Few cases have gained more international notoriety than the globalized proceedings of a group of residents in the Oriente region of the Republic of Ecuador against Chevron Corporation, a sprawling energy conglomerate based in California:<\/p>\n
In reasons released on 23 May 2018 (2018 ONCA 472), a three-judge panel of the Ontario Court of Appeal upheld the motion judge\u2019s decision, unanimous in the result, but with a separate concurring opinion leaving open the possibility of an appeal to the Supreme Court of Canada based on the avenue of piercing the corporate veil on equitable grounds. This decision is significant, not only because it may have brought the Chevron saga to an end, but what it may say for veil-piercing doctrine going forward, certainly in Canada, and possibly in other common law jurisdictions around the world.<\/p>\n
The majority decision of the Court of Appeal written by Justice Hourigan (Huscroft J.A., concurring) made short work of any statutory entitlement to attach shares of Chevron Canada for the parent company\u2019s debt. The majority affirmed the motions judge, Hainey J., who interpreted the\u00a0Execution Act<\/em>\u00a0as a purely procedural statute that \u201cdoes not create any rights in a property but merely provides for the seizure and sale of property in which a judgment-debtor already has a right or interest.\u201d And here the plaintiffs had no right or interest in the shares of Chevron Canada\u00a0per se<\/em>. In this the Court was unanimous, but the separate opinion of Justice Nordheimer parted company with the majority\u2019s rigorous adherence to the principle of corporate separateness originating with the House of Lords decision in\u00a0Salomon v. Salomon & Co.<\/em>\u00a0(1897) and Ontario\u2019s test for piercing the corporate veil established in\u00a0Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co.<\/em>\u00a0(1997).<\/p>\n The appeal by the plaintiffs on enforcement through the assets of Chevron\u2019s Canadian subsidiary was premised on principles of access to justice, which the U.S. Federal Courts had precluded on the basis that the Ecuador judgment had been obtained by fraud.<\/p>\n However, Hourigan J.A. rejected the existence of \u201can independent just and equitable\u201d ground for veil-piercing outside the three situations outlined in the\u00a0Transamerica<\/em>\u00a0test:<\/p>\n when the court is satisfied that a company is a \u201cmere facade\u201d concealing the true facts; and<\/p>\n In turn, the existence of a mere facade\u00a0can only be made out when the court is convinced:<\/p>\n In this regard, plaintiffs\u2019 counsel conceded that Chevron Canada did not meet the\u00a0Transamerica\u00a0<\/em>test and the majority ruled that legal certainty militated against an open-ended exception to the rule based on just and equitable grounds: \u201cOnce the\u00a0Transamerica<\/em>\u00a0test is jettisoned and no principled basis for piercing the corporate veil replaces it, we are left with a pure\u00a0ad hoc<\/em>\u00a0test.\u201d The exhortation to \u201cdo the right thing\u201d was further complicated by the majority\u2019s observations that \u201cthe equities of this case are far from clear,\u201d given the U.S. court findings that the Ecuadorian judgment had been obtained through a \u201cmassive fraud\u201d.<\/p>\n Justice Nordheimer did not dispute the taint around the Ecuador judgment, but did not agree \u201cthat it would never be appropriate to lift the corporate veil to permit the enforcement of a judgment, unless the requirements of the\u00a0Transamerica<\/em>\u00a0test are met.\u201d In support of his dissent on principle, if not in the result, Nordheimer J. draws sustenance from the reasons of Madam Justice Wilson in a 1987 decision, Kosmopoulos v. Constitution Insurance, citing academic authority for the proposition that the principle of \u201cseparate entities\u201d should not be enforced where the result is \u201ctoo flagrantly opposed to justice, convenience or the interests of the Revenue\u201d concluding: \u201cI have no doubt that theoretically the veil could be lifted in this case to do justice\u2026\u201d The majority did not view Kosmopoulos as a bypass to the\u00a0 \u201cconsistent principle\u201d articulated in Transamerica, but\u00a0 Justice Nordheimer saw the \u201cinterests of justice\u201d as a strong enough independent principle to depart from an otherwise consistent approach to the majority of cases. Justice Nordheimer also saw meaningful distinctions between the approach to veil piercing in determining liability as distinguished from enforcement, noting that there would be no hardship to innocent shareholders, given that Chevron owned 100% of Chevron Canada, should the interests of justice commend enforcement.