Candoo Excavating Services Ltd. et al. v. Ipex Inc. et al., 2015 ONSC 809

COURT FILE NO.: CV-14-496872-00A1

DATE: 20150204

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Candoo Excavating Services Ltd. and the Guarantee Company of North America, Plaintiffs

AND:

Ipex Inc. and Wolseley Canada Inc.; Defendants

MPE Engineering Ltd. Third Party,

BEFORE: Sean F. Dunphy, J

COUNSEL: Robert Kirkman, for the Third Party MPE Engineering Ltd.

Stephen Libin, for Defendant Ipex Inc.

Douglas Harrison and

Sinziana Hennia, for the Defendant Wolseley Canada Inc.

HEARD: February 3, 2015

ENDORSEMENT

[1] The Third Party MPE Engineering Ltd. seeks an order staying the claim as against it on the basis of lack of jurisdiction over the subject matter of the dispute or alternatively forum non conveniens. The case raises questions regarding the application of the criteria laid out by the Supreme Court of Canada for this court assuming jurisdiction over non-resident parties in the case of Club Resorts Ltd. v Van Breda 2012 SCC 17, [2012] 1 S.C.R. 572 (“Van Breda”).

[2] While the rules for service ex juris may be broad and permissive, the Supreme Court in Van Breda has ruled that the primary task of the court in assessing whether jurisdiction is properly asserted is to examine whether there exists a real and substantial connection between the subject matter of the litigation and proposed forum.

[3] The facts set forth in the pleadings are simple. In addition to the pleadings, the court had before it the affidavit of Mr. Ron Hust, the CEO of the Third Party MPE Engineering Ltd. (“MPE”). The following is a summary of the facts as pleaded together with the limited supplemental evidence derived from Mr. Hust’s affidavit.

[4] Newell Regional Services Corporation (“Newell”) in Alberta undertook an infrastructure project involving the construction of a 52km potable water pipeline. Newell engaged the Third Party, MPE Engineering Ltd. (“MPE”). The scope of MPE’s retainer was set forth in a letter dated January 21, 2008 (Exhibit “A” to Mr. Hust’s affidavit) and included:

a. “the detailed design,

b. preparation of plans and specifications,

c. preparation of tender notices,

d. review tenders received and summarize,

e. project management services,

f. construction inspection services,

g. construction surveys as required,

h. and preparation of record drawings and documentation.”

[5] Newell also entered into a contract with the plaintiff Candoo Excavating Services Ltd. (“Candoo”) for the excavation and installation work related to the pipeline project. The plaintiff The Guarantee Company of North America (“Guarantee”) provided a performance bond to Newell in relation to Candoo’s work.

[6] In carrying out its contract, Candoo acquired certain pipes and gaskets from the defendant Wolseley Canada Inc. (“Wolseley”) as distributor for the defendant Ipex Inc. (“Ipex”). The project was certified substantially complete in January 2012 but certain leaks were soon detected (the timing of discovery – be it late 2011 or early 2012 - is at issue per the pleadings but is not relevant to this motion). In 2012, Guarantee became obliged to step in and perform on its bond to repair the leaks that Candoo had not successfully repaired.

[7] The plaintiffs in their Statement of Claim have sued Wolseley for breach of contractual warranties relating to the pipe and gaskets and plead the Sale of Goods Act, R.S.O. 19990, S.1, as amended. The plaintiff also pleads negligence and alleges the defendants both knew or ought to have known of the alleged defects in the pipe and gaskets, failed to warn and “failed to manufacture the Pipe and Gaskets to the standard intended by Newell, Candoo and the Contract” (paragraphs 26(h) and 28(d) of the Statement of Claim). The costs of repair and completion of the project are claimed as damages.

[8] Wolseley has delivered a Statement of Defence and Crossclaim as well as a Third Party Claim against MPE. Wolseley pleads that its registered business office is in Burlington Ontario; that it relied upon the Spec Book and Design prepared by MPE in preparing its quotes and in all materials sold to Candoo and that it consulted with MPE directly in regards to various change orders in relation to the project. It alleges that MPE owed a duty of care to Wolseley in relation to the design of the project as well as in carrying out its role in overseeing construction, testing of materials and providing approvals.

