COURT OF APPEAL FOR ONTARIO

CITATION: Yaiguaje v. Chevron Corporation, 2018 ONCA 472

DATE: 20180523

DOCKET: C63309 and C63310

Hourigan, Huscroft and Nordheimer JJ.A.

BETWEEN

Daniel Carlos Lusitande Yaiguaje, Benancio
    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 Grefa 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

Plaintiffs (Appellants)

and

Chevron
    Corporation
,
Chevron Canada Limited
and
Chevron Canada Finance Limited

Defendants (
Respondents
)

Alan Lenczner, Brendan Morrison, Kirk Baert and Celeste
    Poltak, for the appellants (see Schedule I)

Peter Grant, for the appellants (see Schedule II)

Benjamin Zarnett, Suzy Kauffman and Peter Kolla, for the
    respondent Chevron Canada Limited

Larry P. Lowenstein, Laura K. Fric, Clarke Hunter and Robert
    Frank, for the respondent Chevron Corporation

Terrence OSullivan and Paul Michell, for Chevron Canada Capital
    Company

Heard: April 17 and 18, 2018

On appeal from the judgments of Justice Glenn A. Hainey
    of the Superior Court of Justice, dated January 20 and 25, 2017, with reasons
    reported at 2017 ONSC 135 and 2017 ONSC 604 respectively, and from the costs
    order dated May 26, 2015.

Hourigan J.A.:

A.

Overview

[1]

The appellants 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. The result was extensive
    environmental pollution of the area.

[2]

One of the corporations involved in the oil operations was an indirect
    subsidiary of Texaco Inc. (Texaco). The Texaco subsidiary left Ecuador when
    its oil project was completed, in 1992. Since 2001, Texaco has been part of the
    global conglomerate Chevron Corporation. Chevron Corporation is a public
    company with its head office in California. Its principal business is holding
    shares in its subsidiary corporations and managing those investments. It owns
    100 percent of the shares of its direct subsidiary, Chevron Investments Inc., which
    was also incorporated in the United States. Chevron Investments Inc. owns 100
    percent of the shares of its own direct subsidiary, and so on down the
    corporate chain.

[3]

The appellants first sought compensation for the environmental
    devastation through a class action in the United States. Texaco opposed that
    action, not on the merits, but on jurisdictional grounds. It was successful and
    ultimately the appellants commenced a new action in the Ecuadorian courts.
    There followed an eight-year trial and two appeals. The eventual result was a
    $9.5 billion USD judgment against Chevron Corporation.

[4]

The difficulty was that Chevron Corporation had no assets in Ecuador. So
    the appellants took the next logical step of seeking enforcement of their
    judgment in the United States. In its home jurisdiction, Chevron Corporation
    opposed the enforcement of the judgment on the ground that it had been obtained
    by fraud.

[5]

The United States District Court for the Southern District of New York
    (S.D.N.Y.) accepted Chevron Corporations submission. In a comprehensive
    judgment, the court detailed a litany of fraudulent behaviour, not by the
    appellants, but by their counsel in the Ecuadorian proceeding. The court made
    an order enjoining any enforcement proceedings of the Ecuadorian judgment in
    the United States. That decision was upheld on appeal.

[6]

Having had no success in enforcing their judgment in the United States,
    the appellants commenced the present action in the Ontario Superior Court of
    Justice. The enforcement targets this time were the shares and assets of
    Chevron Canada Limited (Chevron Canada), a seventh-level subsidiary of
    Chevron Corporation, with its head office in Calgary. After a jurisdictional
    challenge by Chevron Corporation and Chevron Canada that was ultimately
    rejected by the Supreme Court of Canada, the parties agreed to determine by
    means of a summary judgment motion the issue of whether Chevron Canadas shares
    and assets are exigible to satisfy the judgment debt of Chevron Corporation.
    Chevron Corporation and Chevron Canada were successful on that motion.

[7]

On appeal to this court, the appellants advance two primary submissions.
    First, they argue that the
Execution Act
, R.S.O., 1990, c. E.24 (the
Act
),
    permits execution on Chevron Canadas shares and assets to satisfy the
    Ecuadorian judgment. Second, and in the alternative, they submit that this
    court should pierce the corporate veil in order to render Chevron Canadas shares
    and assets exigible.

[8]

This is a tragic case. There can be no denying that, through no fault of
    their own, the appellants have suffered lasting damages to their lands, their
    health, and their way of life. Their frustration in obtaining justice is
    understandable. Notwithstanding those legitimate concerns, our courts must
    decide cases in a manner that is consistent with the common law as developed in
    our jurisprudence and the statutes enacted by our democratically elected
    legislatures.

[9]

The legal arguments advanced by the appellants cannot succeed. They urge
    upon us an interpretation of the
Act
that finds no support in the
    wording of the legislation or its jurisprudence. If this court endorsed this
    interpretation it would result in significant changes to fundamental principles
    of our corporate law and the law of execution. It would also create new
    substantive rights arising from what is supposed to be a purely procedural
    statute.

[10]

Nor
    can the appellants alternative argument, that this court should ignore the
    corporate separateness of Chevron Corporation and Chevron Canada, succeed. They
    submit that our courts have an equitable ability to pierce the corporate veil
    whenever it appears just. That is not the law in this province. Indeed, this
    submission ignores more than twenty years of jurisprudence. The appellants
    cannot bring themselves within the existing two-part test for piercing the
    corporate veil, as they do not even attempt to address the second part of the
    test. Moreover, they proffer no principled basis for piercing the corporate
    veil other than the assertion that we should do so in the interests of justice.

[11]

What
    is really driving the appellants appearance in our courts is their inability
    to enforce their judgment in the United States. This is not a case where a
    judgment debtor does not have sufficient assets available to pay the judgment
    debt. In the ordinary course, enforcement of a judgment against a parent
    corporation judgment debtor, including against its shares held in subsidiaries,
    is a routine matter. It is only because of the court order in the United States
    that enforcement measures are not being pursued there, and that the appellants
    are asking us to radically alter our law.

[12]

In
    the result, I would dismiss the appeals from the motion judges orders, save
    for his costs award. I would grant leave to appeal the costs order and reduce
    the amounts awarded in accordance with these reasons.

B.

History of ProceedingS

[13]

The
    dispute among the parties has a long and complex history. The following summary
    provides sufficient context to consider the issues raised on these appeals. As
    numerous relevant events occurred in overlapping timeframes, my review of the
    proceedings will not be strictly chronological.

(1)

TexPet drills in Ecuador and the plaintiffs bring the initial U.S.
    action

[14]

In
    1964, the Republic of Ecuador granted TexPet, an indirect subsidiary of Texaco,
    as well as another oil company, a concession to explore for and extract oil
    from the Orienté region of Ecuador. In 1973, Ecuadors state-owned oil company,
    PetroEcuador, joined the consortium and soon thereafter became its majority
    owner. In 1992, when TexPets concession came to an end, TexPet began winding
    down its operations.

[15]

In
    1993, a group of Ecuadorian plaintiffs, the current appellants, brought a class
    action against Texaco in New York. Among the appellants counsel was American
    lawyer Steven Donziger. The S.D.N.Y. eventually dismissed this action on the
    basis of
forum non conveniens

and international comity:
Aguinda
    v. Texaco, Inc.
, 142 F.Supp.2d 534 (S.D.N.Y. 2001). The United States
    Court of Appeals for the Second Circuit (2nd circ.) upheld the dismissal, in
    part because Texaco agreed to commit to the jurisdiction of the Ecuadorian courts:
Aguinda v. Texaco, Inc.
, 303 F.3d 470 (2d Cir. 2002).

(2)

The appellants obtain judgment against Chevron Corporation in Ecuador

[16]

In
    2001, Texaco merged with Chevron Corporation. In 2003, the appellants brought an
    action against Chevron Corporation in Ecuador both in their names and on behalf
    of some 30,000 Ecuadorian indigenous villagers from the Orienté region. Mr.
    Donziger was again among the appellants lawyers. The appellants sought damages
    and remediation for the environmental harm that TexPets oil operations allegedly
    caused.

[17]

After
    lengthy proceedings, Judge Zambrano of the Provincial Court of Justice of
    Sucumbíos entered a judgment against Chevron Corporation for approximately $17
    billion. That amount included about $8.6 billion in punitive damages to be paid
    unless Chevron Corporation issued a public apology within 15 days of the
    judgment. Chevron Corporation did not apologize. The Appellate Division of the
    Provincial Court upheld the judgment. In 2013, the National Court of Justice,
    Ecuadors highest court, reduced the award to $9.5 billion, as Ecuadorian law
    did not contemplate awarding punitive damages where a tortfeaser failed to
    publicly apologize.

(3)

Chevron files an action in New York, contending that the Ecuadorian
    judgment was obtained by fraud

[18]

On
    February 1, 2011, Chevron filed an action in New York against the appellants
[1]
,
    Mr.
Donziger, and other individuals and entities involved with
    his legal team, seeking damages and a global injunction against the enforcement
    of
Ecuadorian judgment. Chevron Corporation alleged that Mr. Donziger
    and his legal team obtained the Ecuadorian judgment fraudulently by, among
    other things, submitting false evidence, ghostwriting the judgment, and bribing
    Judge Zambrano to sign it.

[19]

In
March of that year, Judge Kaplan
of
    the S.D.N.Y. granted preliminary relief in the form of a global injunction with
    respect to the enforcement of the Ecuadorian judgment:
Chevron Corp. v.
    Donziger
, 768 F.Supp.2d 581 (S.D.N.Y. 2011). In 2012, however, the 2nd
    circ. overturned the injunction and held that the appellants could seek to
    enforce the Ecuadorian judgment in any country where Chevron Corporation had
    assets:
Chevron Corp. v. Naranjo
, 667 F.3d 232 (2d Cir. 2012).

