The recent Court of Appeal for Ontario decision in CIMA Plastics Corporation v. Sandid Enterprises Ltd., 2011 ONCA 589, offers an object lesson on how to lose the “race to the courthouse” in parallel proceedings by failing to challenge the jurisdiction of the foreign court.
By way of background, Sandid, an Ontario company, contracted with an Illinois company, Pro Tech Plastics, Inc. (“Pro Tech”), to act as Pro Tech’s Ontario sales agent and sell Pro Tech’s goods to Ontario customers in Canada. Sandid obtained a judgment against Pro Tech in Ontario for unpaid sales commissions and then commenced garnishment proceedings against Pro Tech’s Ontario customer who owed Pro Tech money.
Sandid brought a motion in Ontario pursuant to Rule 60.08(16) seeking a “determination as to the entitlement of the parties to the proceeds currently being held in trust by the solicitor for the garnishee…” against Omron Dualtec Automotive Electronics Inc. (“Omron”) which was holding the total sum of $134,164.52 claimed by Sandid in trust in its solicitor’s account. Sandid’s claim was based upon a prior costs award and a partial default judgment, both of which it obtained in Ontario against Pro Tech.
CIMA Plastics Corporation (“CIMA”), an Illinois corporation, also claimed entitlement to the trust funds.
Before Sandid obtained the Ontario judgment, CIMA obtained an assignment of Pro Tech’s accounts receivable in Illinois for the benefit of Pro Tech’s creditors, becoming the assignee of the debt owing by Omron to Pro Tech.
In the Ontario garnishment motion proceedings, Omron, the garnishee, acknowledged owing Pro Tech or its assignee the funds held in trust, but did not know which of the two claiming parties to pay.
Little, J. of the Ontario Superior Court dismissed Sandid’s motion and held:
 The risk in this case is real, as apparently CIMA has already sued the garnishee in the existing Illinois lawsuit and, counsel for the garnishee advises me that Omron has exigable assets in the United States.
 I have no evidence before me which would indicate that the assignment/sale of Pro Tech’s assets, including its accounts receivable, to CIMA in Illinois was invalid. There is nothing to indicate that CIMA was anything but a bona fide purchaser/assignee for value. I am unable to conclude that the trust funds are those of Pro Tech and subject to the two garnishees in question.
 As a result, no order for a garnishment will issue as there is a real risk of double payment. The entitlement issue seems to me to be one best decided in Illinois, as it deals with the interpretation of the legislation of that state. I acknowledge that this may now be difficult as a result of an apparent default judgment having now been obtained by CIMA as against Sandid in the existing Illinois proceedings. However, since the garnishee is a defendant in the Illinois action and there has not, as yet, been any determination in that jurisdiction relating to its liability for payment of the trust funds to CIMA, I rely upon the provisions of Rule 60.08 (16) (d) in determining that the garnishee should continue to have the funds held in trust by its counsel until such time as a judgment or order of any court is issued directing payment of the same.
CIMA then instituted proceedings in Illinois claiming entitlement to the trust funds in question and also sued Sandid for for tortious interference with an existing business agreement and abuse of process, thereby putting Sandid on notice that the money it sought to garnish from the Ontario creditor was owed to it and not Pro Tech. Ultimately, the creditor paid the money to CIMA and the Illinois judgment against Sandid was reduced to reflect only CIMA’s legal fees and finance charges.
As the Court of Appeal for Ontario notes:
“…While Sandid initially sought to challenge the jurisdiction of the Illinois court, the Illinois judge advised that it was required to enter an appearance in order to argue a lack of jurisdiction. Sandid chose not to do so.
CIMA then commenced enforcement proceedings against Sandid in Ontario and moved for summary judgment to enforce the Illinois default judgment, which Ontario Superior Court Justice Hugh K. O’Connell granted in the amount of $88,995.97 US plus prejudgment interest plus costs of $5000.
Sandid appealed relying on three arguments:
1. There was no evidence to prove the foreign judgement.
2.The motion judge erred in granting judgment to enforce the Illinois judgment as there was no real and substantial connection between Illinois and the appellant or between Illinois and the causes of action in the claim.
3. The motion judge erred because it was contrary to public policy to recognize the Illinois judgment.
In a per curiam endorsement, the Ontario Court of Appeal dismissed the appeal.
