2016 QCCA 260, 2016 QCCA 260

Zimmermann inc. c. Barer 2016 QCCA 260 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No: 500-09-024677-148 (500-17-077734-138) MINUTES OF THE HEARING DATE: February 5, 2016 CORAM: THE HONOURABLE FRANÇOIS DOYON , J.A. MANON SAVARD , J.A. ROBERT M. MAINVILLE , J.A. APPELLANTS ATTORNEYS ZIMMERMANN INC. F. ZIMMERMANN GMBH Mtre RYAN HILLIER (présent) M tre ARIANE BISAILLON ( Blake, Cassels & Graydon ) RESPONDENT ATTORNEY DAVID BARER Mtre LEON J. GREENBERG (absent) ( Sternthal, Katznelson, Montigny )

On appeal from a judgment rendered on July 17, 2014 by the Honourable Madam Justice Eva Petras, of the Superior Court, District of Montreal. DESCRIPTION : Private international law - Recognition and enforcement of a foreign decision Clerk: Marcelle Desmarais Courtroom: Antonio-Lamer HEARING 10 :00 Continuation of the hearing of February 3, 2016. Judgment – see page 3.

Marcelle Desmarais Clerk BY THE COURT JUDGMENT [ 1 ] The appellants sought the recognition and enforcement of a default judgment rendered by the United States District Court for the District of Vermont condemning Barer Engineering Company of America (“BEC”) and the respondent to pay US $961,389.55.

On July 17, 2014, the Superior Court (the Honourable Madam Justice Eva Petras) dismissed their application on the basis that the evidence submitted was not sufficient to confirm the jurisdiction of the District Court over the respondent. [1] [ 2 ] Contrary to what the appellants argue, the trial judge did not reconsider the merits of the case which had already been decided in Vermont. Rather, she confined her analysis to verifying whether the District Court had jurisdiction over the respondent under

articles 3168 and 3164 C.C.Q. The appellants did not establish that the trial judge erred in law or committed a palpable and overriding error of fact in reaching her conclusion. * * * * * [ 3 ] The dispute underlying this appeal originated with the issuance by BEC in 2007 and 2008 of purchase orders to the appellant Zimmerman for manufacturing machinery and services relating to a project for the United States military in Utah. BEC is a Vermont corporation with its principal place of business in Burlington. The appellant Zimmerman is a Michigan corporation. The second appellant, F.

Zimmermann GmbH, a German corporation, manufactured some of the equipment. [ 4 ] A dispute arose between them for payment of the machinery and services and the execution of a letter of credit issued related to the performance of the military contract by BEC. [ 5 ] In 2010, BEC and the appellants entered into a Confidential Settlement and Release Agreement which provided for arrangements pertaining to the management of their disputes.

The respondent Barer, a Montreal resident, signed that agreement on behalf of BEC in his capacity as Secretary of the company. [ 6 ] In March 2011, the appellants filed an action for damages before the District Court against BEC as well as the respondent personally, invoking the alter ego doctrine. They claimed an aggregate amount of US $687,081.70, comprised of the amount drawn on the letter of credit, plus the outstanding invoices for the machinery and services. [ 7 ] Despite being duly served with the proceedings, BEC and the respondent did not appear before the District Court, nor did they submit a defense.

On June 19, 2012, a default judgment (rectified in August 2012) condemning them to pay the appellants US $961,389.55 was rendered. According to the trial judge, the difference between the amount claimed and the amount awarded is composed of costs, interest and attorneys fees. [ 8 ] It is this default judgment that the trial judge refused to recognize and to declare enforceable in Quebec against the respondent. * * * * * [ 9 ] A foreign judgment is recognized and, where applicable, declared enforceable, unless one of the six exceptions enunciated in

article 3155 C.C.Q. is engaged. In Canada Post Corp. v. Lépine , [2] Justice LeBel summarized this provision as follows: [22] In accordance with the evolution of private international law, which seeks to facilitate the free flow of international trade, the basic principle laid down in art. 3155 C.C.Q. for all the rules in Title Four is that any decision rendered by a foreign authority must be recognized unless an exception applies.

The exceptions are limited : the decision maker had no jurisdiction, the decision is not final or enforceable, there has been a contravention of the fundamental principles of procedure, lis pendens applies, the outcome is inconsistent with international public order, and the judgment relates to taxation. […] [Emphasis added] [ 10 ] The case at hand revolves around the exception stated in art. 3155(1) C.C.Q. which provides that ”the Quebec court must find that the court of the country where the judgment was rendered had jurisdiction over the matter”, [3] in conformity with art. 3164 to 3168 C.C.Q. [ 11 ] More particularly, art. 3168 C.C.Q. sets out the rules applicable in personal actions of a patrimonial nature, as in the matter in dispute here.