[9] Mr. Hust’s affidavit notes that MPE, Candoo and Newell are all located in Alberta and the project was also physically located in Alberta. He claims that all of the services provided by MPE under its agreement with Newell were provided under an agreement made in Alberta (the affidavit is however silent as to where such services were provided). All of the engineers utilized by MPE on the project reside in Alberta or British Columbia. MPE has never carried on business in Ontario and is not registered as a professional engineer in Ontario. MPE denies having any contract with Wolseley relating to the project (none is alleged in the Third Party Claim). Mr. Hurst’s affidavit was not the object of cross-examination and is thus unchallenged.

[10] In oral argument, some issue was taken to the sufficiency of Wolseley’s pleading in relation to the location of its corporate office. He noted that while the corporate office might be in Ontario, there was no evidence as to what other national branches Wolseley had and suggested that further factual inquiry into the matter might be appropriate. I indicated to both counsel that the Court’s objective is to resolve the matter before it and not to have purely technical objections creating delays to establish uncontested facts that can be attended to by way of amended pleadings or simple affidavit.

[11] This motion is, after all, a pleadings motion which proceeds on the basis that matters as pleaded are presumed true subject to any issues raised in the affidavit evidence filed. No issues regarding Wolseley’s place of business or the location of its personnel involved in the project were raised in the pleadings of the Third Party nor in the affidavit evidence of Mr. Hurst. The only mention of Wolseley in the affidavit of Mr. Hurst is a negative statement – there was no contract with Wolseley.

[12] The Third Party Claim pleads (i) the location of Wolseley’s registered office in Burlington, Ontario; (ii) the fact that Wolseley relied upon the design and specification documents prepared by MPE to determine materials included in its quote and to the materials sold to Candoo in connection with the Project; and (iii) the fact that Wolseley consulted with MPE directly regarding quotations in respect of various change orders made in the course of the project. Taken together, these allegations appear to me to support the statements contained in paragraph 31 of Woseley’s factum to the effect that the case is based on “MPE’s negligent preparation of documents that were communicated to Wolseley, and upon which Wolseley acted in both Alberta and Ontario”.

[13] Counsel for Wolseley advised that he was not asking to the court to go so far as to infer where MPE’s documents were actually delivered (indeed, this was not pleaded) but, while not denying the national nature of his client’s business, was relying primarily upon the location of the corporate office in Burlington. I did not see any necessity to defer a ruling on the substance of this matter in order to permit the parties to conduct an inquiry into precisely which offices of Wolseley actually received the various plans and specifications prepared by MPE in respect of the project. If I were wrong in that finding, I would grant leave to Wolseley if needed to amend the Third Party Claim consistent with paragraph 31 of its factum.

[14] I note as well that the plaintiff has pleaded the Sale of Goods Act (Ontario) as governing the contract between Wolseley and the plaintiff Candoo, a pleading which does support the inference that Wolseley’s actions in relation to the project were brought about by a contract itself subject to Ontario law.

[15] In approaching the issues raised by this case, I find the reasoning of D.A. Broad J. in the case of Khan v Layden, 2014 ONSC 6868 to be persuasive. In the Khan case, Justice Broad reviewed the Van Breda criteria as applied to a multi-party tort case arising from a motor vehicle incident in Pennsylvania. He said (at para. 16):

“In my view, the enquiry should not be focused only on whether the court is entitled to assume jurisdiction over the individual defendants but should also focus on whether jurisdiction should be assumed over the claim or the dispute. At para 17 of Van Breda, Justice LeBel identified two issues in the appeals as follows “First, were the Ontario court right to assume jurisdiction over the claims of [the plaintiffs] and over [the defendant]. Second, were they right to exercise the jurisdiction and dismiss an application for a stay based on forum non conveniens?” (underlining added). At para 909, Justice LeBel introduced the list of presumptive connecting factors that prima facie “entitle the court to assume jurisdiction over a dispute” (underlining added). At para. 99 he stated that the purpose of the conflicts rules is to establish whether a real and substantial connection exists between the forum and the subject matter of the litigation and the defendant”.

