BETWEEN:
ROBERT MORGAN, d.b.a. KONA CONCEPT INC.,
and
Heard at Quebec, Quebec, on November 30, 2006.
Judgment delivered at Ottawa, Ontario, on December 8, 2006.
REASONS FOR JUDGMENT BY: NADON J.A.
CONCURRED IN BY: DESJARDINS J.A.
NOËL J.A.
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.
“I agree.
Alice Desjardins J.A.”
“I agree.
M. Noël J.A.”
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: A-138-06
STYLE OF CAUSE: ROBERT MORGAN, d.b.a. KONA CONCEPT INC.
Appellant
And
GUIMOND BOATS LIMITED
Respondent
DATE OF HEARING: November 30, 2006
REASONS FOR JUDGMENT BY: Nadon J.A.
CONCURRED IN BY: Desjardins J.A.
APPEARANCES:
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FOR THE APPELLANT
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SOLICITORS OF RECORD:
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Quebec, Quebec
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FOR THE APPELLANT
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Allen, Dixon, Smith, Townsend, Frederiction, N-B |
FOR THE RESPONDENT
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