Society of Lloyd's v. Berezowski, [2006] A.J. No. 1064

Society of Lloyd's v. Berezowski, [2006] A.J. No. 1064

Alberta Judgments

Alberta Court of Queen's Bench

Judicial District of Calgary

Master Laycock (In Chambers)

Heard: June 19, 2006.

Judgment: August 23, 2006.

Docket No. 0201 21181

IN THE MATTER OF the International Conventions Implementation Act (R.S.A. 2000 c. I-6) AND IN THE MATTER OF the Judgment of the Commercial Court of The Queen's Bench Division, High Court of Justice (England) Dated the 24th day of June, 1997 obtained by the Society of Lloyd's against Duane B. Berezowski

(46 paras.)

Case Summary

International law and conflict of law — Conflict of laws — Foreign judgments — Recognition of judgments of foreign state — Application by judgment creditor to domestically register an English default judgment allowed — The respondent argued that the application was statute-barred, that he was never served with the English writ, and that he had an arguable defence — The court held that the application to register was within the requisite six-year time limit — Service was properly effected because the applicant was within its rights to serve the writ on a substitute agent — The respondent had an opportunity to advance his defence in England if he moved to set aside the judgment — International Conventions Implementation Act, Articles IV(2), IV(4).

Statutes, Regulations and Rules Cited:

Alberta Rules of Court, Part 55.1, Rule 21(1), Rule 736.1, Rule 736.3

International Conventions Implementation Act (R.S.A. 2000 c. I-6), Article III(1), Article IV(1), Article IV(2), Article IV(4)

Counsel

Sean T. Fitzgerald for Lloyd's of London

Kevin P. McGuigan for Duane B. Berezowski

REASONS FOR JUDGMENT

MASTER LAYCOCK

INTRODUCTION

1The Applicant, The Society of Lloyd's ("Lloyd's") applies pursuant to Part 55.1 of the Alberta Rules of Court and the International Conventions Implementations Act of Alberta, to register an English judgment against the Respondent as a judgment of this Court. Lloyd's obtained a judgment against the Respondent in England on June 24th, 1997 in the amount of approximately [pounds]519,000. The Applicant's Originating Notice was filed December 17th, 2002. The application was heard by me June 19th, 2006.

2The Respondent resists the application on the basis that: it is being brought out of time, the original English writ was never served on the Respondent, and that the Respondent had good arguable defences to the action.

THE LEGISLATION

3In Part 55.1 dealing with reciprocal enforcement of United Kingdom judgments, Rule 736.3 states in part:

(1) A judgment creditor may apply to the court by originating notice for an order to register a judgment;

(2) an application under subrule (1) must be brought within the time limited by the Act.

4Rule 736.1 defines the Act as Part 3 of the International Conventions Implementation Act. The relevant provisions of Part 3 of the International Conventions Implementation Act are as follows:

Article III

1. Where a judgment has been given by a court of one Contracting State, the judgment creditor may apply in accordance with Article VI to a court of the other Contracting State at any time within a period of six years after the date of the judgment (or, where there have been proceedings by way of appeal against the judgment, after the date of the last judgment given in those proceedings) to have the judgment registered, and on any such application the registering court shall, subject to such simple and rapid procedures as each Contracting State may prescribe and to the other provisions of this Convention, order the judgment to be registered.

Article IV

1. Registration of a judgment shall be refused or set aside if

(a) the judgment has been satisfied;

(b) the judgment is not enforceable in the territory of origin;

(d) the judgment was obtained by fraud;

(e) enforcement of the judgment would be contrary to public policy in the territory of the

registering court; ......

Article IV

2. The law of the registering court may provide that registration of a judgment may or shall be set aside if

(a) the judgment debtor, being the defendant in the original proceedings, either was not served with the process of the original court or did not receive notice of those proceedings in sufficient time to enable him to defend the proceedings and, in either case, did not appear;

BACKGROUND

5On January 1st, 1987, the Respondent executed a General Undertaking with Lloyd's. In paragraph 1 of the General Undertaking, the parties agree as follows:

Throughout the period of his membership of Lloyd's the Member shall comply with the provisions of Lloyd's Acts 1871-1982, any a subordinate legislation made or to be made thereunder and any direction given or provision or requirement made or imposed by the Council or any person(s) or body acting on its behalf pursuant to such legislative authority and shall become a party to, and perform and observe all of the terms and provisions of, any agreements or other instruments as may be prescribed and notified to the Member or his underwriting agent by and under the authority of the Council.

