ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 3249-11

DATE: 2014/07/09

B E T W E E N:

NOVA CHEMICALS (CANADA) LTD., NOVA CHEMICALS CORPORATION AND NOVA CHEMICALS INC.

John Downing, for the Plaintiffs

Plaintiffs

• and -

CEDA-REACTOR LTD. AND CEDA INTERNATIONAL CORPORATION

Ryan Morris and Kristian Ali for the Defendants

Defendants

HEARD: December 2, 2013

LEACH, J.

[1] Before me are two motions, (one brought by the “NOVA” plaintiffs and one brought by the “CEDA” defendants), relating to disputed documentary production and disclosure.

Background and Nature of Dispute

[2] The motions have been brought in the wider context of substantial litigation stemming from an unexpected shutdown of the plaintiffs’ petrochemical facility in Corunna, (near Sarnia, Ontario), in January and February of 2009.

[3] The shutdown is said to have been caused by repair work done at the facility, shortly before the shutdown, by employees of one or both defendants pursuant to a long term service agreement.

[4] In particular, the plaintiffs say that a leak in a steam condensate pipe was addressed improperly by the defendants during the construction of an enclosure, (surrounding the leaking area of the pipe), into which excessive sealing material was injected. The sealing material allegedly then made its way into other areas of the steam piping system, resulting in accumulations and blockages that brought about decreases in pressure and flow. That in turn is said to have triggered shut down of several high pressure boilers, and consequential shut down and restart of compressor trains, causing further damage and more widespread interruption of the facility’s operations and production.

[5] In the result, the plaintiffs initiated this litigation in January of 2011. Their prayer for relief includes a claim for $11.9 in damages.

[6] In essence, the defendants deny responsibility for the facility shutdown and any corresponding damages, which they attribute to alleged mismanagement, imprudence and negligence on the part of the plaintiffs. Particulars set forth in the statement of defence, (formally delivered in June of 2012), include allegations that the plaintiffs failed to follow the defendants’ recommendations and/or applicable safety standards and procedures, improperly ceased to use required filters, engaged in poor maintenance and cleaning practices, and/or engaged in other operational and training errors.

[7] In the course of subsequent preliminary sparring between counsel, (which included requests for inspection and associated allegations of spoliation, initial failure to agree on scheduling and a Discovery Plan, disputes about who would be produced by the defendants for oral discovery examinations, and the defendants’ initial refusal to produce insurance documentation), the plaintiffs took issue with the extent of initial documentary disclosure offered by the defendants.

[8] In that regard, plaintiff counsel asserted that the defendants’ initial production of 33 documents was clearly deficient, and reflected less than adequate efforts by the defendants to ensure proper compliance with production obligations.

[9] In support of that position, plaintiff counsel highlighted such matters as the defendants’ failure to mention a single external or internal email, (despite indications that various individuals employed by the defendants may have communicated in that manner), and the defendants’ failure to produce insurance documentation.

[10] Of more immediate relevance to the present motions was plaintiff counsel’s reliance on the defendants’ failure to mention or address, in their unsworn affidavit of documents, a number of known items, emanating from the defendants, which already had been identified and included in the plaintiffs’ formal productions. This included external correspondence generated by the defendants’ in-house counsel, four specified written statements from individuals employed and/or formerly employed by the defendants, material data safety sheet information, and other documents. In circumstances outlined in more detail below, the material in question had been supplied to the plaintiffs many years earlier, (shortly after shutdown of the plaintiffs’ facility in January-February of 2009), by individuals employed by the defendants.

[11] Defence counsel then responded with vehement assertions, (disputed with equal vehemence by plaintiff counsel), that material previously provided to the plaintiffs remained subject to claims of privilege by the defendants. In particular, it was said that, despite any possible “inadvertent and unintentional” disclosure, there had been no waiver of privilege in relation to such material.

[12] The resulting impasse between the parties led to the motions currently before me.

[13] The plaintiffs were first off the mark, moving for an order directing implementation of a discovery plan, production of a specified employee of the defendants for oral discovery examination, and the defendants’ delivery of a sworn affidavit of documents that would confirm formal production of specified documentation, including:

a. correspondence exchanged between the parties’ respective in-house counsel;

b. the defendants’ insurance documentation;

c. a failure investigation report prepared by the defendants and entitled “Incident Bulletin”;

d. any witness statements of employees or former employees of the defendants with respect to issues raised in the action, (including the known written statements of Dan Rankin, Drue Ritchie, Ted Bailey and Pedro Morey);

e. a specified material data safety sheet;

f. emails relevant to issues raised in the action; and

g. a specified chronology prepared by the defendants, dated January 27, 2009.

