H.M.B. Holdings Ltd. v. Antigua and Barbuda: SCC Clarifies Definition of “Carrying on Business”
On November 4, 2021, the Supreme Court of Canada (“SCC” or “the Court”) released the decision of H.M.B. Holdings Ltd. v. Antigua and Barbuda, 2021 SCC 44 [H.M.B. Holdings]. In an increasingly virtual world, it can be difficult to determine whether a company is “carrying on business” in Canada. The SCC considered this issue in H.M.B. Holdings and in doing so, clarified the definition of “carrying on business” in Canada.
Facts of the Case
In 2014, the Judicial Committee of the Privy Council of Antigua and Barbuda (“Antigua”) ordered Antigua to compensate H.M.B. Holdings Limited (“H.M.B.”) for expropriation of a property owned by H.M.B. (H.M.B. Holdings, para 3). In 2016, H.M.B. sought enforcement of the 2014 judgement in British Columbia. Antigua failed to defend the action, and as a result, H.M.B. obtained a default judgement for enforcement of the 2014 Judicial Committee of the Privy Council judgement. In 2018, H.M.B. filed an application in Ontario to enforce the British Columbia judgement by registering it under the Reciprocal Enforcement of Judgments Act, R.S.O. 1990, c. R.5 [REJA]. One of the provisions of the REJA at issue was s. 3(b), which states that:
“No judgment shall be ordered to be registered under this Act if it is shown to the registering court that the judgment debtor, being the defendant in the proceedings, was not duly served with the process of the original court and did not appear, despite the fact that the judgment debtor was ordinarily resident or was carrying on business within the jurisdiction of that court or agreed to submit to the jurisdiction of that court.” (REJA, s. 3(b)).
Therefore, to determine if the judicial decision could be enforced in Ontario, the Court first needed to decide whether Antigua carried on business in British Columbia.
Antigua’s relevant business activity in British Columbia was its Citizenship by Investment Program (“CIP”), which “aims to encourage investments in Antigua’s real estate, businesses and National Development Fund by granting citizenship to investors and their families in exchange for such investments” (H.M.B. Holdings, para 7). Antigua had contracts with four “Authorized Representatives” in British Columbia who facilitated the application process for CIP applicants and sent completed applications to the Citizenship Investment Unit (“CIU”), an Antiguan governmental agency responsible for administering the CIP (H.M.B. Holdings, para 9). The CIU did not have any physical presence in British Columbia in relation to CIP. Moreover, the CIU did not deal directly with any potential investors in British Columbia, nor did it advertise the investment program in British Columbia beyond its Authorized Representatives. The CIP Authorized Representatives did not partake in the CIU’s decision-making process and were only compensated with a finder’s fee for approved applications. The Court was tasked with determining whether this amounted to the Antiguan government carrying on business in British Columbia, as defined by the REJA.
At the Ontario Superior Court of Justice (H.M.B. Holdings Limited v. The Attorney General of Antigua and Barbuda, 2019 ONSC 1445), the application judge held that active advertising and an internet presence was not sufficient to meet the threshold of a corporation carrying on business in any particular jurisdiction. As a result, the application judge held that Antigua was not carrying on business in British Columbia as it did not have a physical presence in British Columbia and the Authorized Representatives were not licensed agents of the Antiguan Government. The application judge also held that the CIP program would not qualify as business activity and should only be viewed as a governmental program to incentivize citizenship. The application judge also noted that the Antiguan government was not targeting British Columbia in particular because of the fact that only 9 CIP applications came from persons born in Canada, from a total of 1,547 overall applications received. As a result, the application judge dismissed H.M.B.’s application to register the British Columbia judgement under REJA.
At the Ontario Court of Appeal (H.M.B. Holdings Limited v. The Attorney General of Antigua and Barbuda, 2020 ONCA 12), it was held that the application judge was owed deference in his factual finding that Antigua was not carrying on business in British Columbia. While H.M.B. argued that the Antiguan government employed four Authorized Representatives in executing its CIP program, this line of reasoning was not persuasive. Overall, the Ontario Court of Appeal dismissed the appeal and held that it would give deference to the application judge’s factual finding, holding that Antigua was not carrying on business in British Columbia.
The Supreme Court of Canada’s Ruling
The SCC found that the appeal was dismissed. The decision had two different camps, with all five-members of the panel dismissing the appeal. The majority reasoning included Chief Justice Wagner, Justices Karakatsanis, Rowe, and Kasirer, and a concurrent reasoning was written by Justice Côté. In its submissions to the Court, H.M.B. argued that s. 3(b) of the REJA required a “generous and liberal” interpretation (H.M.B. Holdings, para 20). According to H.M.B., the “marketing and selling of Antiguan citizenship” in British Columbia would qualify as “carrying on business” in the province. On the other hand, Antigua argued in its submissions that the application judge applied the correct test in his interpretation of s. 3(b) of the REJA.
