Failure To Respond To Foreign Litigation Can Be Risky

In the complex world of international business, many companies and investors often venture outside of their countries of residence or domicile with the hope of developing new and successful business projects or making successful investments. In doing so, however, these companies and investors, plus their professional advisers sometimes fail to understand that actively doing business in foreign countries can expose them to the jurisdiction of a foreign court in the event that their prospective business ventures fail and litigation ensues, and, moreover, that a failure to respond to such foreign litigation can result in judgments against them that will be enforceable in Ontario even if the litigation is ignored.

Such was the case in a failed foreign business project in China that resulted in an Ontario court enforcing an Italian judgment against a Toronto lawyer, Geoffrey King ("King"), who was held personally liable for the disappearance of USD $600,000 by an Italian court when he chose not to defend the action that was brought against him and others in Italy.

While King subsequently sought to pass the blame for this result onto the lawyers acting for the plaintiff in Italy and his own various Ontario lawyers, particularly the lawyers who unsuccessfully attempted to convince an Ontario Court to reject the enforcement of the Italian judgment here, the Honourable Justice Corbett determined in the following trilogy of decisions, King v. Giardinai, King v. O'Tooleii, and Lang Michener v. Kingiii, that King's multiple lawsuits should be dismissed, with the exception of a claim against a lawyer, John P. O'Toole ("O'Toole"), who allegedly advised King not to defend the initial Italian action, which was permitted to proceed to trial.

The Facts

In the 1990's, King had become involved in a project to build a hotel in Nansha, China (the "Project"). A major shareholder in the Project was Sincies Chiementin SpA ("Sincies"), an Italian construction company, who was seeking to grow its business outside of Europe because of a sluggish European economy.

King had a legal relationship with a Sincies affiliate and had thus learned about Sincies interest in the Project. Ultimately, King was engaged in connection with the Project and received a 5% interest in it.

Unfortunately, the Project was unsuccessful and Sincies went bankrupt.

During a bankruptcy investigation conducted in Italy, Sincies' trustee discovered that USD $600, 000 had been misappropriated from the Project by an investor who used it for a new joint venture agreement. The investor, in turn, claimed that King had authorized his signing...