites requirements by giving effect to the judgment. A Quebec lawyer at that will say that it’s not public policy but mandatory rules (3076) that says that choice of applicable rules can be overwritten. Securities laws would then be applicable.
  
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  Relationship bt public poilcy and mandatroy rules? Public policy argument is one that inderectly corresponds to 3076 (shouldn’t give effect to foreign judgment bc it ignores Ont rules that make act illegal)
  
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  In Lloyd’s judgment aspect of security violation was treated as defense in public policy vein.
  
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  Mandatory rules at end bc it’s hard.
  

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  Policy in code (3081) is drafted as exclusion of foreign law that would otherwise be applicable.
  
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  3155 denies effect to foreign judgment if they at outcome all circumstance would be against public order understood internationally.
  
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  Mandatory rules in 3111 it’s for domestic K. So if Qc K, the parties chose rules X under general applicable rules and X rules are now applicable rules for the K. But 3111 says choice is subject to mandatory rules under law of Qc. In way same as public policy insofar as it excludes those rules of X that are inconsistent with mandatory rules of forum (here Qc). This all cast in affirmative terms in how mandatory rules of Qc overrride those of K.
  
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  In securities (investment protection) law example: done in public policy interest by encouraging investment trying to have everyone playing on equal footing, and at the same time protecting investors. The investment I enter into has K that says our agreement is governed by law of country X. If the investor is located in Qc and vendor is located in Qc and their investment activity is also in Qc we have entirely domestic contract. So under 3111 our choice of X laws is subject to mandatory laws of Qc securities law. Lets suppose laws of X doesn’t recognize market and allows to engage in normal K without positive obligations. The system on mandatory rules says that X laws apply subject to domestic rules. If we applied public policy analysis we wouldn’t get the same result. Without 3111 we’d have to rely on 3081 and it would say we’re not allowing chosing law that doesn’t have investor protection provisions in it that are at least similar to them. It would have to be something fundamentally worng with system that makes us reject X laws (mainly in moral sesne). This would be particularly hard to do in economic transactions such as this one. In public policy argument only morally repugnant systemic problems would allow rejection of choice of law. This is where mandatroy rules provisions come into effect. They do so by saying “our rules overrule your rules” and does not say “it’s morally repugnant that you don’t protect investors.” BIG difference in language and quite possibly in results.
  
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  Say you had intl contract bc you had foreign vendor of investment. Also have foreign investment activity and then local investor. 3111 para 2 is not going to apply bc there is foreign element present. Then we have to go to either (1) art 3076 (says that rules enforced in Qc by reason of their particular object) and have result in courts of country X where securities laws of Qc or any jur’n intended to apply even when you’ve got foreign vendor? Qc securities commission entitled to regulate English companies when they solicit investments in Qc. They are entering this market and ^^ securtities lws intended to apply to this activity.
  
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  All this to say Qc court would not react very differently than Ont courts did.
  
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  Does this mean that priovate K’s entered into by Qc investors with foreign vendors have attached to themn all these private law remedies? Would Qc court say all those rules override party’s choice of law? Not so sure bc there body of lit saying there ways of interpreting of intl mandatory rules that respect intl contracts, too. WE’re talkin of rules of priv law spehere thast affect ordinary contractual terms. Be careful not to quikcly conclude that mandatory rules once int; element enters picture are intended to override all other decisions.
  
