CITATION: Central Sun Mining Inc. v. Vector Engineering Inc., 2015 ONSC 3320

COURT FILE NO.: CV-09-374510

DATE: 20150430

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Central Sun Mining Inc., Plaintiff

AND:

Vector Engineering Inc., Vector Colorado LLC, Vector Costa Rica, S.A., Vector Ingeniera Costa Rica, S.A., Steffen Robertson Kirsten/SRK Consulting, Steffen Roberson Kirsten (U.S.) Inc., SRK Field Services LLC, Golder Associates Inc., Golder Associates Ltd., Richard Frechette, A.V. Chance, Brent Johnson, Don West, Dave S. Hallman, Charles J. Khoury, Rob Dorey, Allan Breitenbach, Michael Henderson, Mark Smith, Marc Leduc, Matt Fuller, Sean Currie, and XVEI INC., Defendants

BEFORE: Pollak J.

COUNSEL: William D. Black and Christopher M. Hubbard, for the Plaintiff

John Pirie and Ahmed Shafey, for the Defendant Vector Engineering Inc.

James Jones, for the Defendants Old Vector

HEARD: February 4, 2015

ENDORSEMENT

[1] In this Action, the Plaintiff, Central Sun Mining Inc. ("Central Sun") seeks damages arising from a landslide at a gold mine in Costa Rica. It alleges negligence, negligent misrepresentation, and breach of contract by the Defendants.

[2] The Defendant, Vector Engineering Inc. ("New Vector"), and its parent company, Ausenco, claim they had no involvement with the services provided to the Plaintiff by the other Defendants.

[3] Central Sun relies on the American doctrine of "successor liability" against New Vector, arguing that it is jointly and severally liable for any damages caused by XVEI Inc. (“Old Vector”).

[4] New Vector claims it was not aware of any potential liability with respect to Central Sun's claim at the time it bought the assets of Old Vector. Old Vector denies this.

[5] New Vector asks for an order to bifurcate the Trial to avoid the cost of preparing a defence to the negligence claims against Old Vector, submitting that, if the Court refuses to apply the American successor liability doctrine, such costs would be incurred needlessly. New Vector submits that the factual and legal questions relevant to the successor liability issue are completely separate from the other issues in this action. It requests that there be a limited discovery on the issue of successor liability, followed by a short trial on the applicability of the doctrine. This, it submits, is the most efficient and just approach in the unique circumstances of this case and will not result in any prejudice to Central Sun.

[6] Central Sun objects to having the issue of successor liability dealt with first solely on the basis that doing so might result in cost savings for New Vector. It submits that such an approach would delay the litigation for the remaining 14 defendants for an estimated two to four years. Central Sun characterizes this as "litigation by instalments", which would result in multiplicity of proceedings. This, it submits, is contrary to the "basic right of a litigant to have all issues in dispute resolved in one trial", and to s. 138 of the Courts of Justice Act, R.S.O. 1990, c. C.43 which provides that "[a]s far as possible, multiplicity of legal proceedings shall be avoided".

[7] Old Vector attended the hearing, but did not make formal submissions.

[8] The parties are agreed that the principles set out in the case of Unwin v. Crothers (2005), 2005 23337 (ON SC), 76 O.R. (3d) 453, 140 A.C.W.S. (3d) 421 (S.C.), which summarizes the law and factors to be considered, are applicable. In that case, the Court held that the evidence to justify bifurcation must be "extraordinary” and that “the circumstances of the case must show that the preponderance of factors justify the court in departing from the general rule that all issues relating to litigation should be determined at the trial" (para. 79). The Court stated at paras. 78-81:

[78] Before considering this question, a review of the principles governing the court's discretion to order the bifurcation of proceedings is necessary. In Elcano, supra, the seminal case on a judge's inherent jurisdiction to bifurcate, the Court of Appeal held that the power to bifurcate a proceeding is a narrowly circumscribed power, is a departure from the basic right of litigants to have all issues in dispute in a proceeding resolved in one trial, and ought therefore to be exercised only in exceptional cases. [page 472] The moving party has the onus of demonstrating that there is a clear benefit to be gained, in terms of time and expense, from severing an issue from the trial. This burden is particularly high when the opposing party objects to the bifurcation. As Justice Morden stated for the court at p. 59 O.R.:

However, since it is a basic right of a litigant to have all issues in dispute resolved in one trial [the power to grant an order for bifurcation or split a trial] must be regarded as a narrowly circumscribed power ... The power should be exercised, in the interest of justice, only in the clearest cases. We would think that a court would give substantial weight to the fact that both parties consent to the splitting of a trial, if this be the case. On the other hand, a court should be slow to exercise the power if one of the parties ... objects to its exercise.

