Date: 20061208
Docket: A-138-06
Citation: 2006 FCA 401
CORAM: DESJARDINS
J.A.
NOËL
J.A.
NADON
J.A.
BETWEEN:
ROBERT MORGAN, d.b.a. KONA
CONCEPT INC.,
Appellant (Plaintiff)
and
GUIMOND BOATS LIMITED,
Respondent (Defendant)
REASONS FOR JUDGMENT
NADON J.A.
[1]
This is an
appeal from a decision of Hugessen J. of the Federal Court, 2006 FC 370, dated
March 22, 2006, which dismissed the appellant’s motion for summary judgment for
a declaration recognizing and enforcing, as a final judgment of the Federal
Court, a judgment of the United States District Court for the District of
Hawaii (the “District Court”) in favour of the appellant against the respondent
in the amount of $402,213.42.
[2]
Although
the respondent fully participated in the proceedings before the Federal Court,
it did not file a Memorandum of Fact and Law in this appeal, nor did counsel
appear on its behalf at the hearing in Quebec City on November 30, 2006.
[3]
For the
reasons that follow, I conclude that the appeal should be allowed. A brief
review of the facts will be helpful to a proper understanding of the issue
raised by this appeal.
[4]
The
appellant, a resident of the State of Hawaii, entered into a contract with the
respondent, a New Brunswick Corporation, pursuant to which the respondent
agreed to construct and deliver a 50-foot ocean fishing vessel to be used by
the appellant in the waters off of Hawaii.
[5]
A dispute
arose between the parties with respect to the vessel’s seaworthiness and
compliance with the terms of the contract and, as a result, on October 24,
2002, the appellant filed a Complaint, i.e. a Statement of Claim, before the
District Court.
[6]
On
February 5, 2003, the respondent, by way of a motion, challenged the District Court’s
jurisdiction. On April 14, 2003, the respondent’s motion was dismissed by the
District Court, which concluded that it had personal jurisdiction over the
respondent. No appeal was taken from that decision.
[7]
On April
23, 2003, the respondent filed an answer to the appellant’s complaint, i.e. a
defence, before the District Court. In its answer to complaint, the respondent
put forward 23 grounds of defence. The last one, which appears at paragraph 51
of the answer to complaint, reads as follows:
51. Defendant intends to rely on all other
defenses and affirmative defenses in Rule 8(c) that may be applicable as discovery
continues.
[8]
Rule 8(c)
of the United
States Rules
of Civil Procedures, referred to in paragraph 51 of the respondent’s Answer
to Complaint, provides:
8(c) Affirmative Defenses. In pleading to a
preceding pleading, a party shall set forth affirmatively accord and
satisfaction, arbitration and award, assumption of risk, contributory
negligence, discharge in bankruptcy, duress, estoppel, failure of
consideration, fraud, illegality, injury by fellow servant, laches, license,
payment, release, res judicata, statute of frauds, statute of limitations,
waiver, and any other matter constituting an avoidance or affirmative defense.
When a party has mistakenly designated a defense as a counterclaim or a
counterclaim as a defense, the court on terms, if justice so requires, shall
treat the pleading as if there had been a proper designation.
[9]
On April
28, 2003, the District Court held a scheduling conference with the parties,
setting February 17, 2004 for the final pre-trial conference and setting the
case down for trial on March 30, 2004.
[10]
On August
28, 2003, the parties attended a settlement conference before the District
Court, but were unable to reach an agreement.
[11]
On
February 17, 2004, both parties attended the final pre-trial conference and, on
February 24, 2004, the appellant filed a motion for default to be heard on
April 15, 2004.
[12]
On March
8, 2004, counsel for the respondent filed a motion for leave to withdraw,
scheduled to be heard on April 15, 2004.
[13]
On April
15, 2004, counsel for the respondent advised the District Court that he had
been instructed by his client to withdraw from the proceedings and that his
client intended to contest any judgment rendered by the District Court, should
the appellant attempt to enforce it in Canada.
[14]
On April
25, 2004, counsel for the respondent was granted leave to withdraw and on July
26, 2004, judgement was entered, as amended on January 26, 2005, in favour of
the appellant.
[15]
On
September 17, 2004, the appellant filed an action in the Federal Court, seeking
to enforce the District Court’s judgment.
[16]
On
November 20, 2004, the respondent filed a motion to strike on the ground that
the Federal Court did not have jurisdiction to hear and determine the
appellant’s action. On February 10, 2005, Phelan J. dismissed the respondent’s
motion and no appeal was taken from that decision.
