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Canadian Court Orders Ecuadorian Plaintiffs to Deposit Nearly $1 million

Date: Oct 2, 2017

Ecuadorian plaintiffs have hit yet another stumbling block in their attempt to enforce the fraudulent Ecuadorian judgment in Canada.

In a decision issued September 21, a judge of the Court of Appeal for Ontario found that the plaintiffs are unlikely to overturn a ruling of a lower court which held that the $9.5 billion Ecuadorian judgment against Chevron Corporation cannot be enforced against Chevron Canada Limited, an indirect subsidiary.  The Court of Appeal also ordered the Ecuadorian plaintiffs to deposit nearly C$1 million with the court as security for costs for the plaintiffs’ appeals and for the proceedings in the trial court.

Ontario has a “loser pays” system in which the losing party in a lawsuit can be required to bear not only their own legal costs but also the costs of the winning party.  If certain criteria are met, the court may also require the losing party to deposit funds as a form of security for costs for ongoing proceedings before the Ontario courts, including appeals.

In its decision, the Court of Appeal for Ontario found that the relevant criteria were met and that Chevron Corporation and Chevron Canada Limited were entitled to security from the Ecuadorian plaintiffs for the plaintiffs’ appeals as well as for the costs awarded in the trial court in which Chevron Corporation and Chevron Canada Limited prevailed.

“In my view, the Ecuadorian plaintiffs have not demonstrated that their appeal has a good chance of success,” Justice Gloria J. Epstein of the Court of Appeal for Ontario said in a 31-page ruling.  “The motion judge held that, absent a piercing of the corporate veil, the shares and assets of Chevron Canada are not available for execution and seizure to satisfy the Ecuadorian judgment against Chevron.  That conclusion is unlikely to be overturned.”

Justice Epstein concluded that “significant security” was warranted because the Ecuadorian plaintiffs failed to prove that they lacked funds or were likely to succeed in their appeal of the January 2017 decision rejecting the plaintiffs’ attempt to enforce the Ecuadorian judgment against Chevron Canada Limited.  The court ordered the plaintiffs to pay the ordered security for costs to the court, and under Ontario rules, the plaintiffs cannot take any further steps in their appeal until such security has been paid.

In ordering the plaintiffs to pay the security, Justice Epstein found that the trial court decision was likely to stand.  The plaintiffs’ appeal “challenges long-standing and well-established corporate law principles – and, in my view, is unlikely to do so successfully,” she wrote.

The plaintiffs could have sought to avoid the requirement to post security by showing they lacked sufficient funds, but failed to do so, Justice Epstein found.  “The Ecuadorian plaintiffs have failed to demonstrate that they are impecunious,” she held.  Settlement agreements with financiers show they “received a significant amount of funding for this litigation in the past” yet “leave unanswered the question of whether the Ecuadorian plaintiffs have other funding available to them — a question that the Ecuadorian plaintiffs declined to answer,” she said.  “We know nothing about the individual circumstances of any of the 47 Ecuadorian plaintiffs — and perhaps more importantly, their financial backers,” she concluded.

Justice Epstein ordered plaintiffs to deposit nearly C$1 million with the court, which includes security for costs in the amount of C$591,335 for Chevron Canada Limited and C$351,616 for Chevron Corporation.