[79] The onus is on the party requesting bifurcation to establish that the case is one [in] which the court's discretion to bifurcate should be exercised. The evidence filed by a moving party in support of its motion for a bifurcation order must be extraordinary and the circumstances of the case must show that the preponderance of factors justify the court in departing from the general rule that all issues relating to litigation should be determined at the trial. Only if the court is satisfied on the balance of probabilities that severance will more likely than not result in the just, expeditious and least expensive determination of the proceedings on the merits, should the court order bifurcation (see Bourne v. Saunby, [1993] O.J. No. 2606, 23 C.P.C. (3d) 333 (Gen. Div.), at p. 344C.P.C.).

[80] The Supreme Court of Canada has expressly held that "litigation by installment" is to be avoided wherever possible, so as to minimize the risk of multiplicity of proceedings and multiplicity of appeals. The plaintiffs argue that the master's order offends this principle (see Garland v. Consumers' Gas Co., 2004 SCC 25, [2004] 1 S.C.R. 629, [2004] S.C.J. No. 629, at para. 90).

[81] The court considers the following primary factors when determining whether to bifurcate an action:

(a) Are the issues to be tried simple?

(b) Are the issues of liability clearly separate from the issues of damages?

(c) Can a better appreciation of the nature and extent of the injuries and consequential damage to the plaintiff be more easily reached by trying the issues together?

(d) If the issues of liability and damages are severed, are facilities in place which will permit the two separate actions to be [page473] tried expeditiously before one court or before two separate courts as the case may be?

(e) Is there a clear advantage to all parties to have liability tried first?

(f) Will there be a substantial savings of costs?

(g) Will splitting the case save time, or lead to unnecessary delay?

(h) Is it likely that the trial on liability will put an end to the action?

(i) Is the action so extraordinary and exceptional that there is good reason to depart from normal practice requiring that liability and damages be tried together?

See Bourne v. Saunby, supra, at para. 30.”

[9] The parties also agree that, to succeed on this motion, New Vector must prove that there would be a clear benefit of reducing time and expense. The burden would then shift to Central Sun to establish the existence of any real prejudice that would outweigh these benefits.

[10] New Vector has already brought an unsuccessful motion for summary judgment wherein it argued that, as the doctrine of successor liability has not been recognized in Canada, Central Sun’s claim against it had no realistic prospect of success: Central Sun Mining Inc. v. Vector Engineering Inc. 2011 ONSC 1439, 199 A.C.W.S. (3d) 663, per Frank J.

[11] New Vector proposes the matter proceed as follows:

• affidavits of documents and productions.

• examinations for discovery of New Vector and Old Vector with respect to the successor liability issue.

• the trial of the successor liability issue, followed by any appeals.

• examinations for discovery on the remaining issues.

• the trial of the non-successor liability issues, followed by any appeals.

[12] The parties agree that the issue on this motion is whether the circumstances of this case are so extraordinary that this Court should exercise its limited discretion to deviate from the usual and ordinary course of litigation and grant the exceptional remedy of bifurcation in accordance with the principles set out in the Unwin case.

[13] New Vector relies on the affidavit from a law clerk who refers to the affidavit evidence relied on by New Vector on its unsuccessful motion for summary judgment to dismiss Central Sun's Claim. No direct evidence has been introduced, making cross-examination effectively impossible.

