Court File and Parties

Court File No.: CV-12-453450-00A1
Date: 20140317

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: KWH PIPE (CANADA) LTD., Plaintiff

AND:

CORIX WATER PRODUCTS (EAST) INC., Respondent

BEFORE: CHIAPPETTA J.

COUNSEL:
James Tausendfreund, for the Plaintiff
Kara L. Denny, for the Respondent

HEARD: March 4, 2014

ENDORSEMENT

Overview

[1] KWH Pipe (Canada) Ltd. (“KWH”), a third party defendant, brings this motion for summary judgment to dismiss the third party claim of Corix Water Products (East) Inc., Corix Water Services Inc., and Corix Water Products (GO) Inc. (collectively “Corix”), the plaintiff in the third party action and defendant in the main action. All the litigation arises out of a leak in a section of high density polyethylene (“HDPE”) pipe that occurred on or about January 27, 2011.

The Parties

[2] The Regional Municipality of York, who is not a party to the action, contracted with North Rock Group Ltd. (“North Rock”) as the general contractor, to install a water main underground in or around King City (“King City Project”).

[3] North Rock subcontracted with Earth Boring Company Limited (“Earth Boring”) for the drilling of the underground tunnels, or bores, to house the HDPE pipe and to install the water main.

[4] Earth Boring subcontracted with Corix to provide the HDPE pipe and to fuse the pieces of the HDPE pipe into the longer length(s) required for the water main.

[5] Corix contracted with KWH, the manufacturer of the HDPE pipe, to supply Corix with HDPE pipe for the King City Project.

[6] After the pipe leak, Earth Boring commenced a negligence action against Corix. Corix subsequently commenced a third party claim against North Rock and KWH. KWH now moves to have the third party claim against it dismissed.

Background

[7] On June 15, 2010, Corix contracted with KWH to supply Corix with 2,950 feet of HDPE pipe, to be shipped in 54 foot lengths, for the total price of $274,119.30 for the King City Project. KWH’s individual plastic pipe pieces typically have to be fused together by its customers to create a longer pipe, or a “pipe string”. The technical term for the procedure is call “butt fusion”.

[8] During the butt fusion process, the ends of two pipe pieces are brought together and clamped into a fusion machine. The ends are trimmed with a metal blade so that the ends are relatively aligned and flat. Once the pipe ends have been made relatively level and the inside and outside of the pipes have been properly cleaned of plastic shavings and ribbons, the two ends of the pipe are then compressed together against a heater plate. The heater plate causes a melt “bead” to form around the circumference of the two pipe ends, thereby joining or “fusing” the pipe ends together after cooling, and a pipe string is created.

[9] KWH produces a “butt fusion guide” for its customers. In the butt fusion guide there is a warning that a fusion technician must “inspect pipe lengths and fittings for unacceptable custom gouges, deep scratches or other deleterious defects. Damaged products should not be used”.

[10] In November 2010, after North Rock completed its underground drilling, Corix fused together the individual pipe pieces and Earth Boring performed the “pull through” installation of the pipe string.

[11] On or about January 27, 2011, a leak from the installed underground pipe became apparent; water was coming up between the curb and the asphalt on King Road. It took several months to find the precise location of the leak, which was ultimately identified in mid-April 2011. Eventually, the damaged portion of pipe (“the subject pipe”) was replaced. The subject pipe was approximately 20 to 30 feet underground and a spray of water was shooting out of the pipe. The spray was coming from a horizontal crack in the pipe, along the length of the pipe, near a fusion weld.

[12] In May 2012, Earth Boring issued a Statement of Claim naming Corix as defendant. Earth Boring alleges that Corix was negligent because Corix failed to notice the subject pipe before fusing it and for performing the fusion in a sub-standard matter. Earth Boring is seeking damages of $718,749.

[13] In July 2012, Corix delivered its Statement of Defence. Corix denies any negligence on its part. At para. 21 of the Statement of Defence, Corix pleads that if the subject pipe was fractured before their performance of fusion services, the fracture was not apparent or detectable upon inspection.

[14] In October 2012, Corix issued a Third Party Claim against North Rock and KWH. The allegation Corix made at para. 21 of its Statement of Defence is repeated in para. 14 of the Third Party Claim. Corix’s allegations as against KWH are set out at para. 15 of the Third Party Claim as follows:

1. KWH employed incompetent personnel;

2. KWH designed and manufactured the HDPE pipe in a manner it knew or should have known could result in product deficiencies and/or weaknesses;

3. KWH designed and manufactured the HDPE pipe with inadequate, insufficient, and improper materials that it knew or should have known were not suitable for the intended purpose;

4. KWH failed to test and inspect the HDPE pipe adequately or at all to ensure its quality and safety;

5. KWH failed to ensure that the HDPE pipe would be reasonably fit for its intended purpose;

6. KWH sold and delivered HDPE pipe it knew or should have known was defective;

7. KWH sold and delivered HDPE pipe it knew or should have known was damaged;

8. KWH sold and delivered HDPE pipe it knew or should have known was not of merchantable quality; and

9. KWH did not take reasonable care in loading and/or transporting the HDPE pipe resulting in damage to the pipe.

Preliminary Issues

[15] Before the motion, KWH raised three preliminary evidentiary issues.

