Enforcement of Foreign Judgements: SCC Grants Leave to Appeal in Lanfer v. Eilers
On March 3, 2022, the Supreme Court of Canada (“SCC” or “the Court”) granted leave to appeal in the case of Lanfer v. Eilers, a ruling from the British Columbia Court of Appeal, 2021 BCCA 241 [Eilers]. The SCC will rule on whether a foreign judgement granting the remedy of specific performance for the transfer of a British Columbia property is enforceable.
Facts of the Case
A court in Germany granted an order for specific performance to Christianne Lanfer, Inge Otten, Christine Lanfer and Hermann Lanfer (“Plaintiffs”). The order required Kerstin Eilers (“Ms. Eilers”) to transfer ownership of a British Columbia property to the Plaintiffs. Shortly thereafter, Ms. Eilers mortgaged the property for $1 million and then went on to sell the property for $2.9 million, which ultimately did not end up closing (Eilers, paras 7-11).
In April 2020, the Plaintiffs commenced an action seeking registration of the German judgement in the Supreme Court of British Columbia. The chambers judge dismissed the application on the basis of a previous SCC decision, namely Duke v. Andler, 1932 S.C.R. 734 [Duke] (Eilers, paras 12-13).
The Duke Decision
In the Duke decision, there was a contract to sell land in British Columbia. However, the parties resided in California and entered into the contract there. The purchaser breached the contract, and the vendor obtained a judgement from a California court granting the vendor the remedy of specific performance for the reconveyance of the land to the vendor. The purchaser failed to comply with the California court decision (Eilers, paras 46-49). When heard by the SCC, the Court refused to enforce the California court judgement on the basis of the foreign immovable rule. The SCC endorsed the foreign immovable rule, which states:
“…if a court pronounce a judgment affecting land out of the jurisdiction, the courts of the country where it is situated — and, it is presumed, also the courts of any other country — are justified in refusing to be bound by it, or to recognize it; and this even if the judgment proceed on the lex loci rei sitae.
This rule is merely an application of a more general principle that no court ought to give a judgment the enforcement w hereof lies beyond the court’s power, and especially if it would bring the court into conflict with the admitted authority of a foreign sovereign, or what is the same thing, the jurisdiction of a foreign court.” (Eilers, para 53).
As a result, the foreign immovable rule holds that a “court of a foreign country has no jurisdiction to adjudicate upon the title to, or the right to possession of, any immovable situated outside that country” (Eilers, para 14). The foreign immovable rule makes it so that non-monetary judgements are not similarly recognized and enforced (Eilers, para 14). On the basis of the Duke decision rendered by the SCC, the British Columbia Supreme Court refused to enforce the German court judgement because of the foreign immovable rule.
The British Columbia Court of Appeal’s Ruling
After the British Columbia Supreme Court’s decision, the Plaintiffs were granted an appeal to the British Columbia Court of Appeal. The British Columbia Court of Appeal was tasked with ruling on whether recent case law developments, namely the decision of Pro Swing Inc. v. Elta Golf Inc., 2006 SCC 52 [Pro Swing], had overtaken the precedent set out by the Duke decision. In the Pro Swing decision, the SCC held “that Canadian courts may recognize and enforce foreign non-money judgments provided certain criteria are satisfied.” (Eilers, para 2). As set out by the Pro Swing decision, in order for foreign non-monetary judgements to be enforceable, they must meet the requirements set out for monetary judgements, as well as other criteria. Based on the British Columbia Court of Appeal’s interpretation of the Pro Swing decision, it held that the Pro Swing decision had overtaken the law set out by the Duke decision governing the recognition and enforcement of non-monetary judgements. The decision of Pro Swing holds that the recognition and enforcement of foreign monetary and non-monetary judgements requires the same analysis, with non-monetary judgements requiring an additional set of considerations when analyzing whether a foreign non-monetary judgement ought to be recognized and/or enforced (Eilers, paras 28-29).
The decision of Pro Swing calls for a vigilant approach to enforcing foreign non-monetary judgements. This approach gives a Judge the discretion to decline enforcing a foreign non-monetary judgements because “it is not of a nature that comity requires the domestic court to enforce” (Eilers, para 72). To expand on this further, the Court in Pro Swing held that:
“Comity is a balancing exercise. The relevant considerations are respect for a nation’s acts, international duty, convenience and protection of a nation’s citizens. Where equitable orders are concerned, courts must take care not to emphasize the factor of respect for a nation’s acts to the point of imbalance. An equitable order triggers considerations of both convenience for the enforcing state and protection of its judicial system.” (Pro Swing, para 27).
If this consideration and the other considerations set out in Pro Swing is met, the British Columbia Court of Appeal held that a foreign order for specific performance of an immovable property can be recognized and enforced in the province of British Columbia (Eilers, para 74). In applying the law set out by the decision of Pro Swing to the case at bar, the British Columbia Court of Appeal held that the Germany court judgement is enforceable as it meets the requirements set out in Pro Swing. The Germany court judgement was made by a court with jurisdictional competence, the judgement does not reach in any inappropriate way into the principles of the Canadian judicial system, and the case does not fall under any of the exceptions where a foreign non-monetary judgement should not be enforced (Eilers, paras 85-87). The British Columbia Court of Appeal allowed the appeal and held that the German court judgement should be registered and enforced, granting the Plaintiffs an order vesting title to the British Columbia property owned by Ms. Eilers (Eilers, para 103).
As stated previously, the foreign immovable rule holds that a “court of a foreign country has no jurisdiction to adjudicate upon the title to, or the right to possession of, any immovable situated outside that country” (Eilers, para 14). Despite the fact that the British Columbia Court of Appeal held that the Pro Swing decision has overtaken the rule set out in the Duke decision, it still characterized land as “a cornerstone of territorial sovereignty.” (Eilers, para 79).
At the same time however, the British Columbia Court of Appeal recognized that “land is increasingly traded like any other market commodity and the flow of people, wealth and skills across borders has made it common for individuals to buy, own, and sell land in foreign jurisdictions.” (Eilers, para 79). It is clear that the latter approach was adopted, in that land is being recognized just like any other market commodity and there is a shift in not distinguishing between foreign monetary and non-monetary judgements.
It can be argued that the approach set out by the SCC in the decision of Pro Swing was not meant to overtake the decision of Duke. This is because the decision of Pro Swing was about recognizing and enforcing non-monetary orders, which did not have anything to do relating to the transfer of land or the remedy of specific performance.
In ruling that the decision of Pro Swing had overtaken the decision of Duke, the British Columbia Court of Appeal failed to recognize the importance of land as “a cornerstone of territorial sovereignty” given that it is the greatest form of immovable property under the foreign immovable rule (Eilers, para 79). In accordance with the longstanding precedent set by the Duke decision and the Court’s endorsement of the foreign immovable rule, there has always been a special character inherent to land in recognizing and enforcing foreign non-monetary judgements.
In granting leave to appeal in the Eilers case, the SCC will be tasked with ruling on whether the Pro Swing decision has overtaken the longstanding Duke decision. If the Court decides that the case of Pro Swing is the current law in Canada and was meant to overtake the decision of Duke, the SCC should consider adding additional factors to the test set out by Pro Swing in assessing the enforceability of foreign non-monetary judgements.