APPEAL ALLOWED

TELUS Communications Inc. v. Wellman, 2019 SCC 19

Civil procedure — Stay — Class actions — Consumer and nonconsumer claims — Arbitration clause

APPLICATIONS FOR LEAVE TO APPEAL DISMISSED 

37820

Raghed Daabous also known as Rudy Daabous v. Softmédical inc.

QC

Appeals – Standard of review

38179

Edgar Schmidt v. Attorney General of Canada

FC

Charter of Rights — Parliament and legislatures

38412

City of Hamilton, et al. v. Madeline Smith, et al.

ON

Municipal law — Civil liability

38444

Michael Chiocchio Sr. and Michael Chiocchio Jr. by his Litigation Guardian Michael Chiocchio Sr. v. City of Hamilton

ON

Municipal law — Civil liability

38350

NB

Civil procedure — Class actions

38280

9207-3287 Québec inc., carrying on business as Pizzeria Socrate and Réal Michaud v. Agence du revenu du Québec

QC

Taxation — Income tax — Tax audits

38481

George Boutsakis v. John Kakavelakis

BC

Property — Real property — Co-ownership

APPEAL ALLOWED

TELUS Communications Inc. v. Wellman, 2019 SCC 19

Civil procedure — Stay — Class actions — Consumer and nonconsumer claims — Arbitration clause

On appeal from a judgment of the Ontario Court of Appeal (Weiler, Blair and van Rensburg JJ.A.), 2017 ONCA 433, affirming a decision of Conway J., 2014 ONSC 3318.

W filed a proposed class action for damages against TELUS on behalf of about two million Ontario residents who entered into mobile phone service contracts with TELUS during a specified timeframe. The class consists of both consumers and non‑consumers (business customers). W alleges that TELUS engaged in an undisclosed practice of rounding up calls to the next minute such that customers were overcharged and were not provided the number of minutes to which they were entitled. The standard terms and conditions of the service contracts included an arbitration clause stipulating that all claims arising out of or in relation to the contract, apart from the collection of accounts, must be determined through mediation and, failing that, arbitration. This clause was invalidated by the Consumer Protection Act to the extent that it would otherwise prevent class members who qualify as consumers from pursuing their claims in court. However, since the business customers do not benefit from this protection, TELUS sought to have the proceeding stayed with respect to the business customer claims, relying on the arbitration clause. The motions judge dismissed TELUS’s motion for a stay and certified the action. She held that s. 7(5) of the Arbitration Act, 1991 grants the courts discretion to refuse a stay where it would not be reasonable to separate the matters dealt with in the arbitration agreement from the other matters, thereby allowing all of the matters to proceed in court. She was of the view that this discretion may be exercised to allow non‑consumer claims that are otherwise subject to an arbitration clause to participate in a class action, where it is reasonable to do so. The Court of Appeal dismissed TELUS’s appeal.

Held (Wagner C.J. and Abella, Karakatsanis and Martin JJ. dissenting): The appeal should be allowed and the claims of the business customers stayed.

Per Moldaver, Gascon, Côté, Brown and Rowe JJ.:

Section 7(5) of the Arbitration Act, 1991 does not grant the court discretion to refuse to stay claims that are dealt with in an arbitration agreement. The protections afforded by the Consumer Protection Act allow the consumers to pursue their claims in court, but the business customers remain bound by the arbitration agreements into which they entered. Accordingly, the latter are exposed to a stay under s. 7(1) of the Arbitration Act, 1991. Since the only potential exception to the general rule under s. 7(1) relied on by W does not apply, the business customer claims should be stayed.