[16] The purposive approach to the “real and substantial connection” inquiry adopted by D.A. Broad J. in Khan is entirely consistent with the approach suggested by LeBel J. in Van Breda. In paragraph 74 of Van Breda LeBel J. wrote “the goal of the modern conflicts system is to facilitate exchanges and communications between people in different jurisdictions that have different legal systems...and, in the Canadian context, respect for and deference to other provinces and their courts”. Van Breda does not mandate a blinkered approach to the consideration of the status of each individual party in isolation from a consideration of the overall subject-matter of the litigation in question. Indeed, our Court of Appeal in Export Packers Co. v SPI International Transportation, 2012 ONCA 481, summarized the Van Breda criteria by indicating that “the values of order, fairness and comity can serve as useful analytical tools for assessing the strength of the relationship of the forum to which the factor in question points” (at para. 21).

[17] What then is the subject-matter of this litigation? This was a project that was completed in Alberta, involved Alberta design and construction firms, a national distributor headquartered in Ontario and an Ontario-based manufacturer. We are now faced with litigation the object of which will be to determine (i) what was the cause of the problems experienced in the construction of the project; and (ii) which party, if any, bears responsibility for those problems and to what degree? There are a multiplicity of claims and relationships arising out of this project which any court dealing with the matter will be required to examine and resolve. These include, among many other factors, a consideration of the design of the project and its specifications (MPE), the process of tendering, selection of contractors and handling of change orders (MPE advising Newell), the construction of the project (Candoo), the manufacture of the pipe and gaskets (Ipex) and the role of the distributor in selecting the products to be supplied to the project (Wolesley).

[18] In my view, it would be an error to focus the Van Breda inquiry into “real and substantial connection” upon the characteristics of the defendant in isolation. The subject-matter of the dispute between the parties and the relation of the defendant to it must be examined. It is true that this defendant (MPE) is based in Alberta and was engaged by an Alberta client to perform design and other work in relation to a project in Alberta. Viewed in isolation, their connection to Ontario would appear slim. However, MPE provided design work and advice regarding tenders that it ought reasonably to have foreseen might make their way “through the stream of commerce” to be relied upon by parties outside Alberta, including the defendants. Much manufacturing in Canada takes place in Ontario and certainly Ontario would be reasonably foreseeable as a place where supplies for the proposed project might have to be procured and that suppliers might have to rely upon the designs and specifications for the project that it was MPE’s task to prepare. Indeed, MPE’s engagement included assistance in the review of quotations and the selection of bidders – a role which would suggest that it was likely that MPE would have been aware of which parties would be relying upon its engineering work and where.

[19] Mr. Hurst’s affidavit was prepared in contemplation of a motion to stay a Third Party Proceeding based upon tort jurisdiction. The pleadings allege that MPE was involved in the design and specifications for the project and was involved in the preparation of quotes for requested changes, dealing directly with Wolseley. The fact that the affidavit was silent as to the main question before the court – the situs of the tort alleged against MPE – is telling. Absent specific evidence to the contrary, I find it fair to make the inference from paragraph 31 of Wolseley’s factum when considering the pleadings taken as a whole.

[20] Two of the presumptive criteria listed by LeBel J (themselves not exhaustive) are (i) the situs of the tort and (ii) the existence of a contract “connected with the dispute” being made in the forum province. Both of these criteria would appear to be met in this case.

