Sofina Foods Inc. v. Meyn Canada Inc., 2017 ONSC 6957

CITATION: Sofina Foods Inc. v. Meyn Canada Inc., 2017 ONSC 6957

COURT FILE NO.: 06-CV-30438000A3

DATE: 20171122

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

LILYDALE COOPERATIVE LIMITED SOFINA FOODS INC.

Plaintiff

– and –

MEYN CANADA INC., MEY-CAN CANADA EQUIPMENT LTD., and MEYN FOOD EQUIPMENT INC., EMK NV and ELBOMA MOORTGAT KONSTRUKTIE NV

Defendants

– and between –

ELBOMA MOORTGAT KONSTRUKTIE NV and EMK NV

Third Parties

No one appearing for the Plaintiff

Christopher Reain and Christine Matthews, for the Defendants, Meyn Canada Inc., Mey-Can Equipment Ltd. and Meyn Food Equipment Inc.

Daniel Bernstein and Sean Husband, Agents for Meyn Canada Inc., Mey-Can Canada Equipment Ltd. and Meyn Food Equipment Inc.

Erin Hoult and Daniel Styler, for the Third Parties, EMK NV and Elboma Moortgat Konstruktie NV

HEARD: July 19 and 20, 2017

CAVANAGH J.

reasons for judgment

Introduction

[1] This is a motion by the third parties EMK NV and Elboma Moortgat Konstruktie NV (collectively, “EMK”) for (a) summary judgment dismissing the Third Party Claim brought by the defendants Meyn Canada Inc., Mey-Can Equipment Ltd. (“Mey-Can”), and Meyn Food Equipment Inc. (collectively, “Meyn”); and (b) alternatively, a determination that Belgian law governs Meyn’s claim against EMK.

[2] The issue on the motion for summary judgment is whether Meyn is out of time to sue EMK for contribution and indemnity in respect of the plaintiff’s claims against Meyn.

[3] For the following reasons, EMK’s motion for summary judgment is dismissed and its motion for an order declaring that Belgian law governs Meyn’s claim in contract against EMK is granted.

Factual Background

Parties

[4] EMK is a Belgian company. In 1993 and 1994, EMK was in the business of manufacturing and installing industrial equipment, which included boilers.

[5] Meyn is a wholly-owned subsidiary of a Dutch holding company. At the relevant time, Meyn sold, among other things, fryer and oven systems for cooking food products.

[6] The main action arises from a fire which occurred at a poultry processing plant of Lilydale Cooperative Limited, now named Sofina Foods Inc. (“Lilydale”), in Edmonton, Alberta, on January 29, 2004. Lilydale claims that the fire occurred because of defects in a fryer and oven system, or the installation or a component thereof.

[7] Meyn sold the fryer and oven system to Lilydale.

[8] EMK supplied a boiler to Meyn that was part of the fryer and oven system.

[9] Weishaupt Corporation (“Weishaupt”) sold a burner to Meyn that was part of the system that Meyn sold to Lilydale. Weishaupt brought a separate motion for summary judgment dismissing Meyn’s Third Party Claim against it. I heard Weishaupt’s motion together with EMK’s motion, and my decision on Weishaupt’s motion is being released with this decision.

[10] Meyn and another entity, Allied Boiler Services Inc. (“Allied”), were involved in the installation of the system.

Procedural History

[11] Lilydale first commenced an action in Alberta on December 22, 2004 and later commenced an action in Ontario on January 19, 2006. The pleadings in both actions were served in March and April, 2006 on Meyn and on EMK. Lilydale claimed against Meyn in contract and in tort, and against EMK in tort.

[12] On May 12, 2006 Meyn’s Alberta counsel sent EMK’s Ontario counsel copies of Meyn’s Statement of Defence in the Alberta action and Third Party Notices in the Alberta action indicating that Meyn is claiming contribution and indemnity from both EMK and Allied.

[13] In November 2006, Meyn moved to stay the Ontario action on the ground that Alberta was the convenient forum for the dispute and/or the Ontario action was an abuse of process. Meyn’s motion was dismissed on February 13, 2007, and an appeal was dismissed on February 21, 2008.