(i)

Judge Kaplan rules that the Ecuadorian judgment was obtained by fraud

[20]

The
    action proceeded to a full bench trial in the S.D.N.Y. before Judge Kaplan. By
    that time, five causes of action remained, including the allegation that Mr. Donziger
    and his team engaged in fraud and civil conspiracy. In addition, Chevron had
    waived all claims for damages and sought only equitable relief. On March 4,
    2014, Judge Kaplan released a lengthy decision with extensive and detailed
    factual findings:
Chevron Corp. v. Donziger
, 974 F.Supp.2d 362
    (S.D.N.Y. 2014). He ultimately found that Mr. Donziger and his team corrupted
    the Ecuadorian proceedings. He summarized his findings at the outset of his
    decision, at p. 384:

They coerced one judge, first to use a
    court-appointed, supposedly impartial, global expert to make an overall
    damages assessment and, then, to appoint to that important role a man whom
    Donziger hand-picked and paid to totally play ball with the [
appellants
]. They then paid a Colorado consulting firm secretly to write all
    or most of the global expert's report, falsely presented the report as the work
    of the court-appointed and supposedly impartial expert, and told half-truths or
    worse to U.S. courts in attempts to prevent exposure of that and other
    wrongdoing. Ultimately, the [
appellants
] team wrote
    the [Ecuadorian] court's Judgment themselves and promised $500,000 to the
    Ecuadorian judge to rule in their favor and sign their judgment.

[21]

Judge
    Kaplan held that Chevron Corporation was entitled to equitable relief as the
    record established both corruption and coercion of judges: p. 558. Even absent
    the bribery, ghostwriting the judgment and misrepresenting the nature of the
    expert report constituted fraud: pp. 560-66. Judge Kaplan imposed a
    constructive trust for Chevron Corporations benefit on Mr. Donzigers
    contractual and other rights to fees and payments and issued injunctive relief
    to ensure that Mr. Donziger will never benefit in any material way from the
    Ecuadorian judgment. He also ordered Mr. Donziger and the other defendants in
    that action to pay over and assign to Chevron Corporation all fees and other
    payments and benefits that they had received or will receive as a result of the
    Ecuadorian judgment: pp. 639-41. Finally, Judge Kaplan enjoined the defendants
    in that action from initiating any enforcement proceedings of the Ecuadorian
    judgment in the United States: pp. 641-44.

(ii)

Judge Kaplans decision is upheld on appeal

[22]

The
    2nd circ. upheld Judge Kaplans decision in 2016:
Chevron Corporation v.
    Donziger
, 833 F.3d 74 (2d Cir. 2016).
In 2017,
    the Supreme Court of the United States denied the petition for writ of
certiorari
:
Donziger v. Chevron Corp.
,
137
    S.Ct. 2268.

(4)

The
    appellants commence proceedings in Ontario

[23]

In
    2012, the appellants commenced an action in the Ontario Superior Court of
    Justice for the recognition and enforcement of the Ecuadorian judgment. The action
    was originally commenced against Chevron Corporation, Chevron Canada, and
    Chevron Canada Finance Limited. It was discontinued against the last corporation.

[24]

In
    their Amended Statement of Claim, the appellants sought against Chevron Canada,

inter alia
, the Canadian equivalent of approximately $18.2 billion
    US resulting from the Ecuadorian judgment (later reduced to reflect the National
    Court of Justices ruling); a declaration that Chevron Canadas shares and
    assets are exigible to satisfy the Ecuadorian judgment if enforced in Ontario;
    and the appointment of an equitable receiver over Chevron Canadas shares and
    assets.

(i)

The proceedings involving jurisdiction

[25]

In
    response to the Amended Statement of Claim, Chevron Corporation and Chevron
    Canada brought motions seeking a declaration that the Ontario court had no
    jurisdiction to hear the action. Brown J., then of the Superior Court of
    Justice, heard the motions:
Yaiguaje v. Chevron Corporation
, 2013 ONSC
    2527, 361 D.L.R. (4th) 489. He concluded that the Ontario court had
    jurisdiction to recognize and enforce the Ecuadorian judgment. However, he also
    found that this was an appropriate case in which to exercise the courts power
    to stay the proceedings pursuant to s. 106 of the
Courts of Justice Act
,
    R.S.O. 1990, c. C.43.

[26]

Among
    his reasons for the stay was his finding that there was no basis for asserting
    that Chevron Canadas assets were Chevron Corporations assets for the purposes
    of satisfying the Ecuadorian judgment. Nor was there a legal basis for piercing
    Chevron Canadas corporate veil. He thus concluded that there was nothing in
    Ontario to fight over, and no reason to allow the claim to proceed: para. 111.

[27]

The
    appellants appealed the stay, and Chevron Corporation and Chevron Canada
    cross-appealed the jurisdictional ruling. This court affirmed that the Ontario
    court had jurisdiction, but reversed the imposition of the stay:
Yaiguaje
    v. Chevron Corporation
, 2013 ONCA 758, 118 O.R. (3d) 1. This court noted
    that the only issue at that juncture of the proceedings was jurisdiction;
    issues concerning Chevron Canadas corporate veil could be properly addressed
    in later proceedings: para. 39.

[28]

The
    matter reached the Supreme Court of Canada, which confirmed that the Ontario court
    had jurisdiction:
Chevron Corp. v. Yaiguaje
, 2015 SCC 42, [2015] 3
    S.C.R. 69. Gascon J., writing for the court, was careful to indicate that his
    reasons should not be understood to prejudice future arguments with respect to
    the distinct corporate personalities of Chevron [Corporation] and Chevron
    Canada and that the court took no position on whether Chevron Canada can
    properly be considered a judgment-debtor to the Ecuadorian judgment (para.
    95). As jurisdiction was the only issue in these proceedings, Gascon J. noted
    that Brown J.s findings concerning the separate corporate personalities of
    Chevron Corporation and Chevron Canada were not entitled to deference.

(5)

The judgments under appeal

[29]

Following
    the Supreme Court of Canadas decision on jurisdiction, Chevron Corporation and
    Chevron Canada filed Statements of Defence in the action. Chevron Corporations
    defences included that the Ecuadorian judgment could not be recognized or
    enforced in Ontario because, as Judge Kaplan found in 2014, it was obtained by
    fraudulent means. The appellants moved to strike Chevron Corporations
    defences. Hainey J. granted that motion in part, striking certain paragraphs
    that he found contained impermissible defences. That portion of Hainey J.s
    ruling is not at issue on this appeal.
[2]

(i)

Justice Hainey dismisses the appellants claim against Chevron Canada

[30]

The
    appellants did not allege any wrongdoing against Chevron Canada, nor did they
    allege that the corporate structure of which Chevron Canada is a part was
    designed or used as an instrument of fraud or wrongdoing. They pleaded that
    Chevron Corporation wholly owned and controlled Chevron Canada, and
    beneficially owned Chevron Canadas assets. As such, Chevron Canadas assets
    were exigible pursuant to s. 18(1) of the
Act
, since they represented
    any legal, equitable or other rightwhether direct or indirect of Chevron
    Corporation.

[31]

Chevron
    Corporation and Chevron Canada each

moved for summary dismissal with respect to the appellants claim
    against Chevron Canada. They submitted that Chevron Canadas shares and assets
    were not exigible pursuant to the
Act
, and that there was no basis to
    pierce the corporate veils between Chevron Canada and its indirect parent
    Chevron Corporation so that Chevron Canadas shares and assets could be available
    to satisfy the Ecuadorian judgment.

[32]

Hainey
    J. heard the motions for summary judgment:
Yaiguaje v. Chevron Corporation
,
    2017 ONSC 135,
136 O.R. (3d) 261. He
articulated
    the issues to be decided upon the motions as follows, at para. 23:

(1) Are the shares and assets of Chevron Canada exigible and
    available for execution and seizure pursuant to the
Execution Act
to
    satisfy the Ecuadorian judgment against Chevron?

(2) If they are not, should Chevron Canadas corporate veil be
    pierced so that its shares and assets are available to satisfy the Ecuadorian
    judgment against its indirect parent, Chevron?

Hainey J. answered both questions in the negative and
    dismissed the appellants claim against Chevron Canada.

[33]

The
    appellants principal submission before Hainey J., as it is on appeal, was that
    Chevron Canada is an asset of Chevron Corporation that is exigible and
    available for execution and seizure. They argued that the broad wording of the
Act

permits the sheriff to seize any property in which a judgment debtor has a
    direct or indirect legal or beneficial interest. According to the appellants,
    Chevron Corporation has an indirect beneficial interest in Chevron Canada
    because Chevron Corporation is the sole owner of the shares of Chevron
    Canadathrough the 100 [percent] ownership of cascading intermediary
    subsidiaries which carry on no business.

[34]

Hainey
    J. rejected this submission. He noted that Chevron Corporation does not own the
    shares of Chevron Canada. Rather, all of Chevron Canadas shares are owned by its
    direct parent, Chevron Canada Capital Company (CCCC). Hainey J. held that
    Chevron Canada was not an asset of Chevron Corporation, or indeed any other
    person or corporation, including CCCC. He further found that the
Act

is a procedural statute that does not create any rights in property but
    merely provides for the seizure and sale of property in which a judgment-debtor
    already has a right or interest. On a plain reading of the
Act
, nothing
    in it override[s] or supplant[s] the long-established principle of corporate
    separateness.

As such, the
Act
did not give Chevron Corporation any right or
    interest in the shares or assets of Chevron Canada: paras. 37, 47. Absent a
    finding that Chevron Canadas corporate veil should be pierced, Chevron
    Canadas shares and assets were not exigible to satisfy the Ecuadorian
    judgment.

[35]

Hainey
    J. also rejected the appellants submission that the principle of corporate
    separateness should not apply in this case. He held that the principle has
    been recognized and respected since the 1896 decision of the House of Lords in
Salomon
    v. Salomon & Co
 (para. 58, citing [1897] A.C. 22 (H.L. (Eng.)). Further,
    he found that the principle applies equally to groups of companies, like
    Chevron Corporations group of companies of which Chevron Canada is a part.

