Commercial Litigation and Dispute Resolution Blog

In June, 2014, a Notice of Civil Claim was filed in the British Columbia Supreme Court in the case of Adolfo Garcia v. Tahoe Resources Inc. (“Garcia”).  In Garcia, the plaintiffs have sued a Canadian parent company that conducts mining activities through a foreign subsidiary in Guatemala.  This is the first time this type of claim has been bought in British Columbia. This claim parallels the claim brought in Ontario in Choc v. Hudbay Minerals Inc. (“Choc”).  The courts in Ontario have refused to strike the claim in Choc and it appears to be heading to trial.

Historically, corporations have relied upon the separate legal personality of subsidiary corporations to shield the parent corporation from direct legal liability for the activities of the subsidiary.  Garcia and Choc are examples of plaintiffs, usually backed by non-governmental organizations, using traditional legal principles in an attempt attach liability directly to the parent corporation for the activities of a foreign subsidiary. Importantly, these claims have been brought in Canadian, not foreign, courts. Accordingly, corporations conducting activities abroad should take note of these types of claims because, absent a strong judicial rebuke, the use of this litigation strategy is likely to increase.

The plaintiffs in Garcia are seven Guatemalan individuals. The pleadings allege that they were shot by security personnel during a protest at mine owned by the subsidiary of the defendant.  The plaintiffs claim damages, saying that the defendant, a Canadian parent corporation, is directly liable for battery. Battery is a legal term for a claim for the intentional use of force to the body of another person without consent. Alternatively, the plaintiffs claim that the defendant is vicariously liable for battery through its wholly owned Guatemalan subsidiary or for the battery committed by the security personnel. Finally, the plaintiffs claim that defendant was negligent in failing to prevent the use of excessive force by its security personnel. The plaintiffs also seek punitive damages.

Choc involves three actions that have been consolidated into one claim before the courts in Ontario. There the plaintiffs’ claims are based primarily on allegations that the defendants has direct liability for negligence in failing to prevent harms committed by mine security personnel. The plaintiffs also allege that the defendant was vicariously liable for torts of its subsidiary and its subsidiary’s employees. In July of 2013, the  Superior Court of Ontario ruled that Choc should proceed to trial and refused to strike the claim on either legal or jurisdictional grounds.

Garcia and Choc are both examples of the use of traditional and well known legal principles – battery, negligence and vicarious liability – in an effort to have claims against Canadian parent companies adjudicated in Canada.  The legal principles are not new but how they are being used is novel. Canadian corporations doing business abroad can expect the use of this legal strategy to increase. Ultimately, the use of this strategy means that Canadian corporations ought to be  prepared to defend their activities and the activities of their subsidiaries in Canadian courts.