6The General Undertaking further provides that the relationship between the parties shall be governed by the laws of England and the courts of England shall have exclusive jurisdiction to settle any disputes of any nature arising out of the member's participation with Lloyd's.

7Prior to entering into the General Undertaking between the parties, a substitute agent's Byelaw was enacted on July 18th, 1983. Pursuant to this Byelaw, Lloyd's was authorized to appoint a substitute agent for any member of Lloyd's who is authorized to provide directions to the substitute agent concerning the underwriting business of any member.

8In the decision, Society of Lloyd's v. Campbell-White et al 2005 U.S. Dist. LEXIS 22403, a decision of the United States District Court for the District of Massachusetts, the Court gave the following background with respect to Lloyd's:

Contrary to common belief, Lloyd's is not an insurer. Rather, Lloyd's is an insurance market "somewhat analogous to the New York Stock Exchange." Roby v. Corporation of Lloyd's, 996 F.2d 1353, 1357 (2d Cir. 1993). Through a succession of special Acts (the Lloyd's Acts 1871-1982), the Parliament of the United Kingdom has charged Lloyd's with the authority and duty to regulate the London insurance market. To that end, and in accordance with its authority under the Lloyd's Acts, Lloyd's governing body, the Council of Lloyd's, promulgates regulations (known as "Byelaws") which apply to all insurance providers in the Lloyd's market.

...

In the late 1980s and early 1990s, Lloyd's insurers incurred huge underwriting losses that threatened the very existence of the three hundred-year-old insurance market. To address this predicament, the Council of Lloyd's approved several measures aimed at reinsuring risks underwritten by Names and the syndicates in which they operate. First, the Council issued the "Reconstruction and Renewal Byelaw (No. 22 of 1995)," which contemplated the execution of a contract to provide reinsurance for Lloyd's Members. Then, on September 3, 1996, the Council issued the "Resolution and Directions of the Council of Lloyd's." See Declaration of Nicholas Demery, Exhibit 3. Exercising powers previously conferred by the "Substitute Agents Byelaw (No. 20 of 1983)," and the Reconstruction and Renewal Byelaw (No. 22 of 1995), the resolution appointed Additional Underwriting Agencies (No. 9) Limited ("AUA9") as a "Substitute Agent" for all Names who participated in the Lloyd's market during the relevant period. See id. The Council's directive conferred on the Substitute Agent the authority "to execute the Reinsurance Contract for itself and on behalf of the Members in such form as the Council may direct and to undertake all obligations of the Substitute Agent under the Reinsurance Contract ... and to perform all functions necessary therefor or incidental thereto." Id. s. 1 (iv).

Pursuant to the Council's mandate, AUA9 executed the "Equitas Reinsurance Contract" for itself and, in its capacity as Substitute Agent, on behalf of all Names, including the individual defendants in this case. See Declaration of Nicholas Demery, Exhibit n4 ("Reinsurance Contract"). The Reinsurance Contract requires the Names to pay a premium to Equitas in exchange for reinsurance coverage. Under the terms of the Reinsurance Contract, Names cannot avoid paying the premium by opting to forgo the reinsurance coverage. Payment of the premium is mandatory for all Names bound by the contract. Of particular relevance to the instant case, the Reinsurance Contract also contains a provision stating that "each Name ... not domiciled in the United Kingdom hereby irrevocably appoints the Substitute Agent [i.e. AUA9] as agent to accept service of any proceedings in the English Courts on his behalf." Id. s. 25.2.

According to Lloyd's, approximately ninety-five percent of the Names covered by the Reinsurance Contract voluntarily paid the reinsurance premium to Equitas. The remaining five percent, including the defendants in this case, did not pay the premium. To ensure the funding necessary for Equitas to meet its reinsurance commitments under the agreement, Lloyd's assumed the obligation to pay and did pay Equitas the premiums for the non-cooperating Names. In exchange, Equitas assigned to Lloyd's its right to collect the premium amounts from those Names who did not meet their payment obligations under the Reinsurance Contract.

