Enforcing Canadian Judgments in Israel

This article addresses the risks to Israelis being sued in Ontario, Canada. Sometimes there is a tendency for Israeli defendants to ignore Ontario lawsuits. Perhaps they feel judgment proof because they have no assets in Canada. That may be unwise. Ontario may assume jurisdiction and grant judgments against Israeli defendants. Such judgments may be enforceable in Israel leaving the defendant's assets in Israel vulnerable to collection.

Israelis sued in Ontario are at risk. Sometimes these defendants ignore Ontario lawsuits because they have no assets in Canada. That may be unwise. Ontario courts, under certain circumstances, will assume jurisdiction and grant judgments against Israeli defendants. Such judgments may be enforceable in Israel under private international law and the principles of comity. Israelis named as defendants in Ontario litigation should contact competent lawyers in both jurisdictions to strategize about how to deal with litigation commenced in a court in Canada.

Why Should Israelis Care If They Are Sued In A Foreign Jurisdiction?
When faced with a court case in a foreign country there could be many rationalizations for the Israeli defendant to not want to go to Canada and deal with the Ontario litigation. Firstly there may be concurrent litigation in the Israel. Secondly, there is a concept in law of Attornment. When a defendant appears in the Ontario court and disputes the case on the merits that defendant will be taken to have consented to the jurisdciton of the court even if it otherwise would not have had the authority to deal with the case. As well the Israeli defendant may feel little risk because he has no assets in Canada and he suspects that the plaintiff lacks the resources or will to pursue the matter in Israel. This thinking may be flawed.

Failure by the Israeli defendant to respond may result in default judgment against them in the Ontario court. The Canadian Plaintiff may hire an Israeli Attorney to successfully enforce the Ontario judgment in Israel. Israelis who ignore litigation against them in Ontario do so at their own peril.

The issue of litigation between Israeli and Canadian business people has become more important as trade and business between the countries has increased. The State of Israel and the Government of Canada have successfully fostered trade between the two countries through the removal of trade barriers. The free trade treaty came into effect in 1997(FN 1). The Canada Israel Chamber of Commerce provided statistics from 2007 showing Israel being the 37th highest importer of Canadian products (FN2) and 38th highest exporter (FN3). In his article on Free Trade Dov Mishor of Ben Gurion University points out that the Free Trade Agreements significantly enhanced exports and imports.(FN4)

To appreciate the risks one has to understand that as cross border commerce increased courts and legislatures on both sides of the border had to deal with disputes. Imagine an Ontario manufacturer selling its products to an Israeli distributor located in Tel Aviv. The Israeli says the products are flawed and the Canadian wants to get paid. Do they go to a court in Ontario or Tel Aviv? Does the law of Israel or Ontario govern? It may be that in accordance with the principles of private international law, comity and forum non conveniens both Israel and Ontario have jurisdiction and the courts have to address which is the most appropriate jurisdiction to deal with the case. In our case scenario outlined above the Tel Aviv defendant who ignored the law suit in Ontario may find the Israeli court enforcing the Ontario judgment.

For example, in Ahava (USA) Inc v JWG Ltd (Jer DC 3137/04) an American company bought Israeli products and sold them in the US under the US registered trademark.(FN5) The Israeli company also sold its products worldwide through its website. Some of the products sold on the website used the American company’s trademark. The American successfully obtained an injunction forbidding the Israeli company from selling those products with the US company’s trademark. They then obtained an order from the Israeli court to enforce the American order in Israel. Given the Israeli court’s willingness to enforce Foreign orders under certain circumstances Israeli companies would be reckless in not retaining counsel to address a court action against them in Canada.

First Step – Determine Vulnerability to Assets Being Seized:
The Israeli defendant would be wise to assess what assets are at risk if an Ontario judgement is made against them. If there are assets in Ontario there is a substantial risk. If there are only assets in Israel then Israeli counsel should be consulted to determine the chances of an Israeli court enforcing an Ontario judgment. Before deciding whether to defend the Ontario lawsuit it is imperative to figure out if in accordance with relevant Israeli legislation and the principles of private international law the judgment of the Ontario court would be enforceable in Israel.