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  Going back to reasoning: if giving effect to this judgment court would be overriding Ont securities laws. This would be against Ont public policy. Court says maybe they are giving result that wont enforce Ont law. But this is bc of choice of jur’n clause and creating conflict of jur’prudence if they didn’t accept ruling. Also bc they say this is intl contract as investors solicited all over the world. If court applies particular laws of Ont, then investors everywhere else would be given securities laws of Ont and they are not so sure Ont laws are so perfect and the effects oculd be to disencourage intl investment. Another reason is third party victims. Investment liabilities (ie monies investors being asked to pay up) is being asked to pay out loss and if they didn’t pay $$ those who lose are the innocent insurers who didn’t participate in this lack of disclosure that resulted in such economic disaster. We’ll protect you by invoking Ont securities laws, indirectly to protect these other ppl. Besides, original culprits already long gone. In other words, they’re givin indirecty the choice of law clause effect. That analysis would have resonance in Qc bc in applying 3076 (and it has yet to be applied successfully to override choice of foreign law) it’s completely new approach taken. First have to decide that Qc legislator intended this to apply, notwithstanding the foreign element. In deciding this you don’t just look at what legislature would ideally want but if it would push to disrupt markets beyohnd Qc and have repercussions to 3^rd parties outside of Qc. Much narrower sphere than it looks like.
  
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  Third category of Qc laws in 3079 has even less hope. It imagines situation where aprties have chosen laws of X, for some reason the litigation is being heard in Qc (maybe cuz of investment activities) but investors are from US and investors comet o Qc courts and ask not to enforce X laws bc under US laws the vendor violated their securties norms under their laws and want contract to be voided. 3079 says that to win that argument there would have to be legitimate and manisfestly preponderant interests and this is really high hurdle that no one will clear. Para 2: Would mean giving effect to public order of another country. What if ours are not as stringent as theirs? Idea behind all of this is right in principle by preventing party attornment to limit party autonomy and have demands of globalisation leading to release of public policy aspirations at least at level of contracts. Mandatory rules situation tries to give regulation at private law level but this may not be feasible aspiration.
  
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  Public policy does a lot more work for CML than for CVL which has refined categories to great extent. Saunders captures public policy as basis of positive evocation of mandatory rules. Just that they have in CML another langauge for it. They talk of public policy when what they really are doing is talking of mandatory rules of Ont securities provisions.
  

Adjudicatory Jurisdiction

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  General Jurisdiction
  
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    Under code we find that under domcile of Df (art 3138) is always basis of jur’n even if nothing else is based in Qc (bc Qc courts have authority over you)
    
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    Contractual/extra-contractual dispute: voluntary submission and/or agreement
    
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  Subject-Matter jur’n
  
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    Concerned w/ art 3148(3)  based on fault, damage, injuries act or action of someone under contractual obligation
    

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  General Jur’n
  
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    Instead of asking for real and subtantial nexus, the CML says that physical presence is (historically) the rule and is enough to bring upon an action
    
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    Voluntary submission is also enough in CML
    

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  Subject-Matter Jur’n
  
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    Up until 1975 (as per Sharpe J) there was focus on subject matter connection but then focus of rules changed and shifted to Pl’s conditions and courts took on more role in interpreting the subject matter connection leading to expansion of rules to allow for even most limited of subject-matter connections to be sufficient. This included damaged suffered.
    

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  Now have situation where CML when from limited interpretation to one where subject matter connection is widened. All this now understood at time of Morguard decision
  
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    Here LaForest made it clear that what he had to say also applied to jur’n underpinning Canadian courts. He says there had to be real and substantial connection in the forum for a Canadian court to exercise jur’n. At level of adjudicatory jur’n! Not so much basis for jur’n as limit to jur’n and having a negative role. This was already there in courts as they were taking subject matter connection as basis for taking jur’n from one prov in another. What he did was create R&S connection as basis for adjudicatory jur’n
    
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  CML said that for purpose of recognizing ju’n of foreign courts, physical presence or voluntary submission are only acceptable ways of recognizing jur’n. Otherwise, wont recognize judgments.
  
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  Morguard expands adjudiactory jur’n saying we will recognize judg’mt emanating from other provs if there is a real and substantial connection to that province. And same idea and criterion will be expanded to intl judgments.
  
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  So from CML viewpoint can see diff in role that R&S connection playing in context. This is bc rules of jur’n for foreign courts were diff at CML than rules for forum courts (domestic) jur’n.
  
