Last year, the Ontario Court of Appeal heard the appeal from the motion for summary judgment that the Ecuadorian plaintiffs could not pierce the corporate veil and enforce an Ecuadorian judgment against Chevron’s seventh-level subsidiary, Chevron Canada. We analyzed that decision here.
The origin of the Ontario action stems from an Ecuadorian judgment, obtained by plaintiffs in 2011 against Chevron for environmental damages arising from Chevron’s operations in the Orienté region. The judgment was for 9.5 billion USD. As Chevron had no assets in Ecuador, the plaintiffs sought to enforce the judgment against Chevron in the US. After a New York Court found that the Ecuadorian judgment was invalid (having been obtained through fraud), the plaintiffs sought to enforce the judgment in Ontario against Chevron Canada, a seventh-level subsidiary of Chevron.
The defendants, Chevron and Chevron Canada moved for summary judgment dismissing the action, arguing that the plaintiffs could not succeed in enforcing the judgment. The defendants relied on the principle of corporate separateness, arguing that it prevented the plaintiffs from accessing Chevron Canada’s assets to satisfy a judgment against Chevron. The defendants’ motion was granted. The plaintiffs then appealed to the Court of Appeal.
While the majority of the three justice panel of the Court of Appeal dismissed the appeal and rejected the plaintiffs’ argument that it ought to be entitled to pierce the corporate veil on “just and equitable grounds”, the concurring minority found that such a ground for piercing the corporate veil might very well exist, but such a ground was not available to the appellants on the facts of this case.
This opened the door for a potential appeal to the Supreme Court of Canada to clarify when such a circumstance may arise to pierce the corporate veil on a “just and equitable ground”. However, earlier this month, the Supreme Court of Canada dismissed the plaintiffs’ application for leave to appeal the Court of Appeal’s decision.
Accordingly, the Court of Appeal’s decision remains intact. Coupled with the Supreme Court’s refusal to hear an appeal of the decision, corporations with Ontario-based assets whose related entities are operating abroad should have some comfort that the law of corporate separateness has not been disturbed.