In keeping with the modern approach that sees arbitration as an autonomous, self‑contained, self‑sufficient process pursuant to which the parties agree to have their disputes resolved by an arbitrator, not by the courts, s. 6 of the Arbitration Act, 1991 signals that courts are generally to take a hands off approach to matters governed by that statute. Section 7(1) of the Arbitration Act, 1991 establishes the general rule that where a party to an arbitration agreement commences a proceeding in respect of a matter dealt with in the agreement, the court shall, on the motion of another party to the agreement, stay the court proceeding in favour of arbitration. This general rule reaffirms the concept of party autonomy and upholds the policy underlying the Arbitration Act, 1991 that parties to a valid arbitration agreement should abide by their agreement. Section 7(2) lists five exceptions to the general rule under s. 7(1) where it would be either unfair or impractical to refer the matter to arbitration. Section 7(5) provides a further exception to the general rule under s. 7(1) and consists of two main components. First, paragraphs 7(5)(a) and (b) set out two preconditions. The first precondition is met if the agreement deals with only some of the matters in respect of which the proceeding was commenced. That is, the proceeding must involve at least one matter that is dealt with in the arbitration agreement and at least one matter that is not dealt with in the arbitration agreement. The second precondition is met if it is reasonable to separate the matters dealt with in the agreement from the other matters. Second, if both preconditions are satisfied, then instead of ordering a full stay, the court may allow the matters that are not dealt with in the arbitration agreement to proceed in court, though it must nonetheless stay the court proceeding in respect of the matters that are dealt with in the agreement. If the preconditions are not met, then the discretionary exception under s. 7(5) is not triggered as s. 7(5) can have effect only if the two preconditions are satisfied. At that point, unless one of the exceptions listed in s. 7(2) applies, the general rule under s. 7(1) would apply, meaning that the proceeding must be stayed.

Policy considerations cannot be permitted to distort the actual words of the statute, read harmoniously with the scheme of the statute, its object, and the intention of the legislature, so as to make s. 7(5) say something it does not. While policy analysis has a legitimate role in the interpretive process, the responsibility for setting policy in a parliamentary democracy rests with the legislature, not with the courts. This is particularly so given that the Ontario legislature has already spoken to some of these policy concerns by shielding consumers from the potentially harsh results of enforcing arbitration agreements contained in consumer agreements, which often take the form of standard form contracts, through the Consumer Protection Act. The legislature made a careful policy choice to exempt consumers — and only consumers — from the ordinary enforcement of arbitration agreements. That choice must be respected, not undermined by reading s. 7(5) in a way that permits courts to treat consumers and non‑consumers as one and the same.

While there can be no doubt as to the importance of promoting access to justice, this objective cannot, absent express direction from the legislature, be permitted to overwhelm the other important objectives pursued by the Arbitration Act, 1991. To do so would undermine the legislature’s stated objective of ensuring parties to a valid arbitration agreement abide by their agreement, reduce the degree of certainty and predictability associated with arbitration agreements, and weaken the concept of party autonomy in the commercial setting. It would expand the opportunities for parties to a valid arbitration agreement to avoid their agreement and seek relief in court. Furthermore, this case is not about debating the merits and demerits of enforcing arbitration clauses contained in standard from contracts. Rather, it is about the proper interpretation of s. 7(5) of the Arbitration Act, 1991. And, while distinguishing between consumers and non‑consumers may be a difficult exercise in certain cases, that difficulty does not bear on the proper interpretation of s. 7(5). Sorting between consumers and non‑consumers may be cumbersome in certain cases, but this inconvenience does not permit the court to re‑cast the legislation as it sees fit in order to avoid such difficulties. Permitting non‑consumers to tag along with consumers on the basis that it would be cumbersome to sort between the two would also allow commercial entities to find the inside of a courtroom despite having agreed to arbitration, even where the arbitration agreement was fully negotiated. This would reduce the degree of certainty and predictability associated with arbitration agreements and permit parties to those agreements to piggyback onto the claims of others. Lastly, where the application of an Ontario statute, properly interpreted, leads to a multiplicity of proceedings, the court must give effect to the will of the legislature. Section 7(5) of the Arbitration Act, 1991 expressly contemplates bifurcation of proceedings, as it permits the court to order a partial stay, thereby potentially resulting in concurrent arbitration and court adjudication.

The sole matter at issue in the proceeding commenced by W is alleged overbilling. This matter is dealt with in the arbitration agreements into which the consumers and business customers entered. Therefore, because there is at least one matter in the proceeding that is dealt with in the arbitration agreements, the general rule under s. 7(1) of the Arbitration Act, 1991 would ordinarily require a stay of the proceeding as a whole, leaving both consumers and business customers locked out of court. But, s. 7(5) of the Consumer Protection Act renders the arbitration agreements entered into by the consumers invalid to the extent that they would otherwise prevent the consumers from commencing or joining a class action of the kind commenced by W. The business customers, however, do not qualify as consumers and as such they cannot invoke the protections that the consumers enjoy.

