Canada: Yaiguaje v. Chevron Corporation - The Ontario Court Of Appeal Does Not Pierce The Corporate Veil, But The Concurring Minority Questions The Principle Of Corporate Separat

The issues at stake

The Ontario Court of Appeal recently released its decision in Yaiguaje v Chevron Corporation, perhaps putting an end to the long, drawn-out litigation between Ecuadorian plaintiffs, Chevron Corporation ("Chevron") and Chevron Canada. 

The Court of Appeal found that the lower court correctly decided that the plaintiffs could not pierce the corporate veil and enforce an Ecuadorian judgment against Chevron against Chevron's  seventh-level subsidiary, Chevron Canada. 

However, while the majority dismissed the appeal and rejected the appellants' argument that it ought to be entitled to pierce the corporate veil on "just and equitable grounds", the concurring minority found that such a ground for piercing the corporate veil might very well exist, but that it such a ground was just not available to the appellants on the facts of this case.

How the proceeding made it to the Court of Appeal

In 2011, the Ecuadorian plaintiffs obtained a 9.5 billion USD judgment in Ecuador against Chevron for environmental damages relating to its past operations in Ecuadorian region of Orienté.  The judgment, however, was empty, as Chevron no longer had any assets in Ecuador.  As a result, the plaintiffs sought to enforce the judgment against Chevron in the United States.  The enforcement proceeding was dismissed, as the New York Court found that the Ecuadorian judgment was invalid, having been  obtained through fraud. 

In 2013, the plaintiffs sought to enforce the judgment in Ontario against Chevron Canada, a seventh-level subsidiary of Chevron.  In 2015, the Supreme Court of Canada affirmed Ontario's jurisdiction to hear the enforcement proceeding. 

Shortly thereafter, the defendants, Chevron and Chevron Canada, moved for summary judgment dismissing the plaintiffs' claim against Chevron Canada on the grounds that that its shares were not an exigible  asset of Chevron, nor could the plaintiffs pierce the corporate veil and enforce the judgment against Chevron Canada's assets.  Justice Hainey of the Superior Court of Justice agreed with the Chevron companies and dismissed the plaintiffs' claim.  It is from that decision that the plaintiffs appealed.

The majority's decision

The appellants advanced two primary arguments on appeal:

  1. That the Execution Act permits execution of Chevron Canada's shares and assets to satisfy the Ecuadorian judgment against Chevron, and;
  2. The Court should pierce the corporate veil in order to render Chevron Canada's shares and assets exigible.

Justice Hourigan, writing for the majority, ultimately rejected these arguments on the basis that they "ignore[d] more than twenty years of jurisprudence" and cautioned that if the Court were to accept the appellants' submissions, "it would result in significant changes to fundamental principles of our corporate law and the law of execution."

Chevron's shares are not exigible

Justice Hourigan found that it was legally impossible to grant the appellants' request for a declaration against Chevron Canada that the shares of its company were exigible. The Execution Act is procedural and does not purport to grant substantive rights to judgment creditors. Simply put, it was not enough that Chevron had an "amorphous indirect right" to the assets of Chevron Canada. Rather, there must be an existing substantive legal right that permits seizure of the assets.

The Court also found that if the appellants' submissions were accepted on this issue, a judgment creditor would have greater rights to the issuing corporation's assets than a judgment debtor shareholder because access would occur while the corporation was ongoing (as opposed to when it was wound-up). Moreover, if the Court granted the appeal, it would mean that the assets of Ontario subsidiaries of both domestic and foreign companies would automatically and always be subject to execution orders to satisfy the judgment of parent companies.  The Court refused to permit that outcome.

Part of the Court's analysis considered the expectations of corporations that operate in Ontario.  The Court determined that stakeholders of those corporations (creditors, shareholders, employees, etc.) rely on the doctrine of corporate separateness when they do business with these corporations.  The expectation of those stakeholders is that they need only consider the liabilities of that corporation, and not the liabilities of all of the related corporations, when doing business with them.  Those expectations should not be altered by the Court.

There is no "just and equitable ground" for piercing the corporate veil

Next, the court addressed the appellants' argument that the Court has the ability to pierce the corporate veil when the interest of justice demand it.

The majority bluntly dismissed this argument, stating that the court has "repeatedly rejected an independent just and equitable ground for piercing the corporate veil", while at the same time protecting the principle of corporate separateness.  The Court found that the veil may be pierced when "courts will disregard the separate legal personality of a corporate entity where it is completely dominated and controlled and being used as a shield for fraudulent or improper conduct." Both elements of the test must be met.  In this case, they were not.

Particularly troubling for the Court was the appellants' assertion that the rigorous corporate separateness doctrine ought to be relaxed in cases involving enforcement of a judgment debt, as opposed to cases of first instance where the Court is tasked with determining liability.  The Court found that such an argument '"dangerously resembles" the enterprise theory of liability, in which several corporations that operate closely as a 'group' are in reality a single entity and should accordingly be responsible for the others' debt. The Court found that the extent of liability under the enterprise theory would introduce an "intolerable" level of uncertainty, and was therefore untenable.

Further, the Court found no merit in the appellants' policy reasons for lifting the corporate veil, finding that the equities in the case were far from clear (recall that the New York court found that the Ecuadorian judgment was obtained through fraud).

 In the end, the Court re-affirmed the test for piercing the corporate veil and rejected the independent "just and equitable" grounds for doing so.  While the majority conceded that the rules for piercing the corporate veil can and will evolve, it must do so on in a "principled manner that certainty and clarity, not in a way that sows confusion and is devoid of principle". 

The concurring minority's decision

While concurring with the outcome of the majority's decision, Justice Nordheimer took issue with the majority's approach to the corporate separateness doctrine.

Unlike the majority, Justice Nordheimer held that the jurisprudence may allow for the corporate veil to be pierced in situations where equity would demand a departure from the strict application of the corporate separateness principle.  This includes situations where liability was not in issue, such as in the context of the enforceability of a valid judgment.

Justice Nordheimer relied on the phrase that equity is the "conscience of law", and found that the jurisprudence was not clear enough in its pronouncement to limit the Court's inherent equitable powers to pierce the corporate veil in extraordinary situations.  Such a situation may occur where liability has been established, but the judgment creditor remains without a remedy because of the judgment debtor's internal corporate structure.

While Justice Nordheimer was of the view that such an element to the test for piercing the corporate veil existed, the facts and equities of this particular case did not warrant it.

Is a crack forming in the principle of corporate separateness?

Corporations with assets in Ontario whose related entities operate abroad should feel comforted by the fact that a majority of the Province's highest court was not prepared, as the majority stated, to "sacrifice certainty in the law for expediency" and pierce the corporate veil. 

While ultimately the dissent's position is not binding on lower courts, it does leave the door open for future debate as to whether an independent "just and equitable ground" for piercing the corporate veil is available to parties looking to enforce both foreign and domestic judgments against related corporations.

This may very well be an issue that the Supreme Court of Canada will be called upon to address.  Check back here for our analysis should it do so.

To view the original article click here

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions