Ontario Court of Appeal declines to stay execution of foreign judgment pending appeal

The Court of Appeal for Ontario in Tiernan v. Dietrich, 2011 ONCA 263 has declined to stay execution of a foreign judgment pending appeal. The matter involves an action to enforce a judgment obtained in Michigan against the defendant, a former Michigan attorney.

The plaintiff sued his former attorney in May 2007, and after a 3½-week jury trial, obtained a judgment in Michigan against him for approximately $2.1 million.  The plaintiff then sought to  enforce the judgment in Ontario by executing against a property in Kincardine, valued at $525,000, owned by the defendant.  In November 2008, the defendant made an assignment in bankruptcy in Michigan and on the same day, conveyed title to the Kincardine property to his grandson for nominal consideration, later arranging for his grandson to grant a life interest in the Kincardine property to the defendant’s former wife.

In June 2010, a judge in the United States Bankruptcy Court in Michigan declared the conveyance to the grandson to be fraudulent and void, holding the property belonged to the bankruptcy estate subject to Tiernan’s lien rights.

Pursuant to Minutes of Settlement, incorporated into the order of O’Connell J., of the Ontario Superior Court of Justice dated November 16, 2007, the parties previously agreed that the Michigan judgment against the defendant was to be “registered” in Ontario as a judgment of the Superior Court.  However, under paragraph 2 of the order, enforcement of the judgment was stayed pending  appeal in the State of Michigan, which eventually was dismissed by the Court of Appeals for the State of Michigan. The defendant thereafter sought leave to appeal of the dismissal to the Michigan Supreme Court, while the plaintiff moved to  set aside the stay of the enforcement of the Ontario judgment ordered by O’Connell J. Murray J. of the Ontario Superior Court of Justice lifted the stay of the enforcement of the Michigan judgment in Ontario.  The defendant then appealed Murray J.’s order to the Court of Appeal for Ontario.

Laskin J.A. (in Chambers) dismissed both the defendant’s  motion to stay enforcement and ordered security for costs against the defendant. Justice Laskin held that the defendant’s appeal to reinstate the stay that Murray J. lifted was not automatically stayed pending appeal. Furthermore, Laskin, J.A. held:

[9]              And, in my opinion, Dietrich’s request for a stay has no merit for the simple reason that he has no interest in the Kincardine property.  His bankruptcy estate controls title to the property.  Even if I were to disregard the bankruptcy proceedings in Michigan, Dietrich himself voluntarily conveyed title to the Kincardine property to his grandson.  On either basis, he has no standing to claim a stay of enforcement proceedings against that property.  Accordingly, his motion for a stay is dismissed.

With regard to security for costs of the appeal, the Court of Appeal noted that Rule 61.06(1)(a) of the Rules of Civil Procedure provides that a judge of that court may order security for costs where there is good reason to believe that the appeal is frivolous and vexatious and that the appellant has insufficient assets to pay the costs of the appeal.  Tiernan met both prongs of rule 61.06(1)(a), including his failure to pay three outstanding costs orders. As Justice Laskin concludes:

[11]         I see no merit in Dietrich’s appeal.  His appeal in Michigan was dismissed.  That dismissal justifies lifting the stay ordered by O’Connell J.  Dietrich’s motion for leave to the Michigan Supreme Court does not afford any basis to overturn Murray J.’s order.  The order of O’Connell J. contemplated solely the appeal to the Michigan Court of Appeals, and Dietrich was unsuccessful on that appeal.

[12]         Dietrich has no assets in Ontario.  He has failed to pay three costs orders.  He conveyed away the Kincardine property, which apparently was his sole asset in this province.  Even if he had maintained title to it, the value of the property is but one quarter of the judgment against him.

[13]         Thus, in my view, Tiernan is entitled to an order for security for costs.  He has not filed a proposed bill of costs.  I order that Dietrich pay $5,000 for security for the costs of the appeal.  That amount must be paid at least seven days before the hearing of the appeal.

[14]         Tiernan is entitled to the costs of these motions, which I fix in the amount of $750, inclusive of disbursements and applicable taxes.

A couple of points to consider.

First, I am uncertain why the Court of Appeal continues to use the term “registration” of a foreign judgment in circumstances outwith any reciprocal enforcement legislation. My preference is that once a foreign judgment is deemed enforceable by an Ontario court, it is then converted or domesticated into an Ontario judgment. There is no registration procedure available unless the foreign judgment falls under either the Reciprocal Enforcement of Judgments (U.K.) Act, R.S.O. 1990, c. R.6 or is an inter-provincial judgment governed by the Reciprocal Enforcement of Judgments Act, R.S.O. 1990, c. R.5.

Second, whether a Michigan bankruptcy court has jurisdiction over a bankrupt’s real estate located in Ontario depends on whether the fraud exception applies. The conflict of laws rule is that a foreign court generally has no subject-matter jurisdiction over foreign real property (foreign immovables) following the Mocambique Rule. See my article, Staking Claims Against Foreign Defendants in Canada: Choice of Law and Jurisdiction Issues Arising from the in Personam Exception to the Mocambique Rule for Foreign Immovables (2009) 35 Adv. Q. 230.

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