<\/p>\n The most provocative element of this decision taken as a whole is a face-off between two principled arguments. For the majority, the interests of legal certainty prevailed. Against this principle Justice Nordheimer invokes \u201c[t]he origins of equity [which] flow from the need to ameliorate the harshness of positive law in principled circumstances.\u201d Both decisions display a mastery of precedent in supporting their ultimately quite different views of what principled approach should apply. However, that level of detail is the material for an article going well beyond the scope of this comment.<\/p>\n In the end, Justice Nordheimer joins the majority in the result based on the principle of comity in relation to the underlying foreign judgments, decisively in this case with respect to the U.S. Federal District and Circuit Court decisions respectively determining and upholding a finding of fraud undermining the Ecuador judgment. \u201cBecause of the manner in which this matter has proceeded, our courts have not been called upon to make their own determination of the validity of the Ecuadorian judgment,\u201d Justice Nordheimer reluctantly observes: \u201cAbsent such a finding, even on my approach to the judgment enforceability question, the circumstances here cannot rise to the level that would be necessary to conclude that the result is \u2018too flagrantly opposed to justice\u2019 to permit the corporate veil to be pierced.\u201d<\/p>\n There is no doubt that the Nordheimer dissent on issues of controlling principle in the common law raises ambiguities worthy of further judicial thought and inquiry. It is worthy of note that fraud is one of a few established \u201cimpeachment defences\u201d along with natural justice, order and fairness and public policy, upon which, based on established Supreme Court of Canada authority in\u00a0Morguard v. De Savoye\u00a0<\/em>(1990) and\u00a0Beals v. Saldanha\u00a0<\/em>(2003), Canadian courts can conduct an independent inquiry on whether to enforce without deference to the originating court as a matter of \u201cfull faith and credit\u201d in the domestic context or as a matter of \u201ccomity\u201d internationally. In light of what has already been litigated in the Chevron saga, it would be a difficult and complex undertaking to put a Canadian court in a legitimate position to second guess the U.S. courts with respect to the originating judgment in Ecuador. However, those issues, like the initial question of whether an Ontario court had enforcement jurisdiction at all with respect to the foreign judgment debtor\u2019s subsidiary, which earlier found its way to the Supreme Court of Canada, may once again reach our highest court for remand to courts below. In that event, portions of the already substantial Canadian chapter of the Chevron saga remain to be written.<\/p>\n","protected":false},"excerpt":{"rendered":" Few cases have gained more international notoriety than the globalized proceedings of a group of residents in the Oriente region of the Republic of Ecuador against Chevron Corporation, a sprawling energy conglomerate based in California: undoubted environmental devastation from a project in Ecuador developed by an indirect subsidiary of Texaco Inc, between 1964 and 1992, […]<\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[140],"tags":[],"_links":{"self":[{"href":"https:\/\/www.cambridgellp.com\/wp-json\/wp\/v2\/posts\/2766"}],"collection":[{"href":"https:\/\/www.cambridgellp.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.cambridgellp.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.cambridgellp.com\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/www.cambridgellp.com\/wp-json\/wp\/v2\/comments?post=2766"}],"version-history":[{"count":0,"href":"https:\/\/www.cambridgellp.com\/wp-json\/wp\/v2\/posts\/2766\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.cambridgellp.com\/wp-json\/wp\/v2\/media?parent=2766"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.cambridgellp.com\/wp-json\/wp\/v2\/categories?post=2766"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.cambridgellp.com\/wp-json\/wp\/v2\/tags?post=2766"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n
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