On October 31, 2017, the Ontario Court of Appeal released the latest decision in a nearly 25-year legal saga being pursued on behalf of approximately 30,000 indigenous Ecuadorian villagers affected by environmental pollution allegedly caused by Texaco Inc., a company that later merged with Chevron Corporation.
The decision in Yaiguaje v Chevron Corporation, 2017 ONCA 827, clarifies the test to be applied when security for costs are sought before an appeal is heard and, applying the test, holds that the representative plaintiffs do not have to post security in the unique circumstances of the case. The result re-opens the door for the plaintiffs’ appeal on the merits concerning their thus-far unsuccessful efforts to recognize and enforce a US$9.5-billion Ecuadorian judgment in Ontario.
The history of the underlying dispute is long and complex. In 1993, the representative plaintiffs first commenced proceedings against Texaco in New York. While that proceeding was ultimately dismissed, the plaintiffs commenced new proceedings in Ecuador in 2003 against Chevron, which by that time had merged with Texaco. The Ecuadorian proceeding resulted in a US$9.5-billion judgment against Chevron.
In 2012, the plaintiffs commenced proceedings in Ontario against Chevron and Chevron Canada seeking recognition and enforcement of the Ecuadorian judgment. Only after unsuccessfully arguing the Ontario court lacked jurisdiction up to the Supreme Court of Canada did the Chevron companies defend the action on its merits. The defences advanced include that (a) the shares and assets of Chevron Canada are not exigible and (b) there is no basis to pierce the corporate veil between Chevron and Chevron Canada to render the Canadian company’s shares and assets available to satisfy the Ecuadorian judgment.
On a summary judgment motion, the Superior Court of Justice accepted the Chevron companies’ defences and dismissed the plaintiffs’ action (We wrote about that decision: The Corporate Veil Matters). The plaintiffs appealed to the Court of Appeal. In response, the Chevron companies moved for security for costs of the proceeding and the appeal. The security for costs motion gives rise to the Court of Appeal’s recent decision. Security for costs are intended to protect a defendant from an unenforceable costs award because the plaintiff is outside Ontario and has no assets in Ontario.
In first instance, the motion judge of the Court of Appeal granted the motion and ordered that security for costs exceeding $1 million must be posted, an amount virtually certain to end any appeal on the merits. However, on appeal, a three-judge panel of the Court of Appeal clarified important principles relevant to security for costs motions that the motion judge failed to consider:
Here, the Court of Appeal held that the unique factual circumstances require the conclusion that the interests of justice dictate that no security for costs be ordered. These circumstances included:
As a result, the path has been cleared for the Ecuadorian plaintiffs to pursue their appeal on the merits and, in turn, for the Court of Appeal to decide whether those plaintiffs have finally found an avenue to recognize and enforce the Ecuadorian judgment.
This decision is important for businesses who may be sued in Ontario by absent plaintiffs, making it more difficult for them to protect themselves against adverse costs awards. Given that the Court of Appeal, last week, green-lighted a class action by absent foreign plaintiffs (see Ontario Court of Appeal Grounds Class Action Jurisdiction Challenges), this decision seems to be leading to Ontario becoming a forum for foreign litigants.