In an effort to recoup the premium payments it had made to Equitas, Lloyd's instituted separate proceedings against the non-cooperating Names, including the defendants, in the High Court of Justice, Queen's Bench Division in London, England. Lloyd's, however, did not serve process directly on the individual defendants. Instead, Lloyd's served writs of summons on AUA9 in its capacity as Substitute Agent for two of the defendants in the instant case, Paul Anthony Campbell-White and Ann Grace. See Declaration of Joseph Bradley, Exhibits 1, 2. Similarly, Lloyd's served process on the Member's Agent4 of Peter Claflin Pierce, the third defendant in this lawsuit. See Declaration of Leslie John Taylor, Exhibits 1-3; Declaration of Nicholas Demery, Exhibit 7.

LIMITATION ARGUMENT

9The respondent argues that this application was not heard within six years of the entry of the judgment in England. However Article III paragraph 1 requires the judgment creditor to apply to this court within six years after the date of the judgment. The applicant did so.

SERVICE

10The respondent argues that the failure to serve or notify him amounts to a breach of natural justice. The Applicant's original proceeding against the Respondent was filed in the High Court of Justice, Queen's Bench Division, Commercial Court on October 25th, 1996. On May 23rd, 1997, counsel for Lloyd's instructed service of the Writ of Summons to be effected on the Respondent by personally delivering the documents to Joseph Bradley, a Director of Additional Underwriting Agencies (No. 9) Limited ("AUA9") at its registered office in London. On May 23rd, 1997, Writs of Summons for the Defendant and 107 other names were delivered to Joseph Bradley.

11Pursuant to the Reconstruction and Renewal Byelaw No. 22 of 1195, AUA9 was authorized to enter into the contract on behalf of all names. That contract contained a service of process clause by which each name, not domiciled in the United Kingdom, irrevocably appoints AUA9 as agent to accept service of any process in the English Courts on their behalf.

12The Applicant has produced a letter dated May 28th, 1997, directed to the Respondent which encloses a copy of the Writ of Summons and advises the Respondent of his right to defend the proceedings. The letter is addressed to the Respondent at RR2 Glenview Road, Cochrane, Alberta, T0L 0W0.

13The Respondent has sworn in his affidavit that he did not receive the letter or enclosure.

14On October 8th, 1997 the Applicant served copies of Default Judgments against the various names, including the Respondent, by service on AUA9. There is no evidence that the respondent received notice from AUA9.

15Prior to the filing of the Writ on October 25th, 1996, the Applicant and Respondent exchanged correspondence with respect to the Applicant's claim which included a settlement proposal from the Applicant sent to the Respondent on September 12th, 1996, at his address in Cochrane. The Respondent, on October 2nd, 1996, replied that for financial reasons he could not accept the settlement offer. On October 22nd, 1996, Lloyd's sent further correspondence to the Respondent at his Cochrane address expressing disappointment in the Respondent's reply and invited the Respondent to fully set out his finances and make a settlement proposal to the Applicant failing which they would issue enforcement proceedings.

16On November 25th, 1996, the Respondent wrote to the Applicant acknowledging receipt of the letter of October 22nd, 1996, offered a $5,000 to $6,000 settlement without providing the requested financial disclosure.

17On December 16th, 1996, Lloyd's wrote to the Respondent advising the settlement offer was unacceptable without comprehensive financial disclosure. The letter concludes by stating:

Lloyd's reserves the right to pursue enforcement proceedings against you in Canada at such time in the future as is deemed appropriate.

18On October 3rd, 1997, Lloyd's wrote to the Respondent at his Cochrane address and stated in part:

Upon conducting a review of your case we find that you have not put forward acceptable proposals for the discharge of your liability to Lloyd's. We would remind you that this matter has already been the subject of legal proceedings and in that regard a copy of the judgment we have obtained against you in the High Court of Justice is now enclosed.

Lloyd's again asks for settlement proposals.

19The next evidence of any discussion about settlement occurs in 2005.

20The Respondent complains about the conduct of Lloyd's throughout. He is aggrieved that Lloyd's gave itself authority to act on his behalf in ways contrary to what he would have instructed. He was not advised of numerous Byelaws before their passage or after they went into effect. He had appointed agents in England to represent him and was unaware of the substitute agents. He notes that AUA9 were retained by Lloyd's, paid by Lloyd's, have offices located in the same premises as Lloyd's and have been created for the sole benefit of Lloyd's.