The only potential exception to s. 7(1) of the Arbitration Act, 1991 sought to be invoked on behalf of the business customers in this case, the partial stay provision under s. 7(5), offers no assistance. This is because the sole matter at issue in the proceeding is dealt with in the arbitration agreements into which the consumers and business customers entered, such that the first precondition set out in s. 7(5)(a) is not met. Consequently, the general rule under s. 7(1) is left intact insofar as the business customers are concerned and the proceeding must be stayed. However, this stay must be restricted to the parties who are legally bound by an arbitration agreement — namely, TELUS and the business customers. In sum, the motions judge and the Court of Appeal erred in law by interpreting s. 7(5) of the Arbitration Act, 1991 incorrectly and refusing to order a stay that, under s. 7(1), was mandatory. Section 7(5) of the Arbitration Act, 1991 does not permit the court to ignore a valid and binding arbitration agreement.

Per Wagner C.J. and Abella, Karakatsanis and Martin JJ. (dissenting):

The appeal should be dismissed. Where a proceeding includes matters covered by an arbitration agreement and other matters that are not, s. 7(5) of the Arbitration Act, 1991 gives a judge discretion to allow the entire proceeding to continue in court, even if some parties would otherwise be subject to an arbitration clause.

Section 7(5) of the Arbitration Act, 1991 reflects an explicit legislative intention to override an otherwise applicable arbitration clause. The words of the provision state that “the court may stay the proceeding with respect to the matters dealt with in the arbitration agreement and allow it to continue with respect to other matters”. This means that the court can either stay the arbitrable matters before it or allow them to proceed. Logically, a discretionary ability to grant a partial stay also includes the power to refuse a partial stay. The only interpretation that gives meaningful effect to the discretionary language of s. 7(5) is one that confers on judges the ability to allow both arbitrable and non‑arbitrable disputes to proceed in court. An assertion that a court can never stay arbitrable matters under s. 7(5) renders the opening phrase — “may stay the proceeding with respect to the matters dealt with in the arbitration agreement” — superfluous. By interpreting the provision to apply only to non‑arbitrable matters, s. 7(5) adds nothing to a judge’s existing discretion.

Ontario’s Arbitration Act, 1991 was enacted to allow parties to design their own settlement processes and resolve their disputes outside the courts. It anticipated two or more parties freely negotiating their arbitral process. To ensure expedient resolution and lower litigation costs, the Arbitration Act, 1991 limited court intervention in arbitrable disputes. But it also gave judges discretion to permit court proceedings in certain limited circumstances, such as where the arbitration agreement was manifestly unfair. Where a proceeding includes both matters covered by an arbitration agreement and other matters that are not, s. 7(5) gives a judge discretion to allow the entire proceeding to continue in court, even if some parties would otherwise be subject to an arbitration clause. Since 2002, the Ontario Court of Appeal has interpreted s. 7(5) as granting the discretion to stay matters that would otherwise be subject to arbitration. Similarly, for nearly a decade, the Ontario Court of Appeal has interpreted s. 7(5) as permitting otherwise arbitrable matters to be joined with class actions in the public interests of avoiding duplicative proceedings, increased costs, and the risk of inconsistent results. This interpretation aligns with the text and scheme of the provisions and is consistent not only with the purposes motivating the enactment of the Arbitration Act, 1991 but also with the purpose of s. 7(5) itself.

The overall purpose of the Arbitration Act, 1991 was to promote access to justice. Its chosen means of achieving that goal was to promote accessibility by giving parties the choice of resolving disputes outside the court system. The reason for creating this option was a recognition that the court system could be costly and slow. The courts’ discretion to intervene in arbitrable matters was therefore narrowed to further the goals of expedient dispute resolution.

Arbitration was intended to be a means by which parties on a relatively equal bargaining footing chose to design an alternative dispute mechanism. One cannot talk about “equal bargaining power” and “party autonomy” if the very nature of the contract reveals that one party has exclusive contractual authority. Parties to mandatory individual arbitration clauses cannot reasonably be said to have “come to the table” and bargained, since there is no bargaining table. That individuals and companies sign these contracts is a function not of bargaining choices, but of an absence of choice. All of TELUS’s clients — both business and consumer — signed the same, non‑negotiable standard form agreement. TELUS’s individualized arbitration clause effectively precludes access to justice for business clients when a low‑value claim does not justify the expense. And its mandatory nature illustrates that the animating rationales of party autonomy and freedom of contract are nowhere to be seen.