[16] First, KWH submits that paras. 20, 26, and the last 13 words of para. 36 of Frank Kosturik’s affidavit, sworn January 15, 2014, should be disregarded for referring to the examination of discovery transcript of Corix’s own representative. Frank Kosturik is counsel retained on behalf of Corix. I agree with KWH. The above paragraphs and words in Mr. Kosturik’s affidavit violates Rule 39.04(2) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, and must be disregarded.

[17] Second, KWH submits that an adverse inference should be drawn against Corix pursuant to Rule 20.02(1) of the Rules for Corix’s failure to provide evidence from a representative of Corix having personal knowledge of the contested facts. I disagree. A representative of Corix has admitted under oath that Corix has no evidence of which party is to blame for dropping the subject pipe, including KMH. Causation of the fracture to the subject pipe is the central issue on this motion. Their failure to submit evidence from a representative is a symptom of their peremptory admission and does not, in my view, warrant an adverse inference.

[18] Third, KWH submits that the report of Nigel Peach, dated January 7, 2014, attached to his affidavit sworn January 20, 2014, is inadmissible for failure to comply with Rule 53.03 of the Rules. I agree that the report is deficient in that it lacks a description of the instructions provided to Mr. Peach in relation to the proceeding (Rule 53.03(2.1)(3)), the assumptions that form the basis of the report (Rule 53.03(2.1)(6)(i)), and a list of the documents relied on by Mr. Peach to prepare his report (Rule 53.03(2.1)(6)(iii)).

[19] However, in the circumstances of this motion, the non-compliance as noted is not sufficient to render the report inadmissible. Mr. Peach offered direct evidence by his own affidavit. Mr. Peach was available to KWH for cross-examination and KWH chose not to cross-examine him on his affidavit, or his report or his resumé, which are attached as exhibits to his affidavit. KWH makes no objections to Mr. Peach’s qualifications. This was not the case before Mr. Justice Spence in Markowa v. Adamson Cosmetic Facial Surgery Inc., 2012 ONSC 1012, at paras. 81-82.

[20] While the report will need to be revised before trial to ensure compliance with Rule 53.03, the revisions will be non-substantive. For the purposes of this motion, therefore, I conclude that the report of Mr. Peach, dated January 7, 2014, is admissible.

Analysis

[21] In Hryniak v. Mauldin, 2014 SCC 7, the Supreme Court of Canada recently set out a roadmap to be followed in adjudicating summary judgment motions, at para. 66:

On a motion for summary judgment under Rule 20.04, the judge should first determine if there is a genuine issue requiring trial based only on the evidence before her, without using the new fact-finding powers. There will be no genuine issue requiring a trial if the summary judgment process provides her with the evidence required to fairly and justly adjudicate the dispute and is a timely, affordable and proportionate procedure, under Rule 20.04(2)(a). If there appears to be a genuine issue requiring a trial, she should then determine if the need for a trial can be avoided by using the new powers under Rules 20.04(2.1) and (2.2). She may, at her discretion, use those powers, provided that their use is not against the interest of justice. Their use will not be against the interest of justice if they will lead to a fair and just result and will serve the goals of timeliness, affordability and proportionality in light of the litigation as a whole.

[22] I must consider first, then, based on the evidence before me, if there is a genuine issue requiring a trial. As the moving party, KWH bears the onus of establishing that there is no genuine issue requiring a trial.

[23] The parties agree that the record before me indicates no genuine issue requiring a trial as it pertains to the following claims made by Corix against KWH:

1. KWH employed incompetent personnel;

2. KWH designed and manufactured the HDPE pipe in a manner it knew or should have known could result in product deficiencies and/or weaknesses;

3. KWH designed and manufactured the HDPE pipe with inadequate, insufficient, and improper materials that it knew or should have known were not suitable for the intended purpose;

4. KWH failed to test and inspect the HDPE pipe adequately or at all to ensure its quality and safety;

5. KWH failed to ensure that the HDPE pipe would be reasonably fit for its intended purpose; and

6. KWH sold and delivered HDPE pipe it knew or should have known was defective.

[24] Partial summary judgment is therefore granted to dismiss Corix’s claims of negligence against KWH particularized above.

