No mulligans: The SCC highlights the ‘difficult strategic choice’ faced by Quebec defendants sued abroad

Recently, in Barer v. Knight Brothers LLC, the Supreme Court of Canada clarified the applicable threshold for a party’s submission to a foreign court’s jurisdiction under the Civil Code of Quebec.

Recently, in Barer v. Knight Brothers LLC, the Supreme Court of Canada clarified the applicable threshold for a party’s submission to a foreign court’s jurisdiction under the Civil Code of Quebec. Quebec defendants sued abroad — and foreign companies sued in Quebec — should take notice.

The context Knight Brothers LLC, a Utah-based company, sued David Barer, a Quebec resident, and two companies allegedly under his control, in Utah. In addition to a contractual claim against the company, Knight sought to pierce the corporate veil to seek personal liability against Barer and made a claim for fraudulent misrepresentation.

Barer brought a motion to dismiss Knight’s lawsuit on a variety of grounds, including the lack of personal jurisdiction of the Utah court. Crucially, Barer also alleged in his motion that the corporate veil should not be pierced and that the fraudulent misrepresentation claim was barred. The Utah court refused Barer’s motion to dismiss. Eventually, the Utah court rendered a default judgment against the defendants. 

Knight sought to have the Utah judgment recognized by Quebec’s Superior Court, in view of enforcing it against Barer. Barer argued that the Utah judgment should not be recognized in Quebec, as the Utah court had no personal jurisdiction over him. The Superior Court of Quebec disagreed and recognized the Utah judgment. According to the Superior Court, Barer could not argue lack of jurisdiction because, by submitting substantive arguments in his defence, he had submitted to the jurisdiction of the Utah Court. The Quebec Court of Appeal upheld the Superior Court’s decision.

The decision of the SCC On appeal, the Supreme Court of Canada sought to clarify the circumstances under which a defendant is properly found to have submitted to a court’s jurisdiction. The court pointed out that, while such an analysis is highly contextual, it is of pivotal importance to people or companies in deciding how — or whether — to respond to proceedings brought against it outside of its home jurisdiction.

In reasons delivered by Justice Clément Gascon, the majority of the court found that Barer submitted to the jurisdiction of the Utah court by presenting substantive arguments in his motion to dismiss, which, if accepted, would have resolved all or part of the dispute in his favour. The court expressly rejected the approach by which “a defendant should not be taken to have submitted to jurisdiction where it was merely attempting to ‘save its skin,’” finding that such an approach “hardly serves the administration of justice.” The court held that allowing a party to present substantive arguments in the hope of securing a favourable decision — but without submitting to jurisdiction — could give rise to a “legal mulligan,” allowing the party to have “two kicks at the can.”

In dissent, Justice Suzanne Côté takes issue with this threshold and advocates for a more flexible approach that notably accounts for a defendant’s subjective intent in submitting to a jurisdiction.

The takeaway: a strategic choice for defendants sued in foreign jurisdictions As a matter of principle, the CCQ favours the recognition and enforcement of judgments rendered outside of the province so as to ensure the free flow of trade and stability in international relations. There are a limited number of exceptions to this general principle, however — notably, a lack of jurisdiction of the foreign authority over the defending party under the CCQ.

Since the threshold for submission to jurisdiction now requires that arguments made before a foreign court must be limited to jurisdictional ones alone, defendants must consider what constitutes a purely jurisdictional issue, with reference to the procedural — and possibly substantive — laws of the foreign jurisdiction. Such issues of foreign law could later resurface in Quebec enforcement and recognition proceedings. Thus, parties in this situation will likely require legal advice in both their home jurisdiction and the foreign one.

A final caution is called for, which should resonate well outside of Quebec’s borders. The rules of the CCQ on submission to jurisdiction and their interpretation by the Supreme Court in Barer are equally applicable to a Quebec court’s assertion of jurisdiction over foreign parties. Indeed, foreign litigants would be well advised to engage in a similar balancing of risks and strategies before taking any steps to defend themselves before a Quebec court.

Elisabeth Neelin is a partner at Langlois lawyers who practises civil and commercial litigation. Daniel Baum and Laurence Angers-Routhier are lawyers in the firm’s litigation group.

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