“Get those coming up from under! Los de Abajo! Get the underdogs!” [i]
On June 8, 2017, the Supreme Court of Canada refused Tahoe Resources Inc.’s application for leave to appeal the British Columbia Court of Appeal’s decision in Garcia v. Tahoe Resources Inc., 2017 BCCA 39.[ii] I can only assume the plaintiff farmer, Adolfo Garcia, and his remaining co-plaintiffs, must be feeling some satisfaction; perhaps, similar to that of the farmer-turned-revolutionary, Demetrio Macías, in the early parts of Mariano Azuela’s novel, Los de Abajo (The Underdogs).[iii]
In 2013, Garcia and his colleagues were shot and injured by private security personnel during a protest outside a mine in Guatemala. The mine was (and remains) owned by Tahoe, a Canadian reporting issuer incorporated in British Columbia. Tahoe’s ownership of the mine is through wholly-owned Barbadian, Swiss and Guatemalan incorporated subsidiaries. Aside from criminal charges pending against the mine’s security manager in Guatemala, no charges were brought against Tahoe or its Guatemalan subsidiary.
In 2014, Garcia and six co-plaintiffs commenced suit against Tahoe in the Supreme Court of British Columbia. They allege that Tahoe is directly and vicariously liable for battery and negligence. While Tahoe conceded that British Columbia had jurisdiction over the plaintiffs’ claim, it asked the court to decline to exercise that jurisdiction on the ground that British Columbia was forum non conveniens.
The application judge exercised her discretion to decline jurisdiction, allowed Tahoe’s application, and stayed the action (see Garcia v. Tahoe Resources Inc., 2015 BCSC 2045). A significant point in her decision to grant a stay was that, in Guatemala, civil complainants can be joined in a criminal proceeding. In this case, six of the seven plaintiffs were joined in a criminal proceeding against the security manager in an attempt to obtain compensation from him.
The Court of Appeal allowed the plaintiffs’ appeal. In doing so, it admitted fresh evidence in relation to the status of the criminal proceedings in Guatemala. The fresh evidence showed that the security manager had escaped house arrest in Guatemala and fled for his native Peru; and, the criminal proceedings, including the plaintiffs’ parallel claims for compensation from him, had been suspended pending the outcome of extradition proceedings.
Garcia’s journey to trial has been undeniably protracted. But with the forum non conveniens challenge now resolved, he is closer to trying his claim that Tahoe owed and breached a duty of care, causing forseeable losses for which it should be found liable. This is noteworthy because, although the claim applies ordinary legal principles, it is not a conventional negligence case. To the contrary, it may establish – as a matter of Canadian common law – that a parent-entity can owe a direct duty of care to foreign individuals in relation to conduct at the operations of a foreign subsidiary.
To my knowledge, no Canadian court has fully considered the possibility yet. A corollary to determining whether such a duty of care should be imposed (I expect at stage two of the Anns-Cooper analysis) will be whether the courts consider that the imposition of a duty of care on a parent-entity is inconsistent with the doctrine of separate corporate personality. As such, Garcia’s case and others like it (see, for example, Choc v Hudbay Minerals Inc., and Araya v Nevsun Resources Ltd.) warrant close attention.
The direct duty of care pleadings advanced in Garcia, Choc and Araya reflect UK and Australian positions as a Canadian possibility. Courts in the UK and Australia confirmed that a direct duty of care between a parent-entity and those affected by the operations of a foreign subsidiary can exist where the evidence establishes that the parent-entity has, by its conduct and knowledge, brought itself into a relationship with the plaintiffs, thus making it just and reasonable to impose a duty of care.[iv]
In those UK and Australian instances where a direct duty of care was imposed, it was common finding that the parent-entity’s involvement “went beyond the ordinary incidents of shareholder power and transgressed into managerial or operational control of the subsidiary’s affairs”.[v] Importantly, the Court of Appeal of England and Wales in Chandler v Cape PLC rejected a test that looks for what the normal incidents of shareholder power are, acknowledging that the way corporate groups operate varies from case to case.[vi]
UK and Australian appellate courts have also recognized the distinction between piercing the corporate veil and the imposition of liability by the application of established tort principles. As such, there appears to be a consensus between the courts, albeit sometimes criticized by commentators, that such a duty neither offends nor disregards the principle of separate corporate personality established by Salomon v A. Salomon & Co. Ltd.[vii]
A statement on the absurdity of violence without purpose, Los de Abajo end
s with the death of its revolutionary hero, Demitrio. It is unclear whether the plaintiffs in Garcia, Choc and Araya appreciate that their actions may one day revolutionize Canadian negligence law, bringing it in step with the UK and Australia. Recognizing the challenges that await them, and on account of my acting with close colleagues for Araya and his many co-plaintiffs, I’m with the plaintiffs/underdogs in the Garcia fight.
[i] Azuela, Mariano. Los de Abajo. Tezontle: Fondo de Cultura Economico, 1916. Translation, The Underdogs, E. Munguia. New York. Brentano’s, 1929.
[ii] Tahoe Resources Inc. v. Adolfo Agustin Garcia et al., 2017 CanLII 35114 (SCC).
[iii] In the early parts of the book, Macías rebels against treatment he receives at the hands of Federales. Despite having no personal ambition, his bravery and leadership lead him to earn him the rank of general in the rebel army.
[iv] CSR Ltd v Wren, (1997) 44 NSWLR 463 (CA); Chandler v Cape PLC,  EWCA Civ 525; Lubbe v Cape Industries PLC,  1 WLR 1545; Thompson v The Renwick Group PLC,  EWCA Civ 635; Guerrero and others v. Monterrico Metals PLC.  EWHC 2475; HRH Emere Godwin Bebe Okpabi and Others v Royal Dutch Shell PLC and Shell Petroleum Development Company of Nigeria Ltd., 2017 EWHC 89 (TCC).
[v] CSR Ltd v Wren, (1997) 44 NSWLR 463 (CA); Chandler v Cape PLC,  EWCA Civ 525; and see Stefan H C Lo, 2014, A Parent Company’s Tort Liability to Employees of a Subsidiary, Journal of International and Comparative Law, at 10.
[vi] Chandler v Cape PLC,  EWCA Civ 525, at 43-45.
[vii] CSR Ltd v Wren, (1997) 44 NSWLR 463 at 485 (CA); Chandler v Cape PLC,  EWCA Civ 525, at 69-70.