[17]
On
September 21, 2005, the appellant filed its motion for summary judgment. Before
Hugessen J., the respondent argued that the appellant’s motion ought to be
dismissed. Firstly, it submitted that in the absence of a federal statutory
basis for the appellant’s claim, the Federal Court did not have jurisdiction to
give executory force to the District Court’s judgment. The learned Judge,
relying on a number of Supreme Court of Canada decisions, namely, ITO-International
Terminal Operators Ltd. v. Meda Electronics Inc., [1986] 1 S.C.R. 752, Whitbread
v. Walley, [1990] 3 S.C.R. 1273, Monk Corp. v. Island Fertilisers Ltd.,
[1991] 1 S.C.R. 779, and Ordon Estate v. Grail, [1998] 3 S.C.R. 437, as
well as on paragraph 22(2)(n) of the Federal Courts Act, which
provides that “any claim arising out of a contract relating to the
construction, repairs or equipment of a ship”, had no difficulty in concluding
that the appellant’s claim clearly fell within the ambit of Canadian maritime
law.
[18]
As a
result, Hugessen J. was of the view that the Federal Court had jurisdiction to
hear and determine the appellant’s action.
[19]
The
respondent’s second submission was that the appellant had the burden of showing
that the District Court had the necessary jurisdiction over it to render the
judgment which the appellant seeks to enforce. In other words, it was the
appellant’s burden to convince the Court that the District Court’s jurisdiction
did not raise a triable issue.
[20]
In addressing
that issue, the Judge referred to the Supreme Court’s recent judgment in Beals
v. Saldanha, [2003] 3 S.C.R. 46, where the Court, in reviewing the law
pertaining to the enforcement of foreign judgments in Canada, adopted the “real
and substantial connection” test, which had previously been limited to
inter-provincial enforcement of judgments. After a review of Beals, supra,
and of the evidence before him, the learned Judge indicated that, in his view,
the respondent’s connection with Hawaii,
in the words of Major J. in Ordon Estate, supra, was “fleeting and
relatively unimportant”.
[21]
The Judge
then turned his attention to the question of whether the respondent had
attorned to the jurisdiction of the District Court. After a brief review of the
procedural history of the case before the District Court, some comments on the
law in Canada with respect to attornment and a further reference to Beals,
supra, he concluded that the appellant had not met his burden of proof in
regard to his motion for a summary judgment, i.e. that there was no genuine
issue for trial. In his view, there remained issues of fact which were not
satisfactorily dealt with by the affidavit evidence and a clearer picture of
the jurisdictional facts was required in order to dispose of “complex issues of
law”.
[22]
In
reaching this conclusion, the Judge opined that Beals, supra, had
changed the law with respect to attornment to a foreign jurisdiction when that
was the only factor connecting a defendant to a foreign jurisdiction. In his
view, the question of whether a defendant had attorned to a foreign
jurisdiction was a factor which served to “bolster” the defendant’s connection
to the foreign jurisdiction. At paragraph 14, he expressed himself in the
following manner:
14. More
significant still is the recent adoption of the "real and substantial
connection" test detailed above. Its effect on the rules relating to
attornment in Canadian maritime law remains to be determined. If the only
connecting factor between the defendant and the foreign court is an alleged
attornment, a somewhat more flexible approach to that rule would appear to be
in order. Again quoting Justice Major, the "traditional indicia",
specifically including attornment, will serve only to "bolster" a
real and substantial connection. In my view and on the evidence presently
available to me, the test has not been met here. Obviously, if that is the
case, there is nothing to bolster and no jurisdiction in the foreign court.
[23]
The
appellant says that the Judge erred in refusing to grant summary judgment in his
favour. In particular, the appellant says that the Judge erred in the following
respects:
·
by
requiring him to meet the “real and substantial connection” test;
·
in finding
that the respondent’s connection to Hawaii
was “fleeting and relatively unimportant”; and
·
in finding
that he had not met his burden of proof with regard to whether the respondent
had attorned to the jurisdiction of the District Court.
[24]
Because I
am of the view that the respondent did attorn to the jurisdiction of the
District Court and as that issue is determinative of the appeal, I will address
that issue only.
[25]
In my
respectful view, the Judge misunderstood what the Supreme Court of Canada said
in Beals, supra, in regard to the consequences flowing from a defendant’s
attornment to the jurisdiction of a foreign court. As I have already indicated,
the learned Judge, at paragraph 14 of his reasons, opined that by reason of Beales,
attornment was only a factor which went to bolster a real and substantial
connection to a foreign jurisdiction. Thus, according to the Judge, if the only
factor connecting a defendant to a foreign jurisdiction is that of attornment,
there will be no jurisdiction in the foreign court to render judgment against
that defendant.
[26]
In support
of his position, the learned Judge quoted paragraphs 31 to 38 of Major J.’s
reasons in Beals, supra. For the present purposes, I need only reproduce
paragraph 37 of those reasons:
37. There are
conditions to be met before a domestic court will enforce a judgment from a
foreign jurisdiction. The enforcing court, in this case Ontario, must determine
whether the foreign court had a real and substantial connection to the action
or the parties, at least to the level established in Morguard, supra. A
real and substantial connection is the overriding factor in the determination
of jurisdiction. The presence of more of the traditional indicia of
jurisdiction (attornment, agreement to submit, residence and presence in the
foreign jurisdiction) will serve to bolster the real and substantial connection
to the action or parties. Although such a connection is an important
factor, parties to an action continue to be free to select or accept the
jurisdiction in which their dispute is to be resolved by attorning or agreeing to
the jurisdiction of a foreign court.