In interpreting the definition of “carrying on business,” the majority decision written by Chief Justice Wagner held that determining whether a corporation is “carrying on business” is a question of fact and requires inquiring whether a corporation holds “some direct or indirect presence in the jurisdiction, accompanied by a degree of business activity that is sustained for a period of time” (H.M.B. Holdings, para 41). The Court held that some form of physical presence, regardless of whether it is direct or indirect, is necessary to establish if a company is “carrying on business” in any jurisdiction. Chief Justice Wagner further held that a virtual presence that does not qualify as an actual presence will not meet the threshold (H.M.B. Holdings, para 41). In conducting the analysis for whether a company is “carrying on business” in any particular jurisdiction, the Court provided a non-exhaustive list of factors to consider, including “whether or not the fixed place of business from which the representative operates was originally acquired for the purpose of enabling them to act on behalf of the foreign corporation” (H.M.B. Holdings, para 37). Chief Justice Wagner declined any appellate intervention as the finding of facts from the courts below did not demonstrate any palpable and overriding error (H.M.B. Holdings, para 44). As a result, Chief Justice Wagner dismissed the appeal and held that since Antigua did not have a physical presence in British Columbia, they were not “carrying on business” in the province of British Columbia for the purposes of s. 3(b) of the REJA.
An important point to note from Chief Justice Wagner’s majority judgement is the majority decision’s description of “derivative judgements,” where the majority held that the British Columbia Supreme Court judgement was a derivative judgement. Chief Justice Wagner defined derivative judgements as a “judgment that itself enforces a judgment of a non-reciprocating jurisdiction” (H.M.B. Holdings, para 25). According to s. 3(g) of the REJA, “the judgment debtor would have a good defence if an action were brought on the original judgment” [REJA, s.3(g)]. In this case, the majority found that the British Columbia Supreme Court judgement was a derivative judgement because the original decision was made by the Judicial Committee of the Privy Council (H.M.B. Holdings, para 15). As a result, only the original judgement can be deemed enforceable because the British Columbia judgement is merely a judgement that is enforcing a prior decision from a non-reciprocating jurisdiction. Doing otherwise would “circumvent Ontario’s statutory limitation period for the registration of foreign judgments, permitting H.M.B. to do indirectly what it cannot do directly” (H.M.B. Holdings, para 21). In Justice Côté’s concurring judgement, Justice Côté agreed with Chief Justice Wagner’s holding of dismissing the appeal and his interpretation of s. 3(b) of the REJA. However, the point of departure in Justice Côté’s concurring judgement was derivative judgements, where Justice Côté held that “derivative judgements” are enforceable under the REJA (H.M.B. Holdings, para 69).
Given the current state of global affairs, many would call into question the SCC’s reasoning in its decision of H.M.B. Holdings. The pandemic has caused many businesses to operate entirely virtually, with some businesses even having no physical presence whatsoever. Based on the SCC’s decision in H.M.B. Holdings, these entirely virtual businesses may not necessarily be considered to be “carrying on business” in a particular province. This is an increasingly important issue to consider as virtual businesses continue to grow, as it is important for enforcing judgements.
Businesses have the ability to sell goods and services anywhere in the world by virtue of the internet. For example, an American living in Canada while selling goods in Japan poses a major problem for ascertaining where the individual is carrying on its business. With the growth of digital businesses as described above, it is important that the SCC consider loosening its definition of “carrying on business” in favour of a more liberal interpretation to cater to the changing business landscape.
As the Court stated in its decision of H.M.B. Holdings, the REJA is intended to provide “an easy, economical and expedient route for enforcing foreign judgments” (H.M.B. Holdings, para 23). The process for registering a judgement is made easier by the REJA because it is a simpler process. At the same time however, the REJA presents unique challenges as well, as demonstrated by the judgement of H.M.B. Holdings. While the REJA has clear rules set out in its statute, judges are tasked with the responsibility of statutory interpretation of these very rules. While the Court made it clear in the decision of H.M.B. Holdings that “carrying on business” for the purposes of s. 3(b) of the REJA requires a physical presence of some sort, the Court still left up in the air the accurate interpretation for derivative judgements, especially after Justice Côté’s reasoning.
Overall, the SCC’s interpretation of s. 3(b) of the REJA will allow judgement creditors to be aware of any potential challenges they may face as a result of potential judgement debtors not “carrying on business” in a Canadian jurisdiction. While many may disagree with the SCC’s narrow interpretation of “carrying on business” for the purposes of s. 3(b) of the REJA, it will nevertheless provide companies clarity and assist them in their judgement enforcement strategies going forward.
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