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  R&S connection provides basis for expansion of adjudicatory jur’n.
  

Back to Qc

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  Continue to have in Qc a lopsided view of permissible basis for jur’n as bt Qc courts and other courts. For Qc courts we know under 3148(3) what’s enough for Qc court to assume jur’n. B ut for courts of Qc to recognize foreign court’s jur’n the rules are a bit more stringent.
  
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  3168  must show prejudice was suffered, etc, etc. Stronger nexus is needed. This point aside the Qc rules still follow the same basic format for their jur’n and for foreign basis jur’n. Domicile and submission and there’s also subject amtter jur’n. When you go to CML you experience in the case a law a copuple of real difficiulties with understanding concept of R&S connection. Reasons include that historical basis for jur’n shows difficulties in working those concepts into idea of R&S connection. If we compare it w/ CVL approach we can start understanding them better.
  
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  CML has (1) presence (2) agreement/submission (3) Subject-Matter
  
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  Does there have to be R&S connection bt the Df and the province or a R&S connection bt Df and event/subject even if he has done nothing to submit to it?
  
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    In CML Under what would be Sub-Matter jur’n in CCQ, you are getting fusion of what CVL says gen’l jur’n and subject-matter jur’n. Why this messiness? Bc presence not based on real connection bt Df and territory. It’s very diff from basis of jur’n that in effect says that in chosing to live somewhere you’re submitting to jur’n. So in CML what looks like a parallel, isnt really one since there’s diff bt presence there and domicle.
    
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  So when R&S connection came about q’n arose of whether it applied to connection bt Df and place or bt place and action that occurred there. That’s why CML case law is so confusing.
  
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  It can be both things for CML courts. Courts saying that if Df does something/purposeful activity or dispute arises from activities carried on there, then we’ll call that a R&S connection. Not necessarty for Df to do action there.
  
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  CML more confused idea than in CCQ. Best way to analyize it? Rely on idea that is reflectedin CVL of domeicle or residence in a place being a basis for jur’n while continuing to separate analuticially this from subject-matter jur’n and defend that on basis that courts have said that R&S connection bt forum and Df and then under subject-matter connection also a R&S connection but btwn act and Df
  
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  Presence still seems to exist as basis for jur’n. So is residence or domicile an additioanl bassi? No, presence should be replaced by idea of gen jur’n based on Df domicile in place and having R&S assists us in detrermining all this.
  
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  This is analytical structure adopted by Uniform Legislation.
  
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  In terms of how legislative drafters are seeing how analysis should work, it’s same as CCQ and only crossover that we see is for commerces and branch offices as basis for jur’n as well.
  
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  Activities w/in territory that have impact are also basis for adjudicatory jur’n.
  
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  For CML R&S is a limit on jur’n of courts otherwise already assumed. For intl judgments it’s basis for taking jur.
  
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    Test satisfied by residence or domicile of Df (Beals) and includes independently of any durable presence a fault or damage (subject amtter) that occurs within territorual borders.
    
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    Is this abstract test applied regardless of context? NO two types ofapproached come into play. First if it’s inter-prov’l or intl problem. R&S connection and streght needed according to Ont Court of Appeal in Porcel case a less of a connection is needed interprovincially than internationally. One of issues in Porcel asks if we’re dealng w/ Can Df or foreign Df. If canadian Df then cant be as demanding, If dealing w/ intl Df, we need more stringent apporach why? Bc hardship on Df is greater in intl context and bc we’re not dealing w/ a federal integrated judicial netowrk as we are in Can context.
    
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    In SCC decision in Spar and Lebel’s reasoning tempts us to come to opposite conclusion. Court took jur’n on basis of very basic nexus and court went on to imply that bc it’s intl he’s prepared to take static view of what R&S connection is. Can two judgments sit side by side now? No. If Df from aborad we require a stonger connectio to prov or the other way around? Porcel syas out of country must show stronger and Lebel believes opposite and that within Can we must have more stringent view than if we are dealing w/ another country.
    