It enunciates the six situations in which the jurisdiction of foreign authorities can be recognized under this provision:

In personal actions of a patrimonial nature, the jurisdiction of foreign authorities is recognized only in the following cases: (1) the defendant was domiciled in the State where the decision was rendered; (2) the defendant possessed an establishment in the State where the decision was rendered and the dispute relates to its activities in that State; (3) injury was suffered in the State where the decision was rendered and it resulted from a fault which was committed in that State or from an injurious act which occurred there; (4) the obligations arising from a contract were to be performed in that State; (5) the parties have submitted to the foreign authorities the present or future disputes between themselves arising out of a specific legal relationship; however, renunciation by a consumer or a worker of the jurisdiction of the authority of his place of domicile may not be set up against him; (6) the defendant has submitted to the jurisdiction of the foreign authorities. 3168.

Dans les actions personnelles à caractère patrimonial, la compétence des autorités étrangères n'est reconnue que dans les cas suivants :

(1) Le défendeur était domicilié dans l'État où la décision a été rendue; ( 2) Le défendeur avait un établissement dans l'État où la décision a été rendue et la contestation est relative à son activité dans cet État;

(3) Un préjudice a été subi dans l'État où la décision a été rendue et il résulte d'une faute qui y a été commise ou d'un fait dommageable qui s'y est produit;

(4) Les obligations découlant d'un contrat devaient y être exécutées;

(5) Les parties leur ont soumis les litiges nés ou à naître entre elles à l'occasion d'un rapport de droit déterminé; cependant, la renonciation du consommateur ou du travailleur à la compétence de l'autorité de son domicile ne peut lui être opposée;

(6) Le défendeur a reconnu leur compétence. [ 12 ] In addition to establishing the jurisdiction of the foreign authority pursuant to art. 3168 C.C.Q ., art. 3164 C.C.Q . also requires the existence of a substantial connection between the dispute and the said foreign authority. [4] [ 13 ] It is the responsibility of the Quebec authority to determine if the foreign authority had jurisdiction over the matter. In Iraq (State of) c.

Heerema Zwijndrecht, b.v. , [5] the Court wrote: [15] Il appartient, par ailleurs, au tribunal saisi de la demande de reconnaissance d’examiner la preuve soumise pour s’assurer que le tribunal étranger avait compétence sur la matière. […] [ 14 ] In doing so, the Quebec authority must limit itself to verifying whether the criteria for recognizing the foreign decision have been met, without reviewing the merits of the case or retry it. [6] Art. 3158 C.C.Q . states that: 3158.

The Quebec authority confines itself to verifying whether the decision with respect to which recongnition or enforcement is sought meets the requirements prescribed in this Title, without considering the merits of the decision . 3158. L’autorité québécoise se limite à vérifier si la décision dont la reconnaissance ou l’exécution est demandée remplit les conditions prévues au présent titre, sans procéder à l’examen au fond de cette décision. [ 15 ] The appellants argue that the trial judge erred by re-examining the merits of the case decided in Vermont contrary to art. 3158 C.C.Q.

They further argue that she erred in concluding that additional evidence needed to be adduced before her so as to enable her to recognize the jurisdiction of the District Court with regard to the respondent. Finally, they state that she should have concluded that the District Court had jurisdiction over the respondent since it applied the doctrine of alter ego to lift the corporate veil in order to find him personally liable.

Therefore, under the mirror principle set out in art. 3164 C.C.Q. , they alleged that “[…] if Quebec tribunals can apply the doctrine of alter ego to affirm their jurisdiction over the foreign alter ego of a Quebec corporation, the Quebec courts must equally respect a foreign tribunal’s determination that it holds jurisdiction over the Quebec alter ego of a corporation registered in their jurisdiction”. [7] * * * [ 16 ] The trial judge correctly asked herself whether the District Court had jurisdiction over the respondent pursuant to art. 3168 and 3164 C.C.Q.

Art. 3158 C.C.Q. requires her to do so. [ 17 ] In Mutual Trust Co. c. St-Cyr , [8] Justice Rousseau-Houle underlined in these terms the limits of the Quebec authority’s powers to review a foreign judgment:

L'article 3158 prévoit que le juge québécois ne peut dorénavant que vérifier si la décision dont on demande la reconnaissance ou l'exécution remplit les conditions posées à l'article 3155. Il ne peut donc ainsi examiner que les aspects du fond de la décision qui se

rapportent à la compétence internationale indirecte du juge étranger , à la finalité du jugement et à sa conformité avec l'ordre public international. [Emphasis added; reference omitted] [ 18 ] When commenting on art. 3520 [9] of the draft legislation leading to the revision of the Civil Code of Quebec [10] ( i.e. the present art. 3158 C.C.Q. ), Professors Talpis and Goldstein circumscribed the role of a Quebec authority with regard to its review of a foreign judgment as follows: L’article 3520 précise que la révision au fond du jugement étranger est exclue en principe 249 .