[Emphasis
added]
[27]
The above
words of Major J. make it clear, in my view, that in adopting the “real and
substantial connection” test, the Supreme Court did not intend to prevent the
recognition and enforcement of a foreign judgment where the defendant has
attorned to the jurisdiction of the foreign court. As irrefutable evidence of
the correctness of that proposition is the fact that the Supreme Court, in Beals,
supra, concluded that in filing a defence to the action commenced against
him in Florida, the defendant, Dominic Thivy, had attorned to the Florida court’s
jurisdiction and, as a result, irrespective of the “real and substantial
connection” test, the Florida court would have had had jurisdiction over him
for the purpose of enforcing its judgment in Ontario. At paragraph 34 of his
reasons, Major J. stated:
37. … In light of
Canadian rules of conflict of laws, Dominic Thivy attorned to the jurisdiction
of the Florida court when
he entered a defence to the second action. His subsequent procedural failures
under Florida law do not
invalidate that attornment. As such, irrespective of the real and
substantial connection analysis, the Florida court would
have had jurisdiction over Mr. Thivy for the purposes of enforcement in Ontario.
[Emphasis
added]
[28]
Consequently,
if the respondent attorned to the jurisdiction of the District Court, the
jurisdiction of that Court over him is established and the appellant is
entitled to judgment on the terms sought.
[29]
As I have
already indicated, after the commencement of the proceedings against it in Hawaii, the respondent
unsuccessfully challenged the jurisdiction of the District Court and did not
appeal that Court’s decision.
[30]
Following
the District Court’s decision, the respondent filed a defence to the
appellant’s Complaint. Some 23 grounds of defence were put forward, but none of
them raised the issue of the Court’s jurisdiction. Although the learned Judge
indicated that it was not clear to him whether paragraph 51 of the respondent’s
Answer to Complaint “preserved its objection to jurisdiction”, it is clear to
me, on the record before us, that the respondent’s Answer to Complaint did not
make any reservation with respect to the District Court’s jurisdiction.
[31]
Paragraph
51 of the Answer to Complaint states that the respondent intends to rely on
“all other defenses and affirmative defenses in Rule 8(c)…”. Rule 8(c), which I
have reproduced at paragraph 7 of these reasons, sets out a list of affirmative
defences which a party must set forth in its pleadings. None of these defences
include a defence based on the Court’s jurisdiction. In his affidavit in
support of the respondent’s position before the Federal Court, Cory Guimond,
the President of the respondent company, states at paragraph 19 thereof that
Rules 8(c), 12(b) and 12(h) of the United States Federal Rules of Civil
Procedures were applicable to all civil actions brought in the United
States federal district courts, including the District of Hawaii.
[32]
I have
already reproduced Rule 8(c). I now reproduce Rules 12(b)(2) and 12(h)(1)(B):
12(b) How Presented.
Every defense, in law or fact, to a claim for relief in any pleading, whether a
claim, counterclaim, cross-claim, or third-party claim, shall be asserted in
the responsive pleading thereto if one is required, except that the following
defenses may at the option of the pleader be made by motion:
(B) lack of
jurisdiction over the person.
Waiver or Preservation
of Certain Defenses:
(1) A defense of lack of
jurisdiction over the person, improper venue, insufficiency of process, or
insufficiency of service of process is waived
(B) if it is neither
made by motion under this rule nor included in a responsible pleading or an
amendment thereof permitted by Rule 15(a) to be made as a matter of course.
[33]
These
Rules clearly provide that a defence of lack of jurisdiction over the person
must be made, at the option of a pleader, either by way of a specific motion or
by way of a defence included in a responsive pleading, failing which such a
defence is waived. Although the respondent relied on Rule 8(c) in its Answer to
Complaint, it did not rely on Rules 12(b)(2) and 12(h)(1)(B). Thus, in my view,
the respondent did not, in its defence to the action before the District Court,
raise the question of jurisdiction, nor did it seek to preserve its objection
thereto. Whether such an objection would have allowed the respondent to argue
that it had not attorned to the District Court’s jurisdiction is an issue which
we need not address.
[34]
I also
wish to note that following the filing of its Answer to Complaint, the respondent
unequivocally participated in pre-trial conferences before the District Court
and attended a settlement conference.
[35]
In these
circumstances, I am satisfied that the respondent attorned to the District
Court’s jurisdiction and, as a consequence, the District Court had the
jurisdiction to render the judgment which the appellant seeks to enforce.
[36]
As a
result of this conclusion, I am satisfied that there is no genuine issue for
trial. I would therefore allow the appeal with costs, set aside the decision of
the Federal Court and, rendering the judgment which ought to have been
rendered, I would allow the motion for summary judgment and condemn the
respondent to pay to the appellant the Canadian dollar equivalent, as of July
26, 2004, of the sum of US $430,396.93 with interest at the commercial rate,
compounded semi-annually.
“M.
Nadon”
“I
agree.
Alice
Desjardins J.A.”
“I
agree.
M.
Noël J.A.”
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