[14] On May 22, 2008, Meyn served Lilydale and EMK with its Statement of Defence and Crossclaim in the Ontario action. On July 8, 2008, EMK served Lilydale and Meyn with its Statement of Defence and Crossclaim in the Ontario action.

[15] In November 2008 Meyn and EMK each issued Third Party Claims against Allied and against Weishaupt Corporation (“Weishaupt”) in the Ontario action.

[16] On July 3, 2009, Lilydale formally discontinued the Alberta action.

[17] Allied moved to dismiss the third party claims of EMK and Meyn on the basis that the limitation period had expired. This motion was granted by D. Wilson J. on July 9, 2010 on the basis that the third party claims were issued outside of the two year limitation period for contribution and indemnity claims set out in the Ontario Limitations Act, 2002, S.O. 2002, c. 24, Sch. B (the “Limitations Act”). There was no appeal.

[18] In 2013, Lilydale, Meyn, EMK, Weishaupt and Allied brought a motion under Rule 22 of the Rules of Civil Procedure to determine the applicable law of Lilydale’s claims in contract and in tort. The parties agreed that if Alberta law governed Lilydale’s claims, such claims were statute barred by Alberta’s 10 year ultimate limitation period. By an order dated October 30, 2013, Pollak J. decided that the tort claims were subject to Alberta law and statute-barred. As a result, Lilydale’s tort claims against Meyn and EMK and the related tort claims amongst the defendants and third parties were dismissed. Lilydale’s contractual claim against Meyn was found to be subject to Ontario law. As a result, Lilydale’s contractual claim against Meyn and Meyn’s contractual claim against EMK (which was then pleaded as a crossclaim) remained.

[19] Meyn appealed the decision of Pollak J. that Ontario law governs its contract with Lilydale. No appeal was taken from the order dismissing the tort claims. On April 22, 2015, the Court of Appeal dismissed Meyn’s appeal and upheld the determination that Ontario law governs Lilydale’s contractual claims against Meyn.

[20] On November 25, 2016, McEwen J. granted leave to Lilydale to amend its Statement of Claim to remove EMK as a defendant. This order also provided that Meyn’s remaining contractual claim against EMK was not dismissed, and could be continued by way of a third party claim.

[21] Lilydale served EMK and Meyn with its Amended Statement of Claim on November 30, 2016.

[22] Meyn served EMK with its Fresh as Amended Statement of Defence and Third Party Claim on December 7, 2016. EMK served its Statement of Defence to the main action and its Third Party Defence on December 21, 2016. Meyn served its Reply to EMK’s Third Party Defence on January 3, 2017.

Analysis

[23] On this motion, EMK, as the moving party, has the onus of proving that there is no genuine issue requiring a trial with respect to Meyn’s claim. Pursuant to Rule 20.04(2)(a), the court shall grant summary judgment where there is “no genuine issue requiring a trial” with respect to a claim. Summary judgment is available for third party claims under Rule 20.09.

[24] In Hyrniak v. Maudlin, 2014 SCC 7, the Supreme Court of Canada held that summary judgment rules must be interpreted broadly, favouring proportionality and fair access to the affordable, timely, and just adjudication of claims, and that summary judgment is no longer merely a means to weed out unmeritorious claims, but rather a legitimate alternative means for adjudicating and resolving legal disputes: Hyrniak, at paras. 5 and 36.

[25] There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result. These principles are interconnected and all speak to whether summary judgment will provide a fair and just adjudication: Hyrniak, at paras. 49-50.

[26] The following issues are raised on EMK’s motion for summary judgment:

a. What law governs the contract of sale between EMK and Meyn: the law of Belgium or the law of Ontario?

b. If the law of Belgium applies:

i. Has EMK shown that summary judgment should be granted because there is no genuine issue requiring a trial on the question of whether Meyn has satisfied its burden under ULIS Article 40 (a law that applies under Belgian law) to show that there was a lack of conformity of the Boiler which relates to facts of which EMK knew, or of which EMK could not have been unaware, and which EMK did not disclose?

ii. Has EMK shown that summary judgment should be granted because there is no genuine issue requiring a trial on the question of whether Meyn’s claim was brought within a short delay / time as required by Article 1648 of the Belgian Civil Code?

c. If Ontario law applies:

i. Has EMK shown that summary judgment should be granted because there is no genuine issue requiring a trial on the question of whether Meyn has satisfied its burden under CISG Article 40 (an Ontario law) to show that there was a lack of conformity of the Boiler which relates to facts of which EMK knew or could not have been unaware, and which EMK did not disclose?

ii. Has EMK shown that summary judgment should be granted because there is no genuine issue requiring a trial on the question of whether Meyn’s claim was commenced after the expiry of the limitation period under Ontario law?

