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ed Chevron Corp., says that Hainey's rea-
sons bear up under scrutiny.
"Justice Hainey's reasons are a very care-
ful and comprehensive affirmation of bed-
rock principles of corporate law as to the
separateness of parent and subsidiary," he
says. "His reasons summarily dismiss the
argument that the interests of justice can
override corporate protection in the case
of a fully-fledged viable subsidiary that has
done nothing wrong."
But the plaintiffs have appealed to On-
tario's appellate court. Alan Lenczner of
Lenczner Slaght Royce Smith Griffin LLP
in Toronto, who was co-counsel for the
plaintiffs, calls portions of Hainey's judg-
ments "completely off the rails" and "com-
pletely nuts." e notice of appeal chal-
lenges Hainey's conclusion that Chevron
Canada was not an asset of its parent and
maintains Hainey misinterpreted the Su-
preme Court of Canada's landmark judg-
ment in BCE v. 1976 Debentureholders.
"BCE does not say that when you have
a judgment against a company, you can't
seize the corporation and sell its assets,"
Lenczner says. "e corporate veil is in-
tended to protect personal assets, but it
was never intended that a company can
further insulate its own assets simply by
creating a subsidiary."
In support of this argument, Lenczner
maintains that Hainey made serious errors
in determining the relationship between
parent and subsidiary.
"[Hainey's] error emanates from the lack
of examination and advertence to the strict
policies of Chevron Corp. and the 7,000
pages of documents implementing those
policies, which demonstrate that every ma-
terial aspect of Chevron Canada's explora-
tion and production business was subject to
Chevron Corp.'s approval and control," the
notice of appeal states.
e appeal also challenges Hainey's
conclusion that Ontario's Executions Act
was merely a procedural statute and did
not allow for seizure of the assets of a judg-
ment debtor's wholly owned subsidiary. If
the statute were in fact purely procedural,
Lenczner argues, it would be "unneces-
sary" because a judgment debtor's directly
owned assets can be seized. "e Act is,
by its words and by judicial application, of
wider reach," the notice of appeal states.
e appeal is just the latest step along a
lengthy and tortuous path through Ecua-
dorean and
US courts, which snaked its
way to Ontario's doorstep in 2013. e case
began when Ecuadorean villagers suffered
environmental pollution as the result of oil
companies' activities from the 1960s to the
1990s. e villagers obtained a $9.5-billion
judgment in an Ecuadorean court.
Chevron, which had no assets in Ecua-
dor, refused to pay the judgment. US courts
found the judgment to be fraudulent and
unenforceable by US courts. In 2013, the
plaintiffs sought relief against Chevron
Corp. and Chevron Canada in Ontario.
e companies contested the jurisdiction
of Ontario courts all the way up to the
Supreme Court of Canada, which deter-
mined that such jurisdiction did exist.
Both the plaintiffs and defendants then
brought motions for summary judgment
regarding the claim against Chevron Can-
ada. Hainey dismissed the case against the
Canadian subsidiary and allowed Chev-
ron Corp. to maintain the defences it had
raised in its own right.
If the history of this case is any indica-
tion, however, Ontario's appellate court
may not be the last stop on this journey. As
it did previously, the SCC may loom on the
horizon in what could become a turning
point in the history of Canadian corporate
law and corporate social responsibility.
THE ONTARIO Superior Court of Justice
has put a dent in the viability of corporate
social responsibility principles — especially
of resource companies operating abroad
— with its recent refusal to enforce an
Ecuadorean judgment worth $9.51 billion
against Chevron Corp. by ordering the sei-
zure of assets belonging to its seventh-level
indirect subsidiary Chevron Canada Ltd.,
which has no connection to the Ecuador-
ean proceedings.
But Justice Glenn Hainey's January de-
cision in Yaiguaje v. Chevron goes beyond
that. It's also a huge relief for Canada's busi-
ness community at large.
Indeed, had the plaintiffs succeeded in
their enforcement application, which de-
pended on demolishing the defendants'
submission that the Chevron parent and
subsidiary were "distinct corporate per-
sonalities," the decision would have turned
corporate law on its ear.
But Hainey refused to pierce the corpo-
rate veil, affirming longstanding principles
that this should occur only where the par-
ent had complete domination and control
of the subsidiary, and fraud in the establish-
ment or use of the corporation had been
proven. ese principles, Hainey noted,
are now enshrined in the Canada Business
Corporations Act.
Larry Lowenstein of Osler, Hoskin &
Harcourt LLP in Toronto, who represent-
Court refuses to enforce Ecuadorean judgment against Chevron Canada, finding it is separate entity BY JULIUS MELNITZER
Ruling in Chevron has impact abroad
PHOTO:
SHUTTERSTOCK
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