Supreme Court of Canada Clarifies “Carrying on Business” Standard for Enforcement of Foreign Judgments

In our increasingly globalized world where businesses can easily operate virtually, the question of whether a company is “carrying on business” in Canada can be difficult to answer. The Supreme Court of Canada recently considered this issue in the context of enforcement of foreign judgments, and declined an invitation to make it easier for foreign creditors to seize assets in Canada to satisfy debts incurred outside of Canada. In H.M.B. Holdings Ltd. v. Antigua and Barbuda, the Supreme Court held that to be “carrying on business” in a jurisdiction requires some kind of actual presence, whether direct or indirect. A physical presence in the form of maintenance of physical premises will be compelling, and a virtual presence that falls short of an actual presence will not suffice.

Background

H.M.B. Holdings concerned efforts by a creditor to enforce in Ontario a multi-million dollar foreign judgment against the Antiguan government it received in May 2014. The foreign judgment resulted from an expropriation by the Antiguan government of a resort property in Antigua owned by H.M.B. Holdings Limited.

In October 2016, H.M.B. Holdings Limited brought a proceeding to enforce the foreign judgment in B.C., even though the Antiguan government did not have any property or assets there nor any physical presence. The only connection to B.C. was that the Antiguan government had contracts with four businesses in B.C. that were to be paid a finder’s fee to direct applicants to a program of the Antiguan government that effectively granted citizenship to investors in exchange for making a monetary investment in Antigua under its Citizenship by Investment Program (CIP).

B.C.’s Limitation Act provides for a ten-year limitation period to enforce a foreign judgment, while Ontario’s Limitations Act, 2002 provides for a much shorter two-year limitation period. In this way, the enforcement proceeding in B.C. was not time-barred, but would have been time-barred had it been brought in Ontario. The Antiguan government did not resist having the Antiguan judgment enforced in B.C., and a B.C. default judgment was issued in 2017.

Decisions Below

Supreme Court of Canada Decision

The Supreme Court held that to determine under the REJA whether a defendant is carrying on business in a jurisdiction requires a fact-based inquiry into whether it has some direct or indirect presence in the jurisdiction, accompanied by a degree of business activity that is sustained for a period of time. Some kind of actual presence, whether direct or indirect, is required. A physical presence in the form of maintenance of physical premises will be compelling, and a virtual presence that falls short of an actual presence will not suffice. The Supreme Court also directed courts when analyzing this issue to consider various non-exhaustive indicia, including:

• whether or not the fixed place of business from which the representative operates was originally acquired to enable them to act on behalf of the foreign corporation;
• whether the foreign corporation has directly reimbursed the representative for the cost of their accommodation at the fixed place of business and the cost of their staff;
• what other contributions, if any, the foreign corporation makes to the financing of the business carried on by the representative;
• how the representative is remunerated;
• what degree of control the foreign corporation exercises over the running of the business conducted by the representative;
• whether, and if so how, the representative displays the foreign corporation’s name at their premises or on their stationery;
• what business, if any, the representative transacts as principal exclusively on their own behalf; and
• whether the representative makes contracts with customers or other third parties in the name of the foreign corporation or otherwise in such manner as to bind it.

The Supreme Court did not disturb the findings of fact below that Antigua was not carrying on business in B.C. In the result, the Supreme Court dismissed the appeal.

The majority of the Supreme Court declined to answer the question of whether a derivative judgment can be enforced under the REJA. It left that question to be resolved in future litigation (although, notably, Côté J. in a concurring opinion indicated she would have held that derivative judgments can be enforced under the REJA).

Concluding Remarks

While the decision in H.M.B. Holdings shows there are limits on what can properly be considered “carrying on business” in Canada for purposes of enforcing foreign judgments, that determination is very fact specific.

For more information concerning H.M.B. Holdings or issues involving enforcement of foreign judgments or carrying on business in Canada, please contact any member of our Dispute Resolution Group.