By inserting the reasonableness requirement in s. 7(5)(b) of the Arbitration Act, 1991, the provincial legislature clearly contemplated that in certain circumstances, it would be unreasonable to separate the matters dealt with in the arbitration agreement from the other matters. The availability of judicial discretion in s. 7(5) does not require judges to allow a class action including arbitrable claims to proceed: it simply lets them decide when it is reasonable to do so. Eliminating judicial discretion, on the other hand, effectively eliminates access to justice. In this light, s. 7(5) must be interpreted to give judges the discretion to refuse to stay arbitrable claims if it is unreasonable to separate them from non‑arbitrable claims. This interpretation applies with equal force whether the proceeding is between two or more named parties, or is a class action. An interpretation of s. 7(5) of the Arbitration Act, 1991 which permits otherwise arbitrable matters to be joined with class actions in the public interest of avoiding duplicative proceedings, increased costs, and the risk of inconsistent results aligns with the text and scheme of the provisions and is consistent not only with the purposes motivating the enactment of the Arbitration Act, 1991 but also with the purpose of s. 7(5) itself.

TELUS’s interpretation would result in costly and time‑consuming factual inquiries on how to divide the arbitrable and non‑arbitrable claims even where the substance of both claims is identical, as in this case. Both parties acknowledged the potential difficulties associated with drawing the line between a “consumer” as defined by the Consumer Protection Act, who is exempt from arbitration, and a business customer, who is not. This distinction may be especially difficult to determine for those individuals who use their cell phone for both personal and business purposes. For these individuals, determining whether they fall within the scope of the exception in the Consumer Protection Act adds unnecessary complexity.

The purpose of the Arbitration Act, 1991, was to facilitate the ability of parties to negotiate their own process for resolving disputes outside of the courts, on the premise that access to justice had as much to do with access to a result as with access to a judge. To impose arbitration on unwilling parties violates the spirit of the Arbitration Act, 1991 and the arbitral process. This operates as an invisible but formidable barrier to a remedy and presumptively immunizes wrongdoing from accountability contrary to our most fundamental notions of civil justice. Section 7(5)(b) of the Arbitration Act, 1991 gave the motions judge discretion to consider whether it was reasonable to separate the matters dealt with in the agreement (claims of business customers) from the other matters (the consumer claims). The discretion was properly exercised in this case to allow the business claims to be joined with the consumer class action dealing with the same issues.

Citation: TELUS Communications Inc. v. Wellman, 2019 SCC 19

SCC File No. : 37722

Reasons for Judgment: Moldaver J. (Gascon, Côté, Brown and Rowe JJ. concurring.

Dissenting Reasons: Abella and Karakatsanis JJ. (Wagner C.J. and Martin J. concurring)

https://scc-csc.lexum.com/scc-csc/scc-csc/en/item/17654/index.do

APPLICATIONS FOR LEAVE TO APPEAL DISMISSED

37820

Raghed Daabous also known as Rudy Daabous v. Softmédical inc.

(Que.)

Appeals – Standard of review – Evidence

The applicant Mr. Daabous and Rita Noumeir are engineers who held shares in the respondent Softmedical, a computer company in the medical imaging field. Mr. Daabous and Ms. Noumeir worked together to develop that company from 1998 to 2012. Their relationship deteriorated so much that Mr. Daabous left Softmedical while the company was carrying out a software development contract entered into with a third party. Softmedical then instituted an action against Mr. Daabous alleging, inter alia, that he had given it a server from which a large amount of data resulting from several months of work, data essential to the performance of the contract, had been erased. Mr. Daabous claimed damages from Softmedical for harm to his reputation and for the inconvenience caused by its action, which he considered abusive. He also asked that Softmedical be ordered to redeem his shares after their fair market value was determined.

38179

Edgar Schmidt v. Attorney General of Canada

(F.C.)

Charter of Rights  — Parliament and legislatures — Legislation 

Mr. Schmidt sought a declaration concerning the meaning of three legislative provisions. Pursuant to s. 3 of the Canadian Bill of Rights and s. 4.1 of the Department of Justice Act, the Minister of Justice (“Minister”) must ascertain whether proposed legislation and regulations are inconsistent with the Bill of Rights and the Charter of Rights. If the Minister ascertains that an inconsistency with guaranteed rights does exist, she must file a report to the House of Commons indicating her conclusion. With respect to most regulations, pursuant to s. 3 of the Statutory — Instruments — Act, the Clerk of the Privy Council, in consultation with the Deputy Minister of Justice, must ascertain whether an inconsistency with guaranteed rights exists. If an inconsistency is found, they will report their conclusion to the regulation — making authority. Mr. Schmidt became concerned about the appropriateness of the standard of scrutiny applied. He initiated a simplified action in Federal Court to seek a declaration as to the proper interpretation of the examination provisions in each of the statutes. Mr. Schmidt submitted that the threshold for making a report had to be when proposed legislation was “more likely than not inconsistent” with the constitutional and quasi-constitutional standards. The Attorney General submitted that a report only had to be made when “no credible argument” could be made that the proposed legislation met those standards. The Federal Court dismissed Mr. Schmidt’s application for a declaration. This decision was upheld on appeal.