Each of these issues is addressed below.

What law governs the contract of sale between EMK and Meyn: the law of Belgium or the law of Ontario?

[27] The parties agree that it is appropriate for me to decide this question on this motion for summary judgment.

Factual Circumstances

[28] In and around 1993, Lilydale was looking to purchase a new poultry production line in its processing plant in Edmonton, Alberta which would primarily consist of a large oven and a large deep fryer. Mey-Can Equipment Ltd. was awarded the contract for the design and sale of the fryer and oven system. Mey-Can Equipment Ltd. is one of several wholly-owned subsidiaries of Meyn Holding BV.

[29] The contract between Mey-Can and Lilydale was found in October 2013 to be governed by the law of Ontario. One of the components of the fryer and oven system was a thermal fluid boiler (Thermiflow 400/40/300V) which was supplied by EMK, along with a motor and pump (the “Boiler”).

[30] Prior to October 1993, EMK had sold two boilers to one of Meyn’s Dutch affiliates (“Meyn Holland”). In late October or early November 1993, Meyn contacted EMK to ask about purchasing the Boiler. The evidence is not clear about whether the initial contact was through Meyn Holland. The evidence of EMK’s witness is that based on her review of EMK’s internal price calculations for the Boiler dated November 15, 1993, she believes that Meyn Holland first contacted EMK to ask about purchasing the Boiler.

[31] The following is a description of the main documents and events that relate to the contract:

a. On December 6, 1993, EMK faxed a written quotation to Meyn in respect of the requested Boiler. A copy of this written quotation cannot be located.

b. On December 6, 1993 Meyn faxed a purchase order to EMK in Belgium for the purchase of a “Thermal Oil Boiler Thermiflow 400/40/300V” for a total price of 743,740 Belgian francs. The purchase order states “As per your quotation and your fax of December 6th, 1993”.

c. Between December 6 and 9, 1993 Meyn asked EMK to make a change order relating to the motor and pump, which required a price change.

d. On December 9, 1993 EMK faxed a confirmation for the order to Meyn. The first paragraph of the confirmation reads “We thank you for your fax order dd 06.12.93 and have the pleasure to send you herewith our confirmation following our general sales conditions”. The confirmation describes items including the “Thermal Oil Boiler Thermiflow 400/40/300V” and related items including a pump. The price in the confirmation is 758,740 Belgian francs. The confirmation provided for delivery “ex works”. There is a list of items described under the heading “Not Included in Our Price” that includes “transport of the material”, “installing of the material”, “starting-up and regulation at site of the thermal oil boiler” and “all not explicitely (sic) described works and deliveries”.

e. On December 13, 1993 Meyn faxed to EMK a memo referencing the supply of the motor and pump and including the sentence “We agree with your pricing of 15,000 Belgium Francs bringing our contract to 758,740 Belgium Francs”.

f. On December 23, 1993, a shipper picked up the Boiler from EMK’s factory in Belgium. The Boiler was delivered to Meyn in Mississauga, Ontario.

g. On December 14 or December 24, 1993 (the date on the invoice copy is unclear) EMK sent its invoice to Meyn in the amount of 758,740 Belgian Francs.

h. On December 23, 1993, EMK sent to Meyn two copies of the layout drawing and flow sheet and the wiring diagram.

i. On January 19, 1994 EMK sent Meyn a formal certificate of guarantee.

j. On April 8, 1994 Meyn paid EMK in Belgian Francs, as invoiced.

