



COURT OF APPEAL FOR ONTARIO

CITATION: Yaiguaje v. Chevron Corporation, 2017 ONCA 827

DATE: 20171031

DOCKET: M48342 (C63309 and C63310)

Hoy A.C.J.O., Cronk and Hourigan JJ.A.

BETWEEN

Daniel Carlos
    Lusitande Yaiguaje, Benancio Fredy Chimbo Grefa, Miguel Mario Payaguaje
    Payaguaje, Teodoro Gonzalo Piaguaje Payaguaje, Simon Lusitande Yaiguaje,
    Armando Wilmer Piaguaje Payaguaje, Angel Justino Piaguaje Lucitante, Javier
    Piaguaje Payaguaje, Fermin Piaguaje, Luis Agustin Payaguaje Piaguaje,  Emilio
    Martin Lusitande Yaiguaje, Reinaldo Lusitande Yaiguaje, Maria Victoria Aguinda
    Salazar, Carlos Grefa Huatatoca, Catalina Antonia Aguinda Salazar, Lidia
    Alexandria Aguinda Aguinda, Clide Ramiro Aguinda Aguinda, Luis Armando Chimbo
    Yumbo, Beatriz Mercedes Grefa Tanguila, Lucio Enrique Grefa Tanguila, Patricio
    Wilson Aguinda Aguinda, Patricio Alberto Chimbo Yumbo, Segundo Angel Amanta
    Milan, Francisco Matias Alvarado Yumbo, Olga Gloria Grefa Cerda, Narcisa Aida
    Tanguila Narvaez, Bertha Antonia Yumbo Tanguila, Gloria Lucrecia Tanguila
    Grefa, Francisco Victor Tanguila Grefa, Rosa Teresa Chimbo Tanguila, Maria
    Clelia Reascos Revelo, Heleodoro Pataron Guaraca, Celia Irene Viveros Cusangua,
    Lorenzo Jose Alvarado Yumbo, Francisco Alvarado Yumbo, Jose Gabriel Revelo
    Llore, Luisa Delia Tanguila Narvaez, Jose Miguel Ipiales Chicaiza, Hugo Gerardo
    Camacho Naranjo, Maria Magdalena Rodriguez Barcenes, Elias Roberto Piyahuaje
    Payahuaje, Lourdes Beatriz Chimbo Tanguila, Octavio Ismael Cordova Huanca,
    Maria Hortencia Viveros Cusangua, Guillermo Vincente Payaguaje Lusitande,
    Alfredo Donaldo Payaguaje Payaguaje
and
Delfin Leonidas Payaguaje Payaguaje

Plaintiffs (Appellants)

and

Chevron Corporation
,
Chevron Canada Limited
and
Chevron
    Canada Finance Limited

Defendants (Respondents)

Alan Lenczner, Brendan Morrison, Kirk Baert and Celeste
    Poltak, for the appellants (see Schedule I)

Peter Grant, for the appellants (see Schedule II)
[1]

Benjamin Zarnett, for the respondent Chevron Canada

Larry Lowenstein, for the respondent Chevron Corporation

Heard: October 11, 2017

On motion to vary the security for costs order
    of the motion judge, dated September 21, 2017, with reasons reported at 2017
    ONCA 741.

REASONS FOR DECISION

Introduction

[1]

The appellants bring a motion to vary the order of the motion judge requiring
    them to post $942,951 as security for costs of the proceeding and the appeals in
Yaiguaje v. Chevron Corporation
(C63309 and C63310), both now pending
    in this court, prior to the hearing of the appeals.

[2]

For the reasons that follow, we grant the motion and vacate the order of
    the motion judge.

Facts

[3]

The dispute among the parties has a long and complex history.  For
    present purposes, the following brief factual summary provides sufficient
    context.

[4]

The appellants are residents of Ecuador who hold a judgment of US$9.5
    billion against Chevron Corporation obtained in 2011.  The judgment was the
    result of a claim for environmental damage that the appellants allege was
    caused by Texaco Inc., a company that later merged with Chevron Corporation.
    The appellants are representative plaintiffs for approximately 30,000
    indigenous Ecuadorian villagers who have been affected by the environmental
    pollution.

[5]

The appellants first commenced proceedings against Texaco Inc. in 1993
    in New York. That proceeding was eventually dismissed on
forum non
    conveniens

and international comity grounds. The decision was
    upheld on appeal, in part, because Texaco Inc. had agreed to submit to the
    jurisdiction of the Ecuadorian courts.

[6]

The appellants commenced proceedings against Chevron Corporation in
    Ecuador in 2003. By then, Texaco Inc. had merged with Chevron Corporation.  It
    was in that proceeding that the appellants obtained their judgment. Chevron
    Corporation has resisted enforcement of the judgment in courts around the world
    on the basis of the assertion, among others, that the judgment was obtained by
    fraud.

