Judgments

• Author: International Law Group

Defendant, Rene Hamouth, a Vancouver, British Columbia, businessman, borrowed $300,000 from plaintiff Lev Zaidenberg, a New York citizen. The loan was secured by a way of a promissory note, the terms of which required repayment by June 2, 2001. Plaintiff sued for payment in New York federal court. When defendant failed to defend the New York action, the court entered default judgment in favor of plaintiff for $316,588. (A-1).

Plaintiff then sought recognition and enforcement of the A-1 judgment in a British Columbia (B.C.) court (A-2); defendant responded by alleging that plaintiff had fraudulently induced him to enter into an oral loan agreement with plaintiff. Defendant argued that, in A-1, neither side had disclosed the fraudulent conduct to the New York court and that a plea of fraud prevented the B.C. courts from enforcing the A-1 judgment. The trial court rejected defendant's claims, ruling that the type of alleged fraud was no defense to the enforcement of the foreign judgment in British Columbia. Defendant appealed but the British Columbia Court of Appeal (B.C.C.A.) affirms.

The B.C.C.A. holds that the New York court had jurisdiction over A- 1. The promissory note stated that New York law shall control and that all disputes shall go exclusively to the New York state or federal courts. The Court observes that "parties to an action continue to be free to select or accept the jurisdiction in which their dispute is to be resolved by upturning or agreeing to the jurisdiction of a foreign court." [¶ 19]

The Court notes that several Canadian Courts of Appeal differ as to whether a plea of fraud can defeat the enforcement of a foreign judgment. For instance, the positions of the appellate courts of British Columbia and Ontario hinged on the distinction between "intrinsic fraud" or "fraud which goes to the merits of the case and to the existence of a cause of action" and "extrinsic fraud" or "fraud going to the jurisdiction of the issuing court or the kind of fraud that misleads the court, foreign or domestic, into believing that it has jurisdiction over the cause of action." [¶ 24]

As the B.C.C.A. explains: "The courts in British Columbia have maintained a strict approach to the defense of fraud, holding that only extrinsic fraud can be raised as a defense in defense of the enforcement of a foreign judgment. The trial judges below...