[36]

Because
    the principle of corporate separateness applied to Chevron Corporation and
    Chevron Canada, Hainey J. held that the appellants had to meet the test for
    piercing Chevron Canadas corporate veil, established in
Transamerica Life
    Insurance Co. of Canada v. Canada Life Assurance Co.
,

(1996), 28
    O.R. (3d) 423 (Gen. Div.), affirmed: (1997)
74
    A.C.W.S. (3d) 207 (Ont. C.A.). That case held, at pp. 433-34, that
courts
    will disregard the separate legal personality of a corporate entity where it is
    completely dominated and controlled and being used as a shield for fraudulent
    or improper conduct. The appellants did not allege that the corporate
    structure of which Chevron Canada is a part was designed or used as an
    instrument of fraud or wrongdoing. This was fatal to their claim: para. 65.

[37]

Hainey
    J. also held that the appellants failed to establish that Chevron Corporation
    had total effective control over Chevron Canada to meet the first part of the
Transamerica test
. That test requires more than ownership, but
    complete domination of the subsidiary corporation such that the subsidiary
    does not function independently or is a puppet of the parent: paras. 69, 72.

[38]

Finally,
    Hainey J. rejected the appellants argument that corporate separateness should
    not be applied where it will yield a result too flagrantly opposed to
    justice. In his view, the jurisprudence established that courts do not have a
carte
    blanche

to pierce the corporate veil where it appears just to do
    so, absent fraudulent or improper conduct: paras. 66-68.

(ii)

The motion to add CCCC as a party

[39]

Over
    a month after arguments concluded on the summary judgment motions, the appellants
    brought a motion to further amend their Amended Statement of Claim to add CCCC
    as a defendant. Hainey J. dismissed this motion:
Yaiguaje v. Chevron
    Corporation
, 2017 ONSC 604,
275 A.C.W.S. (3d)
    729.
He held that, because the appellants sought the same relief against
    CCCC as they did against Chevron Canada, their claim against CCCC could not
    succeed for the same reasons that it could not against Chevron Canada. Hainey
    J. further held that the appellants did not establish that the courts of
    Ontario would have jurisdiction over CCCC, a company incorporated in Nova Scotia
    with no assets or operations in Ontario.

(iii)

The costs order

[40]

Hainey
    J. awarded costs on a partial indemnity basis in the amounts of $533,001.81 to
    Chevron Canada and $313,283 to Chevron Corporation:
Yaiguaje v. Chevron
    Corporation
, 2017 ONSC 3217 (unreported: (26 May 2017), Toronto CV-12-9808-00CL).

[41]

Hainey
    J. noted that the ordinary rule is that a successful party receives its costs
    on a partial indemnity scale. Given the high stakes of the litigation, the
    various theories the appellants advanced, and the appellants numerous requests
    for additional discovery and cross-examination, it was reasonable for the
    appellants to expect Chevron Corporation and Chevron Canada to expend
    significant resources to defend the claims.

[42]

Hainey
    J. rejected the appellants submissions that he should award no or only nominal
    costs because the appellants action raised novel points of law that were in
    the public interest. He adopted Chevron Canadas submissions that this would
    detract from the finding that there was no legal basis to involve Chevron
    Canada in this high stakes litigation. He also rejected that the appellants
    claim against Chevron Canada was analogous to a class proceeding to which s.
    31(1) of the
Class Proceedings Act
,
1992
, S.O. 1992, c. 6
    applied. In any event, the appellants claim was not a test case, did not raise
    a novel point of law, and was not in the public interest.

[43]

As
    the appellants were partially successful on their motion to strike Chevron Corporations
    defences, Hainey J. reduced Chevron Corporations claim for costs by $50,000.

(6)

Proceedings for security for costs in this court

[44]

When
    the appellants appealed to this court from Hainey J.s orders, Chevron
    Corporation and Chevron Canada sought an order for security for costs totalling
    over $1 million. The motion judge concluded that the appellants had demonstrated
    neither impecuniosity, nor that third party litigation funding was unavailable.
    Nor had they demonstrated that their appeal had a strong chance of success.
    Thus, the motion judge ordered security for costs in the amount of $591,335.14
    for Chevron Canada, and $351,616.33 for Chevron Corporation:
Yaiguaje v.
    Chevron Corporation
, 2017 ONCA 741,
137 O.R.
    (3d) 729.

[45]

A
    three-judge panel of this court set aside the motion judges ruling:
Yaiguaje
    v. Chevron Corporation
, 2017 ONCA 827, 138 O.R. (3d) 1. The panel held
    that, in deciding motions for security for costs, judges are obliged to first
    consider the specific provisions of the Rules governing those motions and then
    effectively to take a step back and consider the justness of the order sought
    in all the circumstances of the case, with the interests of justice at the
    forefront (para. 22). As the motion judge failed to undertake the second part
    of this analysis, it fell to the panel to evaluate the justness of the order.

[46]

The
    panel concluded that, in the unique circumstances of this litigation, the
    interests of justice required that no order for security for costs be made.
    While the appellants legal arguments were innovative and untested, this did
    not foreclose the possibility that one or more of them may eventually prevail.
    It could not be said at that stage that the case was wholly devoid of merit. Moreover,
    given the nearly 25-year history of this litigation, the panel found it difficult
    to accept that the motion for security for costs was anything more than a
    measure intended to bring an end to the litigation (para. 26).

C.

Issues

[47]

These
    appeals raise the following issues:

(1)

Did Hainey J. err in his
    interpretation of the
Act
, such that Chevron Canadas shares and
    assets are exigible to satisfy the judgment debt of Chevron Corporation?

(2)

Did Hainey J. err in failing to
    pierce the corporate veil?

(3)

Did Hainey J. err in dismissing
    the motion to add CCCC as a party?

(4)

Should the appellants motion to
    tender fresh evidence on appeal be granted?

(5)

Should leave to appeal the costs
    order be granted and, if so, should this court interfere with the costs order?

D.

Analysis

(1)

The
Execution Act

[48]

At
    the outset, it is necessary to address the appellants submission to the effect
    that, because this case involves the enforcement of a foreign judgment, this
    court must, for reasons of comity, interpret the
Act
in an especially expansive
    manner to facilitate the collection of the debt.

[49]

A
    foreign judgment is evidence of a debt. Absent the establishment of one of the
    limited defences available to a judgment debtor, an enforcing court in Canada
    need only be satisfied that it was issued by a court of competent jurisdiction,
    that it is final, and that the amount of the judgment is correct. Thus
    satisfied, the enforcing court then lends its judicial assistance to the
    foreign litigant by allowing him or her to use its enforcement mechanisms:
Pro
    Swing Inc. v. ETLA Golf Inc.
, 2006 SCC 52, [2006] 2 S.C.R. 612, at para.
    111. See also
Chevron
(SCC), at para. 46.

[50]

Critically,
    enforcement of a foreign judgment is done in accordance with domestic law regarding
    the enforcement of domestic judgments. It would hardly be equitable to have one
    set of enforcement rules for domestic judgments and a second, far more
    expansive set of rules for foreign judgments. So the task for this court is to
    determine whether Hainey J. erred in his application of domestic debtor-creditor
    law in finding that under the
Act
,
the shares and assets of Chevron Canada are not exigible to satisfy Chevron
    Corporations debt.

[51]

I
    must also address at the outset one of the appellants requests because it is a
    legal impossibility. They seek a declaration against Chevron Canada that the
    shares of its company are exigible. Such an order cannot be made. A corporations
    shares do not belong to the corporation, but to the shareholders:
Chevron
(SCC), at para. 95. In fact, under s. 30(1) of the
Canada Business
    Corporation Act
,
R.S.C. 1985, c. C-44

(the
CBCA
),
    corporations are prohibited from owning their own shares.

[52]

Turning
    to what the
Act
does permit, a judgment creditor is granted extensive
    rights to collect on a judgment debt. The relevant sections of the
Act
for present purposes are as follows:

14(1) The interest of an execution debtor in a
    security or security entitlement may be seized by the sheriff in accordance
    with sections 47 to 51 of the
Securities Transfer Act
, 2006
.

(3) Every seizure and sale made by the sheriff shall
    include all dividends, distributions, interest and other rights to payment in
    respect of the security, if issued by an issuer incorporated or otherwise
    organized under Ontario law, or in respect of the security entitlement and,
    after the seizure becomes effective, the issuer or securities intermediary
    shall not pay the dividends, distributions or interest or give effect to other
    rights to payment to or on behalf of anyone except the sheriff or a person who
    acquires or takes the security or security entitlement from the sheriff.

***

18(1) The sheriff may
    seize and sell any equitable or other right, property, interest or equity of
    redemption in or in respect of any goods, chattels or personal property,
    including leasehold interests in any land of the execution debtor, and, except
    where the sale is under an execution against goods issued out of the Small
    Claims Court, the sale conveys whatever equitable or other right, property,
    interest or equity of redemption the debtor had or was entitled to in or in
    respect of the goods, chattels or personal property at the time of the delivery
    of the execution to the sheriff for execution, and, where the sale is under an
    execution against goods issued out of the Small Claims Court, the sale conveys
    whatever equitable or other right, property, interest or equity of redemption
    the debtor had or was entitled to in or in respect of the goods, chattels or
    personal property at the time of the seizure.

[53]

The
    appellants rely on s. 18(1) to argue that it permits the seizure of any
    interest and further submit that Chevron Corporation has an indirect interest
    in Chevron Canada. In oral argument, Mr. Lenczner undertook a detailed review
    of various internal documents produced by Chevron Corporation and Chevron
    Canada, wherein Chevron Canada sought approval from Chevron Corporation to
    undertake certain corporate actions, such as investment in oil exploration
    projects. The point of this exercise, he said, was to demonstrate the extent of
    Chevron Corporations interest in Chevron Canada. This submission reflects a
    fundamental misunderstanding of the
Act
.

[54]

It
    is common ground that the
Act
is procedural only and does not purport
    to grant substantive rights to judgment creditors. Its only function is to
    facilitate the collection of judgments through the various methods provided
    therein to enforce the judgment debtors existing rights. The sheriff
    effectively steps into the judgment debtors shoes and enforces his or her
    rights for the benefit of the judgment creditor.