[7]

In 2012, the appellants commenced an action in the Ontario Superior
    Court of Justice for the recognition and enforcement of the Ecuadorian judgment
    against Chevron Corporation and Chevron Canada, a seventh level, indirect
    subsidiary of Chevron Corporation.

[8]

In the Ontario proceeding, Chevron Corporation and Chevron
    Canada challenged the jurisdiction of the Superior Court of Justice to
    recognize and enforce the Ecuadorian judgment.  Justice David Brown (as he then
    was) dismissed that motion and concluded that the Ontario court had
    jurisdiction to recognize and enforce the judgment against these defendants. However,
    Brown J. also concluded that this was an appropriate case in which to exercise
    the courts power to stay the proceedings pursuant to s. 106 of the
Courts
    of Justice Act,
R.S.O. 1990, c. C.43.

[9]

This court overruled the imposition of the stay and upheld the decision
    on the jurisdictional issue:
Yaiguaje v. Chevron Corporation
,
2013

ONCA 758. The Supreme Court of Canada affirmed this courts decision with
    respect to the Ontario courts jurisdiction:
Chevron Corporation v.
    Yaiguaje
,
2015 SCC 42
.

[10]

Following
    the Supreme Courts decision, Chevron Corporation and Chevron Canada filed
    defences in the action. The defences raised by Chevron Corporation include that
    the Ecuadorian judgment cannot be recognized or enforced in Ontario because, as
    the United States District Court for the Southern District of New York found in
    2014, it was obtained by fraudulent means.
[2]

[11]

Chevron
    Corporation and Chevron Canada then moved for summary judgment, submitting that
    the shares and assets of Chevron Canada are not exigible pursuant to the
Execution
    Act
,
R.S.O. 1990, c. E.24 and that there is no basis to pierce the
    corporate veils between Chevron Canada and its indirect parent Chevron Corporation
    so that Chevron Canadas shares and assets become available to satisfy the
    Ecuadorian judgment against Chevron Corporation. Justice Glenn Hainey accepted
    these submissions, granted summary judgment in favour of Chevron Corporation
    and Chevron Canada, and dismissed the plaintiffs claim against Chevron Canada:
Yaiguaje v. Chevron Corporation
, 2015 ONSC 135.

[12]

The
    appellants have appealed the order of Hainey J. to this court, and Chevron
    Corporation and Chevron Canada brought a motion for security for costs of the
    proceeding and the appeals.

[13]

Whether
    the Ecuadorian judgment can or should be recognized or enforced in Ontario
    remains to be determined.

Decision of the Motion Judge

[14]

The
    motion judge granted the motion and ordered security for costs be posted before
    the appeals could be heard.

[15]

In
    so ruling, the motion judge found that the appellants had not established that they
    were impecunious or that third party litigation funding was unavailable. 
    Because she found that impecuniosity had not been established, the motion judge
    ruled that the appellants had to demonstrate that their claim has a good chance
    of success. On a review of the merits of the claim, she found that the
    appellants had not met that onus.

[16]

The
    motion judge went on to reject the appellants other submissions, including
    that the order should not be made on the basis that this is an action for the
    enforcement of a foreign judgment or because it is essentially a class
    proceeding.

Analysis

(i)

Standard of Review

[17]

Chevron
    Corporation and Chevron Canada relied on rules 61.06(1)(b) and 56.01(1)(a) of
    the
Rules of Civil Procedure
, R.R.O 1990, Reg. 194, in support of
    their motion for security for costs. In an appeal, rule 61.06(1)(b) authorizes
    this court to make such an order for security for costs of the proceeding and
    the appeal as is just where an order for costs could be made under r. 56.01.

[18]

Rule 61.06 is permissive, not mandatory. In an appeal,
    there is no entitlement as of right to an order for security for costs. Even
    where the requirements of the rule have been met, a motion judge has discretion
    to
refuse to make the order:
Pickard
    v. London Police Services Board
, 2010 ONCA
    643,
268 O.A.C. 153,
at
para. 17.

[19]

In
    determining whether an order should be made for security for costs, the 
overarching principle to be applied to all the
    circumstances is the justness of the order sought:
Pickard
,
at para.
    17

and

Ravenda Homes Ltd. v. 1372708 Ontario Inc.
, 2017 ONCA 556, at para. 4.

[20]

The
    appellants move pursuant to s.
7(5) of
Courts
    of Justice Act
to review and vary the
    motion judges order. In fact, although the motion uses the term vary, they
    ask the court to set aside the order. No evidence of change in circumstances
    was tendered. The appellants acknowledge that the impugned order was
    discretionary. Therefore, the motion judges decision is afforded deference:
DeMarco
    v. Nicoletti
,
2017 ONCA 417, at para. 3.


