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Ontario Court of Appeal Overturns Security for Costs Order in Yaiguaje v. Chevron Corporation

Posted in Awards and Recognitions, Litigation, Mining
Andrew Kalamut

Yaiguaje v. Chevron Corporation, 2017 ONCA 827

Overview

The Ontario Court of Appeal has overturned the decision of the motion judge who ordered that the foreign-resident plaintiffs post approximately $1M in security for costs in order to continue their proceeding and appeal against Chevron Corporation (“Chevron”) and Chevron Canada.

This is a significant reversal, as the motion’s judge decision (analyzed here) called into question whether the plaintiffs would be in a position to proceed with their appeal of Justice Hainey’s decision dismissing the proceeding against Chevron Canada on the basis that its assets are not available to satisfy the plaintiffs’ foreign judgment against Chevron (decision analyzed here).

The Appeal of the Security for Costs Order

When ordering that the plaintiffs post security for costs, the motion judge determined that the plaintiffs had failed to establish impecuniosity, and, importantly, had also failed to demonstrate that their appeal had a good chance of success. The motion judge also found that she was not barred from ordering security for costs on the basis that the action was an enforcement of a foreign judgment.

The plaintiffs appealed this decision to a three-member panel of the Ontario Court of Appeal (the “Panel”).

The Standard of Review

The Panel determined that the overarching requirement for an order for security for costs is the “justness” of that order. The Panel found that while the motion judge should be afforded deference on a discretionary order (such as a security for costs order), an error in principle in determining the justness of the order would allow the Panel to interfere with the order.

The Justness of the Order

The Panel articulated that while factors such as the merits of the claim, access to justice concerns, and the public importance of the litigation are relevant considerations when determining the justness of an order, the court should not be bound to rigid, static criteria. Instead, the court must take a holistic approach and examine all of the surrounding circumstances of the matter.

The Panel determined that in this case, the unique circumstances required that there be no order for security for costs. These unique circumstances are as follows:

  1. The matter is public interest litigation. Funds from judgment will go into a trust for use in environmental rehabilitation and health care.
  2. It would be difficult for the plaintiffs (representing 30,000 people) to establish impecuniosity. In addition, there was no doubt that environmental devastation to the plaintiffs’ lands severely hampered their ability to earn a livelihood.
  3. Chevron and Chevron Canada have annual gross revenues in the billions of dollars. The Court did not accept that the two corporations required protection for any cost award it may obtain against the plaintiffs.
  4. 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. The plaintiffs in this case left that issue unanswered.
  5. The case, at this stage, cannot be said to be wholly devoid of merit. The motion judge herself acknowledged, at para. 51 of her reasons, that it might be possible to establish that Chevron Canada’s shares are exigible under the Execution Act.
  6. The plaintiffs’ legal arguments are innovative and untested. It is possible that one such argument may prevail, as that is how the common law evolves. It is not just that potential advancements in or restatements of the law be thwarted for procedural or tactical reasons.
  7. The history of the 25-year old litigation establishes that Chevron will employ all means to resist enforcement of the $9.5B USD judgment. The court recognized that the security for costs motion was intended to terminate this proceeding.

Analysis of the Panel’s Decision

Where the motion judge seemingly shut the door on the plaintiffs’ appeal, the Panel swung the door open, perhaps wider than it was before the security for costs motion was decided.

The Panel made explicit reference to the fact that the plaintiffs were pursuing novel arguments to pierce the corporate veil, alluding to the potential for modifications and revisions to the common law. This is a drastic shift from the motion judge’s language that expressly referred to the plaintiffs’ failure to establish that their appeal had a good chance of success.

What has become clear is that the plaintiffs’ substantive appeal of Justice Hainey’s decision will likely now proceed.

Be sure to check back with Mining Prospects for further commentary and analysis when the appeal is heard.