Situs of the Tort

[21] The tort allegation in the main action against Wolseley as distributor of the pipes and gaskets supplied by Ipex includes allegations that they were not manufactured to the specifications required or that Wolseley failed to warn of this alleged fact. Obviously the conformity of the products supplied by Wolseley to the plaintiff with the design and specifications provided by MPE are at the core of the dispute to be resolved in the main action. Wolseley in turn seeks contribution from MPE alleging negligence in the project design and specifications which Wolseley relied upon in selecting and supplying Ipex’s products. Once again, the same issue of whether Wolseley selected or provided goods in conformity with the design and specifications prepared by MPE are central to the Third Party Claim. The torts alleged in both mandate the same inquiry: were the pipes and gaskets selected and supplied by Wolseley for the purposes of the project in conformity with the design and specifications prepared by MPE or did they fail to meet them in some way which caused or contributed to the damage? What is the situs of that alleged tort? While the project was in Alberta, the corporate office of both Wolseley and the manufacturer it chose to deal with (Ipex) were both in Ontario.

[22] The Court of Appeal in Central Sun Mining Inc. v. Vector Engineering Inc. 2013 ONCA 601 considered a similarly mixed fact pattern. The allegation in that case was of a negligent representation from a United States based engineering firm. The plaintiff was a Canadian mining company based in Toronto with offices in Vancouver and a mine in Costa Rica. The plaintiff claimed that it relied on the engineering work of the defendant and suffered damages when its Costa Rican mine suffered an accident arising from defective engineering work. It was held that since the engineering studies would have been acted upon in Ontario where the mining company was headquartered, the situs of the tort was where the alleged misrepresentations were relied upon notwithstanding that some studies may have been addressed to the Vancouver address of the mining company. Goudge J.A. noted that “in the modern world where corporations have various offices in various locations, corporate defendants should not escape liability simply because they send their studies to an office of the plaintiff located outside of Ontario with the clear understanding that it will be acted upon in Ontario” (at p. 32).

[23] In the present case, I find the pleading supports the conclusion that the situs of the tort alleged against MPE was Ontario where the corporate headquarters of the recipient of designs and specifications at issue was located and no evidence to suggest a contrary conclusion has been alleged. As indicated above, in the event of any doubt as to this conclusion, I would have granted the Wolseley leave to amend its pleading to plead more specifically the matters alleged in paragraph 31 of their factum, although I believe that given the lack of issue taken with this in the Hurst affidavit, there is no need to do so.

Situs of the Contract

[24] It is common ground that there was no contract between MPE and Wolseley. However, MPE did contract with Ipex and it did contract with the plaintiff Candoo. The latter contract forms the basis for one of the claims of the plaintiffs in the main action and is in respect of the precise same subject-matter as Wolseley’s tort claim against MPE. Wolseley’s involvement in the project arises from that contract. The plaintiffs have pleaded the Ontario Sale of Goods Act in relation to it and the corporate office of Wolseley is in Ontario. I am entitled in the circumstances to infer from these pleaded facts that the contract which brought Wolseley and MPE to deal with each other is an Ontario contract and have no evidence from any other source to suggest a contrary conclusion.

[25] Considering the entirety of the litigation fact matrix, the following appears to this court to be of significance:

a. The plaintiffs in the main action have selected Ontario as their forum in pursuing the defendants and there is no challenge to the propriety of the plaintiff’s choice of forum;

b. The plaintiffs have alleged, among other things, a contract between Wolseley and Candoo to which the Sale of Goods Act (Ontario) is pleaded to apply;

c. The plaintiff’s action involves allegations sounding in tort against the defendants which, as pleaded, could reasonably be argued would have a situs in Ontario;

d. MPE’s role in the project in preparing the design and specification documents on which all parties relied lies at the very heart of the factual matrix underlying the litigation in the main action and the Third Party Claim;

e. Had the plaintiffs chosen to pursue MPE, Ipex and Wolseley in a single action in Ontario or Alberta, there could have been no question as to the right of Wolseley to cross-claim for contribution against MPE as co-defendant; and

f. Whether or not MPE is actually a co-defendant selected by the plaintiffs, any trial or trials of the issues raised by this case will necessarily entail an apportionment of liability as between the three of them and it would be highly undesirable to run the risk of conflicting judgments on that central issue to both claims.