If the defendant only has assets in Israel and they are such that those assets are statutory insulated from collection then that is a relevant consideration in determining whether to come to court in Ontario. Both Ontario Counsel for the Plaintiff and the legal advisors for the defendant would be wise to review the differing thresholds for collection in each jurisdiction. Assuming that they are the same in each jurisdiction could be a costly mistake. For example, in some jurisdicitons judgment debtors have far greater protection. While in Ontario a successful Plaintiff may seize the judgment debtor's prime residence in some other jurisdictions that is not the case. In Ontario there are limits to how much you can garnish a judgment debtor's wages. The same may not apply in the other jurisdiction.

Second Step - retain Ontario Lawyers to determine if there are grounds to dispute Ontario Court's Jurisdiction:
In Ontario the test for assuming jurisdiction involving a foreign defendant was addressed in the seminal case of Muscutt v Courceles (2002) 60 O.R. (3d) 20. (FN6). The Muscutt test was adjusted by the Court of Appeal in Van Breda v. Village Resorts Limited, 2010 ONCA 84, (FN7). The exact nature of the test for determining jurisdiction of Ontario courts over foreign defendant will hopefully be clarified as the Supreme Court of Canada has granted leave to appeal the Ontario Court of Appeal’s decision on this case. (FN8). As of the writing of this article this case has been judicially considered in Canada 22 times. For a clear review of the evolution of the test used by Ontario Courts for assuming jurisdiction of foreign defendants see Sona Dhawan’s February 17th, 2010 blog “Muscutt Quintet Test Simplified in Van Breda”. (FN9). For the purposes of this article it is unnecessary to review the Van Breda case in detail other than to say the Court of Appeal wanted, in their words, “tune-up” the Muscutt test “after seven years in the trenches”. In summary, under the new test a preliminary analysis is conducted to determine if there is a presumption that a “real and substantial connection” exists between the conflict and Ontario. The court will then look at two main issues
1. The connection between the forum and the plaintiff’s claim and
2. The connection between the forum and the defendant.

The other 6 factors set out under Muscutt are “analytic tools” used to weigh the connection between the forum, claim and defendant.

Until the Supreme Court of Canada rules otherwise the Ontario Court of Appeal test articulated in Van Breda stands. The Supreme Court of Canada will not nullify the principles of comity or forum non conveniens. There is no going back to the time where an Ontario Court will not assume jurisdiction over a foreign defendant. However, what will be addressed is the exact nature and evolution of the test set out in Muscutt. Van Breda has already been followed 12 times by different courts in Canada. In is also important to remember that the Supreme Court of Canada has addressed the issue in four key decisions in the early 1990s (FN10). As set out in paragraph 40 of the Ontario Court of Appeal decision “As Sopinka J. explained in Amchem, supra, at p. 912, “[f]requently there is no single forum that is clearly the most convenient or appropriate for the trial of the action but rather several which are equally suitable alternatives.”

Where more than one forum is capable of assuming jurisdiction, the most appropriate forum is determined through the forum non conveniens doctrine, which allows a court to decline to exercise its jurisdiction on the ground that there is another forum more appropriate to entertain the action.” Those decisions make it clear that that the Supreme Court of Canada has accepted that while more than one forum may have jurisdiction to hear a case, each jurisdiction should exercise jurisdiction if it identifies its forum as the most appropriate forum for the litigation in accordance with the principles of international comity (FN11).

If it is in the defendant’s interest to not litigate in Ontario the lawyer should review the case law and determine if there are grounds to dispute jurisdiction. For example, did the plaintiff commit fraud? Did the litigation process result in a denial of natural justice to the defendant? Would assumption of jurisdiction offend public policy? The following additional questions should be addressed:
• the location of the majority of the parties
• the location of key witnesses and evidence
• contractual provisions that specify applicable law or accord jurisdiction
• the avoidance of a multiplicity of proceedings
• the applicable law and its weight in comparison to the factual questions to be decided
• geographical factors suggesting the natural forum
• whether declining jurisdiction would deprive the plaintiff of a legitimate juridical advantage available in the domestic court.