[32] In early 1994, EMK sent a facsimile to Meyn containing information for the installation of the Boiler and circulation pump. Meyn faxed to EMK the as-built electrical control panel schematics. EMK sent Meyn a fax providing information about the motor and enclosing technical data to change the motor. On or about March 30, 1994, EMK sent Meyn a fax confirming that the Boiler was designed for installations with a temperature of 300°C. Meyn sent EMK questions concerning the installation of the Boiler and, specifically, the high pressure relief location, the certificates of compliance and the location of the expansion vessel. EMK responded by fax on April 22, 1994. EMK subsequently sent pressure tests certificates for the coils, expansion vessel and expansion cooler; used tubes and welding certificates.

[33] There is no evidence of any further correspondence between EMK and Meyn after the delivery of the testing certificates until after the fire in 2004.

Legal Principles

[34] EMK and Meyn did not include an express choice of law clause in their contract. In the absence of such a clause, the applicable law of a contract is determined by the application of the “closest and most substantial connection” test approved by the Supreme Court of Canada in Imperial Life Assurance Co. of Canada v. Colmenares, 1967 CanLII 7 (SCC), [1967] S.C.R. 443. In Colmenares, the Supreme Court of Canada, at page 448, accepted that the test to be applied to determine the proper law of a contract is “by considering the contract as a whole in light of all of the circumstances which surround it and applying the law with which it appears to have the closest and most substantial connection”. The proper law of a contract is to be determined as of the date when it was made: Colmenares, at p. 450.

[35] In Colmenares at p. 448, the Supreme Court of Canada refers to the following passage from Cheshire on Private International Law, 7th ed., p. 190 in describing the many factors which have been taken into consideration in determining the proper law to be applied:

The court must take into account, for instance, the following matters: the domicil and even the residence of the parties; the national character of a corporation and the place where its principal place of business is situated; the place where the contract is made and the place where it is to be performed; the style in which the contract is drafted, as, for instance, whether the language is appropriate to one system of law, but inappropriate to another; the fact that a certain stipulation is valid under one law but void under another; … The economic connexion of the contract with some other transaction; … The nature of the subject matter or its situs; the head office of an insurance company, whose activities range over many countries; and, in short, any other fact which serves to localize the contract.

[36] In a decision made in this action, the Court of Appeal addressed whether the motion judge erred in finding that Ontario law, rather than Alberta law, governed the contract between Lilydale and Meyn. The motion judge had focused on four criteria: the nature and subject matter of the contract; the place of performance of the contract; the place of contracting; and the domicile and residence of the parties. The Court of Appeal did not disagree that these were the relevant criteria in respect of the Lilydale contract, and concluded that the motion judge’s findings on the relevant criteria were reasonable, as was her overall conclusion: Lilydale Cooperative Limited v. Meyn Canada Inc., 2015 ONCA 281.

[37] I have considered the contract as a whole in light of the circumstances which surround it. I address the relevant factors under the following headings.

(a) Place of contracting

[38] A contract is formed in the place where the offeror receives notification of the offeree’s acceptance and the last act essential for its formation takes place: Eastern Power Limited v. Azienda Communale Energia & Ambiente, 1999 CanLII 3785 (ON CA), 178 D.L.R. (4th) 409, at paras. 22-23.

[39] I agree with Meyn that the EMK quotation (which has not been located) is properly characterized as an invitation to treat. Meyn’s purchase order dated December 6, 1993 was an offer to purchase a product described as “Thermal Oil Boiler Thermiflow 400/40/300V” for a total price of 743,740 Belgian Francs. If EMK had accepted this offer, a contract would have been made. However, this offer was not accepted by EMK.

[40] EMK’s response to Meyn’s purchase order was transmission of the confirmation dated December 9, 1993 which referenced Meyn’s purchase order. The price that was written in the confirmation was 758,740 Belgian Francs which included the addition of a pump and motor. This is a higher price than the price in Meyn’s purchase order. It was open to Meyn upon receipt of the confirmation to object to the price in the confirmation. The EMK confirmation was a counter offer that included the essential contractual terms including, specifically, the overall price for the Boiler, which included the pump and motor. The confirmation states that it is sent “following our general sales conditions”, and also refers to a Guarantee accompanied by the words “see annexe”.