With respect to proof the foreign judgment, the panel noted that affidavit evidence and the attached exhibits provided evidence to support the motion judge’s finding, but that “[i]n any event, this challenge was not raised below and was not seriously pursued in oral argument.”
The Court of Appeal then turned to the motion judge’s jurisdictional analysis and application of the “real and substantial connection” test, following the Supreme Court of Canada decision in Beals v. Saldanha,  3 S.C.R. 416, at paras 28- 29 and the reformulated test in Van Breda v. Village Resorts Ltd. (2010), 98 O.R. (3d) 721 (C.A.), leave to appeal to S.C.C. granted,  S.C.C.A. No. 174;  S.C.C.A. No. 114, heard and reserved March 21, 2011 (at para. 84). The Court of Appeal observes,
 In assessing the real and substantial connection test, the motion judge turned first to what he understood to be the Illinois judge’s reasons for determining that Illinois had jurisdiction to issue default judgment. It appears that the Illinois judge sought submissions on jurisdiction before granting default judgment. However, it is common ground that the Illinois judge gave no reasons for his decision. The motion judge appears to have been referring to counsel’s submissions in support of the motion.
 The motion judge correctly noted that he was not bound by the Illinois judge’s determination of jurisdiction. However, the motion judge ultimately adopted a number of the ‘statements’ he attributed to the Illinois judge in finding that a real and substantial connection with Illinois had been established. To that extent, given the absence of reasons by the Illinois judge, the motion judge erred in considering the Illinois judge’s “reasons” as findings relating to jurisdiction.
 The motion judge acknowledged that Sandid had no connection with Illinois other than acting as a sales representative in Ontario, for Pro Tech, an Illinois company for six years. In finding a real and substantial connection, the motion judge relied upon the fact that the originating contract between Sandid and Pro Tech involved an Illinois company and a Canadian/American agreement. The motion judge found that the appellant’s action in Ontario and the garnishment were irrelevant to the issue of whether there was a real and substantial connection between the Illinois and the action brought in Illinois.
 While the motion judge correctly articulated the law, he did not specifically consider the nature of the causes of action in the Illinois claim. In our view, the motion judge erred in finding that the appellant’s Ontario action and garnishment were irrelevant to the issue of whether there was a real and substantial connection between Illinois and the claim for tortious interference with an existing business agreement and for abuse of process. The garnishment in Ontario formed the basis of the causes of action in the Illinois action.
 We acknowledge that the connection between Illinois and the defendant is not strong. It is clear that Sandid had no business relationship with Cemi. Cemi simply purchased the accounts receivable from Pro Tech. Furthermore, the conduct of the defendant in issue, Sandid’s pursuit of garnishment proceedings in Ontario, occurred entirely outside Illinois. The connections relied upon by the motion judge all related to Sandid’s connection to Illinois in the underlying business relationship with Pro Tech that gave rise to the Ontario judgment against Pro Tech and the ensuing garnishment of its former creditor. Even in the underlying relationship, it is clear that Sandid never went to Illinois, he acted as sales representative for Pro Tech in Ontario for Ontario customers.
 However, given the real and substantial connection between Illinois and the plaintiff’s claim, the fact that the connection between Illinois and the Ontario defendant is not strong is not determinative. As noted by the Supreme Court of Canada in Beals, at para. 23, “[a] substantial connection with the subject matter of the action will satisfy the real and substantial connection test even in the absence of such a connection with the defendant to the action.”
Finally, the Court of Appeal panel rejected Sandid’s “public policy” defence, agreeing with CIMA’s submission that it was “essentially a challenge to the merits of the plaintiff’s claim in the foreign judgment” and that it was not “contrary to the ‘Canadian concept of justice’ or to our ‘basic view of morality’.”
Aside from failing to avoid default judgment in Illinois, it appears as though Sandid did not take steps to enforce its costs order and partial judgment in Illinois. Perhaps if Sandid had challenged jurisdiction in Illinois and also brought a declaratory action against CIMA in Ontario that the assignment was invalid, it may have won the “race to the courthouse”. Then again, Sandid was never really “in the race”, as it failed to name CIMA in the garnishment proceedings. Furthermore, considering the relatively modest amount at stake, Sandid should have simply challenged Pro Tech’s assignment of its accounts receivable to Pro Tech in its capacity as a judgment creditor.