38412

City of Hamilton v. Madeline Smith, Laura Smith, and Randy Smith, minors by their Litigation Guardian, Florence Smith, and Florence Smith personally, Thomas Smith, Thomas Smith Jr. and Madeline Smith, Edward Smith, Gladys Lianos, George Lianos and Dawn Marie Safranyos

— and between —

City of Hamilton v. Alexandra Safranyos and Victoria Safranyos, both infants under the age of 18 years by their Litigation Guardian, Shelly Lalonde, and Shelley Lalonde personally, Cynthia Green and Dawn Marie Safranyos

(Ont.)

Municipal law — Civil liability — Liability of municipality for failure to repaint line at stop sign

On June 16, 2007, at 1:03 am, a two car collision occurred in the city of Hamilton at the intersection of Upper Centennial Parkway and Green Mountain Road. A vehicle operated by Dawn Safranyos, carrying four children, failed to yield the right of way upon entering Upper Centennial Parkway, a through highway, and was T‑boned at highway speed by a vehicle operated by Daryl McHugh. Mr. McHugh had consumed alcohol and was exceeding the 70 kilometre per hour speed limit. The occupants in Ms. Safranyos’ vehicle were all seriously injured. Lawsuits were brought on behalf of the injured children and their family members against Ms. Safranyos and Mr. McHugh for their alleged negligent driving, and the city of Hamilton for the alleged non‑repair of the intersection. The Ontario Superior Court of Justice determined that each of the defendants was liable, apportioning liability at 50 percent to Ms. Safranyos, and 25 percent to each of Mr. McHugh and the city of Hamilton. The Court of Appeal of Ontario dismissed the appeal by Hamilton (allowing it for Mr. McHugh) on the basis that the trial judge was entitled to make a finding of non-repair for the intersection in question. It concluded that the trial judge applied the correct legal tests for non-repair, causation, and statutory defences.

38444

Michael Chiocchio Sr. and Michael Chiocchio Jr. by his Litigation Guardian Michael Chiocchio Sr. v. City of Hamilton

(Ont.)

Municipal law — Civil liability — Liability of municipality for failure to repaint line at stop sign

On April 29, 2006, a two car accident occurred in the city of Hamilton at the intersection of 5th Concession West and Brock Road. Richard Ellis was driving a sedan westbound on 5th Concession West. He was stopped at a stop sign where his view of northbound traffic was blocked. A faded stop line had not been repainted closer to the intersection. Mr. Ellis proceeded into the intersection and T‑boned a minivan headed northbound in which Michael Chiocchio Sr. was a passenger. Mr. Chiocchio was rendered a quadriplegic as a result of the accident. Lawsuits were brought against Mr. Ellis for negligent driving, and against the city of Hamilton for non-repair of the intersection. The Ontario Superior Court of Justice found Mr. Ellis (and Wendy Ellis as owner of the car) 50% liable and the city of Hamilton 50% liable. The Court of Appeal of Ontario overturned the trial judge’s findings of liability against the city. It concluded that an ordinary driver, having their view of traffic obstructed, would have stopped again closer to the intersection.

38350

City of Saint John v. Robert Hayes, on behalf of himself and other class members

(N.B.)

Civil procedure — Class actions — Municipality — Liability — Vicarious liability

It is alleged that Kenneth Estabrooks, an officer with the Saint John Police Department between 1953 and 1975, used his position to sexually assault a number of individuals during that time, and that, when the Police Department was informed of his sexual conduct towards two boys, Mr. Estabrooks was transferred to the City of Saint John’s City Works Department. It is further alleged that, in his new position, which he held until his retirement in December 1983, he continued to commit sexual assaults. In 1999, Mr. Estabrooks was convicted of four of six counts of sexual assault alleged against him, and he was sentenced to six years imprisonment. He has since died.