[55]

The
    difficulty in the present case is that Chevron Corporation has no existing
    rights as against the assets of Chevron Canada. It is not enough to state that
    Chevron Corporation has an amorphous indirect right to the assets of Chevron
    Canada; there must be an existing legal right that permits seizure of the
    assets. To understand why Chevron Corporation does not hold such a right, it is
    necessary to consider how the
Act
operates in practice, basic
    principles of corporate law, and the policy implications of the appellants
    submission.

[56]

I
    start with a review of how the
Act
operates. If a judgment debtor is a
    corporation with money in the bank, the sheriff may seize that money. If it
    owns equipment, the sheriff may seize that equipment and sell it. Shares that a
    judgment debtor owns are also exigible and may be seized and sold by the
    sheriff. But the assets of the issuing corporation are not exigible: Kevin P. McGuinness,
Canadian Business Corporations Law
, 3rd ed., vol. 1 (Markham:
    LexisNexis Canada, 2017) at para. 6.71. So, for example, if a judgment debtor
    owns 10,000 shares of Corporation A, the sheriff may seize and sell those
    shares. However, the sheriff cannot attempt to execute the judgment at the
    corporate offices of Corporation A by seizing assets owned by Corporation A. To
    do so would be to violate fundamental principles of corporate law.

[57]

It
    is important to understand the distinction between corporations and their
    shareholders. Pursuant to s. 15(1) of the
CBCA
, Parliament has made a
    clear policy choice that corporations have the rights, powers and privileges
    of a natural person. This is not, as the appellants suggest, a mere legal
    fiction. It is a bedrock principle of our corporate law. Consistent with the
    law established in
Salomon
, Parliament has entrenched in our law the
    notion of corporate separateness. That means that corporations are separate
    entities from their shareholders, capable of carrying on business and incurring
    debts on their own behalf. Thus, if a judgment debtor is a parent corporation,
    it and not its shareholders or subsidiaries, is responsible for the debts it
    incurs. It also means that a corporations assets are its own and do not belong
    to related corporations.

[58]

A
    shareholder of a corporation does not have a right to claim a proportionate
    share of the corporations assets while it is ongoing. That right only arises
    if and when the corporation is wound up:
BCE Inc. v. Debentureholders
,
2008 SCC 69, [2008] 3 S.C.R. 560, at para. 34. This makes logical sense because
    the corporation is deemed to be a natural person. While it is extant, it holds
    its assets. When it ceases to exist, the assets are distributed to the
    shareholders, subject to claims from creditors and others, because there is at
    that point no existing entity capable of holding the assets.

[59]

If
    we accept the appellants submission, a judgment creditor would have greater
    rights to the issuing corporations assets than a judgment debtor shareholder
    because access would occur while the corporation is ongoing. This enforcement
    of future contingent rights is also contrary to the wording of s. 18(1) of the
Act
.
    It does not purport to enforce future rights, such as a right upon wind-up. It
    allows only for the enforcement of rights as at the time of the delivery of
    the execution to the sheriff for execution.

[60]

In
    the case at bar, granting the rights sought would be even more extraordinary
    because it would ignore the corporate separateness of the various subsidiaries
    in between Chevron Corporation and Chevron Canada. The appellants would have
    this court proceed on the basis that Chevron Canadas shares are directly owned
    by Chevron Corporation. They are not. CCCC owns those shares, and it is not a
    party to this action. Another corporation owns CCCCs shares and so it goes up
    the corporate chain. We are being asked to ignore the legal reality of the way
    Chevron Corporation structured its subsidiary corporations. Clearly we are
    being asked to pierce the corporate veil, notwithstanding appellant counsels
    assertion, made in reply, that we are not.

[61]

The
    appellants proposed interpretation of the
Act
would also have a
    significant policy impact on how corporations carry on business in Canada.
    Corporations have stakeholders. Creditors, shareholders, and employees, among
    others, rely on the corporate separateness doctrine that is long-established in
    our jurisprudence and that is a deliberate policy choice made in the
CBCA
.
    Those stakeholders have a reasonable expectation that when they do business
    with a Canadian corporation, they need only consider the liabilities of that
    corporation and not the liabilities of some related corporation.

[62]

Finally,
    it is necessary to address the appellants policy submission that it is unconscionable
    that a parent corporation can incorporate a number of wholly-owned subsidiaries
    and secrete valuable assets away from judgment creditors. That submission is
    not consistent with how the
Act
operates. Let us assume for the moment
    that Chevron Corporation held in Canada 100 percent of the shares of a
    subsidiary corporation. Those shares could be seized and sold. If that
    subsidiary had substantial assets, the sale price of the shares would reflect
    the value of the underlying assets. Even if the assets were held by a distant
    subsidiary protected by a series of 100-percent-owned subsidiaries, the sale
    price of the shares in the first subsidiary would reflect the underlying value
    of the ultimate assets. Therefore, there would be no need for the sheriff to
    seize and sell the assets of the first subsidiary corporation because he or she
    would achieve the same result, without violating the principle of corporate
    separateness, by selling its shares. In either case the judgment debtor would
    obtain the value of the underlying assets.

[63]

In
    summary, I am not persuaded that Hainey J. erred in rejecting the appellants
    submission that under the
Act
,
Chevron Canadas shares and assets are exigible to satisfy the Ecuadorian judgment.
    The appellants interpretation is not supported by the wording of the
Act
and would violate fundamental principles of our corporate law. Reading the
Act
in the way the appellants suggest would amount to the granting of extraordinary
    rights to a judgment creditor through a purely procedural statute, designed to
    permit only the enforcement of existing rights.

(2)

Piercing the corporate veil

[64]

The appellants alternatively submit that this court has the
    ability to pierce the corporate veil when the interests of justice demand it.
    In support of that argument, they rely on Wilson J.s remarks in
Kosmopoulos
    v. Constitution Insurance Co.
, [1987] 1 S.C.R. 2, where she stated at p. 10:

The law on when a court may disregard this principle by lifting
    the corporate veil and regarding the company as a mere agent or puppet of
    its controlling shareholder or parent corporation follows no consistent
    principle. The best that can be said is that the separate entities principle
    is not enforced when it would yield a result too flagrantly opposed to
    justice, convenience or the interests of the Revenue.

[65]

Kosmopoulos
was decided approximately thirty years ago. Not
    surprisingly, the law has developed. The starting point is the decision of
    Sharpe J., as he then was, in
Transamerica
. Justice Sharpe rejected
    the notion that the test for piercing a corporate veil is anything like a just
    and equitable standard (p. 433). Relying on Gower:
Principles of Modern
    Company Law
, 5th ed. (London: Sweet & Maxwell, 1992), he found, at p.
    433, that there are only three circumstances where the court will pierce a
    corporate veil:

(1)

When the court is construing a statute, contract or other document;

(2)

When the court is satisfied that a company is a mere facade
    concealing the true facts; and

(3)

When it can be established that the company is an authorized agent of
    its controllers or its members, corporate or human.

[66]

With respect to cases where it is alleged that a subsidiary corporation
    is a mere facade that protects its parent corporation, in order to ignore the
    corporate separateness principle, the court must be satisfied that: (i) there is
    complete control of the subsidiary, such that the subsidiary is the mere
    puppet of the parent corporation; and (ii) the subsidiary was incorporated for
    a fraudulent or improper purpose or used by the parent as a shell for improper
    activity:
Transamerica,
at pp. 433-34.

[67]

This court has repeatedly rejected an independent just and equitable
    ground for piercing the corporate veil in favour of the approach taken in
Transamerica
:
    see
Boyd v. Wright Environmental Management Inc.
, 2008 ONCA 779, 243
    O.A.C. 185, at paras. 44-45;
Parkland Plumbing & Heating Ltd. v. Minaki
    Lodge Resort 2002 Inc.
, 2009 ONCA 256, 250 O.A.C. 232, at paras. 50-51;
    and
Indocondo Building Corp v. Sloan
,
2015 ONCA 752, 259 A.C.W.S. (3d) 691, at para. 9.

[68]

The Supreme Court of Canada has protected the principle of corporate
    separateness without suggesting a standalone just and equitable exception. In
Sun
    Indalex Finance v. United Steelworkers
, 2013 SCC 6, [2013] 1 S.C.R. 271, at
    para. 238, Cromwell J. rejected the submission that a subsidiary should be
    liable for a breach of fiduciary duty committed by its parent corporation,
    holding that unless there is a legal basis for ignoring the separate corporate
    personality of separate entities, those separate corporate existences must be
    respected. See also
Continental Bank Leasing Corp. v. Canada
, [1998]
    2 S.C.R. 298, at paras. 108-112.

[69]

The appellants rely on a number of cases that they submit demonstrate
    that the principle of corporate separateness is sufficiently malleable that
    courts are free to ignore it when they see fit. However, an examination of
    those cases makes clear that their reliance is misplaced:

·

Lynch v. Segal
(2006), 82 O.R. (3d) 641 (C.A.), involved
    the use of a corporation to disguise property so that the defendants wife and
    children would not have access to it for support purposes. This is precisely
    the type of abusive use of a corporation that
Transamerica
says
    justifies an exception to the corporate separateness principle.

·

Downtown Eatery (1993) Limited v. Ontario

(2001),
    54 O.R. (3d) 161 (C.A.), was an employment case where this court found that the
    plaintiff had entered into an employment contract with a non-legal entity and
    was paid by a corporation that was simply acting as the paymaster for a group
    of companies. This court held that in those unique circumstances, the entire
    group of companies had in fact employed the plaintiff. In my view, this
    conclusion rested more on the plaintiffs relationship to the group of
    companies rather than the relationships among the companies in the group.

·

Buanderie centrale de Montréal Inc. v. Montreal (City)
,
    [1994] 3 S.C.R. 29, is actually an example of one of the exceptions to the corporate
    separateness principle listed in
Transamerica
. This was a case where
    the corporate veil was pierced because it was provided for by statute.

