Friday, 31 May 2013

Chevron Judgment Enforcement Action Stayed

This month, Mr. Justice Brown of the Ontario Superior Court of Justice stayed an action brought by certain Equadorean plaintiffs to enforce a mammoth, 18 billion dollar judgment against Chevron Corporation, which judgment was affirmed on appeal by an Equadorean appellate court last year. 
In Yaiguajeet al v. Chevron et al 2013 ONSC 2527, the three defendants, Chevron Corporation and its Canadian subsidiaries Chevron Canada Limited and Chevron Canada Finance Limited, brought a motion to a.) set aside the service ex juris of the claim on Chevron Corporation and b.) to stay the action under s.106 of the Courts of Justice Act.   Chevron had argued that even in a proceeding to enforce a foreign judgment, the court must find a real and substantial connection between the forum and the defendants or subject matter of the action, that such a connection did not exist, and thus the service ex juris must be set aside and the action stayed.   The court rejected the argument, reaffirmed that the requirement of a real and substantial connection applies only to a court assuming jurisdiction over the initial adjudication of a claim on its merits, and declined to set aside service ex juris. 
Nonetheless, the court stayed the action, on the grounds that the plaintiffs have no hope of success in enforcing the judgment in Ontario.  The Court did so even though the defendants had not brought a motion for summary judgment, nor a Rule 21motion to strike out the claim on the ground there was no reasonable cause of action.  The court cited evidence that Chevron Corporation has no assets in Ontario, and it is not likely to have assets here in the future.  As for the assets of the Canadian subsidiaries, the court emphatically rejected the plaintiffs’ arguments that the corporate veil should be pierced so as to make those assets available for execution.   
The court did not delve into the issue of whether the corporate veil analysis should be different in the context of proceedings to enforce foreign judgments.  Such a discussion is warranted having regard for two factors. One is the view, expressed in the top two Supreme Court of Canada decisions on enforcement of foreign judgments (namely, Morguard v. DeSavoye [1990] 3 SCR 1077  and Beals v. Saldanha [2003] 3 SCR 416) , that “Accommodating the flow of wealth, skills and people across state lines has now become imperative”.  Two,  the plaintiffs’ claim is based on tort (environmental damage), not breach of contract, which means the plaintiffs had not agreed to accept the risks in dealings with a limited liability corporation, i.e. Chevron.   
The plaintiffs have indicated their intention to appeal.


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