[21]

The
    appellants raise numerous grounds in support of their motion. For present
    purposes, it is only necessary to consider one: whether the motion judge erred
    in principle in determining the justness of the order sought. An error in
    principle is one of the bases on which this court may interfere with a
    discretionary order:
DeMarco
, at para.3.

[22]

In
    deciding motions for security for costs judges are obliged to first consider
    the specific provisions of the Rules governing those motions and then
    effectively to take a step back and consider the justness of the order sought
    in all the circumstances of the case, with the interests of justice at the
    forefront. While the motion judge concluded that an order for security for
    costs would be just, with respect, she failed to undertake the second part of
    that analysis. The failure to consider all the circumstances of the case and conduct
    a holistic analysis of the critical overarching principle on the motion before
    her constitutes an error in principle. It therefore falls to this panel to
    conduct the necessary analysis of the justness of the order sought.

(ii)

Justness of the Order

[23]

The
    Rules explicitly provide that an order for security for costs should only be
    made where the justness of the case demands it. Courts must be vigilant to
    ensure an order that is designed to be protective in nature is not used as a litigation
    tactic to prevent a case from being heard on its merits, even in circumstances
    where the other provisions of rr. 56 or 61 have been met.

[24]

Courts
    in Ontario have attempted to articulate the factors to be considered in
    determining the justness of security for costs orders. They have identified
    such factors as the merits of the claim, delay in bringing the motion, the
    impact of actionable conduct by the defendants on the available assets of the
    plaintiffs, access to justice concerns, and the public importance of the
    litigation.  See:
Hallum v. Canadian Memorial Chiropractic College

(1989), 70 O.R. (2d) 119 (H.C.);
Morton v. Canada (Attorney
    General)

(2005), 75 O.R. (3d) 63 (S.C.);
Cigar500.com
    Inc. v. Ashton Distributors Inc.

(2009), 99 O.R. (3d) 55
    (S.C.);
Wang v. Li
,

2011 ONSC 4477
    (S.C.); and
Brown v. Hudsons Bay Co.
,
2014 ONSC 1065
,
318 O.A.C. 12
(Div
. Ct.).

[25]

While
    this case law is of some assistance, each case must be considered on its own facts.
    It is neither helpful nor just to compose a static list of factors to be used
    in all cases in determining the justness of a security for costs order. There
    is no utility in imposing rigid criteria on top of the criteria already provided
    for in the Rules. The correct approach is for the court to consider the justness
    of the order holistically, examining all the circumstances of the case and
    guided by the overriding interests of justice to determine whether it is just
    that the order be made.

[26]

Having
    undertaken that analysis, we conclude that the unique factual circumstances of
    this case compel the conclusion that the interests of justice require that no
    order for security for costs be made.  To conclude otherwise, in our view,
    would result in an unjust order for security for costs. The pertinent
    circumstances include the following:

(a) The appellants are
    seeking to enforce a judgment in which they have no direct economic interest.
    Funds collected on the judgment will be paid into a trust and net funds are to be
    used for environmental rehabilitation or health care purposes. This is public
    interest litigation.

(b) Although there was no direct
    evidence of impecuniosity before the motion judge, it would be highly
    impractical to obtain this evidence from the representative plaintiffs, let
    alone the 30,000 people who would indirectly benefit from the enforcement of
    the judgment. There can be no doubt that the environmental devastation to the appellants
    lands has severely hampered their ability to earn a livelihood. If we accept
    the findings that underlie the Ecuadorian judgment  findings that have not yet
    been undermined in our courts  Texaco Inc. contributed to the appellants
    misfortune.

(c) In contrast to the
    position of the appellants, Chevron Corporation and Chevron Canada have annual
    gross revenues in the billions of dollars. It is difficult to believe that either
    of these two corporations, which form part of a global conglomerate with approximately
    1,500 subsidiaries, require protection for cost awards that amount or could
    amount to a miniscule fraction of their annual revenues.

(d) While the question
    whether the Ecuadorian plaintiffs have third party litigation funding available
    to them was left unanswered, there should be no bright line rule that a
    litigant must establish that such funding is unavailable to successfully resist
    a motion in an appeal for security for costs. This is especially so in this
    case, where counsel for the appellants has advised the court he is operating
    under a contingency arrangement and where there is evidence that Chevron
    Corporation has sued some of the appellants former third party funders, and
    the funders withdrew their financial support.

(e) It cannot be said, at
    this stage, that this is a case that is wholly devoid of merit. The motion
    judge herself acknowledged, at para. 51 of her reasons, that it might be
    possible to establish that Chevron Canadas shares are exigible under the
Execution
    Act
.