[25] The remaining claims of negligence by Corix against KWH relate directly to whether KWH caused the fracture to the subject pipe. They are as follows:

7. KWH delivered HDPE pipe it knew or should have known was damaged;

8. KWH did not take reasonable care in loading and/or transporting the HDPE pipe resulting in damage to the pipe; and

9. KWH sold and delivered HDPE pipe it knew or should have known was not of merchantable quality.

[26] The question therefore is whether KWH caused the subject pipe to be fractured while it was in its care, custody, and control is a genuine issue requiring a trial.

[27] KWH submits that the record before me is devoid of anything beyond mere speculation that the pipe was fractured while in the care of KWH. To this end, it is submitted that there is no genuine issue requiring a trial as it pertains to the third party claim against KWH.

[28] In my view, this approach is far too simplistic and ignores a broader issue that permeates both the main action and the third party action; namely, which of the three parties who admit they had care and control of the HDPE pipe caused the subject pipe to be dropped and fractured.

[29] Although there is no evidence before me directly linking causation for the fracture of the subject pipe to KWH, similarly, however, there is no evidence linking causation to any of the three parties involved in the subject litigation that had admitted opportunity to cause the fracture, including KWH.

[30] While the liability of Earth Boring and North Rock is not directly before me for consideration, I cannot simply ignore that granting summary judgment in favour of KWH would effectively render a finding of fact that of the three parties involved in the subject litigation who had admitted care and control of the subject pipe, KWH did not cause the subject pipe to be dropped and fractured. In my view, this would not be a fair and just resolution of the issue. I make this conclusion in part for the following reasons:

1. The fracture to the subject pipe occurred before Corix fused the subject pipe to the pipe string. On April 19, 2011, Brian Jack of Corix told Ted Taylor of KWH that he believed the fracture occurred as a result of the subject pipe being dropped on pavement in cold temperatures. On April 20, 2011, Ted Taylor of KWH concluded that the crack was most likely present in the pipe wall before the fusion was performed by Corix.

2. In or around August 2011, all of the parties (Earth Boring, Corix, North Rock and KWH) agreed to retain Jana Laboratories to examine the subject pipe and to prepare an expert report regarding the cause of the leak. Representatives of each of the parties were present at Jana Laboratories while Jana performed destructive testing on the subject pipe. In the final Jana report of January 11, 2012, it was concluded that the pipe failure was a fast fracture that occurred before fusion and installation.

3. An issue in assessing Corix’s liability, if any, will be whether Corix’s fusion technician ought to have recognized the fracture on the subject pipe before fusion and then ought to have declined to fuse the damaged subject pipe to the pipe string. Mr. Peach’s report states that the fracture may not have been detectable prior to fusion.

4. There will remain a live issue of liability, contributory or otherwise, against the party who caused the fracture to the subject pipe in the first place. The only evidence on the record before me is that the fracture was caused by dropping the subject pipe in cold temperatures. The subject pipe was handled by Earth Boring, North Rock, and KWH at different times between September and November 2010. Each party denies dropping a piece of HDPE pipe.

5. On behalf of Earth Boring, at his examination for discovery, Gene Woodbridge advised that if a piece of HDPE pipe had been dropped on the King City Project jobsite, it would have been inspected for damage and the incident would have been reported to the site foreman and any damaged pipe would be removed from the jobsite. Mr. Woodbridge denied that any pieces of HDPE pipe were dropped on the King City Project jobsite. Once the HDPE pipe arrived at the King City Project jobsite, it was unloaded by Earth Boring using a John Deere 624K loader with an attachment similar to a forklift. Earth Boring then moved the lengths of pipe to several different staging areas where they were stored alongside the road until they were ready to be fused. Earth Boring employees were also responsible for lifting and inserting the HDPE pipe into the equipment used by Corix to fuse the separate lengths together.

6. On behalf of North Rock, at his examination for discovery, George DiPede denied that they had received any reports of HDPE pipe being dropped at the King City Project jobsite. He advised that had such an incident been witnessed or caused damage, North Rock would have likely been charged by York Region. North Rock was responsible for assisting Earth Boring with the handling and placement of the pipe before installation. The HDPE pipe was stored on the King City Project jobsite, which was under the care and control of North Rock as general contractor.

7. On behalf of KWH, at his examination for discovery, Ted Taylor stated that KWH used forklifts to move HDPE pipe around their facility in Huntsville, Ontario and used forklifts to load HDPE pipe onto trucks for transport. Generally speaking, he stated, pipe damage had been known to occur at their facilities when pipe was being relocated and/or loaded onto trucks for transportation. He advised that KWH relies upon their forklift operators and members of their shipping department to identify damaged pipes and remove them from inventory. KWH manufactured the approximately 63 HDPE pipe pieces for the King City Project between July 4 and July 24, 2010. The first of seven shipments was made on July 27, 2010. In each shipment, the pieces were shipped on a truck from KWH’s plant in Huntsville, Ontario, in a 3X3 fashion by a third party shipper. The last shipment was made on September 27, 2010. A replacement piece was shipped from KWH’s facility on or about October 21, 2010.

