Law Times

LAW TIMES • MARCH 10, 2014 PAGE 9 www.lawtimesnews.com court concluded, an Ontario court "had jurisdiction to adjudicate a recognition and enforcement action against Chevron Canada's indirect corporate parent that also names Chevron Canada as a defendant and seeks the seizure of the shares and assets of Chevron Canada to satisfy a judgment against the corporate parent." Concerns about the corporate veil were a matter for the hearing on the merits. Arguably, the equities played a signifi cant role in the appeal court's decision to allow the matter to proceed against Chevron Canada. " e word 'injustice' stands out on the facts of this case where vulnerable plaintiff s have been dragged around various legal systems for 20 years," says Gibson. "It may be that the court is being overly equitable here or perhaps simply exercising its equitable pow- ers against the big corporation and in favour of the little guy." Finally, the court vacated the stay granted by the lower court largely because neither party had requested it. But the court also noted parties could litigate for "strategic reasons" even where their chances of collecting on the foreign judg- ment were remote. "It is not the role of the court to weed out cases on this basis and it is a risky practice for a judge to second-guess counsel on strategy in the name of ju- dicial economy," the court stated. According to Hoult, Yaiguaje demonstrates that challenges to the jurisdiction of Ontario courts to hear enforcement actions relating to foreign judg- ments have little chance of success. "I would see future motions of this sort as non- starters," she says. " e emphasis may well shi to forum non conve- niens arguments." Chevron responded to the Court of Appeal's judgment by seeking and obtaining a stay pending an appeal to the Supreme Court. In granting the stay, the Court of Appeal found that the proposed appeal raised three serious questions relating to the jurisdiction of provincial superior courts in recog- nition and enforcement actions; the test when a non-party to the foreign judgment was involved; and the role of the corporate veil in the analysis. e court also found these were questions of pub- lic importance. LT FOCUS ON Litigation Yaiguaje v. Chevron Corp. When will Canadian courts enforce foreign judgments? he Supreme Court of Canada's landmark decision in Club Re- sorts Ltd. v. Van Breda went a long way to clarifying the jurisdiction of Ca- nadian courts over foreign defen- dants. But the top court hasn't di- rectly readdressed the related but distinct issue of when Canadian courts will enforce foreign judg- ments since its 2003 judgment in Beals v. Saldanha. Beals affi rmed the applicabil- ity of the "real and substantial test" to the enforcement issue. Van Breda did the same for juris- diction but put a substantial gloss on the methodology for deter- mining whether a particular set of facts met that test. "Van Breda took a very broad view of Canadian courts' juris- diction," says Erin Hoult of Blake Cassels & Graydon LLP's Toron- to offi ce. e top court hasn't yet de- termined the extent to which Van Breda will aff ect Beals. But a recent decision of the Ontario Court of Appeal, Yaiguaje v. Chevron Corp., is the subject of a leave application that will likely give the top court an opportu- nity to revisit Beals. e appeal court ruled On- tario courts have the power to recognize a US$9.51-million judgment rendered by Ecuador's National Court of Justice against Chevron. It also ruled the courts had the same power to enforce the judgment against Chevron Canada Ltd ., which wasn't a par- ty to the Ecuadoran judgment but had Chevron as its indirect parent. Yaiguaje arose from allega- tions that Chevron's predecessor, Texaco, was responsible for envi- ronmental pollution that harmed 30,000 residents of Ecuador's Su- cumbíos province. e plaintiff s sued in the United States, but the U.S. Court of Appeals for the Sec- ond Circuit dismissed the action on condition that Texaco submit to the jurisdiction of the Ecua- doran court. e company did so and the Ecuadoran court made the US$9.51-billion award against it. Chevron maintained the judgment involved fabricated evidence, judicial coercion, and bribery. A U.S. civil suit based on these allegations went to trial re- cently. Meanwhile, the plaintiff s asked the Ontario Superior Court to recognize and enforce the judgment against Chevron and Chevron Canada. In December 2013, the Ontar- io Superior Court of Justice ruled it had jurisdiction to enforce the Ecuadoran judgment but stayed the action on the basis that there was no prospect of recovery be- cause Chevron had no assets in Ontario and the plaintiff s had "no hope of success" against Chevron Canada's assets given their pro- tection by the corporate veil. Both parties appealed. Chev- ron argued there had to be a real and substantial connection be- tween Ontario and either Chev- ron or the subject matter of the action that gave rise to the Ecua- doran award. But the Court of Appeal held that the core issue was whether the foreign judgment should be enforceable in Ontario, an issue clearly within the jurisdiction of the Ontario courts. e court acknowledged that other factors, such as the preferability of New York as a forum for the enforce- ment proceedings and the fact that Chevron had no assets in Ontario, might ultimately be fatal to the plaintiff s. It was premature, however, to dismiss the enforce- ment action at a preliminary stage. So far as Chevron Canada went, the Court of Appeal noted it had jurisdiction over the Ca- nadian company because it had an offi ce in Ontario. As well, the connection between the parent and its subsidiary was an "eco- nomically signifi cant" one. " at's coded language saying the two companies may basically be the same entity with Chevron Canada just making money for Chevron U.S.," says Matt Gibson, an associate at Toronto's Affl eck Greene McMurtry LLP. In these circumstances, the Challenges to the jurisdiction of Ontario courts to hear enforcement actions relating to foreign judgments will have little chance of success, says Erin Hoult. BY JULIUS MELNITZER For Law Times This practical text will help you prepare for mediations by providing you with best practices, strategies, checklists and precedents. Learn what works and what doesn't work with practical insight from case studies. 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