21The Respondent is aggrieved that Lloyd's in the correspondence prior to the issuance of the Writ on October 25th, 1996, failed to refer to the pending proceedings. He swears he never received the letter from AUA9 and had no knowledge of the existence of the Writ and therefore was deprived of an opportunity of defending the action. He wonders why Lloyd's served the agent in the next office when they had been corresponding with him in Cochrane. He argues that Lloyd's should have been required to obtain an Order for Service Ex Juris in England and served him personally in Cochrane.

22The Respondent gives no explanation for his failure to immediately file a motion in England to set aside the Default Judgment once he received notice of it in October, 1997.

23The Applicant argues that it had the right pursuant to legislation and agreement to serve the Writ of Summons on the agent AUA9. They duly served the agent. Time for defence passed and they obtained a Default Judgment. They argue that these facts allow them to make the application for the registration of the English judgment in Alberta. The Respondent counters that he had no knowledge of AUA9 and was not aware that the Applicant had a right to serve them as substitute agent and, in any event, he never received a copy of the Writ of Summons in time to defend. It seems to me that where different methods of service are available to a plaintiff, the plaintiff may select the type of service which the plaintiff deems to be easiest for them. The Applicant has prima facie good service in accordance with the agreements between the parties and the law in England. The Applicant has chosen not to cross-examine the Respondent on his Affidavit and therefore the Respondent's evidence that he did not receive the Writ of Summons stands unimpeached.

24The question therefore is, what is the effect of the Respondent not getting the Writ of Summons or notice of the proceedings? I will assume that breach of natural justice is a ground for denial of the application to register the foreign judgment, even though it is not specifically stated to be ground to refuse registration in the provisions of the International Conventions Implementations Act. The Supreme Court of Canada discussed the grounds for refusing registration of foreign judgments in Beals v. Saldanha, [2003] S.C.J. No. 77, 2003 SCC 72, [2003] 3 S.C.R. 416. The court stated at para 61:

The enforcing court must ensure that the defendant was granted a fair process.

And at para 62:

Fair process is one that, in the system from which the judgment originates, reasonably guarantees basic procedural safeguards such as judicial independence and fair ethical rules governing the participants in the judicial system.

And at para 65:

In Canada, natural justice has frequently been viewed to include, but is not limited to, the necessity that a defendant be given adequate notice of the claim made against him and that he be granted an opportunity to defend.

25A cornerstone of Alberta civil proceedings is that the defendant to an action must have notice of the action. It may not always be necessary that the Statement of Claim (or Writ of Summons) be served on the defendant. It is enough that the defendant be aware of the proceedings. (See Fontaine v. Serban, [1974] 5 W.W.R. 428; Clarke v. Treadwell [1997] A.J. No. 683, (1997) Alta. C.A. No. 16149).

26The Applicant refers to a number of American decisions where a similar lack of service argument has been raised. In Campbell-White, the Court concluded that AUA9 was the defendant's duly appointed agent and authorized to accept service. The Court stated further:

Because the plaintiff has shown that AUA9 accepted the writs of summons on behalf of the defendants, the defendants' claim that they did not receive notice of the proceedings is unavailing. See Mass. R. Civ. P. 4(d)(1).

27The Court in Campbell-White proceeded to register the English judgment for enforcement in the State of Massachusetts.

28In The Society of Lloyd's v. Cohen a decision of the United States District Court for the Southern District of Texas, Houston Division, Case No. MC-02-464, filed September 16, 2003, Lloyd's application for registration was also granted pursuant to the Texas Uniform Foreign Country Money-Judgment Recognition Act. Their Act provides the following:

(b)

A Foreign Country Judgment need not be recognized if:

(1) the defendant in the proceedings in the foreign country court did not receive notice of the proceedings in sufficient time to defend.

