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8 Oct 2018

Stephen G. Ross & Andrew Yolles, Rogers Partners LLP, on Mondaq

Ontario Court of appeal restricted ability to pierce corporate veil in lawsuit by affected Ecuadorian communities against Chevron in Canada, say lawyers

"A New And Restrictive Approach To Piercing The Corporate Veil", 8 Oct 2018

In Yaiguaje v. Chevron Canada Corporation, 2018 ONCA 472, the Ontario Court of Appeal significantly restricted the court's ability to "pierce the corporate veil".

Leave has been sought to appeal this decision to the Supreme Court of Canada. However, if leave is denied, or the decision is upheld, it could have far reaching consequences for nearly every field of law in this province...

It is the authors' view that leave to appeal Yaiguaje to the Supreme Court of Canada should be granted, so that the law can be clarified to reintroduce the court's discretion to pierce the corporate veil where the interests of justice demand it...

Our recommended approach, as set out above, would be similar to the Kozel test applied in the context of the equitable remedy of relief from forfeiture. The court should consider:

  1. the conduct of the party seeking to pierce the veil;
  2. the gravity or importance of the issue to both parties; and
  3. the balance between the value in maintaining separate legal personality vs. piercing the corporate veil in the context of the case.

It is our view that although the imposition of such a test would not alter the outcome in Yaiguaje, it would nevertheless provide discretion to the court to pierce the veil when the "interests of justice demand it", and provide some guidance and structure to the circumstances where that discretion should be exercised...