[41] Meyn accepted this counter offer when it sent a facsimile transmission on December 13, 1993 to EMK in Belgium and wrote that “[w]e agree with your pricing of 15,000 Belgium Francs bringing our contract to 758,740 Belgium Francs”. This was the last essential act of contract formation. I do not agree with Meyn’s submission that the addition of a pump and motor has no effect on the place of contracting because, before Meyn’s December 13, 1993 facsimile transmission, there had not been acceptance by either party of an offer that contained all essential terms of the Contract.

[42] I conclude that the contract was made in Belgium. This factor points to the law of Belgium as the law applicable to the contract.

(b) Place of performance of the contract

[43] The principal obligation of EMK was to deliver the goods to be supplied under the contract to Meyn. Delivery was agreed to be on an “ex works” basis. The EMK confirmation also states that transport of the material is not included in the price. Delivery took place at EMK’s factory in Belgium on December 23, 1993 where the Boiler was picked up for shipment.

[44] Mr. O’Connor, gave evidence on his cross-examination that the term “Ex Works Delivery” means “their [EMK’s] responsibility stops at their back door, at their shipping dock. Then you have to come and get it”. Mr. O’Connor advised that it would be open to the parties to negotiate the shipping separately.

[45] Meyn submits that it did not arrange for shipping of the thermical oil heaters from Europe, and points to the bill of lading that shows EMK as the exporter and “May Can” in Mississauga, Canada as the consignee. In my view, whatever the arrangements were in respect of shipping, even if Meyn made separate arrangements with EMK for it to ship the Boiler to Meyn in Ontario, this does not change the fact that property in the Boiler sold by EMK to Meyn passed to Meyn in Belgium.

[46] The place of delivery is not necessarily the controlling factor. In Lilydale, the Court of Appeal addressed the submission made by Meyn and by EMK that delivery, installation, and start-up took place at Lilydale’s plant in Alberta and that, therefore, the law of Alberta governs the contract. The Court of Appeal, at para. 23 of its decision, disagreed with Meyn’s submission, observing that the Lilydale contract was not simply a contract for the sale of goods. It had a design component, and that component was performed in Ontario. Thus, the Lilydale contract was partly performed in Alberta, and partly performed in Ontario: Lilydale, at para. 20. The Court of Appeal did not disturb the motion judge’s finding that the law applicable to the Lilydale contract with Meyn is the law of Ontario.

[47] On the evidence before me, the contract was for the sale of equipment, the Boiler, not for the design of a system. Unlike the contract between Lilydale and Meyn, the contract between Meyn and EMK was performed entirely in one location, Belgium.

[48] The place of performance of this contract is a factor that points to the law of Belgium as the applicable law.

(c) The nature and subject matter of the contract

[49] Meyn submits that EMK was aware that the Boiler would be used in Canada, based upon the shipment destination in Mississauga on the Meyn purchase order dated December 6, 1993, the reference to “Meyn – Canada” on an EMK wiring diagram, and other documents.

[50] Mr. O’Connor provided affidavit evidence that EMK was aware that Meyn would be using the Boiler for the purpose of cooking food products and that EMK was aware of Meyn’s sole reason for purchasing thermical oil heaters, which was to heat hot oil and hot air food fryer systems. Another Meyn witness, Hans Eijkenboom, the general legal counsel with the Meyn parent company, gave affidavit evidence that EMK was aware of the application for which Meyn required EMK boilers. Neither Mr. O’Connor nor Mr. Eijkenboom said how he knew these statements to be true, but neither was cross-examined on these statements.

[51] Ms. De Cock who provided evidence for EMK, said that she was not aware of Meyn’s intended use of the Boiler and, to the best of her knowledge, EMK was not aware how Meyn intended to use the Boiler. On cross-examination, Ms. De Cock agreed that she did not ask anyone else with whom she worked at the time whether they were aware of Meyn’s business, and that she could not confirm or deny whether EMK knew what the Boiler was to be used for.

[52] The evidence shows that EMK knew when the contract was made that the Boiler would be shipped to Canada. I accept that EMK also knew that the Boiler would be used for the purpose of heating oil fryers or air fryers for cooking food.