29The Texas Court concluded that AUA9 had authority to accept service of the process on Cohen's behalf and such authority could not be revoked by Cohen because the agency appointment was not for the benefit of Cohen but was held for the benefit of Lloyd's. Further, the Court stated:

By signing the General Undertaking, Cohen agreed that any dispute would be settled in England under English Laws. Furthermore, Cohen agreed to be bound by all regulations and bylaws adopted by the Society of Lloyd's regulatory Council. By signing the General Undertaking, Cohen waived some of his procedural rights and such a waiver is permitted. Society of Lloyd's v. Webb, 156 F. Supp. 2d 632, (N.D. Tex. 2001) aff'd. 303 F.3d 325 (5th Cir. 2002) (citing D.H. Overmeyer Co. v. Frick Co., 405 U.S. 174, 92 S.Ct. 775, 31 L.Ed.2d 124 (1972) ("[t]he due process rights to notice and hearing prior to civil judgment are subject to waiver"); Ashenden, 233 F.3d at 479).

30In Campbell-White the reciprocal enforcement legislation also contains a provision as to service similar to the Texas legislation. In Campbell-White, the Court held that where process is served on a duly appointed agent but the agent fails to notify the principal, service is still proper. The remedy of the principal is to sue the agent for failing to notify him of the court proceedings. The Massachusetts' civil procedure regulations specifically authorizes service of process on an agent as being sufficient if it is made on an agent authorized by appointment. The Court found that AUA9 were properly and duly appointed agents authorized to accept service in accordance with the General Undertaking signed by the defendants and in accordance with byelaws and regulations adopted by Lloyd's.

31By entering Default Judgment the English Courts have accepted that service upon the agent in England is effective service upon the respondent. Alberta Rule 21(1) allows parties to a contract to select a method of service. It states:

21(1) When the Court has jurisdiction in any action or other proceeding in respect of a contract and in the contract the parties have agreed on

(a) a place for service, or

(b) a mode of service, or

service of any document in the action may be made in accordance with the agreement and, notwithstanding anything in this Part, service when so made is good service.

32In Stevenson & Cote's Annotations, the authors note that this rule comes from an English rule and refer to English decisions on the effect of the rule: Montgomery & Co. v. Liebenthal & Co., [1898] 1 Q.B. 487, 67 LJQB 313 (C.A.); Reversionary International Society v. Locking, [1928] W.N. 227.

33Whether the service requirements between the Applicant and Respondent are contractual agreement or statutorily imposed, service has been technically perfected and the Default Judgment stands until it is otherwise set aside.

34Both the English and Alberta Rules allow defendants to make application to set aside a default judgment. The overriding test in England and Alberta is whether the defendant has an arguable defence.

35On the facts of this case, the Respondent had two opportunities to advance his defence to the English Courts. Firstly, if the respondent received notice of the claim, he should have defended. Accepting the Respondent's uncontroverted evidence that he did not receive the original Writ, he had not opportunity of presenting a defence within the time originally limited.

36The second opportunity afforded to the Respondent to advance his defence in the English Court was upon learning that the judgment had been entered against him. He could have moved immediately to have the Default Judgment set aside. The English Courts could then consider the defective service and the merits of his defence. Should the English Courts have determined that service was effective, the English authorities, provided by the Applicant, confirm that the English Courts will review the issue of a meritorious defence. The English Court has the sole jurisdiction to determine the Plaintiff's claim and the Respondent's defence.

37Given that the respondent had a chance to apply to set aside the default judgment in October 1997 and may still have that ability, there has not been a breach of natural justice.

PUBLIC POLICY

38The refusal to register a judgment is governed by Article IV, paragraph 1. The only part of paragraph 1 that may apply is subsection (e) that provides that registration of the judgment would be refused if "enforcement of the judgment would be contrary to public policy" in Alberta. There is no evidence that the judgment was obtained by fraud (paragraph 1(d)). I have determined that the original Court had jurisdiction in this matter (paragraph 1(c)). The judgment is enforceable in England (paragraph 1(b)). The judgment has not been satisfied (paragraph 1(a)). Sub-paragraphs (f) and (g) have no application in this matter.

39The concept of public policy in registration of foreign judgments was recently considered by the Supreme Court of Canada in Beals. The Court said this about the defence of public policy:

The third and final defence is that of public policy. This defence prevents the enforcement of a foreign judgment which is contrary to the Canadian concept of justice. The public policy defence turns on whether the foreign law is contrary to our view of basic morality. As stated in Castel and Walker, supra, at p. 14-28:

... the traditional public policy defence appears to be directed at the concept of repugnant laws and not repugnant facts ... .