·

Bazley v. Curry
, [1999] 2 S.C.R. 534, is
a vicarious liability case. That doctrine makes one
    person liable for the acts of another. There must, however, be some basis for
    imposing vicarious liability. In that case, it was the employment relationship
    and the
question was whether the employees wrongful
    act was sufficiently related to conduct authorized by the employer to justify
    the imposition of vicarious liability. There is no suggestion in the present
    case that Chevron Corporation and Chevron Canada were engaged in any employment,
    agency, or other relationship in undertaking oil exploration in Ecuador.

[70]

The
Transamerica
test is consistent with the principle
    reflected in the various business corporation statutes in Canada that corporate
    separateness is the rule. Where the corporate form is being abused to the point
    that the corporation is not a truly separate corporation and is being used to
    facilitate fraudulent or improper conduct, the law recognizes an exception to
    this rule. It is important that courts be rigorous in their application of the
Transamerica
test because the rule is provided for in statute and stakeholders of
    corporations have a right to believe that, absent extraordinary circumstances, they
    may deal with the corporation as a natural person.

[71]

The significance of the
Transamerica
decision should not be
    underestimated. In a single case, Sharpe J. synthesized the jurisprudence
    regarding piercing the corporate veil. More importantly, he brought clarity and
    certainty to our law by providing a framework for determining when it is
    appropriate to ignore the principle of corporate separateness. This can be
    contrasted to the state of the American jurisprudence, where years of cases
    decided with no identifiable and consistent test has resulted in an
ad hoc
and unpredictable application of the remedy: Jonathan Macey & Joshua Mitts,
    Finding Order in the Morass: The Three Real Justifications for Piercing the Corporate
    Veil (2014) 100:1 Cornell L. Rev. 99.

[72]

The current state of the law in the United States is comparable
    to the state of the Canadian jurisprudence at the time of
Kosmopoulos
.
    The appellants misinterpret Wilson J.s statement in that case, quoted above at
    para. 64, as an endorsement of a standalone just and equitable standard for
    piercing the corporate veil. It was not. Rather, the court was decrying the
    absence of a coherent set of criteria for ignoring corporate separateness.
    Wilson J. stated, at p. 12, that corporate separateness should not ignored

to ameliorate its ill
    effects on a case‑by‑case basis.

Transamerica

rejected the
ad hoc
approach
    previously employed and achieved the needed certainty in the law. The question
    for determination in this case is whether this court is prepared to sacrifice
    certainty for the sake of expediency.

[73]

The appellants advance a number of arguments to justify ignoring the
    corporate separateness between Chevron Corporation and Chevron Canada. I do not
    find any of them to be persuasive.

[74]

First, they submit that Hainey J. erred in finding that Chevron
    Corporation did not wield sufficient control of Chevron Canada to meet the
    first part of the
Transamerica
test. I need not consider that argument,
    as it is plain that the appellants cannot meet the second part of the
    conjunctive test. Chevron Canada was incorporated over 50 years ago. There is no
    allegation of wrongdoing on its part and no suggestion that it was established
    or used for fraudulent or improper purposes. Indeed, in their Amended Statement
    of Claim, the appellants specifically plead that Chevron Canada has not engaged
    in any inappropriate conduct. As Hainey J. correctly found, under the
Transamerica
test, this is a complete bar to the request to pierce the corporate veil.

[75]

Next the appellants argue that
Transamerica
is not applicable
    because in this case we are dealing with the enforcement of a judgment debt,
    not a case of first instance where the issue is establishing liability. This
    submission cannot be accepted. If it were, a judgment against any corporation
    could be enforced against the assets of any other related corporation.
    Resourceful litigators would not sue multiple related corporations who could
    rely on the
Transamerica
test. Instead, they would pick one company to
    sue and then enforce their judgment against all related corporations who would then
    be barred from relying on the
Transamerica
test. The non-judgment
    debtor corporation would thus lose all of its protection as a natural person
    under the
CBCA
. The exception to the rule of corporate separateness
    would become the rule once judgment was obtained.
[3]

[76]

Not only is such an argument problematic from a policy standpoint, it
    comes dangerously close to the adoption of the group enterprise theory of
    liability. That theory holds that where several corporations operate closely as
    part of the same group of corporations, they are in reality a single
    enterprise and should, accordingly, be responsible for each others debts. It
    has been consistently rejected by our courts:
Meditrust Healthcare Inc. v.
    Shoppers Drug Mart
(2002), 61 O.R. (3d) 786 (C.A.), at paras. 30- 31 and
Fairview
    Donut Inc. v. The TDL Group Corp.
, 2012 ONSC 1252, 112 O.R. (3d) 190, at
    paras. 651-665, affirmed: 2012 ONCA 867, 225 A.C.W.S. (3d) 31, leave to appeal
    refused: [2013] S.C.C.A. No. 47.
[4]
It has also been rejected in England: see
Adams v. Cape
[1990], 1 Ch.
    433 (Eng. C.A.) at pp. 532 and 536-38.

[77]

There is good reason for this rejection. There is a difference between
    economic reality and legal reality. The fact that on an operational level
    corporate separateness is more nuanced among a group of related corporations is
    of no moment. It is the legal reality, as provided for in the relevant business
    corporation statutes, that counts. The
CBCA
permits subsidiary
    corporations but also says that each corporation is a natural person. If
    Parliament wished to carve out an exception to the natural person rule for
    subsidiaries, it would have been very easy to do so.

[78]

As stated by Mary Elisabeth Kors in her article, Altered Egos:
    Deciphering Substantive Consolidation (1998), 59 U. Pitt. L. Rev. 381, at pp. 437-38,
    there are also good policy reasons for the rejection of this sweeping doctrine:

While enterprise liability may offer some appeal, measuring the
    extent of an economic unit introduces an intolerable level of uncertainty
    into the question of liability. The task of marking the limits of liability on
    the basis of incorporation is relatively simple: the corporation has either
    complied with the technical requirements of incorporation or it has not.
    Extending liability to the edges of the enterprise requires courts to determine
    the scope of the economic enterprise. The answer to this issue will rarely, if
    ever, be clear. Creditors extending credit would not be able to determine with
    any precision the liabilities for which the debtor will be responsible and the
    assets that will be available to satisfy their claims. Such uncertainty
    substantially reduces both the efficiency and fairness of corporate law.

[79]

The appellants further submit that the corporate separateness of Chevron
    Corporation and Chevron Canada should be ignored for policy reasons. Yet they
    provide no guidance regarding the basis upon which it will be appropriate to
    pierce the corporate veil in future cases. Once the
Transamerica
test
    is jettisoned and no principled basis for piercing the corporate veil replaces
    it, we are left with a purely
ad hoc
test. In the end, Mr. Lenczners submissions
    boil down to an exhortation that we should do the right thing for his clients,
    untethered to the jurisprudence, the statutory rights of corporations, or any
    discernible principle. Even if we were free to do that, which we are not, this
    case illustrates the difficulties with this approach. At this stage, the equities
    of this case are far from clear. On the one hand, the appellants have suffered
    devastating loss through no fault of their own. On the other, on the finding of
    the United States courts, the Ecuadorian judgment against Chevron Corporation
    was the result of a massive fraud.
[5]

[80]

It is also important to remember the context in which the request to
    pierce the corporate veil is being made in this case. It is common ground that
    the judgment debtor has more than enough assets to satisfy the Ecuadorian
    judgment. This is also not a case where the judgment debtors assets are being
    funnelled to a related corporation and as a consequence the judgment creditor
    cannot execute on its judgment. In fact, the appellants allege that the opposite
    is true. They say the profits of Chevron Canada are being funnelled up to
    Chevron Corporation as dividends. If they are correct, Chevron Canada is
    actually enhancing the ability of Chevron Corporation to pay the Ecuadorian judgment.

[81]

As noted above, the appellants submissions fail to acknowledge that the
    real fact driving their appearance in the Canadian courts is that they have not
    enforced their judgment in the United States. The reason for this seems clear,
    but in his oral submissions, Mr. Lenczner stated that the existing United
    States court order does not prohibit his clients from enforcing the Ecuadorian
    judgment, whereas in his factum filed on the costs appeal he asserted that his
    clients are prohibited from enforcing that judgment in the United States. Query
    if there truly is no prohibition, why he is in the Ontario courts making novel
    legal arguments to get at the assets of a seventh level subsidiary?

[82]

Whatever the reason for not enforcing the Ecuadorian judgment in the
    United States, it is clear that the difficulties the appellants are
    encountering in collecting the judgment are not related to Chevron
    Corporations structuring of its subsidiaries. What we are really being invited
    to do is to assist the appellants in doing an end-run around the United States
    court order by breaking with well-established jurisprudence and creating an
    exception to the principle of corporate separateness that is both ill-defined
    and will be unnecessary for similarly situated judgment creditors.

[83]

To be clear, as this court stated in its reasons on the review of the
    security for costs order, the common law is not set in stone. It evolves over time
    to respond to pressing legal issues. The existing rules for piercing the
    corporate veil can and likely will evolve. But the law must evolve on a
    principled basis and in a manner that brings certainty and clarity, not in a
    way that sows confusion and is devoid of principle.

(3)

Adding CCCC as a party

[84]

I
    agree with Hainey J. that it was not appropriate to add CCCC as a party because
    the claim against its assets must fail for the same reasons that the claim
    against Chevron Canadas assets must fail. Accordingly, the amended pleading
    was not legally tenable and did not disclose a cause of action as against CCCC.
    The test under rule 5.04(2) was not met: see
Steel Tree Structures Ltd. v.
    Gemco Solar Inc.
, 2016 ONSC 955.

(4)

Fresh evidence

[85]

I
    would deny the appellants motion for fresh evidence. The documents proposed to
    be tendered relate primarily to the interactions among Chevron Canada and its subsidiaries.
    They are, at best, of marginal relevance to the matters at issue on these appeals
    and could not have affected the result of the motions. Accordingly, they do not
    meet the test for admission articulated in
R. v. Palmer
, [1980] 1 S.C.R.
    759, at p. 775.