[53] Meyn submits that where goods are shipped from one jurisdiction to another, the jurisdiction where the installation, start-up and after sales service takes place, in this case, Alberta, is normally the jurisdiction whose law governs the contract. Meyn points to evidence that EMK assisted with the installation and start-up of the Boiler by providing answers to various questions from December 1993 to April 1994. Meyn submits that this factor does not point to Belgium as the place of performance of the contract, and either points to Alberta, or is a neutral factor.

[54] Meyn submits that the primary contract between Lilydale and Meyn was found to have been governed by Ontario law, and that the connection of Meyn’s contract with EMK to the primary contract between Lilydale and Meyn tips the balance in favour of Ontario law. Meyn relies upon American Home Assurance Co. v. Temple Insurance Co., 2009 CanLII 1648 (ON SC), [2009] O.J. No. 249 in support of this submission.

[55] In American Home, the application judge considered whether a policy of insurance was governed by Ontario law or Quebec law. The policy in question was intended to provide a second layer of insurance over the layer provided by the primary policy. The application judge held that the primary policy had the closest and most substantial connection with Ontario and he concluded that it was governed by Ontario law. The application judge held that it would be reasonable to infer that when the umbrella policy was executed, the parties anticipated and intended that it would be governed by the same legal system as the primary policy.

[56] In my view, the approach that was followed by the application judge in American Home when he was considering a primary insurance policy and an umbrella insurance policy does not assist me to determine the law that has the closest and most substantial connection with the contract between Meyn and EMK. The contract between Meyn and EMK is not as closely related to the contract between Meyn and Lilydale as were the two insurance policies in the American Home case.

[57] The fact that this court in Ontario found in 2013 that the law applicable to the Lilydale contract was the law of Ontario does not assist me in determining which law has the closest and most substantial connection to the contract between Meyn and EMK. The time for determining the law applicable to a contract is when the contract was made. At the time this contract was made, December 13, 1993, there had been no such determination by Pollak J. I also note that Meyn took the position before Pollak J. on the motion to determine what law applied to the Lilydale contract, and before the Court of Appeal, that the law that applied to the Lilydale contract is the law of Alberta, not the law of Ontario. There is no evidence that EMK was aware of Meyn’s contract with Lilydale at the time the contract for the sale of the Boiler was made.

[58] The Court of Appeal in Lilydale wrote that the place of performance of the contract is related to its subject matter and, for determining the applicable law, is perhaps the most important criterion. The Court of Appeal noted that the motion judge concluded that most of the contract was performed in Ontario, and that Meyn performed virtually no work in Alberta. The Court of Appeal concluded that the motion judge’s finding that the place of performance pointed more to Ontario than Alberta was reasonable. I do not, therefore, regard the finding made by Pollak J., affirmed by the Court of Appeal, that the Lilydale contract is governed by the law of Ontario to be a significant factor in my analysis because the reason that Ontario law applied to the Lilydale contract, that the contract was mainly performed in Ontario, does not apply to the contract between EMK and Meyn.

[59] In my view, even if EMK knew that the Boiler would be used by Meyn as a component of a hot air food fryer system to be supplied to a customer of Meyn, this does not point to Ontario as the proper law of the contract between Meyn and EMK.

(d) Currency of the purchase price

[60] In Eastern Power, the Court of Appeal, at para. 30, quoted a passage from Professor Castel’s book, Canadian Conflict of Laws, 4th ed., (1997) at pp. 596-98 which states that one of the factors from which courts have been prepared to infer the intentions of the parties as to the proper law is the currency in which the payment is to be made.

[61] The agreed purchase price for the Boiler to be supplied under the contract was in Belgian Francs. Meyn paid EMK the purchase price on April 8, 1994.

[62] This factor points to the law of Belgium as the applicable law.

(e) The general sales conditions that provide that the courts of Ghent (in Belgium) have sole jurisdiction over a dispute

[63] EMK submits that the contract with Meyn includes its general sales conditions. EMK relies on the following passage written by Janet Walker in Castel & Walker, Canadian Conflicts of Laws, with respect to the importance of a provision for selection of a judicial forum:

An agreed selection of a judicial forum in a particular country is a strong indication that the parties intended the law of that country to apply to the contract. It is a stronger indication than an arbitration agreement because a court, unlike an arbitrator, is bound to apply the law of the country in which it sits unless that country’s choice of law rules authorize it to apply foreign law.

