CITATION: IPEX Inc. v. AT Plastics Inc. 2015 ONSC 2618

DIVISIONAL COURT FILE NO.: DC 71/15

DATE: 20150422

SUPERIOR COURT OF JUSTICE – ONTARIO – DIVISIONAL COURT

RE: IPEX INC. (Responding Party/Plaintiff)

and

AT PLASTICS INC. (Moving Party/Defendant)

COUNSEL: Lawrence Theall and Jeffrey Brown, for the Moving Party

Jessica A. Kimmel and Suzy Kauffman, for the Responding Party

HEARD: In Toronto, in writing

E N D O R S E M E N T

(Leave to Appeal to the Divisional Court)

MOLLOY J:

Introduction

[1] The defendant AT Plastics ("ATP"), seeks leave to appeal to the Divisional Court from the Order of Whitaker J. dated January 28, 2015, dismissing an appeal from the Order of Master Graham dated March 7, 2014.

[2] The issue on the appeal was Master Graham's ruling on one question that IPEX refused to answer at examinations for discovery. IPEX had paid $125 million to settle claims against it in class actions in relation to alleged defects in piping systems it had marketed. Some of the components in those piping systems had been supplied by ATP. IPEX sued ATP to recover all amounts it paid to investigate, defend and settle the class action. IPEX claims in this lawsuit that the only reason it settled the class actions is because it believed that defects in the materials supplied by ATP would cause failure at catastrophic rates, thereby exposing it to much greater liability. The insurers of IPEX contributed to the settlements and participated in the mediation process leading to the settlements. After the settlements, the insurers transferred their subrogated rights and interests to IPEX. Therefore, this action for indemnity is being pursued by IPEX, in its own right, and not by the insurer as a subrogated claim.

[3] IPEX refused at discovery to identify the insurers who contributed to the settlement and the individuals involved on behalf of the insurers. IPEX also refused to make inquiries of its insurers and produce all relevant documents relevant to the proceedings and the recommendations of the insurer as to settlement (identified as Refusal 9).

[4] In a very brief hand-written endorsement, Master Graham ordered IPEX to provide the information as to the identity of the insurers and insurers' representatives who participated, on the grounds that were persons with knowledge of relevant transactions or occurrences, but limited this to the extent the information was within IPEX's knowledge. He ruled that IPEX was not required to answer the other questions because: contribution by the insurer was not relevant based on the private insurance exception; the claim is not a subrogated one; and any indemnity received from the insurer is irrelevant.

[5] Justice Whitaker dismissed the appeal in a brief one-page endorsement. He held that the Master was entitled to deference on this question of mixed fact and law. He also held that the Master was correct when he "considered and directly applied the insurance exception" and stated that he agreed with IPEX's counsel that ATP was attempting to get an affidavit of documents from a non-party without bringing a motion.

The Test for Granting Leave to Appeal

[6] The test for granting leave to appeal under Rule 62.02(4) is well-settled. It is recognized that leave should not be easily granted and that the test to be met is a very strict one. There are two possible branches upon which leave may be granted. Both branches involve a two-part test and in each case, both aspects of the two-part test must be met before leave may be granted.

[7] Under Rule 62.02(4)(a), the moving party must establish that there is a conflicting decision of another judge or court in Ontario or elsewhere (but not a lower level court) and that it is in the opinion of the judge hearing the motion "desirable that leave to appeal be granted". A "conflicting decision" must be with respect to a matter of principle, not merely a situation in which a different result was reached in respect of particular facts: Comtrade Petroleum Inc. v. 490300 Ontario Ltd., 1992 7405 (ON SC), 7 O.R. (3d) 542 (Div.Ct.).

