Thursday, November 2, 2017

Court Of Appeal Vacates Its Security for Costs Order in Ecuadorian Litigation against Chevron

When I last reported on this case Yaiguaje v. Chevron Corporation 2017 ONCA 827, less than a month ago, I reported that Justice Gloria J. Epstein of the Ontario Court of Appeal had ordered that the Ecuadorian plaintiffs post security for costs of more than $942,000 in order to continue with an appeal from a summary judgment order dismissing their against Chevron Canada.  In a decision released on October 31, 2017, a three judge panel of the Ontario Court of Appeal unanimously reversed Justice Epstein’s decision and vacated her order.  The panel (Justices Hoy, Cronk and Hourigan) held that the unique factual circumstances of this case compelled the conclusion that the interests of justice required that no order for security for costs be made.  Unlike their colleague, Justice Epstein, the panel concluded that the motion for security for costs was simply a tactical move made by Chevron to end the litigation.


The panel agreed that under rules of civil procedure, the court may make an order for security for costs where it is “just” to do so.   It held that the rule, as written, was permissive not mandatory and that even where the requirements of the rule have been met, a motion judge has discretion to refuse to make the order.  The panel held that the overarching principle to be applied in all of the circumstances is the justness of the order sought.


Because Justice Epstein’s decision was discretionary, it should be afforded deference.  However, an error in principle is one of the bases on which the court may interfere with a discretionary order. 


The panel held that in deciding motions for security for costs, judges are obliged to first consider the specific provisions of the rules governing such motions and then effectively take a step back and consider the justness of the order sought in all the circumstances of the case, with the interests of justice at the forefront.  They held that Justice Epstein had failed to take into account the second part of that analysis and that failure constituted an error in principle.  It therefore fell to the appeal panel to conduct the necessary analysis of the justness of the order.


In concluding that no order for security for costs should be made in this case, the panel considered the following:


  1. the Ecuadorian plaintiffs were seeking to enforce a judgment in which they have no direct economic interest.  Funds collected on the judgment will be paid into a trust and net funds are to be used for environmental rehabilitation or health care purposes in Ecuador.   In essence, this is public interest litigation;
  2. although there is no direct evidence of impecuniosity before Justice Epstein, the panel held that it would be highly impractical to obtain this evidence from the representative plaintiffs, let alone the 30,000 people who would indirectly benefit from the enforcement of the judgment.  The court found “there can be no doubt that the environmental devastation to the appellants’ lands has severely hampered their ability to earn a livelihood” and that if they accept the findings that underlie the Ecuadorian judgment, Texaco Inc. contributed to the appellants’ misfortune;
  3. in contrast, Chevron Corporation and Chevron Canada have annual gross revenues in the billions of dollars.  It is difficult to believe that either of these two corporations require protection for costs awards that could amount to a miniscule fraction of their annual revenues;
  4. there should be no bright line rule that a litigant must establish that litigation funding is unavailable to successfully resist a motion in an appeal for security for costs.  In this case counsel for the appellants advised the court that he was operating under a contingency arrangement and there was evidence that Chevron Corporation has sued some of the appellants’ former third party funders and the funders withdrew their financial support;
  5. it can’t be said that this case is wholly devoid of merit;
  6. there is no doubt the legal arguments asserted by the appellants are innovative and untested but that does not foreclose the possibility that one or more of them may eventually prevail; and
  7. the history of the litigation which has been ongoing for almost 25 years makes it clear that Chevron has and will employ all available means to resist enforcement of the judgment.  This reality makes it difficult to accept that the motion for security for costs is anything more than a measure intended to bring an end to the litigation. 
    For all of those reasons, the court set aside Justice Epstein’s order and denied Chevron’s motion to require the Ecuadorian plaintiffs to post security for costs on the appeal.      



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