Cependant, on doit faire remarquer que le juge québécois réexamine au fond les appréciations du juge étranger, en mettant en œuvre certaines conditions de reconnaissance ou d’exécution 250 . En effet, il est impossible de supprimer tout examen au fond de la décision car le contrôle de certaines conditions de la reconnaissance ne peut s’exercer effectivement que si le juge québécois réexamine la qualification des faits par son collègue étranger. […].

Si l’une des parties à l’action en exécution au Québec conteste la compétence du juge ontarien, le tribunal québécois ne pourra pas se fier à l’appréciation ontarienne du domicile, mais devra examiner à nouveau les faits pour savoir si à ses yeux – selon les règles de compétence indirecte québécoise – le défendeur était bien domicilié en Ontario. Cette nouvelle appréciation des faits par le juge québécois est normale parce que le juge ontarien ne se préoccupait pas des règles de compétence internationale indirecte québécoise 252 .

Le tribunal québécois ne peut être lié à ce sujet par l’application étrangère des faits, sinon tout contrôle de la compétence indirecte deviendrait formel 253 . Donc, on ne doit pas assimiler absence de révision au fond et absence d’appréciation du jugement étranger au fond.

Le tribunal québécois conserve également un droit critique sur le travail de son collègue étranger en matière d’ordre public, procédural ou autre, comme nous allons nous en rendre compte un peu plus loin. [11] ___________________ 249 Art. 3520 al. 1: “Le tribunal du Québec se borne à vérifier si la décision dont la reconnaissance ou l’exécution est demandée remplit les conditions prévues au présent Titre, sans procéder à l’examen au fond de cette décision.” 250 Voir la communication de D.HOLLEAUX, “Les conséquences de la prohibition de la révision, Trav. Com. Fr.

D.i.-. 1980-81 C.N.R.S., Paris, 1981, 53, p.57. 251 […] 252 V. Holleaux , Id., p. 58-59. 253 Voir en ce sens les excellents Commentaires du Projet de Code civil ( Op. cit., supra, note 1) p. 1010 à l’effet que le juge québécois n’est pas lié par les “qualifications juridiques données aux faits [sur lesquels le tribunal d’origine a fondé sa compétence] par le tribunal étranger.

Encore moins, le juge québécois est-il lié par l’interprétation donnée aux règles de droit appliqués par le tribunal étranger pour fonder sa compétence internationale .” [Emphasis added] [ 19 ] Authors Serge Gaudet and Patrick Ferland share the same view: Essentiellement, le tribunal saisi d’une demande d’ exequatur doit donc prendre le jugement tel quel et déterminer, sur la simple base des conditions énoncées par le

titre quatrième, s’il convient d’en reconnaître ou non le dispositif à l’encontre du défendeur.

Le principe de non-intervention à l’égard du bien-fondé de la décision n’a toutefois pas pour effet de priver le tribunal québécois du droit de vérifier l’existence des conditions requises pour fonder la compétence de l’autorité étrangère ayant rendu la décision (domicile du défendeur ou survenance d’une faute ou d’une préjudice dans la juridiction, par exemple). [12] [Emphasis added] [ 20 ] The trial judge examined all the situations contemplated by art. 3168 C.C.Q. , except par. 3168(3) C.C.Q. since both parties agreed that this provision was not applicable. [13] .

She determined that there was no evidence in the record that would allow her to conclude that the District Court had jurisdiction over the respondent under art. 3168 C.C.Q . based on the doctrine of alter ego and the piercing of the corporate veil. Taking into account the particular circumstances of this case, the appellants have not convinced us that this conclusion is wrong in law or vitiated by a palpable and overriding error. [ 21 ] Art. 2822 C.C.Q . is of no assistance to the appellants in the particular circumstances of this case. An oral hearing was held before the District Court.

Its content was not reproduced in the record. The District Court gave neither reasons nor findings of facts to support its award against the respondent. The trial judge was accordingly unaware of the evidence that may have been adduced, if any, and equally unaware of the content of such evidence, if any. [ 22 ] Furthermore, the respondent was neither a party to the purchase orders with the appellant Zimmermann nor to the Settlement agreement.

The record does not establish the respondent’s role in BEC (except to show that he was a shareholder and acted as BEC’s Secretary in 2010), nor did it identify any fraud, abuse of right or contravention of a rule of public order that would have allowed the piercing of the corporate veil (art. 317 C.C.Q.) .

Therefore, in these circumstances, even it the jurisdiction of the District Court over BEC could have been recognized under art. 3168 C.C.Q., it does not follow that the District Court had jurisdiction over the respondent Barer. [ 23 ] Given that the District Court’s jurisdiction over the respondent had not been established, the trial judge correctly dismissed the

appellants’ motion in accordance with

article 3155 C.C.Q. [ 24 ] In light of this conclusion, there is no need to address the appelants’ other arguments. FOR THESE REASONS, THE COURT : [ 25 ] DISMISSES the appeal, with legal costs. FRANÇOIS DOYON, J.A. MANON SAVARD, J.A. ROBERT M. MAINVILLE, J.A.