This is yet another chapter in the long-running saga in the
case of Yaiguaje v. Chevron Corporation (2017 ONCA 741). It is also
the seventh time that this case has been a subject of a blog post by me.
In this instalment, Justice Gloria J. Epstein, of the
Ontario Court of Appeal, ordered that the Ecuadorian plaintiffs post security for costs of over $940,000 – approximately $591,000 for Chevron Canada
and $352,000 for Chevron Corporation – in order to continue with an appeal from
a summary judgment order dismissing the plaintiffs’ action against Chevron
Canada.
Background in Ecuador
From 1964 to 1992, Texaco Inc., its subsidiaries and various
partners engaged in oil extraction activities in the Lago Agrio region of
Ecuador’s Amazon basin. Litigation followed against Texaco alleging a
variety of environmental, health and other tort claims related to Texaco’s
extraction activity. Texaco and the Ecuadorian plaintiffs finalized a
settlement in 1998. Chevron Corporation acquired Texaco in 2001.
Litigation continued to take place concerning the validity and the effect of
the settlement.
The Ecuadorian plaintiffs in this case represent
approximately 30,000 indigenous villagers from Ecuador’s Oriente Region.
After seven years of litigation, in February of 2011, an Ecuadorian trial court
found Chevron liable for US$17.2 billion. The amount of the judgment was
subsequently reduced to US$9.5 billion.
Chevron, which has no assets in Ecuador, refused to
acknowledge the Ecuadorian judgment. The plaintiffs have sought to
enforce the judgment in various jurisdictions around the world.
North American Litigation
Chevron sought and obtained a global
anti-enforcement injunction against the plaintiffs in the United States
District Court for the Southern District of New York. The District Court judge found
that the Ecuadorian judgment had been obtained by fraud and prohibited the
judgment from being enforced in the United States. On appeal, the United
States Court of Appeal, Second Circuit, held that the plaintiffs could seek to
enforce the judgment in any country in the world where Chevron had
assets.
In 2012, the plaintiffs commenced an action in Ontario
against Chevron and Chevron Canada, seeking to enforce the judgment.
Chevron and Chevron Canada initially disputed whether Ontario courts had jurisdiction
simpliciter to recognize and enforce the judgment. Ultimately,
the Supreme Court of Canada, in a decision released in September 2015, held
that Ontario courts had jurisdiction over the enforcement action.
However, the Supreme Court also held that Chevron and Chevron Canada were free
to argue against enforcement based on their separate corporate personalities
and any other applicable defences.
After the Supreme Court ruled, the enforcement proceedings
came back before Justice Hainey of the Ontario Superior Court of Justice on two
motions for summary judgment. Chevron Canada moved for summary judgment
against the plaintiffs and the plaintiffs moved for summary judgment against
Chevron Canada. In addition, the plaintiffs moved to strike the defences
pleaded by Chevron in its statement of defence.
Summary Judgment Ruling
Chevron is a Delaware company with its head office in
California. Chevron Canada is a seventh level indirect subsidiary of
Chevron with its head office in Calgary, Alberta. The plaintiffs, in
addition to seeking payment of the US$9.5 billion, also sought a declaration
that the shares of Chevron Canada are exigible to satisfy the Ecuadorian
judgment.
Justice Hainey found in favour of Chevron Canada on both
issues and granted summary judgment in its favour. He held that the shares and assets of Chevron Canada were not
exigible and available for execution and seizure pursuant to the Execution
Act to satisfy the Ecuadorian judgment. He also held that Chevron Canada’s
corporate veil should not be pierced so that its shares and assets were
available to satisfy the judgment.
Court of Appeal’s Security for Costs Ruling
The plaintiffs have appealed that decision to the Ontario
Court of Appeal. Chevron Canada and Chevron sought an order for
security for costs in excess of over US$1 million, US$160,000 for the appeal
and the rest for the previous proceedings.
Justice Epstein held that the general principles for posting
security for costs applied to such a motion in the Court of Appeal. Under Ontario's rules of civil procedure, an order for security for costs could be made where
plaintiffs are ordinarily resident outside of Ontario. Justice Epstein found that in this case there was no
dispute that the Ecuadorian plaintiffs reside outside of Ontario. The
issue and relevant considerations were: could they demonstrate on a
balance of probability that they were impecunious and, if not, could they demonstrate that there was a good chance of success on the
appeal.
Novel Submission by Plaintiffs
In addition, the Ecuadorian plaintiffs also advanced what
the judge referred to as “a novel submission”, one that their counsel submitted
should become part of the law pertaining to security for costs, i.e. that in an
action for recognition and enforcement of a foreign judgment which was
tantamount to a class action, security for costs should never be ordered.
Justice Epstein found that the plaintiffs could not
demonstrate impecuniosity. They had filed no evidence as to their
finances beyond three settlement agreements which she held were not “evidence”
in any event.
As for the merits of the appeal, Justice Epstein agreed with
Justice Hainey’s analysis and concluded that the plaintiffs did not have a good
chance of success on the appeal.
Justice Epstein considered in detail the plaintiffs argument
that the court should adopt “a new approach” to recognition and
enforcement actions. However, she did not accept the plaintiffs
submission that the action was analogous to a class proceeding. She held
that even if she were to accept that argument, this would not prevent security
for costs being ordered where justice of the case warrants it.
Justice Epstein held that litigants seeking to enforce a
foreign judgment should not be put in a more advantageous position than
domestic litigants. The Supreme Court of Canada’s earlier decision in the
case did not change that principle. It stood for the proposition that
Canadian courts should take a "generous approach" in finding jurisdiction to
allow litigants holding foreign judgments to bring enforcement actions.
Justice Epstein held that she did not read the SCC's decision as saying that when such
enforcement actions are brought before Canadian courts they should be treated
differently than cases involving domestic litigants. In fact, she held
that the Supreme Court’s Chevron decision actually undercut the plaintiffs
argument. In that decision, Justice Gascon had held, “enforcement is
limited to measures – like seizures, garnishments or executions – that can be
taken only within the confines of the jurisdiction, and in accordance with its
rules” and that “whether recognition and enforcement should proceed
depends entirely on the enforcing forum’s laws”.
As a result, the Court of Appeal was unable to accept as a general rule, that courts should approach security for costs differently in an appeal involving enforcements of foreign judgments and ordered that the Ecuadorian plaintiff's post security for costs.
Regards,
Blair
As a result, the Court of Appeal was unable to accept as a general rule, that courts should approach security for costs differently in an appeal involving enforcements of foreign judgments and ordered that the Ecuadorian plaintiff's post security for costs.
Regards,
Blair
No comments:
Post a Comment