(f) There is no doubt that
    the legal arguments asserted by the appellants are innovative and untested,
    especially with regard to piercing the corporate veil. But this does not
    foreclose the possibility that one or more of them may eventually prevail. That
    is how the common law evolves. Innovative or novel arguments are made and the
    law develops, either gradually or in leaps and bounds. For obvious reasons, substantive
    changes in the law usually take place in our intermediate appeal courts and at the
    Supreme Court. Lower courts are often bound by precedent that restrains them
    from changing the common law. It is hardly just that potential advancements in or
    restatements of the law be thwarted for procedural or tactical reasons.

(g) The history of this
    litigation, which has been ongoing for almost twenty-five years, makes clear
    that Chevron Corporation has and, it may be anticipated, will employ all
    available means to resist enforcement of the Ecuadorian judgment. This, of
    course, is within its rights. However, this reality makes it difficult to
    accept that the motion for security for costs was anything more than a measure intended
    to bring an end to the litigation.

Disposition

[27]

For
    all these reasons, the motion is granted and the order of the motion judge
    requiring the appellants to post security for costs and pay costs of the motion
    for security for costs is set aside.

[28]

The
    appellants are entitled to their costs of the motion for security for costs and
    this motion in the agreed all-inclusive sums of $4,000 and $7,500,
    respectively, payable by Chevron Corporation and Chevron Canada.

Alexandra Hoy A.C.J.O.

E.A. Cronk J.A.

C.W. Hourigan J.A.


SCHEDULE
    I

LENCZNER
    SLAGHT ROYCE SMITH GRIFFIN LLP/
KOSKIE MINSKY LLP

37
    plaintiffs

Daniel Carlos Lusitande Yaiguaje

Benancio Fredy Chimbo Grefa

Miguel Mario Payaguaje Payaguaje

Teodoro Gonzalo Piaguaje Payaguaje

Simon Lusitande Yaiguaje

Armando Wilmer Piaguaje Payaguaje

Angel Justino Piaguaje Lucitante

Javier Piaguaje Payaguaje

Fermin Piaguaje

Luis Agustin Payaguaje Piaguaje

Emilio Martin Lusitande Yaiguaje

Reinaldo Lusitande Yaiguaje

Maria Victoria Aguinda Salazar

Carlos Grefa Huatatoca

Catalina Antonia Aguinda Salazar

Lidia Alexandria Aguinda Aguinda

Clide Ramiro Aguinda Aguinda

Luis Armando Chimbo Yumbo

Beatriz Mercedes Grefa Tanguila

Lucio Enrique Grefa Tanguila

Patricio Wilson Aguinda Aguinda

Patricio Alberto Chimbo Yumbo

Francisco matias Alvarado Yumbo

Olga Gloria Grefa Cerda

Narcisa Aida Tanguila Narvaez

Bertha Antonia Yumbo Tanguila

Gloria Lucrecia Tanguila Grefa

Celia Irene Viveros Cusangua

Lorenzo Jose Alvarado Yumbo

Francisco Alvarado Yumbo

Luisa Delia Tanguila Narvaez

Elias Roberto Piyahuaje Payahuaje

Lourdes Beatriz Chimbo Tanguila

Octavio Ismael Cordova Huanca

Guillermo Vincente Payaguaje Lusitande

Alfredo Donaldo Payaguaje Payaguaje

Delfin Leonidas Payaguaje Payaguaje

SCHEDULE II

GRANT HUBERMAN
    BARRISTERS & SOLICITORS

10 plaintiffs (as per
    Notice of Change of October 4, 2017)

Segundo Angel Amanta Milan

Heleodoro Pataron Guaraca

Hugo Gerardo Camacho Naranjo

Maria Clelia Reascos Revelo

Maria Magdalena Rodriguez Barcenes

Francisco Victor Tanguila Grefa

Rosa Teressa Chimbo Tanguila

Maria Hortencia Viveros Cusangua

Jose Gabriel Revelo Llore

Jose Miguel Ipiales Chicaiza





[1]

Mr. Grant filed a Notice of Change of Lawyers on October 5,
    2017. He purported to represent 10 of the 47 representative plaintiffs and
    sought to make brief oral submissions to supplement those of Mr. Lenczner. As
    an indulgence, the court permitted him to do so, without determining that a
    sub-group of representative plaintiffs, all of who advance the same claim, can
    be represented by different counsel.



[2]

As the motion judge noted, the decision f the United States
    District Court for the Southern District of New York was upheld by the United
    States Court of Appeal for the Second Circuit, and the Supreme Court declined
    to grant
certiorari
for a further appeal.