How is this defence of assistance to a defendant seeking to block the enforcement of a foreign judgment? It would, for example, prohibit the enforcement of a foreign judgment that is founded on a law contrary to the fundamental morality of the Canadian legal system. Similarly, the public policy defence guards against the enforcement of a judgment rendered by a foreign court proven to be corrupt or biassed.

The appellants submitted that the defence of public policy should be broadened to include the case where neither the defence of natural justice nor the current defence of public policy would apply but where the outcome is so egregious that it justifies a domestic court's refusal to enforce the foreign judgment. The appellants argued that, as a matter of Canadian public policy, a foreign judgment should not be enforced if the award is excessive, would shock the conscience of, or would be unacceptable to, reasonable Canadians. The appellants claimed that the public policy defence provides a remedy where the judgment, by its amount alone, would shock the conscience of the reasonable Canadian. It was argued that, if the respondents and their witnesses were truthful in the Florida proceeding, it must follow that the laws in Florida permit a grossly excessive award for lost profits absent a causal connection between the acts giving rise to liability and the damages suffered. Such a result, the appellants submitted, would shock the conscience of the reasonable Canadian. I do not agree. ...

The use of the defence of public policy to challenge the enforcement of a foreign judgment involves impeachment of that judgment by condemning the foreign law on which the judgment is based. It is not a remedy to be used lightly. The expansion of this defence to include perceived injustices that do not offend our sense of morality is unwarranted. The defence of public policy should continue to have a narrow application.

40In my view, there is nothing about the English Judgment which is contrary to the Canadian concept of justice. The Defendant has provided no evidence that the Laws of Contract enforceable in England or the procedures followed by the English Courts are contrary to the Canadian concept of justice. To the contrary, much of the English common law and equitable remedies have been imported into Canada. The English judicial system was the model for the establishment of the Canadian judicial system. The English Rules of Court allow for the review of a judgment obtained in default.

DEFENCES

41The respondent argues that I should consider the merits of his possible defences that he has been deprived of advancing in England. The Respondent has set out, in his affidavit, several arguments that he could have made in England to defeat or reduce the claim against him. The Applicant argues that these suggested defences would be unsuccessful and should be ignored. In my view, it is not for the registering Court to decide whether the defence would be successful. It is for the registering Court to decide whether the defendant had a fair opportunity to present the defences to the original Court. In Beals the Supreme Court (paragraph 64) concluded that the issue of breach of natural justice does not relate to the merits of the defence.

STAY OF REGISTRATION

42Under the International Conventions Implementation Act, Part III, Article IV, paragraph 2, the Alberta Court may set aside the registration of a judgment in Alberta where it can be shown that the Respondent was not served with the original process or did not receive notice of the proceedings in sufficient time to defend.

43Article IV, paragraph 4 allows for a stay of the enforcement of a judgment registered in Canada if:

... it is competent for any party to make an application to have the registration of the judgment set aside or, where such an application is made, until the application has been finally determined.

44These provisions must be read together to determine their effect. These provisions are designed to ensure procedural fairness and that the foreign judgment is final before it can be enforced in Alberta. Paragraph 2 provides that if a lack of notice of the original proceeding has deprived the respondent of a chance to defend, then judgment should not be enforced. As noted above, the respondent may still apply to the English courts to set aside the judgment and defend. If he is not allowed to defend at this time it will be because his proposed defence is not meritorious or because he has forfeited his right to apply be reason of an inordinate delay. Both of these problems in defending should not deprive the applicant of the right to register and enforce its judgment. Para 4 provides that if the respondent brings an application to set aside the English judgment in the English Courts, then enforcement should be deferred.

CONCLUSION

45In conclusion, the Applicant is granted leave to register the judgment of the High Court of Justice, Queen's Bench Division of the Supreme Court of England, dated June 24th, 1997 against the Respondent Duane B. Berezowski plus interest in accordance with that judgment. The amount of the English judgment in pounds shall be converted to Canadian dollars as of the date of the issuance of these reasons at the currency rate in effect on this date. In addition, the Applicant shall be entitled to costs of these proceedings to be taxed.

46An application to stay the enforcement of the foreign judgment may be made on evidence that the respondent has or intends to apply in England to set aside the original judgment.

MASTER LAYCOCK

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