(5)

Costs

[86]

In
    my view, Hainey J. erred when he found that this was not public interest
    litigation. As this court held in its reasons on the review of the security for
    costs order, at para. 26:

The appellants are seeking to
    enforce a judgment in which they have no direct economic interest. Funds
    collected on the judgment will be paid into a trust and net funds are to be
    used for environmental rehabilitation or health care purposes. This is public interest
    litigation.

[87]

I agree with Mr. Zarnetts submission that the fact that this is public
    interest litigation does not mean that the appellants are immune from the usual
    costs consequences of an unsuccessful action. This court in its reasons on the
    review of the security for costs order was dealing with whether it was just to
    deny the appellants their day in court on the basis of a security for costs
    order. It did not consider whether the appellants should ultimately be ordered
    to pay costs.

[88]

Despite the foregoing, the fact that this is public interest litigation
    impacts on the quantum of costs. It should have been factored into Hainey J.s
    analysis of a reasonable amount of costs in all of the circumstances. This constituted
    an error in principle and thus it is appropriate to grant leave to appeal the
    costs award:
Walsh Energy Inc. v. Better Business Bureau of Ottawa-Hull
    Incorporated
, 2018 ONCA 383, at para. 40;
Hamilton v. Open Window
    Bakery Ltd.
, 2004 SCC 9, [2004] 1 S.C.R. 303
. It also
    falls to this court to make the proper costs award in all of the circumstances.

[89]

In my view, when the true nature of the litigation is considered, the
    amounts awarded below were excessive. I would reduce those amounts to $150,000
    to Chevron Canada and $100,000 to Chevron Corporation, all-inclusive.

E.

Disposition

[90]

For the foregoing reasons, I would dismiss the appeals of the motion
    judges orders, save for his costs award. I would grant leave to appeal that
    order and reduce the amounts awarded in accordance with these reasons.

[91]

The parties agreed on the costs of these appeals. Pursuant to that
    agreement, I would order that the appellants pay Chevron Canada and Chevron
    Corporation jointly their costs of the appeal in the all-inclusive total amount
    of $100,000.

C.W.
    Hourigan J.A.

I
    Agree. Grant Huscroft J.A.

Nordheimer J.A. (concurring):

[92]

I
    have read the reasons of my colleague, Hourigan J.A., and agree with the result
    that he reaches.  I also largely agree with the careful analysis he has
    undertaken.  Specifically, I agree with his analysis in respect of the
    interpretation of the
Execution Act
, R.S.O. 1990, c. E.24 and his
    conclusion that Chevron Corporation has no exigible interest in the assets or
    shares of Chevron Canada  or indeed in any of its indirect subsidiaries  on
    the basis of the
Act
alone. However, I part company with him on (i)
    whether the test established in
Transamerica Life Insurance Co. of Canada
    v. Canada Life Assurance Co.
(1996), 28 O.R. (3d) 423 (Gen. Div.),
    affirmed [1997] O.J. No. 3754 (C.A.) is the appropriate one to apply in these
    circumstances and (ii) on the general approach he adopts with respect to when
    it is appropriate to pierce the corporate veil.

[93]

What
    is at the root of this case is whether the corporate veil can be pierced in
    situations where it would be necessary to do so in order to permit a judgment
    creditor to realize on a judgment that would otherwise go unsatisfied.  While I
    accept my colleagues conclusion that it would not be appropriate to do so in
    this case, for the reasons that he gives at paras. 79-82, I do not agree with
    what I perceive to be the thrust of his reasons, that is, that it would never
    be appropriate to lift the corporate veil to permit the enforcement of a
    judgment, unless the requirements of the
Transamerica
test are met.

[94]

In
    my view, the decision in
Transamerica
, as important as it was in
    providing a clear test for lifting the corporate veil, should not have its
    scope expanded beyond the situations from which it arose.  Of considerable
    importance on this point is the fact that the decision in
Transamerica
dealt with imposing liability on a party through the mechanism of lifting the
    corporate veil.  It did not deal with the situation here, that is, the
    enforcement of a judgment debt.  In the latter situation, liability has already
    been established.  The proceeding has moved past that hurdle to a stage that
    concerns the remedies that are available to enforce a valid judgment.

[95]

I
    am not satisfied that the
Transamerica
test can simply be lifted out
    of the liability context and then dropped into, and applied to, the judgment
    enforcement context.  Among other reasons for that conclusion is the fact that
    it would appear to be very difficult to conceive of a factual situation where
    the
Transamerica
test could be met by a judgment creditor, that is,
    where the corporate structure would be found to have been used as a shield for
    fraudulent or improper conduct solely in the execution context.

[96]

In
    his analysis on this point, my colleague downplays the significance of the
    observation of Wilson J. in
Kosmopoulos v. Constitution Insurance Co.
,
    [1987] 1 S.C.R. 2, where she said, at pp. 10-11:

The best that can be said is that the separate entities principle
    is not enforced when it would yield a result too flagrantly opposed to
    justice, convenience or the interests of the Revenue: L.C.B. Gower,
Modern
    Company Law
(4th ed. 1979) at p. 112.
I have no doubt that
    theoretically the veil could be lifted in this case to do justice
, as was
    done in
American Indemnity Co. v. Southern Missionary College
,
supra
,
    cited by the Court of Appeal of Ontario. But a number of factors lead me to
    think it would be unwise to do so.

[Emphasis added.]

[97]

My
    colleague says that this quotation from Wilson J. was not an endorsement of a
    standalone just and equitable standard for piercing the corporate veil but
    was, rather, simply the court decrying the absence of a coherent set of
    criteria for ignoring corporate separateness.

[98]

I
    do not read Wilson J.s decision in that way.  I agree that she was expressing
    concern about the lack of a consistent principle for lifting the corporate
    veil, but I do not view her reasons as dismissing the concept that the
    corporate veil can be pierced when not doing so would yield a result too
    flagrantly opposed to justice.  Indeed, Wilson J. stated that she
    theoretically had no doubt that the veil could be lifted to do justice.
    Moreover, the result in
Kosmopoulos
was based, in part, on the court seeing
    a need to take a more expansive view of an insurable interest than that which
    had been adopted in the United Kingdom, because of the corporate separateness
    principle.  In reaching her conclusion, Wilson J. referred to the decision in
Salomon
    v. Salomon & Co.
, [1897] A.C. 22 (U.K. H.L.) and noted that [t]he
    unhappy consequences of that case for corporate creditors are well-known.  She
    also said, at p. 27:

I have already noted that while in the case of a single
    shareholder corporation courts are unlikely to lift the corporate veil for the
    benefit of that single shareholder, they may be willing to lift the corporate
    veil in the interests of third parties who would otherwise suffer as a result
    of that choice:
Gower
,
supra
, at p. 138.

[99]

I
    can envisage situations where a judgment creditor would be such a third party.
    Indeed, the appellants might well fall into that category were it not for the
    findings of the U.S. courts respecting the fraudulent manner in which the
    Ecuadorian judgment, that the appellants seek to enforce, is alleged to have
    been obtained.

[100]

In response to
    this perspective, my colleague says, at para. 67, that this court has
    repeatedly rejected an independent just and equitable ground for piercing the
    corporate veil in favour of the approach taken in
Transamerica
.  He
    then cites three decisions of this court as examples of that approach.
    However, it does not seem to me that those cases fully support the broad
    proposition that he states.

[101]

I begin by
    noting that all of those cases were again decisions respecting liability, not
    judgment enforcement decisions.  But, in any event, it seems to me that those
    cases are not as restricted as my colleague suggests.  For example, in
Parkland
    Plumbing & Heating Ltd. v. Minaki Lodge Resort 2002 Inc.
, 2009 ONCA
    256, 250 O.A.C. 232, this court reversed a decision of the Divisional Court and
    upheld the trial judges decision to pierce the corporate veil.  In doing so,
    Cronk J.A., at para. 49, expressly reiterated the above quotation from
Kosmopoulos
.
    In doing so, she did not suggest that the decision in
Transamerica
had
    eliminated that general principle.  Nor in
Transamerica
itself did
    this court, in its appeal book endorsement, affirmatively foreclose other bases
    upon which the corporate veil might be pierced in future cases.

[102]

I also do not
    agree with my colleagues assertion that all four cases relied upon by the
    appellants do not support their position.  In particular, it seems to me that
    the decision in
Downtown Eatery (1993) Ltd. v. Ontario
(2001), 54 O.R.
    (3d) 161 (C.A.), leave to appeal refused [2001] S.C.C.A. No. 397 is, in fact, a
    situation where the corporate veil was pierced because not to do so would
    result in manifest unfairness.

[103]

In that case,
    the employer operated a nightclub enterprise through various related
    corporations.  The employee signed an employment agreement with the nightclub
    entity but was paid by a related corporation.  The employee was fired and sued
    for wrongful dismissal.  However, the employer had reorganized its corporate
    structure by the end of the trial.  The corporation that the employee named in
    his suit no longer had any assets to satisfy the judgment against it.  As a
    result, the sheriff executed the judgment by seizing assets owned by a
    corporation related to the judgment debtor.  The related corporation then sued
    the employee for conversion in a subsequent action.  The employee
    counterclaimed that he was entitled to enforce his judgment against
    corporations related to the employer judgment debtor.  The trial judge dismissed
    the employees counterclaim.

[104]

This court
    reversed the decision on appeal.  Importantly, the new corporate structure did
    not preclude this court from granting a remedy.  Justices Borins and MacPherson
    said, at paras. 35-43:

[The employer] could easily have operated the nightclub through
    a single company. They chose not to. There is nothing unlawful or suspicious
    about their choice

However, although an employer is entitled to establish complex
    corporate structures and relationships, the law should be vigilant to ensure
    that permissible complexity in corporate arrangements does not work an
    injustice in the realm of employment law. At the end of the day, [the
    employees] situation is a simply, common and important one  he is a man who
    had a job, with a salary, benefits and duties. He was fired  wrongfully. His
    employer must meet its legal responsibility to compensate him for its unlawful
    conduct. The definition of employer in this simple and common scenario should
    be one that recognizes the complexity of modern corporate structures, but does
    not permit that complexity to defeat the legitimate entitlements of wrongfully
    dismissed employees.

