recent ruling by Ontario's highest court clarifying the law
governing the enforcement of foreign judgments may turn
Canada's most populous province into an attractive forum for
plaintiffs seeking to collect on judgments against multinational
On December 17, the Ontario Court of Appeal
overturned a stay issued by the Ontario Superior Court of
Justice in an enforcement action brought against Chevron and
its Canadian subsidiary by a group of Ecuadorian plaintiffs. The
plaintiffs has previously won a $9.5 billion judgment in Ecuador in
long-running environmental dispute. The decision by the Court
of Appeal allows the Ecuadorian plaintiffs to continue litigating
the question of whether they should be able to seize Chevron
Canada's assets in satisfaction of the judgment they won in
Ecuador, although Chevron and its Canadian subsidiary have until
February 18 to file an appeal with the Supreme Court of Canada.
Before both courts, Chevron argued that absent a "real and
substantial connection" between the company and the province,
the Ontario courts could not exercise jurisdiction over it. The
company posited that no such "real and substantial
connection" existed because it neither did business in Ontario
nor owned any assets there. Chevron Canada, meanwhile, argued that
the Ontario courts lacked jurisdiction despite its presence in
Ontario as it had not been properly served in the case.
The Superior Court rejected all of these jurisdictional
arguments, but it nevertheless stayed the enforcement action
against the parent and its subsidiary because (1) Chevron itself
had no assets in Ontario and (2) Chevron Canada's assets and
activities in Ontario could not be attributed to Chevron unless the
plaintiffs successfully demonstrated that the subsidiary was the
"alter ego" of the parent.
In an unanimous ruling, the Ontario Court of Appeal found that
the Superior Court lacked the statutory authority to stay the
proceedings and deny the Ecuadorian plaintiffs the
"opportunity to attempt to enforce the Ecuadorian judgment in
a court where Chevron will have to respond to the merits."
More significantly, however, the Court of Appeal ruled that
jurisdiction over Chevron could be founded on the
"economically significant relationship between Chevron and
Chevron Canada" even though Chevron Canada is a seventh-level
indirect subsidiary of Chevron.
In reaching this jurisdictional conclusion, the Court of Appeal
found it significant that "Chevron's income is wholly
derived from indirect subsidiaries" and that "Chevron
guarantees the debt of its indirect subsidiaries." The Court
was quick to note that this did not mean that Chevron Canada's
assets could necessarily be used to satisfy the Ecuadorian judgment
against Chevron, but it left this issue to be decided by the
Superior Court at trial.
The Ontario Court of Appeal's ruling makes it much easier
for plaintiffs who win large judgments against multinational
corporations in jurisdictions where the corporation has few assets
to seek the enforcement of such judgments in Canada's most
populous province. In most common law jurisdictions, corporate
parents and subsidiaries are assumed to be entirely separate
entities for jurisdictional purposes, unless the parent exercises
such "domination and control" over the subsidiary as to
render it its alter ego.
In view of the opposite directions that courts in Canada and the
United States seem to be heading on jurisdictional questions
concerning corporations with complex structures, plaintiffs seeking
to enforce on foreign judgments may well be seen heading north with
increasing frequency in the future.
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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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