Given that the law in every jurisdiction may be different there are often advantages to the litigants in different jurisdictions. For example, if the Ontario limitation period has lapsed and the Israeli jurisdiction’s limitation period has not lapsed it makes sense for the plaintiff to litigate in the Israel. Accordingly, disputes about forum are common. For anyone involved in cross border litigation it is prudent to consult with attorneys/lawyers who know the law in both jurisdictions to ensure that the issues of jurisdiction and vulnerability to judgments are addressed.


FN1. See the Free Trade Agreement between Israel and Canada from the Foreign Affairs and International Trade Canada website. http://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/israel/part-1.aspx?lang=en

FN2: See Israel – Canada Chamber of Commerce website for Import data: http://www.israel-canada.org/import.jpg

FN3 See Israel – Canada Chamber of Commerce website for export data http://www.israel-canada.org/export.jpg

FN4 See Free Trade Agreements as a Vehicle to Growth: The Israeli Experience found at http://www.eurojournals.com/IRJFE%203%206%20mishor.pdf

FN5. For a fuller review of the case see the article written by Luzzatto & Luzzatto Patent Attorneys found at http://www.worldtrademarkreview.com/Issues/Article.ashx?g=f875f913-e96a-4650-8099-59972d9abdd9
Here’s a link to the Israeli legislation that deals with enforcement of foreign judgments. www.nevo.co.il/Law_word/law01/055_279.doc
According to Israeli Lawyer Michael Gruda, generally this law can’t be used to get foreign probate orders confirmed in Israel.

FN6. For on line access to the case please see http://www.ontariocourts.on.ca/decisions/2002/may/mIsraelcuttC35934.pdf

FN7. For on line access to this case please see http://www.ontariocourts.on.ca/decisions/2010/february/2010ONCA0084.pdf

FN8. See the Supreme Court of Canada Case Information Summary at http://www.scc-csc.gc.ca/case-dossier/cms-sgd/sum-som-eng.aspx?cas=33692 and Julius Melnitzer’s article in the Financial Post http://busliness.financialpost.com/2010/07/08/scc-grants-leave-in-van-breda/

FN9. Sona Dhawan reviews the Muscutt case and its treatment in Ontario. In that case the Ontario Court of appeal indicated that there must be a real and substantial connection between the dispute and Ontario before a court can assume jurisdiction over an out of province party. That 8 pronged test was reviewed, revised and simplified by the Ontario Court of Appeal in Van Breda v. Village Resorts Limited. It is an interesting blog and a worthwhile read. It can be found at http://www.thecourt.ca/2010/02/17/muscutt-quintet-test-simplified-in-van-breda/

FN10 Morguard Investments Ltd. v. De Savoye, [1990] 3 S.C.R. 1077 and Hunt v. T&N plc., [1993] 4 S.C.R. 289, Tolofson v. Jensen; Lucas (Litigation Guardian of) v. Gagnon, [1994] 3 S.C.R. 1022, and Amchem Products Inc. v. British Columbia (Workers’ Compensation Board), [1993] 1 S.C.R. 897.

FN 11. See Amchem Products Inc. v. British Columbia (Workers’ Compensation Board), [1993] 1 S.C.R. 897 and paragraph 39 of Mache Products Inc. v. British Columbia (Workers' Compensation Board) 1993 CarswellBC 47; 77 B.C.L.R. (2d) 62, [1993] 1 S.C.R. 897, [1993] 3 W.W.R. 441, 14 C.P.C. (3d) 1, 150 N.R. 321, 23 B.C.A.C. 1, 39 W.A.C. 1, 102 D.L.R. (4th) 96, J.E. 93-674.

Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.

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