In Yaiguaje v. Chevron Corporation, the Court of Appeal for Ontario confirmed that the conventional approach to security for costs applies in cases where the action is in pursuit of recognition and enforcement of a foreign judgment.

This decision is of significance for all financial institutions engaged in litigation where security for costs arises, as it confirms the applicability of the test for security for costs to both class proceedings and actions for recognition and enforcement of foreign judgments. Moreover, to the extent that the Court's order for security for costs in this case makes it cost-prohibitive for the plaintiffs' continued pursuit of their action, it also demonstrates how a motion security for costs can prove an effective bar to protracted litigation.

The facts of this case are relatively well known: the Ecuadorian plaintiffs/appellants held a judgment for approximately $9.5 billion dollars from an Ecuadorian court against the respondent, Chevron Corporation, in relation to oil extraction activities in Ecuador that allegedly caused extensive environmental damage. The Ecuadorian plaintiffs sought to enforce that judgment in Ontario against Chevron and its indirect subsidiary, Chevron Canada.

Following litigation regarding Ontario's jurisdiction to enforce the Ecuadorian judgment (which jurisdiction was ultimately affirmed by the Supreme Court of Canada), Chevron and Chevron Canada brought motions for summary judgment to dismiss the plaintiffs' claims against Chevron Canada on the basis that it had a separate corporate personality from Chevron.

The plaintiffs brought cross-motions for summary judgment, a motion to add an additional Chevron entity as a defendant to the action, and to strike the defences in Chevron's statement of defence. In the result, Justice Hainey granted the respondents' motion for summary judgment. He dismissed the Ecuadorian plaintiffs' cross-motion and motion to add a defendant, and partially granted their motion to strike. The Ecuadorian plaintiffs appealed all four decisions to the Ontario Court of Appeal.

Prior to the appeal being heard, the Chevron defendants brought a motion for security for costs for roughly $1,000,000, for both the costs of the proceedings below and the costs of the plaintiffs' appeal. Chevron argued that security for costs was warranted because the Ecuadorian plaintiffs were not ordinarily resident in Ontario, had not established they had a good chance of success on the appeal, and had not provided evidence that they were impecunious.

The Ecuadorian plaintiffs urged the court to apply a different approach to security for costs on two grounds:

  • First, the plaintiffs argued that their action was akin to a class proceeding, and that the Court should be particularly hesitant to impose a barrier to the appeal in such circumstances.

The Court rejected this argument, affirming the motion judge's rejection of the class action analogy, and citing case law demonstrating that even class actions were not immune from security for costs.

  • Second, the plaintiffs argued for a new approach to security for costs where the action to which it relates concerns recognition and enforcement of a foreign judgment, on the basis that the Supreme Court of Canada in the Chevron decision had instructed courts to take a generous approach to finding jurisdiction to allow litigants with foreign judgments to bring enforcement actions in Canada.

The Court rejected the plaintiffs' argument on this point as well on the basis that: (1) there is no difference between an action on a foreign judgment and any other action; and (2) the Supreme Court's decision in Chevron did not change that principle.

The Court therefore concluded that courts should approach security for costs in an appeal involving enforcement of a foreign judgment the same as any other appeal.

In the result, as the Chevron defendants had satisfied the test for security for costs, the Court granted Chevron Canada's motion, and ordered the Ecuadorian plaintiffs to post $942,950 as security for costs.