[14] In response, the defendants moved for a declaration upholding their claims of solicitor-client and/or litigation privilege. The defendants also requested consequential orders directing the plaintiffs to destroy all copies of any such privileged documentation, and “restraining the plaintiffs from using information contained in or derived from the Privileged Documents in the course of this action”. (To underscore that request, the defendants also sought an order compelling the plaintiffs to serve a revised affidavit of documents omitting any reference to the documents in question.)

[15] By the time the motions were argued before me, the parties commendably had been able to resolve a number of their production and discovery disputes.

[16] However, no such agreement was possible concerning the “Incident Bulletin” and four specified written statements mentioned above.

[17] The plaintiffs maintain their position that those documents were not and are not subject to any valid claim of privilege, and that any possible privilege in that regard was deliberately and voluntarily waived by the defendants long ago.

[18] The defendants maintain that those documents were and are subject to a claim of solicitor-client and/or litigation privilege that has never been waived, and that their disclosure in fact was inadvertent, unintentional and unauthorized.

Circumstances of Disclosure

[19] Before turning to evidence relied upon by the defendants as to what should and should not have happened in terms of disclosure, (addressed by the affidavit evidence tendered by the defendants), I think it helpful to start with consideration of what actually occurred in that regard, and the context in which direct communications between the parties were taking place.

[20] Extensive evidence of such matters is found in the affidavit of Edward Cooper, (a Regional Maintenance Services Leader employed by the first named plaintiff), sworn August 8, 2013, and the documents attached as exhibits thereto.

[21] The defendants did not cross-examine Mr Cooper on his affidavit, and in my view, except in relation to important matters concerning the timing and purpose of document creation, (to which I will return in more detail during my analysis below), the evidence tendered by the plaintiffs was not really contradicted or challenged in any material way.

[22] Its more relevant aspects can be summarized in the following chronology:

• The underlying “Miscellaneous Work Agreement” went into effect on February 1, 2007.

• On January 7, 2009, the plaintiffs telephoned Dan Rankin, (employed by the defendants in their Sarnia office), to request repairs in relation to a defective steam condensate leak pipe. Mr Rankin dispatched two of the defendants’ technicians, (Drue Ritchie and Pedro Morey), to attend at the plaintiffs’ facility. Investigation and repair work, involving construction of a “Custom T Box”, was followed by injection of sealant on January 21, 2009.

• The unplanned shutdown of the plaintiffs’ facility, (which would last for approximately four weeks), began on Friday, January 23, 2009. According to Mr Rankin’s written statement, he was contacted that afternoon by Mark Harrison, (employed by the plaintiffs at their facility), who reported blockages and requested further information concerning the sealant injected by the defendants’ technicians.

• On Saturday, January 24, 2009, Mr Rankin was contacted again by Mr Harrison, who indicated that the blockage material was the sealant injected by the defendants’ technicians. Mr Rankin’s statement indicates that he attended at the plaintiffs’ facility that morning, looked at the blockage material, and it appeared to be “E.S. 804”, (a liquid rubber sealant apparently used in the repair work). Shortly after noon that day, Mr Rankin faxed Mr Cooper a copy of the Material Safety Data Sheet relating to that product.

• According to the written statement prepared by Ted Bailey, (a Division Manager employed by the defendants in their “Specialty Services and Emergency Response Services” in Sarnia), Mr Rankin called him between 7:30am and 8:00am on the morning of Monday, January 26, 2009, to inform Mr Bailey about the problem at the plaintiffs’ facility, and its possible connection to the sealant injected into the enclosure installed by the defendants. At approximately 8:45am that same morning, Mr Bailey then spoke by telephone with Mr Harrison at the plaintiffs’ facility, and was advised that the blocking agent, (being sent for analysis), was either sealant injected by the defendants or another product developed by the plaintiffs. At 1:17pm that afternoon, Mr Bailey then followed up by sending an email to Mr Harrison. The email was copied by Mr Bailey to two other individuals employed by the defendants; i.e., Dan Rankin and Ross Potvin, (the Director of the defendants’ Canadian operations relating to “Specialty Services and Emergency Response Services, who was based in Edmonton). The substantive text of the email reads as follows: “I would like to take this opportunity to inform you that we at CEDA are undertaking our own internal investigation into the design, manufacture and installation of the Custom T Box above EA2205B in the Olefins Cold Side. Upon completion, we will ensure that a copy is forwarded to you. In the interim should you have any questions at all, please do not hesitate to contact me immediately.” [Emphasis added.]

(continues exactly as in the source decision through paragraphs [23]–[73], unchanged)

“Justice I. F. Leach”

Justice I. F. Leach

Released: July 9, 2014