[31] The subject pipe was dropped and fractured prior to fusion. Each party with admitted opportunity to handle the HDPE pipe before it was fused by Corix has denied that the subject pipe was dropped or fractured while in their respective care, custody, and control. There is no evidence before me establishing causation.

[32] While I agree that the scope of the genuine issue requiring a trial is not restricted to the third party claim against KMH, the respective degree of fault, if any, of either Earth Boring, North Rock, or KWH is so intimately interwoven with the remaining particulars of negligence alleged against KWH that it cannot be said there is no genuine issue requiring a trial of the third party claim.

[33] I must now therefore determine if the need for a trial can be avoided by using the new fact-finding powers under Rules 20.04(2.1) and (2.2). Rule 20.04(2.1) permits me, in determining whether there is a genuine issue requiring a trial, to weigh the evidence, evaluate the credibility of a deponent, and draw reasonable inferences from the evidence, unless it is in the interest of justice for such powers to be exercised only at trial. Rule 20.04(2.2) permits me, for the purpose of exercising the powers of Rule 20.04(2.1), to order that oral evidence be presented by one or more parties with or without time limits.

[34] In my view, the use of Rules 20.04(2.1) and (2.2) in this matter would not lend itself to a just and fair resolution. The evidence before me is deficient. In order to properly weigh evidence, draw inferences, and determine on the balance of probabilities which party is properly to bear liability for dropping the subject pipe, a detailed account of the specific handling of the HDPE pipe is required by those representatives of North Rock and Earth Boring on site at the King City Project, as well as representatives of KWH involved in moving and loading the HDPE pipe at their manufacturing facility in Huntsville, Ontario. No such evidence is on the record before me.

[35] Similarly, ordered oral evidence on this issue will not serve the goals of timeliness, affordability, and proportionality in light of the entire litigation. The individuals from Earth Boring, North Rock, and KWH with specific knowledge of their respective handling of the HDPE pipe have yet to be identified and their intended evidence yet to be disclosed. Representatives of KWH will nonetheless be summoned to give evidence at trial of the main action independent of the resolution for the third party claim as the trier of fact will require evidence of the entire chain of handling of the HDPE pipe from loading to fusion, to properly assess causation for the fracture. The most timely and affordable way forward would be to have the main action and the third party claim heard together.

[36] Finally, KWH argues that there is a fourth party that had opportunity to cause damage and has not been named as a party to the litigation or pursued by Corix. Westport Transport transported the HDPE pipe in 1500 pound bundles of three for approximately two and a half hours from KWH’s plant to the project site. This may be relevant evidence of consideration for the trier of fact who will ultimately determine liability for the fracture. For the purpose of this motion, however, it adds nothing to the assessments herein.

[37] The subject pipe was somehow dropped and caused it to fracture. Three litigant parties have admitted opportunity and denied causation. The trier of fact will need to take a robust and pragmatic approach to determine if Corix has established that one of Earth Bound, North Rock, or KWH caused the fracture and, if so, which one. This assessment will require detailed evidence from those who handled the HDPE pipe, assessments of credibility, drawing of inferences, and application of common sense and logical reasoning. Rendering a finding in the context of a summary judgment motion restricted to the third party claim against one of those parties, KWH, would not, in my view, be in the interest of justice.

Disposition

[38] For reasons noted above, partial summary judgment is granted to dismiss Corix’s third party claim in negligence as against KWH particularized in the following paragraphs of the Third Party Claim:

1. 15(a)

2. 15(b)

3. 15(c)

4. 15(d)

5. 15(e)

6. 15(f) (as it pertains to defective).

[39] Corix’s third party claim in negligence as against KWH particularized in the following paragraphs of the Third Party Claim is not dismissed:

7. 15(f) (as it pertains to damaged)

8. 15(g)

9. 15(h).

Remain Seized

[40] In my view, the purpose behind the Supreme Court’s direction at para. 78 of Hryniak to remain seized of the matter when a motion for summary judgment is dismissed, in the absence of compelling reasons to the contrary, is not well served in these circumstances.

[41] Discoveries have been completed. The trial record for the main action has been filed. The trial record for the third party action will be filed imminently. The parties intend to have the actions tried together. The insight I gained from hearing this summary judgment motion pertaining to the third party claim will not save judicial time or facilitate access to justice because the issues of the main action are broader than the issues that were heard on this motion.

[42] I am therefore not seized of the third party action or the main action.

Costs

[43] The parties are encouraged to agree on an appropriate costs award for this motion. Should they be unable to agree, I will accept written submission of not more than 3 pages, first from Corix within 30 days from the date of these reasons, and from KMH 10 days thereafter.

CHIAPPETTA J.

Date: March 17, 2014