We last wrote in
July 2013 about Choc v Hudbay Minerals Inc., 2013 ONSC
1414, a decision which seemed to signal an increased willingness by
an Ontario court to assume jurisdiction in a case of alleged
wrongdoing by a foreign subsidiary of a Canadian corporation in a
Now, a new decision from the Court of Appeal for Ontario,
Yaiguaje v Chevron Corporation, 2013 ONCA 758, appears to
reinforce a willingness by Ontario courts to assume jurisdiction
over matters not clearly linked to Ontario.
In Yaiguaje, Plaintiff Ecuadorians obtained in Ecuador
judgment of US$18 billion against Chevron Corporation, an American
corporation incorporated in Delaware. In Yaiguaje, the
Ecuadorians sued in Ontario on the Ecuadorian judgment, for the
purpose of enforcing it in Ontario against Chevron and its Canadian
subsidiary, Chevron Canada Limited. Chevron Canada, headquartered
in Calgary, Alberta, is a seventh-level indirect subsidiary of
Chevron, with operations and 700 employees in Canada. Chevron
itself had no assets in Canada.
Both Chevron and Chevron Canada disputed the jurisdiction of the
Ontario court to hear the action.
In its decision, the Court of Appeal for Ontario set a very low
bar for the enforcement of a foreign judgment in Ontario. The Court
held that before assuming jurisdiction, a court must only find a
real and substantial connection between the subject matter of the
litigation and the foreign court that rendered the foreign
judgment. The Court need not find a connection between the subject
matter of the litigation and the court being asked to recognize and
enforce the foreign judgment. This is a much lower bar at the
enforcement stage than when the Court is called on to consider
whether it should assume jurisdiction over an actual foreign
dispute. The Court found that the test had been met, and assumed
Interestingly, the Ecuadorians seek to enforce their judgment in
Ontario against both Chevron and Chevron Canada, despite the fact
that their judgment is only against Chevron, not Chevron Canada.
Because Chevron Canada was physically present in Ontario, the
Ontario courts were quick to assume jurisdiction over it. However,
the Court of Appeal went out of its way to discuss Chevron
Canada's significant relationship with its corporate parents,
including the fact that it was owned indirectly by Chevron through
a number of intermediate wholly-owned subsidiaries, that Chevron
guaranteed the debt of its indirect subsidiaries which furnish
capital to Chevron Canada, and that Chevron has directly guaranteed
certain performance obligations of Chevron Canada. The Court also
noted that Chevron's income is wholly derived from dividends
from indirect subsidiaries that carry out its actual business,
including Chevron Canada.
The Court of Appeal indicated that the corporate relationship
structure, in addition to Chevron Canada's location in Ontario,
gave the Ontario courts jurisdiction to adjudicate the enforcement
action against Chevron Canada itself.
The Court of Appeal noted that Chevron Canada is entitled to
dispute that its assets are available to satisfy the judgment
against Chevron (and that issue remains to be determined in the
litigation), but, again, the Court went out of its way to discuss
factors that will undoubtedly be at issue when that ultimate issue
is decided. It is hard to view that discussion as anything other
than a signal by the Court that Ontario courts will consider such
factors when deciding whether to enforce foreign judgments against
a Canadian subsidiary not directly linked to the foreign judgment
This decision should give multinational corporations pause when
considering how to structure their affairs so as to shelter
Canadian subsidiaries or parents from liability. This also signals
to Canadian companies seeking to oppose enforcement of foreign
judgments in Canada that their time and money may be better spent
dealing with such challenges on the merits, rather than focusing on
jurisdictional arguments that now seem highly likely to fail.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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