[14] Central Sun submits that New Vector has not led evidence to establish that this is amongst "the clearest cases" warranting the exercise of the Court’s discretionary power. Further, it submits that the circumstances are not "so extraordinary and exceptional that there is good reason to depart from normal practice requiring that liability and damages be tried together". It submits that New Vector has not provided this Court with any substantive evidence. Any potential cost savings to New Vector are speculative.

[15] Further, Central Sun submits that its evidence establishes that it will most likely suffer prejudice as a result of bifurcation, which will outweigh any costs savings. Central Sun argues that New Vector has not, therefore, met its burden of establishing that the extraordinary remedy of bifurcation is appropriate in this case.

[16] To support its argument that this case is “exceptional”, New Vector relies on the following excerpts from Frank J.’s decision with respect to the application of the doctrine of successor liability. Justice Frank stated, at paras. 3, 43, 48, and 50:

[3] The issue is whether a trial is required to determine whether this defendant can be held liable to the plaintiff. The record before me does not allow for a proper determination of whether the claim can succeed against this defendant.

[43] In my view, the evidence in the record before me establishes that there is no continuity of ownership between Old Vector and Ausenco, New Vector's owner. The Ausenco shareholdings that Old Vector's shareholders received as part of consideration for the sale do not amount to sufficient interest in Ausenco to amount to a meaningful ownership interest. However, I cannot conclude on the basis of the decision of Sotomayor J. that this fact precludes a finding of successor liability.

[48] I have concluded that while the prospects of the doctrine of successor liability being applied by a Canadian court to the facts of this case may be limited, it is not impossible based on the facts which are known and the law as it has developed in the U.S. that the doctrine would be adopted and applied in this case.

[50] For a fair and just decision to be made as to whether that doctrine has application, there must be a detailed examination of the transaction and the circumstances leading up to its completion. At this stage, the evidence is inadequate with respect to one of the very things on which New Vector relies, that is Old Vector's ability to respond to this claim. It is inadequate with respect to the knowledge New Vector ought to have had of his claim at the time of its purchase of Old Vector and with respect to New Vector's knowledge, if any, or control over what Old Vector did with the proceeds of the sale.

Are the issues to be tried simple?

[17] New Vector submits that only an examination of the transaction between Old Vector and New Vector is needed to resolve the successor liability issue. The evidence will be limited to the transaction documents and witnesses. Central Sun, however, relies on Justice Frank’s finding at para. 51 that the issue is “novel, or at least unsettled” and cannot be fairly and justly decided without “a full factual record”. I do not agree with New Vector that the issues are “simple”.

Is the issue of successor liability separate from the other issues in the action?

[18] New Vector submits that the issue is separate. None of the same legal or factual questions will be relevant in the rest of the trial. It argues that the facts occurred “at a different time, in a different location, pursuant to a different agreement, and will involve different witnesses”. I accept that there is some merit to this submission.

Is this case so extraordinary and exceptional that it justifies departure from normal practice?

[19] New Vector submits that this Action is “exceptional” because of the application of a novel legal doctrine. It is submitted that it would be unfair to subject it to a full trial if Central Sun’s chances of success are limited because of the uncertainty of the applicability of the successor liability doctrine. New Vector relies on the claim made by Central Sun that Old Vector has limited insurance coverage, and submits that if it is held jointly and severally liable for Old Vector's liability in this action, it will have to pay for the damages awarded as against Old Vector as well. It should be noted that this was essentially the same argument (i.e. that the Claim has little chance of success) made in support of its unsuccessful motion for summary judgment.

[20] Central Sun submits that this successor liability issue arises out of its claim that New Vector is vicariously responsible for the liabilities of Old Vector. Claims of vicarious liability arise in many cases and do not justify bifurcation. If the Court orders bifurcation, it submits that such will open the floodgates to bifurcation orders in analogous cases where vicarious liability is claimed.

[21] In this action, Central Sun also claims that the corporate defendants are responsible for the negligence of their employees. Central Sun suggests that, if the Court allows New Vector’s motion for bifurcation, the Defendants, SRK and Old Vector, could also claim that they are entitled to a separate proceeding to determine whether they are vicariously liable for the negligence of their respective engineers. This result illustrates why the Court should only exercise its jurisdiction in “the clearest cases”.