[8] Under Rule 62.02(4)(b), the moving party must establish that there is reason to doubt the correctness of the order in question and that the proposed appeal involves matters of such importance that leave to appeal should be granted. It is not necessary that the judge granting leave be satisfied that the decision in question was actually wrong; that aspect of the test is satisfied if the judge granting leave is satisfied that the correctness of the order is open to "very serious debate": Nazari v. OTIP/RAEO Insurance Co., 2003 40868 (ON SC), [2003] O.J. No. 3442 (S.C.J. per Then J.); Ash v. Lloyd's Corp. (1992), 1992 7652 (ON SC), 8 O.R. (3d) 282 (Gen Div., per Farley J.). In addition, the moving party must demonstrate matters of importance that go beyond the interest of the immediate parties and involve questions of general or public importance relevant to the development of the law and the administration of justice: Rankin v. McLeod Young Weir Ltd. (1986), 1986 2749 (ON SC), 57 O.R. (2d) 569 (H.C.J. per Catzman J.); Greslik v. Ontario Legal Aid Plan (1988), 1988 4842 (ON SCDC), 65 O.R. (2d) 110 (Div.Ct.).

Reasons to Doubt Correctness

[9] I agree with Whitaker J.'s assessment as to the appropriate standard of review being "palpable and overriding error." Although he found the Master's decision to be also correct, it was not necessary to do so. In considering this leave to appeal, I have applied the more onerous and deferential standard.

[10] Notwithstanding that standard of review, I am persuaded that there are reasons to doubt the correctness of the decision. Strathy J. decided in an earlier motion that IPEX was required to produce all of its material relevant to the mediation because IPEX had put the mediation at issue and ATP would have no effective way to mount a defence without understanding the evidence and arguments that caused IPEX to agree to pay the settlement amounts. What ATP is now requesting is the same type of information and documentation in the hands of the insurers, who were participants in the mediation right along with IPEX. The Master's order that IPEX disclose the names of the insurers and their representatives involved was based on the fact that they are persons who "had knowledge of transactions or occurrences" relevant to the proceeding. Given the nature of the proceeding and of insurance companies, it is a logical conclusion that those insurers and their representatives also have documents that are relevant.

[11] I see no relevance to the fact that this is not a subrogated claim. The insurers were acting on behalf of IPEX at the time and have relevant documents and information. I fail to see a basis for saying there is no requirement on IPEX to at least request these documents and information. The private insurance exception relates to whether ATP can claim a credit for sums recovered by IPEX from its insurers. That is not sought in this case. The information as to settlement amounts paid and why goes to the heart of the lawsuit itself, and is not related to any argument that IPEX's claim for damages is reduced by any amounts it received from its insurers. The reasons of the Master are sparse, but it would appear that an incorrect and irrelevant legal principle was applied in a situation to which it has no bearing. There is at least an argument to be made that this is a palpable and overriding error. There may be a distinction as between the mere production of relevant documents and providing information as to the reasoning of the insurers apart from what may be disclosed in documents. However, no such distinction was addressed in the material here or below, so I leave that to the Court hearing the appeal.

Issue of General Importance

[12] The decision under appeal appears to stand for the proposition that where the private insurance exception applies to damages that may be recoverable, there can be no basis for obtaining information from the insurer for any purpose. It appears to have been applied as a complete bar. This has implications for routine inquiries of third parties normally required of parties to the litigation. In the absence of any obligation on the defendant or plaintiff to make such a simple request of a person with relevant information and who has some relationship with the party, the only alternative would be to bring a motion to get disclosure and discovery from a third party. This is a far more onerous, time-consuming and costly process.

[13] In my view, this is an issue of general application and importance that goes beyond the interests of the parties to the litigation and has implications for the administration of justice.

Ruling

[14] I therefore find that the test for leave to appeal under Rule 62.02(4)(b) is met and leave to appeal to the Divisional Court is hereby granted. The issue on appeal is restricted to those aspects of "Refusal 9" that the Master determined did not need to be answered.

[15] Upon the consent of both parties, costs of this motion are fixed at $4000, payable to the successful party defendant forthwith.

MOLLOY J.

Date: April 22, 2015