In 2013, an investigation conducted by a third party for the City identified 79 living victims. They had been as young as seven years old when they were allegedly assaulted. In December 2013, Mr. Hayes, as representative plaintiff, commenced an action pursuant to the Class Proceedings Act, S.N.B. 2011, c. 125, against the City of Saint John.

Grant J. certified the action as a class proceeding. He defined the class and set out six common issues for determination at trial. The City was granted leave to appeal. Assuming the facts to be true, Richard J.A. struck the plea of breach of fiduciary duty as disclosing no cause of action. The remaining claims were upheld, as was the order certifying the action as a class proceeding.

38280

9207-3287 Québec inc., carrying on business as Pizzeria Socrate and Réal Michaud v. Agence du revenu du Québec

(Que.)

Taxation — Income tax — Tax audits — Alternative methods

The applicants applied to vacate certain notices of assessment issued by the Agence du revenu du Québec (“Revenu Québec”). In analyzing various documents and invoices for the purposes of a tax audit, Revenu Québec had determined that the financial statements of the applicant 9207‑3287 Québec inc., a pizzeria, were no longer reliable. As a result, it had to use an alternative method to estimate the tax owed. It chose to use the natural gas method, which was based on the consumption of gas by the pizzeria’s equipment, to determine the income generated. The trial judge dismissed the pizzeria’s appeal. The Court of Appeal dismissed the appeal from that decision.

38481

George Boutsakis v. John Kakavelakis

(B.C.)

Property — Real property — Co-ownership

In 1973, Mr. Boutsakis and Mr. Kakavelakis purchased a commercial building in Vancouver as tenants in common and equal partners. Their relationship deteriorated over the years and by 1987, they were involved in litigation concerning the building and related disputes. A sale of the building was eventually ordered and Mr. Boutsakis purchased the building from the partnership in September, 2007, after a sealed bidding process under the court’s supervision. There were many outstanding issues between the parties and their actions against each other went to trial for resolution. There was approximately $1,154,000 of remaining partnership funds to be divided between them. The trial judge made many adjustments to the initial equal division of those funds, to settle all outstanding claims, previous causes of action and costs awards. Mr. Kakavelakis was awarded approximately $807,000 while Mr. Boutsakis was awarded approximately $347,000 from the partnership funds that were held in trust. The trial judge declined to award costs. Both parties appealed. The Court of Appeal dismissed the appeals, only granting Mr. Kakavelakis’ appeal on the issue of costs.

38183

Daniel Carlos Lusitande Yaiguaje, Benacio 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 Grega 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 v. Chevron Corporation, Chevron Canada Limited and Chevron Canada Capital Company

(Ont.)

Private international law — Foreign judgments — Enforcement

The applicants are Indigenous peoples of the Orienté region of the Republic of Ecuador. During the period from 1964 to 1992, oil exploration and extraction were undertaken on their traditional lands resulting in environmental pollution of the area. One of the corporations involved in the oil operations was an indirect subsidiary of Texaco Inc. that left Ecuador when its oil project was completed in 1992. Since 2001, Texaco has been part of the global conglomerate, Chevron Corporation (“Chevron Corp.”), a public company with its head office in California.

The applicants first sought compensation for the environmental devastation through a class action in the United States. Texaco successfully opposed that action on jurisdictional grounds. The applicants then commenced a new action in the Ecuadorian courts. The eventual result was a $9.5 billion USD judgment against Chevron Corp.

Chevron Corp. had no assets in Ecuador so the applicants sought to enforce of their judgment in the United States. Chevron Corp. opposed the enforcement of the judgment on the ground that it had been obtained by fraud. The United States District Court accepted Chevron Corp.’s submission and made an order enjoining any enforcement proceedings of the Ecuadorian judgment in the United States. That decision was upheld on appeal.

The applicants then commenced the present action in the Ontario Superior Court of Justice. The enforcement targets were the shares and assets of Chevron Canada Limited (“Chevron”), a seventh-level subsidiary of Chevron Corp. The parties agreed to determine by way of a summary judgment motion the issue of whether Chevron’s shares and assets were exigible to satisfy the judgment debt of Chevron Corp. The applicants had two primary submissions. First, they argued that the Execution Act permitted execution on Chevron’s shares and assets to satisfy the Ecuadorian judgment. Second, they submitted that the court should pierce the corporate veil in order to render Chevron Canada’s shares and assets exigible. The motion judge held that Chevron’s assets in Canada were not exigible to satisfy the Ecuadorian judgment. He further held that Chevron’s corporate veil could not be pierced. His decisions were upheld on appeal.