[22] New Vector’s argument that this case is exceptional is based solely on the fact that the Plaintiff relies on the American doctrine of successor liability to establish New Vector’s liability. Having been unsuccessful on its motion for summary judgment to dismiss the Claim, it now asks the Court to exercise its discretion to order that this issue be adjudicated first, for essentially the same reason that was advanced in the motion for summary judgment (that the Plaintiff’s Claim has little chance of success). I do not accept New Vector’s submission that this action is “extraordinary and exceptional”.

Is there a clear advantage to all parties?

[23] New Vector submits that determining this issue in advance will clarify whether its claims will be defended by Old Vector alone, or whether New Vector will also defend. This determination would also identify the defendants who would be liable. Further, if Central Sun is unsuccessful on the successor liability issue at trial, it would face a significantly increased cost award than if that issue had been determined earlier, as New Vector will not have had to prepare a defence on the claims against Old Vector.

[24] New Vector argues that there will be substantial cost savings. If New Vector is successful, significant legal fees will be avoided. If Central Sun is successful, Old Vector and New Vector will no longer be adverse in interest and will not need to prepare potentially conflicting defences.

[25] Central Sun argues that bifurcation will not provide "a clear advantage to all parties". It may result in savings for New Vector, but there is no evidence that these savings would be "substantial". As well, there is no evidence that any such increased costs could not be compensated for by a costs award. If Central Sun is successful on the successor liability issue, there will be no cost savings.

[26] Further, Central Sun claims that even if New Vector is successful on the issue, bifurcation will result in multiplicity of proceedings, increased costs, and significant delay for Central Sun and the remaining 14 defendants. There will be many examinations for discovery and two trials with the possibility of many appeals. This can significantly increase litigation costs.

[27] Although there will clearly be costs savings for New Vector, I am not persuaded that the other parties will also have these cost savings. I am not persuaded that there is a clear advantage to any party other than New Vector.

Will the overall timeframe of the proceeding be unduly lengthened?

[28] New Vector submits that there will be no delay. The discovery process for the successor liability issue will shorten the discovery process for the rest of the claims. If the issue is decided in New Vector’s favour, it will no longer be party to the action, which will shorten the trial.

[29] Central Sun submits that there will be delay resulting in its prejudice as its evidence will “grow stale and may be lost”. Their two leading expert engineers are 85 and over 70 years old. It is argued that one or both of these experts may not be available to testify if the trial is delayed. I find that the procedure suggested by New Vector will result in litigation delay. While New Vector may benefit from having the successor liability issue determined first, it is not in my view to the benefit of other parties who may be prejudiced by litigation delay.

[30] The issue on this motion is whether I should exercise my discretion. The jurisprudence relied on by the parties provides guidance on which factors the Court should consider in arriving at this decision.

[31] New Vector’s evidence is that of a law clerk who identifies and attaches the affidavits that were relied on by New Vector in support of its unsuccessful motion for a dismissal of Central Sun's claim. These affidavits, which are insulated from cross-examination on this motion, do not provide evidence on any of the relevant factors I have discussed above.

[32] New Vector has not supported its submissions on the relevant factors to be considered by this Court. Central Sun has, however, provided evidence with respect to prejudice which may be caused by any delay as a result of bifurcation which cannot be compensated for by a costs award.

[33] After reviewing all the evidence and submissions in support of this motion and after considering all of the factors discussed above, I conclude that the relief requested by New Vector is not appropriate in this case. I cannot characterize this as "the clearest case" to grant the relief requested or find that the “preponderance of factors” considered above favour New Vector.

[34] New Vector’s motion is therefore dismissed. The Plaintiff is accordingly entitled to a cost award. The parties have agreed on costs on a partial indemnity basis. If the parties are unable to agree on a final cost award, they may make brief written submissions as follows:

Central Sun’s and Old Vector’s costs submissions must be delivered by 12:00 p.m. on May 11, 2015; and New Vector’s costs submissions must be delivered by 12:00 p.m. on May 19, 2015. In accordance with what the Rules provide, the submissions should not exceed three pages in length.

Pollak J.

Date: April 30, 2015