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    Which should it be? Major in Beals says there should be no diff bt intl and interprov. R&S means the same whether you are talking of foreign decision or a Can court jur’n. Same idea operates for both and should not construe nature of rules to be diff in two contexts. His is the last statement of SCC on the q’n of new context but full of difficulty open to criticism and must question if we can rely on it.
    
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    Probably most difficult para is para 37. He says, unclearly and confusingly, that enforcing court must have R&S cnnection and that this is overriding factor, bolstered by attornment or agreement and even presence. So far as agreement and attornment concerned we are saved by last part of para. But there is at least one Ont case where court refused to assume jur’n on basis on not being R&S connection and used ¶37 to show attornment etc were indicia to take into consideration in absence of R&S connection. This is wrong. There’s no scholar or court that would say choice of court agreements are not valid in absence of R&S connection. What court in Ont said can be thrown/argued back by last sentence of para 37, too.
    
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    So Beals has caused confusion in lower courts and difficult to point any part that gives clear guidance. That para may still be useful bc maybe what was intended was to point that when it comes to physical presence as sufficient basis there the R&S connection should be attached as conditional basis.
    
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    Presence as condition remains as matter of controversy. Para 37 gives basis to scratch presnece as no longer sufficient. Virtue of removing presence from equation is to take us back to better structure (one that looks at domicile or residence) as most statutory approach have.
    
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  Idea that we shouldn’t be focusing as CCQ drafters did on particular events in the abstract in discussing ideas of what is appropriate jur’n. Sharpe J (in Muscott) lists a whole series of considerations that court is expected to apply in deciding whether there’s real and substantial connection. Very diff approach from anything that we see in any other of the cases. Damage may be enough in one case, but change some of circumstance and it may be not enough. Contrast with approach in Spar. Sharpe would ask to look at other factors of case and decided whether it’s enough. They include interprovincial or intl context, or unfair to Df in this particualr type of action, is it Can Df or foreign Df, etc, etc. His approach (w he insists is ) is very close to what most appropraite forum and taking into account all diff factors. This permeates class action decision where he looks at issues of procedure and fairness at that level. Very context-specific exercise.
  
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  What is disadvantage of this kind of approach? Lack of predictability. There are 8 diff elements!! Are they really helpful? Having to go through such an exericse is way to handle ideas about jur’n.
  
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  If you are representing someone, you wanna get the jur’n right or else client will be pretty pissed off (and broke). This creates demand of predictability. But also leads to not testing waters by going somewhere else.
  
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  It’s not easy to tie together basic cirteria for courts deicing accepting intl judgments. Ppl can agree on choice of courts and on voluntary submission and residence/domicile and subject matter connection as enough. So general parameters are there so difficulties are in structure and pciking apart these. Also policy based and once past gen criteria and once you focus in on something you face reality of globalization and world where events do not just happen in one place and can have ripple effect on other places and other events.
  

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  M was passenger in car owned by Df S and driven by Df D-G. M injured when struck by car owned by Df C and owned by Df GA. Accident happened in AB. M suffered serious spinal injury, returned to ON and got further care
  
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  At time of accident all Df resided in AB. After accident Df D-G moved to ON.
  
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  M was in AB working for ON empoyer. M was preparing to move to AB when accident occurred.
  
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  M sued Dfs claiming damages in respect of damage sustained in ON arising from a tort.
  
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  Dfs S and D-G moved to set aside service out of jur’n and to stay the action. Argued Civil Procedure rule ultra vires
  
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  Superior Court dismissed motion. Dfs appealed
  

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  Qn of assumed jur’n by Ont.
  
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  As per Morguard Pl who sustains damage in Ont may sue in Ont if there is R&S connection w/ Ont.
  
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