Canada: Yaiguaje V. Chevron Corporation – The Latest Development In The Enforcement Proceedings

Yaiguaje v. Chevron Corporation, 2017 ONCA 741


Resource extraction industries have been following the Yaiguaje v. Chevron proceedings closely. The decisions that flow from this action have far-reaching implications surrounding the enforcement of international judgments and the application of those judgments against related domestic parties' assets.

The proceedings took an interesting turn when the Ontario Court of Appeal recently assessed the merits of the appeal in a security for costs motion.

The Underlying Decision

In 2015, the Supreme Court of Canada affirmed Ontario's jurisdiction over the Ecuadorian plaintiffs' action against Chevron Corporation ("Chevron"). The Ecuadorian courts awarded the plaintiffs judgment in the amount of $9.5B USD. We analyzed the importance of that decision here.

The plaintiffs sought to enforce the judgment against Chevron Canada, a subsidiary of Chevron. Chevron Canada subsequently moved for summary judgment dismissing the action against it on the basis that it was a separate corporate personality of Chevron, and the judgment could not be enforced against it. The plaintiffs, brought a cross-motion brought a cross-summary judgment motion, seeking a declaration that Chevron Canada's assets were exigible.

Earlier this year, Justice Hainey of the Superior Court of Justice granted Chevron Canada's motion dismissing the action against it, and denied the plaintiffs' cross-motion. We considered that decision here. The plaintiffs appealed all of the decisions to the Court of Appeal.

The Defendants Move for Security for Costs Motion

The respondents to the appeal sought security for costs against the appellants in the amount over one million dollars ($160,000 for the appeal and the balance for the proceedings below) on the basis that they were not ordinarily resident of Ontario, have failed to show evidence of impecuniosity, and have not established a good chance of success on appeal.

The appellants opposed the motion for security of costs, arguing a novel approach in how the law of security of costs should be analyzed. The appellants argued that because of two factors - the proceeding is part of an action for recognition and enforcement of a foreign judgment and the original Ecuadorian action essentially amounts to a class action - security for costs should not be awarded.

The respondents opposed this approach, arguing that international comity does not require that Ecuadorian or other foreign plaintiffs are to be treated more favourably than domestic litigants.

Ultimately, Epstein, J.A., granted the motion and awarded security for costs in the amount of nearly $600,000 for Chevron Canada and $350,000 for Chevron. Part of the security for costs motion required Justice Epstein to assess the merits of the case. This decision was perhaps a precursor for the appeal to come - should the appeal even proceed.

Security for Costs Analysis

1. Failure by the Plaintiffs to Establish Impecuniosity

The appellants only filed evidence of settlement agreements that demonstrated that they had received third party funding in the past. The Ontario Court of Appeal found that the agreements left unanswered whether the appellants have other funding available to them. On that basis, Justice Epstein determined that he was to assume that ordering security for costs would not end the litigation.

The threshold hurdle to engage the security for costs rules was agreed upon by the parties – the Ecuadorian plaintiffs were not ordinarily resident in Ontario. The analysis then shifted to whether the appellants established that they were impecunious, and whether they established a good chance of success on appeal.

2. Analysis of the Merits of the Appeal

The common law dictates that where responding party is not impecunious, security for costs will generally be appropriate unless the responding party can demonstrate that their appeal has a good chance of success.

Justice Epstein, perhaps foreshadowing the likely result of the appeal, found that the plaintiffs failed to establish a good chance of success on appeal.

First, it was determined that separate legal personality of corporations is a fundamental principle of corporate law and that because a parent company operates a number of world-wide companies as an integrated economic unit does not displace this principle.

Justice Epstein determined that the plaintiffs do not have a good chance of appeal on the issue of piercing the corporate veil of Chevron Canada. Chevron Canada is not completely dominated and controlled by Chevron, and the plaintiffs never pleaded that Chevron Canada was used as an instrument of fraud or wrong-doing.

The question then turned on whether the plaintiffs can execute against Chevron Canada's assets under the Execution Act. Justice Epstein determined that the Act is a procedural act and does not create new rights. Chevron Canada's assets could not be seized just because Chevron Canada's dividend payments to Chevron could be. The distribution of profits from a sub to a parent in the form of dividends is a standard fact of inter-corporate life.

Justice Epstein made clear, however, that despite her findings that the plaintiffs did not have a good chance of success on appeal, they did not face an "impossible task". Indeed, she referred to the Supreme Court of Canada's 2015 decision in this proceeding that seemed to leave open the possibility of a rethinking of the doctrines of corporate separateness.

Does the Context of the Proceeding Change the Analysis

The Ontario Court of Appeal addressed the appellants argument that the circumstances of this proceeding should change the security for costs analysis. Justice Epstein was not convinced, finding that the well-established law should not be altered for reasons of international comity and that the action is effectively a class proceeding.

Dealing with the latter argument first, Justice Epstein determined that (1) the action was not a class proceeding; and (2) even if it was, there is no case law to establish that non-resident plaintiffs in a class proceeding are insulated from a meritorious motion for security for costs.

On the first point, Justice Epstein determined that there is no basis in Ontario law, or the Supreme Court's decision in 2015, to suggest that the merits of a security for costs motion should be ignored because the proceeding concerns the recognition and enforcement of a foreign judgment. Indeed, the Ontario Court of Appeal accepted the respondents argument, relying on English Court of Appeal jurisprudence that establishes that "there is no difference between an action on a foreign judgment and any other action."


The Court of Appeal seemingly dealt a blow to the plaintiffs' attempts to execute against Chevron and Chevron Canada's Ontario assets.

It is unclear what steps the plaintiffs will take following the decision, though their $9.5 billion USD Ecuadorian judgment continues to be enforceable in Ontario. It remains to be seen how the plaintiffs react to this decision and whether the appeal will proceed given Justice Epstein's analysis of the merits on this motion.

In the meantime, the enforcement saga continues.

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