[]

In these circumstances, when he was wrongfully dismissed, [the
    employee] did his best  he sued the company which had paid him. Later, it
    turned out that that company had no assets. Yet the nightclub continued in
    business, various companies continued to operate it and, presumably, [the
    corporations shareholders] continued to make money.
In these circumstances,
    [the employee] decided to try to collect the money to which a superior court of
    justice had determined he was entitled. In our view, the common employer
    doctrine provides support for his attempt
.

In these circumstances [] we conclude that [the employer]
    when he was wrongfully dismissed was all of [the related corporations]. This
    group of companies functioned as a single, integrated unit in relation to the
    operation of [the nightclub].

[The related organizations went through various reorganizations
    before the end of the trial]. The trial judge found that there was nothing
    nefarious about these reorganizations; they were undertaken for business
    reasons unrelated to [the employees action]. We see no reason to disagree with
    this conclusion.

The question which the reorganizations pose is whether [the
    judgment] [] should also be enforced against the successor or merged companies
    which have been created by the reorganizations.

We have no hesitation in answering this question in the
    affirmative.

[Emphasis added.]

[105]

In my view,
Downtown
    Eatery
provides some support for the proposition that the law on piercing
    the corporate veil might allow the appellants to enforce their Ecuadorian
    judgment against Chevron Canada.  I say this for three reasons.

[106]

First, this
    court pierced the corporate veil of the related corporations in
Downtown
    Eatery
despite the express finding that neither the corporate structure,
    nor the reorganization leaving the judgment debtor corporation without assets,
    was fraudulent.

[107]

Second, this
    court enunciated a principle that the law should not allow even legitimate
    corporate structures to work an injustice.  This strikes me as the invocation
    of a general equitable jurisdiction to ensure that persons who hold valid
    judgments have an enforceable remedy.

[108]

And third,
    unlike the cases my colleague cites at paras. 67-68,
Downtown Eatery
is a case of the enforcement of one corporations judgment debt against a
    related corporation.  It is arguably therefore far more relevant to the instant
    appeal than
Transamerica
.  Moreover, the decision in
Downtown
    Eatery
post-dates
Transamerica
.  Thus, it can be seen as an
    example of how
Transamerica
has not been applied in the debt
    enforcement context.

[109]

Further, the
    decision in
Bazley v. Curry
, [1999] 2 S.C.R. 534 also tends to support
    the concept that equitable principles may be relied upon to override the
    principle of corporate separateness where it is necessary to do justice.
    Indeed, it seems difficult to see a legal foundation for the imposition of
    vicarious liability, other than a foundation in equity.  I note that in
Bazley
,
    McLachlin J. expressly based the imposition of vicarious liability on two
    policy considerations, the first of which was to provide a just and practical
    remedy to people who suffer as a consequence of wrongs perpetrated by an
    employee.  Transferred into this context, a party, who holds a valid judgment,
    has, by definition, been found to have suffered a wrong.  I can conceive of
    situations, albeit rare ones, where piercing the corporate veil for enforcement
    purposes would be necessary in order to provide a just and practical remedy
    to a person who holds a valid judgment, especially in the context of related
    corporations.

[110]

Another concern
    that my colleague expresses regarding any deviation from the corporate separateness
    principle is that it comes dangerously close to the adoption of the group
    enterprise theory of liability.  First, I note that this concern again relates
    to liability and not to enforcement.  I also note that the decision in
Downtown
    Eatery
could be seen as having already adopted the group enterprise theory
    of liability, or at least a variation of it.

[111]

Second, my
    colleague says that, if Parliament had wished to carve out an exception to the
    corporate separateness principle for subsidiaries, it could have done so.
    While that is undoubtedly correct, the fact that Parliament has not made such
    an exception has not prevented the courts from invoking equity to make
    exceptions, as the whole concept of lifting the corporate veil makes clear.

[112]

Third, my
    colleague refers to an article by Mary Elisabeth Kors in which she rejects this
    doctrine because, in her view, the concept of group enterprise is vague or
    amorphous.  While that may be a legitimate concern in some instances, there is
    nothing vague or amorphous about a situation where a corporation owns 100% of
    the shares of another corporation.  For example, in this case, the corporate
    structure that exists between Chevron Corporation and Chevron Canada is very
    clear.  On this point, I would add, in passing, that the motions judges
    blanket conclusion, at para. 36, that Chevron Canada is not an asset of
    Chevron is one that is completely detached from real-world realities.
    Although the law dictates that only the shares of a corporation can be the
    assets of another person (and not the corporation itself), it is crystal clear
    that Chevron Canada is an asset of Chevron Corporation, as that term is
    understood in common business parlance.  All of Chevron Canadas shares are
    owned by Chevron Corporation (albeit indirectly) and, as the evidence in this
    case makes clear, it is ultimately controlled, for all practical purposes, by
    Chevron Corporation.  Consequently, there are no innocent shareholders that
    would be affected by the execution of the Ecuadorian judgment against Chevron
    Canada  a concern that is often raised as militating against any effort to
    interfere with corporate separateness.

[113]

It seems clear
    that the genesis of the courts corporate veil piercing power stems from its
    equitable jurisdiction: see, e.g.,
A-C-H International Inc. v. Royal Bank

(2005), 254 D.L.R. (4th) 327 (Ont. C.A.), at para. 29; and
Burke Estate
    v. Royal & Sun Alliance Insurance Co. of Canada
, 2011 NBCA 98, 381
    N.B.R. (2d) 81, at paras. 54 and 58.  The origins of equity flow from the need
    to ameliorate the harshness of positive law in principled circumstances.  In
    fact, some commentators describe equity as the conscience of law.  It draws
    upon principles of natural law to harmoniz[e] law with the needs and
    requirements of evolving social structures and relationships: Leonard I.
    Rotman, The Fusion of Law and Equity?: A Canadian Perspective on the
    Substantive, Jurisdictional, or Non-Fusion of Legal and Equitable Matters
    (2016) 2(2) Can. J. Comp. Cont. L. 497 at pp. 503-04.

[114]

The importance
    of equity in our system of laws is highlighted by the precedence it takes over
    the common law.  It is [trite] law that where common law and equity conflict,
    equity is to prevail:
Bathgate v. National Hockey League Pension Society

(1992), 11 O.R. (3d) 449 (Gen. Div.), cited with approval by the Supreme
    Court of Canada in
Schmidt v. Air Products of Canada Ltd.
, [1994] 2
    S.C.R. 611, at p. 641.  This court, and the Superior Court of Justice, have
    been expressly entrusted with such equitable powers under s. 96 of the
Courts
    of Justice Act
, R.S.O. 1990, c. C.43.

[115]

As such, in my
    view, it would take much stronger language in the jurisprudence, or a clear
    statutory amendment, to displace or limit the courts equitable power to pierce
    the corporate veil in those extraordinary situations where liability has been
    established but the judgment creditor is nevertheless left without any remedy
    because of the judgment debtors internal corporate structure.  On this issue,
    I agree with the majority of the opinions offered in the most recent decision
    of the Supreme Court of the United Kingdom on this subject in
Prest v.
    Petrodel Resources Ltd.
, [2013] UKSC 34, [2013] 2 A.C. 415.  Although
    Lords Sumption and Neuberger, held that corporate veil piercing should be restricted
    to circumstances that are akin to the ones identified in
Transamerica
,
    the five other justices gave concurring reasons  each explaining why the
    jurisdiction to pierce the corporate veil was not so narrow. As Lord Neuberger
    himself said, at para. 80, the doctrine of piercing the corporate veil:

has been generally assumed to exist in all common law
    jurisdictions, and represents a potentially valuable judicial tool to undo
    wrongdoing in some cases, where no other principle is available.

[116]

My colleague
    states the ultimate question in this case as being whether this court is
    prepared to sacrifice certainty for the sake of expediency.  With respect, I
    believe that puts the question too starkly.  It is not a question of
    expediency.  It is a question of equity.  Consequently, I would reframe the
    question: Is this court prepared to recognize that there may be situations
    where equity would demand a departure from the strict application of the
    corporate separateness principle in the context of the enforceability of a
    valid judgment, whether foreign or domestic?  I suggest that that question
    should be answered in the affirmative while, at the same time, recognizing that
    the situations where such a remedy will be appropriate are likely to be rare
    and exceptional.  On that latter point, I adopt the observation made by Lord
    Mance in
Prest
, at para. 100:

It is however often dangerous to seek to foreclose all possible
    future situations which may arise and I would not wish to do so.  What can be
    said with confidence is that the strength of the principle in
Salomons
case and the number of other tools which the law has available mean that, if
    there are other situations in which piercing the veil may be relevant as a
    final fall-back, they are likely to be novel and very rare.

[117]

However, even
    accepting my reframed question as the proper one, my colleague aptly puts the
    dilemma that this court faces in answering it, at para. 79 of his reasons.  On
    the one hand, we have an apparently valid foreign judgment.  On the other hand,
    we have a finding by the U.S. courts that the judgment was obtained by fraud.
    Comity demands that this court, at this stage, should respect both decisions.
    But, at the same time, we must recognize the obvious conflict between them.
    Because of the manner in which this matter has proceeded, our courts have not
    yet been called upon to make their own determination of the validity of the
    Ecuadorian judgment.  Absent such a finding, even on my approach to the
    judgment enforceability question, the circumstances here cannot rise to the
    level that would be necessary to conclude that the result is too flagrantly
    opposed to justice as to permit the corporate veil to be pierced.

[118]

In the end
    result, I agree that the appeals must be dismissed, save for the costs appeal.

Released: G.H. May 23, 2018

I.V.B.
    Nordheimer J.A.

[1]

Two of the appellants answered and defended the action, Hugo
    Gerardo Camacho Naranjo and Javier Piaguaje Payaguaje. A certificate of default
    was entered against the rest of the appellants.

[2]

Leave to appeal this part of Hainey J.s ruling to the
    Divisional Court was denied:
Yaiguaje v. Chevron Corporation
,
    2017 ONSC 2251,
278 A.C.W.S. (3d) 229.

