Court split over whether deference owed to lower courts' decision to disregard foreign judgments
The National Bank of Canada must not pay a Greek bank, which held a letter of credit for funds Bombardier owed the Greek ministry of defence, because of fraud committed by the ministry, the Supreme Court of Canada has found.
The SCC delivered its decision in Eurobank Ergasias S.A., et al. v. Bombardier inc., et al. Friday morning. The ruling was split. The majority, Justices Richard Wagner, Malcolm Rowe, Sheilah Martin, Nicholas Kasirer, Mahmud Jamal, Michelle O’Bonsawin and Mary Moreau dismissed Eurobank’s appeal based on the fraud exception, finding the bank was aware of and participated in the fraud. As the beneficiary of a letter of counter guarantee, the ministry’s fraud could be attributed to Eurobank, the majority said. Justices Andromache Karakatsanis and Suzanne Côté would have allowed the appeal.
One essential issue on which the majority and dissent diverged was the appropriate weight to give to rulings from Greek courts on the issues in dispute. The Quebec Superior Court and Court of Appeal had placed no weight on the Greek judgments and the SCC’s majority found this conclusion was owed deference.
“Under Greek law, the conduct of the Hellenic Ministry of Defense was not found to be fraudulent – not even abusive – and that was confirmed by the Hellenic Supreme Court,” says Basile Angelopoulos, a lawyer from Laval, Quebec, who acted for the Greek ministry of defence, one of the appellants.
Karim Renno says the SCC’s decision was troubling for how it treated the rulings of the Greek courts. Renno is founding partner of the Montreal law firm Renno & Vathilakis and counsel for Eurobank.
“The concern is comity,” he says. “When you're a multinational corporation or a large corporation dealing with multiple jurisdictions, and you have contradicting decisions rendered in more than one country – to me, the decision rendered today by the Supreme Court should give you a lot of pause.”
“When the highest court in our land says, ‘I don't really care about the judgments that have been rendered in another jurisdiction’ – That's a point of concern for me.”
Bombardier, the Quebec-based aerospace, rail and transportation company, had a procurement contract with the national defence ministry of Greece for ten firefighting amphibious airplanes. Bombardier also agreed to subcontract some of the work associated with the airplanes to Greek companies, and under this contract, Bombardier would owe the ministry if it did not fulfill the subcontracting obligation within ten years.
The ministry had Eurobank secure the money owed on the subcontracting obligation with a letter of credit, under which the bank agreed to pay the ministry if Bombardier did not. The bank then obtained a letter of credit from the National Bank of Canada to ensure reimbursement for the money it would owe the ministry if Bombardier failed to fulfill its obligations.
Bombardier ultimately got into a dispute with the ministry over the subcontracting agreement, and the ministry went to Eurobank to have them fulfil their guarantee. But to Bombardier, the ministry had fraudulently jumped the gun by seeking payment from the bank before their dispute was arbitrated. On that basis, Bombardier asked a Quebec court for an order preventing the National Bank from honouring their agreement to pay Eurobank.
Bombardier argued that Eurobank’s knowledge of the fraud meant that the National Bank was protected by the fraud exception, where, under Canadian law, a bank is not required to pay the beneficiary of a letter of credit if the beneficiary has committed fraud. Eurobank’s demand for payment was fraudulent as an extension of the ministry’s fraudulent conduct, argued Bombardier.
Both the Quebec Superior Court and Court of Appeal agreed with Bombardier, and Eurobank appealed to the SCC.
In Canadian law, the only exception to a bank’s obligation to pay the beneficiary to a letter of credit is fraud. That fraud must involve “some aspect of impropriety, dishonesty or deceit,” said Kasirer, who wrote for the majority. A beneficiary demanding payment with the knowledge that they have no right to payment under the contract “may amount to fraud,” and that is an issue of mixed fact and law for which deference is owed on appeal, he said.
According to Kasirer, the trial judge’s finding that the Greek ministry of defence engaged in fraud is entitled to deference, and “amply supported by the evidence.”
He also said the judgments of the Greek courts have “no decisive relevance in measuring the conduct” of the ministry and of Eurobank.
“Absent a successful application for recognition and enforcement, foreign judgments are merely evidence and the weight given to them is an issue of fact to which deference is owed on appeal,” said Kasirer. “A decision to place little or no weight on an unenforceable foreign judgment can be justified if that decision does not give proper consideration to relevant Canadian judgments or raises other public order concerns.”
He found that no reviewable error had been demonstrated concerning the Quebec Superior Court and Court of Appeal expressly opting to give no weight to the Greek courts’ decisions.
Karakatsanis and Côté disagreed, finding that the decisions of the Greek courts “cannot be ignored.”
Côté, who wrote the dissenting reasons, said that international comity is an “essential guiding principle” when considering foreign judgments and there was no public policy rationale not to give weight to the Greek judgments. According to the dissenting judges, the ministry’s demand for payment under the letter of guarantee was “neither fraudulent nor tantamount to fraud.”
It was “irrelevant,” said Côté, that the Greek judgments were not recognized and enforceable in Quebec, since Greek law governed the letter of guarantee at issue and the parties to the letter were not domiciled in Quebec. Though the Greek rulings are not binding, she said, the principle of comity must guide the determination of the appropriate weight given to them. Quebec courts must recognize the factual effect of foreign decisions and cannot simply ignore them.
