June 2005

Show Me the (Canadian) Money: Collecting Judgments from Debtors in Canada

by Michael Bertoldi

For clients, victory in litigation lies in the collection rather than the decision. While initially clients may be impressed with trial results, in the end their “bottom line” is satisfaction of their judgment. Collection can be difficult and time-consuming if the debtor, or the debtor’s assets, are located outside your jurisdiction. 

Collecting U.S. Judgments in Canada

Here are some important tips for collecting on your judgment in Canada.

When British Columbia or Canada is the jurisdiction of collection, counsel for a judgment creditor faces certain hurdles in enforcing and collecting on their client’s judgment. These requirements arise from both common law and relevant legislation, which in British Columbia is mainly the Court Order Enforcement Act (the COEA). Although the legislation in other provinces varies, most, if not all, have similar procedures to those outlined below.

In our experience, we most often satisfy a U.S. judgment in British Columbia by registering it with the Supreme Court of British Columbia. Although using statutory processes for registration gives the U.S. judgment “. . .  the same effect as if it had been a judgment given originally in (BC) on the date of the registration,”1 even when a U.S. judgment is registered through other processes, the effect is much the same.

Reciprocating Jurisdictions

Collecting on a client’s judgment in British Columbia is simplest when the original judgment comes from a reciprocating jurisdiction. Under the COEA, there are currently six reciprocating jurisdictions in the United States: Washington, Alaska, California, Oregon, Colorado, and Idaho.2

It is important to note that, at the time of writing, federal circuit judgments — including bankruptcy judgments — are not enforceable under the reciprocating jurisdiction rules (though see below for other ways to enforce such judgments).

Reciprocity in Enforcing Judgment

Strategically, the best way to begin enforcing a judgment in British Columbia is usually by applying for a desk order (without hearing, and in this case, without notice to the judgment debtor). This can be done pursuant to the Rules of Court and the COEA.  The time limit for applying to register a judgment is six years after the date of original judgment.3

To register a judgment without giving notice to the judgment debtor, a party must meet all three of the following criteria:

1. The court documents in the original action were personally served on the debtor.

2. The debtor either appeared before the original court, or defended the action, or otherwise submitted to the jurisdiction of the original court.

3. Any appeal in the original jurisdiction, if made, must have been disposed of, or, if not made, must be out of time.4

The documents required to proceed by way of desk order include:

• An affidavit setting out various facts about the judgment.5

• A certified copy of the judgment under the seal of the original court, attached as an exhibit to the affidavit.6

• A certificate signed and sealed by a judge or clerk of the original court setting out particulars of the judgment.7
 
Registration, Notice, and Cancellation

Once the judgment is registered in British Columbia without notice, the judgment creditor has one month from the date of registration to give the judgment debtor notice of such registration.  The judgment debtor then has one month from receipt of notice to apply in British Columbia to have the registration cancelled.8 The scope of grounds for cancellation is limited.  Some of the grounds include:

• The original court acted without jurisdiction.

• The judgment debtor would have a good defense if an action were brought on the judgment.9

Enforcing in the Absence of Reciprocity

While the above process is perhaps the most convenient, a judgment creditor from a non-reciprocating jurisdiction also has recourse. Recent decisions of the Canadian courts have simplified the process of enforcing non-reciprocating judgments.10 

In British Columbia, there are two ways to enforce such a judgment: starting a new British Columbia Action, and starting an Action for Enforcement of a U.S. Judgment.

Starting a New B.C. Action

When collecting on a judgment from a non-reciprocating state, a judgment creditor can sue on the debt in British Columbia using the U.S. judgment to evidence the debt.  Further or new evidence of the debt would be allowed if necessary, but this opens the door for the debtor to dispute the debt.

Starting an Action for Enforcement of a U.S. Judgment

The other option for a judgment creditor is to begin an enforcement action in British Columbia for the U.S. judgment. This provides results similar to enforcing an original B.C. judgment.

Enforcement of a U.S. judgment from a non-reciprocating (such as federal) jurisdiction requires a real and substantial connection of the action with the original jurisdiction. In other words, the original jurisdiction need not have been the best place for determination of the matter, as long as there is a real and substantial connection between the issue and the jurisdiction. Real and substantial connection cannot be defined easily, but some indicia of a real and substantial connection include:

• A contract at issue was formed in the jurisdiction.

• A choice-of-forum clause was exercised.

• Goods were sold or services were provided in that jurisdiction.

• The events concerned took place in that jurisdiction.

• Both parties to the action resided or carried on business there.

The Bottom Line

Collection can be the most labor-intensive part of the litigation. When the judgment debtor does not reside or carry on business in the jurisdiction or leaves the jurisdiction, collection can be more difficult. The good news is, if the debtor is located in British Columbia or elsewhere in Canada, collection in many cases is still quite feasible. 

If your client has obtained a judgment from a reciprocating jurisdiction, the process in British Columbia is fairly simple, and the U.S. judgment likely can be registered quickly and without notice to the judgment debtor.

If the jurisdiction involved is non-reciprocating, your client has two choices: He can either use the U.S. judgment as proof of the debt, or he can try to have the judgment recognized in British Columbia. If there is a real and substantial connection between the original jurisdiction and the cause of action, the U.S. judgment will likely be recognized in British Columbia for enforcement.

In summary, to collect on your client’s judgment in British Columbia, you will need:

1. The identity of the jurisdiction where the judgment was obtained;

2. The identity of the jurisdiction where the cause of action arose;

3. An affidavit setting out specific facts surrounding the judgment; and

4. A certified copy of the judgment under the seal of the original court (to be exhibited to the affidavit).

Michael Bertoldi practices law in Vancouver, British Columbia, with a focus on debt collection. Send your questions regarding the enforcement of U.S. judgments in Canada to mike@bert-law.com.

NOTES
1 COEA s. 33(a).

2  States can be added or removed at any time by Order in Council of the Lieutenant Governor.  Check with a B.C. lawyer prior to collection for the most up-to-date list.

3  COEA s. 29(1). A currently unproclaimed legislative amendment might alter this time limit to 10 years.

4  COEA s. 29(2).

5  B.C. Rules of Court (ROC), Rule 54(3). See Neutsche Nemectron GmbH v. Dolker (1984), 51 B.C.L.R. 162 and Lornal Construction Ltd. v. Lawrence (1984), 47 C.P.C. 99.

6  Ibid.

7  COEA s. 29(3).

8  ROC 54(6) and COEA s. 34.

9  For an exhaustive list, see COEA s. 34(2).

10 See Morguard Investments Ltd. v. De Savoye, [1990] 3 S.C.R. 1077 and Beals v. Saldanha, [2003] 3 S.C.R. 416 and recently Uninet Technologies Inc. v. Communication Services Inc., 2005 BCCA 114.