Enernorth appeals Singapore decision

Should a court ruling in Singapore -- a country accused of having a judicial system sometimes subject to political interference -- be enforced in Canada, when it means a Canadian company will have to hand over millions of dollars in penalties to an overseas rival?

That question will go to Ontario Court of Appeal today when Toronto-based Enernorth Industries Inc. seeks to overturn a Superior Court ruling that said it must abide by a costly Singapore judgment.

Under that ruling, Enernorth has to pay about $7-million to Singapore-based Oakwell Engineering Ltd., the consequence of a contract dispute between the two firms.

If the lower court ruling -- thus the Singapore decision -- stands, Enernorth says it will set a precedent that puts at risk Canadian firms operating in countries with corrupt legal systems.

"Most of Canada's export activities are in the resource sector [and] mainly in countries with dodgy legal systems," said Enernorth's lawyer, David Wingfield. Adverse court decisions could "expose the wealth of Canada to virtually any plaintiff in any bad country, if they have the right access to the legal system."

Oakwell, for its part, says Enernorth readily agreed to have the Singapore courts handle the dispute, and that there is ample precedent to enforce the ruling here.

The dispute has its roots in a 1997 deal where Enernorth and Oakwell formed a joint venture to build mobile power generating plants in India. When the project fell through, each company accused the other of breaching agreements. A settlement clause said future conflicts would be settled in the Singapore courts. Disputes did arise, prompting Oakwell to sue Enernorth.

A 13-day trial in the High Court of Singapore ended with Enernorth being ordered to pay $2.9-million to Oakwell. The total hit $7-million with royalty fees, costs and interest.

Enernorth appealed to the Singapore Court of Appeal and lost.

To collect, Oakwell brought an action in Ontario Superior Court last year, asking that the Singapore judgments be enforced in Canada.

Enernorth argued strenuously that the judgment of an essentially corrupt justice system should not be upheld here. Mr. Justice Gerald Day allowed the ruling, saying there is no evidence of bias in commercial cases in the Singapore courts.

Judge Day said Enernorth failed to prove that the Singapore courts' decisions in this case were unfair.

Now Enernorth's appeal of Judge Day's decision is headed for Ontario's appeal court, and could make it to the Supreme Court of Canada.

The crux of the matter is just how much proof there has to be of corruption and unfairness in a foreign court, before its judgment can be considered unenforceable in Canada. Both parties base their cases on interpretations of earlier Supreme Court cases that dealt with the enforcement of foreign judgments.

The Supreme Court judges made their most recent ruling on the issue in 2003, in the famous "Beals" case that dealt with a soured real estate transaction in Florida. A majority of the top court judges said a huge jury award against a Canadian couple had to be upheld, because there was no evidence the Florida law was unjust or the system unfair.

Enernorth and Oakwell have each interpreted the Beals decision differently.

Enernorth says the Supreme Court made it clear that a judge asked to enforce a foreign judgment must ensure the foreign legal system doesn't have systematic flaws.

In this case, Enernorth says in its filings, it is faced with "having its assets seized under Canadian law to pay a judgment that was granted by a corrupt legal system before biased judges in a jurisdiction that operates outside the rule of law."

Oakwell says Beals means the party resisting enforcement must prove the foreign system is unfair.