Tuesday, 24 December 2013

Ontario Court of Appeal Reverses Stay of Proceeding to Enforce Giant Ecuadorian Judgment

A unanimous Court of Appeal recently allowed the plaintiffs’ appeal of the ruling of Brown J., which had stayed their action for recognition and enforcement of their judgment from Equador against Chevron Corp. relating to environmental damage that harmed villagers there: Yaiguaje et al v. Chevron et al.   

After the plaintiffs had brought their action, the defendants – Chevron Corporation and its two Canadian subsidiaries, Chevron Canada Limited and Chevron Canada Finance Limited -- brought a motion to stay the action, specifically and only on jurisdictional grounds.   The defendants had plainly and emphatically stated they were not attorning to the jurisdiction. 

The motion court held that it has jurisdiction over the case, but nonetheless stayed the action on its own motion, exercising its discretion under s. 106 of the Courts of Justice Act.  The motion court cited the fact that Chevron Corp. has no assets in Ontario and the view that there is no reasonable prospect that the corporate veil will be pierced in respect of Chevron’s Canadian subsidiaries, and concluded that allowing the action to proceed would be “a waste of judicial resources”. 

The appeal court ruled the case did not meet the test for such a stay, namely that continuance of the action would be oppressive or vexatious or an abuse of process, and the stay would not cause an injustice to the plaintiff.     Without commenting on the merits of the plaintiffs’ action the court said the plaintiffs ought to be allowed to present their case at trial.     The court also noted the motion court had not solicited submissions from either side on the discretionary stay.

 The Court also dismissed Chevron’s cross appeal. Chevron had argued that the Ontario court could not take jurisdiction over this judgment enforcement action unless there was a real and substantial connection between the defendant and Ontario, as well as between the defendant and the jurisdiction where the original judgment was issued.  The court pointed out that the recent Supreme Court of Canada decision in Beals v. Saldanha made clear that such a connection to the jurisdiction where the original judgment was issued is necessary, but not also such a connection to the jurisdiction where enforcement is sought, in this case, Ontario.  The Court also discussed the recent Club Resorts v Van Breda decision of the Supreme Court of Canada.

The appellate ruling raises a number of fascinating issues I hope to explore in future posts.  In the meanwhile, have a happy holiday!