[3]

An example of this court applying the principle of corporate
    separateness in the enforcement context is
Belokon

v
.
Krygyz
,
    2016 ONCA 981, 136 O.R. (3d) 39, leave to appeal refused: [2017] S.C.C.A. Nos.
    74 & 75.

[4]

The sole exception in this court appears to be
Manley Inc. v.
    Fallis
(1977), 2 B.L.R. 277 (Ont. C.A.). However, on closer examination the
    court was simply endorsing that an employee could owe a fiduciary duty to both
    his employer and its parent corporation.

[5]

In making this observation, this court is not purporting to
    adopt the findings of the United States courts.


COURT OF APPEAL FOR ONTARIO

CITATION: York Region Standard Condominium Corporation No.
    1039 v.

Richmond Hill (Town), 2018 ONCA 511

DATE: 20180531

DOCKET: C64671

Feldman, MacPherson and Rouleau JJ.A.

BETWEEN

York Region Standard
    Condominium Corporation No. 1039

Appellant (Plaintiff)

and

The Corporation of
    the Town of Richmond Hill,
Rosehill Suites Inc.
, Tarion Warranty Corporation,
Dean Artenosi
, Joseph Battaglia
    Architect,
Arten
    Developments Inc.
,
The Arten Group
    Inc.
,
Principally Green
    Limited
,
    1041549 Ontario Limited carrying on business under the firm name and style
    Tristar Engineering,
Arten
    Developments carrying on business under the firm name and style The Manners of
    Roseview Grand, Arten Developments carrying on business under the firm name and
    style The Rosehill
,
    Socia Engineering Limited, John Doe Bricklayers, Jane Doe, Adam Doe, Andrew
    Doe, Anthony Doe, Alex Doe, Adrian Doe, Anna Doe, Alicia Doe, Alice Doe, Amy
    Doe and Amanda Doe

Respondents
(Defendants)

Patrick Di Monte, for the
    appellant

Kevin Sherkin and Ryan
    Wozniak, for the respondents

Heard: May 28, 2018

On appeal from the order of Justice S.J. Woodley of the Superior
    Court of Justice, dated September 1, 2017, with reasons reported at 2017 ONSC
    6868.

REASONS FOR DECISION

[1]

At the conclusion of the appeal, the court allowed the appeal with
    reasons to follow. These are those reasons.

[2]

The appeal is from an order dismissing the appellants claim against the
    respondents for delay. The claim involved allegations of negligence in the
    construction of a condominium built in 2004, resulting in defects that were discovered
    on August 5, 2012. A number of defendants were named in the Statement of Claim:
    several individuals and corporations, as well as the Corporation of the Town of
    Richmond Hill (Richmond Hill) and Tarion Warranty Corporation (Tarion).

[3]

The claim was issued on August 1, 2014, but was not served on the defendants
    within the six months provided in the
Rules of Civil Procedure
. Some
    of the defendants  the respondents in this appeal  brought a motion for
    dismissal of the claim against them for delay.

[4]

The motion was heard by a master. The appellant explained that it had encountered
    problems locating and serving the respondents due to inaccurate information filed
    in the respondents corporation profile reports. The master determined,
    however, that even if this were true, there was no evidence that the appellant
    had followed up or pursued any investigation once it became aware the respondents
    had not been located. Nor had the appellant brought a motion to extend the time
    for service or to validate service effected to the registered addresses.

[5]

The respondents learned of the claim in June 2015, when they were served
    with the cross-claims of Richmond Hill and Tarion. The respondents invited the
    appellant to bring a motion to extend the time for service and indicated that
    they would oppose such a motion. The appellant did not bring a motion to extend
    time or validate service and, on February 13, 2017, the respondents brought
    their motion for dismissal of the claim for delay.

[6]

In support of the motion, the respondents filed an affidavit to the
    effect that the documents related to the condominium project had been purged in
    the normal course of business and, as far as the principal of the respondent
    corporations was aware, this documentation was no longer available.

[7]

In his reasons, the master correctly stated that the onus was on the
    appellant to explain the delay and establish that the respondents had suffered
    no prejudice. The appellant bore the onus because the limitation period had
    expired during the period of delay. He also observed that prejudice was the key
    consideration in this case. We agree. The master noted that while the respondents
    no longer had their documents, the affidavit did not specify when the documents
    had been destroyed. He went on to infer from the various materials filed that
    the appellants documents were available and that the documents of the
    institutional defendants had also been preserved. We take the masters
    reference to institutional defendants to be a reference to Tarion and
    Richmond Hill. The master concluded that the appellant had met its onus, although
    barely so, and dismissed the motion.

[8]

On appeal to the Superior Court, the judge allowed the appeal and
    dismissed the claim as against the respondents. She found that the master had
    committed palpable and overriding errors of fact and errors of law.

[9]

A central error of fact identified by the appeal judge was the masters finding
    that the documents of the individual Defendants have been preserved. As she
    correctly noted, this finding contradicted the respondents evidence that the
    records had been purged. Unfortunately, however, the typed version of the
    masters handwritten reasons presented to and relied upon by the appeal judge
    contained an error. As we note above, the masters reasons indicated that the
    documents of the institutional defendants were preserved. The typed version
    appears to have incorrectly transcribed institutional as individual. There
    was therefore no inconsistency in the masters finding. This unfortunate error
    in transcription played a significant role in the appeal judges decision to
    allow the appeal.

[10]

As
    for the errors of law identified by the appeal judge, she explained that the
    master failed to apply the proper legal principles and, in particular, that
    there is a strong presumption of prejudice given the expiration of the
    limitation period and the passage of time since the events occurred and that
    the Appellants provided evidence of specific prejudice (purging of documents
    and unavailability of witnesses) which evidence was not considered. In our
    view these criticisms of the masters decision are in error.

[11]

As
    the appeal judge properly noted at para. 21 of her reasons, the delay that is
    to be considered in the circumstances of this case is measured by reference to
    the length of time from the commencement of the proceeding to the motion to
    dismiss. It is in relation to this period of delay that the appellant bore the
    onus of rebutting prejudice. However, when the appeal judge came to apply this principle,
    she implied that the appellant was required to rebut the presumption of
    prejudice for the entire 13 year period since the construction of the
    condominium. Further, the master was well aware of the evidence that the
    respondents had purged their documents. However, as indicated by the master,
    the respondents did not indicate when their documents were destroyed. It was
    open to the master to infer that they had in fact been destroyed well before
    the claim was issued, such that the delay in service of the claim engendered
    little or no prejudice.

[12]

The
    masters decision was entitled to deference, as were the inferences that the
    master drew from the record as a whole. In our view, the appeal ought to be
    allowed and the masters decision restored. We agree with the appellant that
    there should be no costs in this court or in the courts below.

K. Feldman J.A.

J.C. MacPherson J.A.

Paul Rouleau J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Abrahamovitz v. Berens, 2018 ONCA 512

DATE: 20180601

DOCKET: C63272

Laskin, Feldman and Miller JJ.A.

BETWEEN

Faigie Abrahamovitz and Frances Spiro

Plaintiffs (Respondents)

and

Mark Berens, Megapro Property Management Ltd.,
    3030 Danforth Ltd., T.W.M. Consolidated Holdings Inc., and Lois Kalchman

Defendants

Samuel S. Marr and Zachary Silverberg, for the appellant,
    the Estate of Gabriel Zimmerman

David P. Jacobs, for the respondents

Heard: August 21, 2017

On appeal from the order of Justice Robert F. Goldstein
    the Superior Court of Justice, dated January 11, 2017, with reasons reported at
    2017 ONSC 184.

COSTS ENDORSEMENT

[1]

On March 15, 2018, this court released its decision allowing the appeal
    of the appellant, the Estate of Gabriel Zimmerman, and awarding the Estate its costs
    of the appeal: see
Abrahamovitz v. Berens
, 2018 ONCA 252.

[2]

On April 11, 2018, the Estate wrote to the panel asking for an opportunity
    to make submissions on the issue of costs of the motion below. In a letter dated
    April 18, 2018, we directed the parties to provide written submissions on what
    amount the Estate was entitled to, as well as what amount, if any, should be
    awarded to the defendants, given that they participated in the motion below but
    not on the appeal. We have now received and reviewed those submissions.

[3]

The Estate submits that it should be awarded $24,655.00, or the amount
    of costs originally awarded against it by the motion judge, modified to reflect
    a partial indemnity scale. The Bill of Costs the Estate submitted indicates its
    actual partial indemnity costs were $10,288.55, including HST and
    disbursements.

[4]

The respondents submit that, because this court granted the appeal on
    the issue of adding the Estate to the litigation, but did not address a
    secondary issue  whether the defendants should be granted an interpleader
    order  there was mixed success on the motion below, such that each party
    should bear its own costs. Alternatively, the respondents submit that the
    Estate should not be granted the $24,655.00 it seeks; any costs awarded should
    be limited to the Estates actual partial indemnity costs.

[5]

The Estate also submits that the defendants are entitled to costs on the
    motion below. Although they did not participate in the appeal, given our
    decision on appeal, they are now at least partially successful. The respondents
    do not address this issue.

[6]

We agree with the Estate that it is entitled to its costs on the motion
    below. The main focus of this appeal and of the motion below was the issue that
    the Estate successfully appealed: whether it was entitled to be added as a
    party to the underlying action. However, we agree with the respondents that the
    Estates costs should be limited to the actual partial indemnity costs it
    incurred.

[7]

We also agree with the Estate that the defendants are entitled to their
    costs on the motion below on a partial indemnity basis. In its written
    materials, the Estate provided a copy of the defendants certified Bill of
    Costs from the motion below, which evidences partial indemnity costs of $
8,227.97
, inclusive
    of disbursements and HST.

[8]

We therefore order the respondents pay the Estate and the defendants their
    costs of the motion below, fixed in the amount of $10,000, inclusive of
    disbursements and HST, payable to the Estate and $8,000, inclusive of
    disbursements and HST, payable to the defendants.

John
    Laskin J.A

K.
    Feldman J.A.

B.W. Miller J.A.