United States v. Yemec: The New Audi Alteram Partem Impeachment Defence to Enforcement of Foreign Judgments

  • March 01, 2010
  • Antonin I. Pribetic

In a decision released August 26th, 2009, the Ontario Superior Court of Justice in United States v. Yemec has taken a bold step in recognizing the possibility of a new impeachment defence of Audi Alteram Partem (Latin: hear the other side), to the enforcement of a foreign judgments in Canada. The procedural history is long and tortuous, so a brief overview is in order.

Litigation History

In United States v. Yemec, (2003), 67 O.R. (3d) 394, the defendants owned a substantial and well-established telemarketing lottery business, selling Canadian lottery tickets to American residents. In 1999, the United States Federal Trade Commission (“FTC”) began an investigation of the defendants and obtained an ex parte order in June 2002 permitting the examination of the defendants’ Canadian bank accounts. The FTC obtained a temporary restraining order in the U.S. District Court in respect of a claim filed on September 30, 2002. On October 2, 2002, the plaintiff United States government commenced the current action for damages for fraud and obtained a stand-alone Mareva injunction. The defendants subsequently brought a motion to dissolve the injunction on grounds that the U.S. Government lacked standing and failed to satisfy the test for granting such injunctive relief. The defendants argued that the U.S. government had failed to disclose material facts, failed to make out a ‘strong prima facie case’ of fraud against them, and failed to establish that they were likely to dissipate or remove assets from the Ontario jurisdiction. Justice Gans granted the defendants’ motion and held that the U.S. Government failed to meet the Mareva threshold of making full and frank disclosure of several material facts. He further held that the U.S. Government failed to disclose that the defendants had substantial connections in their local community and conducted business in the open, thereby negating any inference of dissipation. He concluded that there was not a strong prima facie case of fraudulent telemarketing conduct by the defendants.

The U.S. Government’s appeal to the Ontario Divisional Court was unsuccessful and a further appeal to the Court of Appeal of Ontario was quashed: United States v. Yemec (2004), 2004 CarswellOnt 141, Borins J.A., Catzman J.A., Laskin J.A. (Ont. C.A.) 

Fast forward to 2009

Although the decision is lengthy (223 paragraphs), Justice Belobaba’s written reasons are cogent, concise and compelling and merit close reading. He considered three overlapping motions before the court: 

(1) The Ontario defendants asked that the damages undertaking that was given to the Ontario court by the U.S. plaintiffs when the Mareva and Anton Piller orders were granted be enforced immediately and any damages awarded be paid forthwith;

(2) The U.S. plaintiffs moved for partial summary judgment to enforce the U.S. judgment; and

(3) The Ontario defendants moved to stay the entire proceeding on a number of grounds, including abuse of process and standing, and alternatively to strike the pleadings. 

In brief, the court on issue 1) held that the 2002 portion of the Ontario action should be stayed; however, the 2005 portion – in essence, the request to enforce the U.S. judgment and the two tracing claims – was ordered to remain in force. With respect to issue 3) although the court dismissed the defendants’ motion for a stay or striking the pleadings, Justice Belobaba did direct that the damages inquiry on the undertaking should be held immediately and, if any damages are awarded, they must be paid promptly and in full by the plaintiffs before any further steps are taken in the Ontario proceeding. 

Issue 3) has the most significant impact on conflict of laws jurisprudence. After reviewing two of the three existing impeachment defences set forth in Beals v. Saldanha ([2003] 3 S.C.R. 416, 2003 SCC 72 (S.C.C.) namely, public policy and natural justice), the court dismissed the U.S. Government’s motion for partial summary judgment to enforce the judgment of the U.S. court. Furthermore, “the defendants’ submission that they were denied a meaningful opportunity to be heard by the actions of the plaintiffs (the so-called “new defence”) raises a genuine issue for trial.” The learned motions judge held, in part, as follows: 

[172] The new defence of ‘loss of meaningful opportunity to be heard’ must be different in scope and content from the natural justice defence. In my view, it must relate not to the process and procedures of the foreign court (that is the natural justice defence) but to some significant unfairness in the way the litigation itself has proceeded or has been conducted. 

[173] Here, the defendants submit that the plaintiffs strategically engaged in conduct that effectively denied the defendants a fair opportunity to be heard in the U.S. forum. The defendants say they could not present a full and fair defence in the U.S. because they were invested in setting aside the ex parte orders in Ontario… 
[179] In sum, the defendants and their U.S. counsel, Mr. Amin, have provided detailed affidavits in support of the submission that they did not receive a full and fair opportunity to defend the U.S. proceedings because of the way that the plaintiffs conducted the litigation. Not surprisingly, all of these assertions are disputed by the plaintiffs. 

Accordingly, Belobaba, J. held that: 

“The defendants should have their day in court to present evidence and legal argument about whether they were denied a meaningful opportunity to be heard because of the plaintiffs’ conduct of the litigation and whether, as a result, the U.S. judgment should be recognized and enforced by this court.” 



Antonin I. Pribetic, Litigation Counsel, Steinberg Morton Hope & Israel LLP, Co-Vice Chair, OBA International Law Section and Executive Member, OBA Civil Litigation Section Member