[26] What of the interests of fairness? Ontario unquestionably has jurisdiction over the claim in the main action brought by the plaintiffs not only arising from the plaintiffs’ choice of forum but also arising the situs of the Ontario contract and the torts pleaded as against both defendants. While either Ontario or Alberta could likely have had jurisdiction in this case, the plaintiffs chose Ontario. As Justice LeBel pointed in in Van Breda (para. 99):

(99) “The purpose of conflicts rules is to establish whether a real and substantial connection exists between the forum, the subject-matter of the litigation and the defendant. If such a connection exists in respect of a factual and legal situation, the court must assume jurisdiction over all aspects of the case. The plaintiff should not be obliged to litigate a tort claim in Manitoba and a related claim for restitution in Nova Scotia. That would be incompatible with any notion of fairness and efficiency”.

[27] MPE’s actions will be central to the adjudication of the main claim and their documents and witnesses will almost certainly be required in Ontario before the case is through. This is not a case like Export Packers where the claim between two Ontario parties could be adjudicated without requiring a determination of the probity of the actions of the Quebec meat packer who released the goods to the rogue. In this case, the designs and specifications of MPE are at the very core of the litigation – were they complied with? Did the problems arise from failure to follow the design? Did the problems arise from the designs themselves? These questions go to the core of the dispute before the court and cannot be resolved in isolation. It is inconceivable that the interests of fairness or justice require those questions to be separately tried and answered by two different courts in two different jurisdictions with the possibility of two conflicting judgments in order to resolve the questions raised by this case. Such a finding would be to place form before substance.

[28] Accordingly, I find that Ontario has jurisdiction over the subject-matter of this dispute including the matters raised in the Third Party Claim.

[29] The mere fact that Ontario has jurisdiction does not dictate that Ontario should exercise it. The moving party relied upon forum non conveniens in its written argument although it was not insisted upon in oral argument. On balance, I am not persuaded that this court ought to decline jurisdiction in this case. Separate proceedings regarding the very same subject-matter would be contrary to the interests of justice. Not only would the risk of inconsistent judgments arise, but the courts in both jurisdictions would be required to grapple with difficult questions of discovery from non-parties, the production of witnesses from other jurisdictions, etc. It is a near certainty that MPE would remain involved in the Ontario action even if successful on its motion as its employees would be needed as witnesses and its documents would almost certainly be required at the discovery phase.

[30] Wolseley also urges upon this Court the matter of juridical advantage arising from a potential discrepancy in limitation periods between Alberta and Ontario. I indicated to both counsel that a consideration of juridical advantage relating to limitation periods involves a relatively circular inquiry in a case such as this: if the situs of the tort is Ontario, then Ontario law, including as to limitation periods, applies. If it is Alberta, then Alberta limitations law would apply. The choice of forum should not impact that analysis. On the other hand, MPE could not reasonably expect to take advantage of a limitation period that expired while the parties were disputing Ontario’s jurisdiction if the Ontario proceeding which it seeks to stay would otherwise have interrupted that limitation period. Had this court been persuaded to grant a stay of proceedings in favour of MPE on either of the two grounds urged by Mr. Kerkmann, a condition of any such stay would have been receipt of the undertaking of MPE that any subsequent Alberta proceedings involving the allegations pleaded in the Third Party Claim should be considered from a limitations perspective as if the Alberta proceeding in question had been commenced on June 20, 2014. In the circumstances, no such order is required and no further consideration of the juridical advantage argument is required.

[31] For the foregoing reasons, I dismiss the motion with costs. I commend the parties for the thoroughness of their submissions and facta which were both extremely helpful. If the parties are unable to agree as to costs, I direct Wolseley to deliver its written submissions as to costs by February 16, MPE to deliver its response by February 23 and reply if any of Wolseley by February 25. All written submissions should be limited to four pages excluding any draft bill of costs. I would request counsel for Wolseley to collect costs submissions of both parties and to arrange for their delivery to Judges’ Administration, Room 170 at 361 University Avenue by close of the court offices on February 25. Alternatively, the parties may arrange electronic transmission with the same deadlines by making arrangements through my assistant.

Sean F. Dunphy, J

Date: February 4, 2015