Ruling says arbitration provision did not automatically negate foreign court’s jurisdiction
The Ontario Court of Appeal has dismissed an appeal of a summary judgment recognizing and enforcing a default judgment obtained in Munich upon determining that the German court had jurisdiction over the parties’ dispute.
In Hilmer Motorsport GmbH v. Mason, 2025 ONCA 875, the appellants were a professional racing car driver and his father and manager. Both appellants lived in Ontario. The respondent, incorporated under German law, operated a racing team competing in the GP3 Series.
In April 2014, the son and the respondent entered into a driver agreement, which enabled Nelson to represent the team for the 2014 season – with nine racing events primarily to occur in Germany or elsewhere in Europe – in exchange for Nelson’s payment of €460,000.
The agreement provided that:
The father guaranteed the son’s debt to the extent of €409,512.13. The guarantee stipulated that German law would apply, with Munich serving as the jurisdictional venue.
In October 2015, the respondent initiated proceedings in a regional court in Munich. The respondent claimed that the appellants had breached the contract and should pay the amount due under the agreement and the guarantee.
The appellants alleged that they failed to defend the action because they had assumed that arbitration was the agreed method of dispute resolution.
In February 2016, the respondent obtained a default judgment in Munich valued at €409,512.13, plus interest and costs.
In Ontario, the respondent filed an action to recognize and enforce the German judgment and moved for summary judgment. In October 2024, Justice R. Lee Akazaki of the Ontario Superior Court of Justice granted summary judgment in the respondent’s favour.
The Court of Appeal for Ontario dismissed the appeal and ordered the appellants to pay the respondent the agreed sum of $13,000, including tax and disbursements.
The appeal court ruled that the motion judge correctly concluded that the German court had jurisdiction over the parties’ dispute.
The appeal court noted that the judgment was final and for a definite sum of money and that a real and substantial connection clearly existed among the German court, the parties, and the subject matter of the proceeding.
The appeal court accepted that the judge had erroneously stated that the races all occurred in Germany. However, the appeal court determined that this error did not take away from his findings.
The appeal court held that the agreement’s arbitration provision did not automatically negate the German court’s jurisdiction.
The appeal court found that Ontario law was the only applicable law, as the appellants did not plead or prove German law and did not attempt to obtain a stay, assuming the German court could grant such a remedy.
According to the appeal court, in Ontario, an arbitration agreement was not self-enforcing, and a court could hear a dispute if the parties did not seek a stay in favour of arbitration.
Next, the appeal court deemed the defences of natural justice and public policy unavailable to the appellants.
First, the appeal court ruled that natural justice did not bar recognition and enforcement of the judgment. The appeal court saw no breach of natural justice.
The appeal court noted that the appellants – who were properly served with the German proceedings, the German judgment, and the motion to recognize and enforce that judgment – yet chose not to participate in the German proceedings.
Second, the appeal court held that recognizing and enforcing the German judgment would not contradict public policy.
The appeal court found that the appellants failed to act or seek any remedy from the German court upon being served with the German proceeding.
The appeal court explained that the appellants could have responded to the German proceeding, appeared before the Munich court, and argued that the court should stay the proceeding and refer the dispute to arbitration.
The appeal court added that the Ontario Superior Court could not assume that the German court had not properly taken jurisdiction.