[64] EMK’s general terms and conditions of sale, translated into English, provide, among other things:

a. By submitting an order, the customer accepts EMK’s terms (s. 1.2);

b. EMK’s terms take precedence over any similar terms and conditions of the customer. EMK will only accept other terms and conditions of sale if such has been explicitly agreed upon (s. 1.5);

c. Deliveries were ex works at EMK’s workshop without packaging. Packaging, tax, transport and shipping costs are payable by the customer (ss. 3.4, 5.2); and

d. In the event of a dispute, the courts of Ghent [Belgium] shall have sole jurisdiction.

[65] As noted, the first page of the confirmation of December 9, 1993 states that “We [EMK] … have the pleasure to send you here with our confirmation following our general sales conditions”. EMK provided affidavit evidence through an administrator, Claudine De Cock, who was employed by EMK or its predecessor between March 1, 1985 and December 31, 2014. This witness provided evidence that in 1993 it was EMK’s practice to attach both its general sales conditions and the guarantee terms to its faxed order confirmation to a customer. Ms. De Cock agreed on cross-examination that she has no independent proof that the general terms and conditions were sent to Meyn.

[66] The standard terms and conditions used by EMK at the time are written in Flemish and in French. On cross-examination, Ms. De Cock gave evidence that at the time the confirmation was sent, the standard terms and conditions were available in English but that she could not find the English version. The Guaranty is written in English.

[67] Meyn’s witness, Gerry O’Connor, was employed by Meyn Canada and its predecessor companies between February 1992 and April 2012. He was employed as a sales representative in Ontario between 1992 and approximately 1998. Meyn was a small company when he joined in February 1992 consisting of three persons and an additional two persons who joined a few months later. Mr. O’Connor’s affidavit evidence is that he has no recollection of Meyn ever receiving copies of any standard terms and conditions from EMK during the purchase of EMK thermic oil heaters. He deposed that he never received or saw any standard terms and conditions from EMK written in English. He deposed that nobody at Meyn would have been able to speak, read or write Flemish and that nobody at Meyn who was involved in this project would have been fluent in French. Mr. O’Connor acknowledged on cross-examination that he does not personally know whether EMK’s general sales conditions and the guaranty terms were attached to the December 9, 1993 confirmation.

[68] Meyn could not check its own files to confirm whether or not the general sales conditions were transmitted and received because it had disposed of many documents which may have been relevant to the action before the fire in issue occurred. There is no evidence that Meyn proposed any alternative terms for the contract with EMK.

[69] I do not agree with EMK’s submission that the language of EMK’s confirmation is sufficiently clear to result in incorporation into the contract of EMK’s general sales conditions. I am unable to determine on the evidentiary record before me whether or not EMK’s general sales conditions were transmitted to Meyn together with EMK’s confirmation. For this reason, I do not regard the forum selection provision in EMK’s general sales conditions to be a factor that points to the law of Belgium as the law applicable to the contract.

(f) Domicile and residence of the parties

[70] EMK is domiciled and resident in Belgium. Meyn is domiciled and resident in Ontario. I regard this as a neutral factor.

(g) Conclusion on applicable law

[71] The factors that point to the law of Belgium as the law of the place with which the contract has the closest and most substantial connection are (i) the contract was made in Belgium, (ii) the contract was performed in Belgium, and (iii) the purchase price was paid in Belgian currency.

[72] The factor that points to the law of Ontario is the fact that Meyn’s contract with Lilydale was found to be governed by the law of Ontario, and the two contracts are related. For the reasons I have given, I do not regard this to be a significant factor.

[73] In Lilydale, at para. 16, the Court of Appeal wrote that “[t]he place of performance of the contract is related to its subject matter and, for determining the applicable law, is perhaps the most important criterion.” I conclude, relying on Lilydale, that the place of performance of the contract between Meyn and EMK is the most important criterion for me to consider in this case.

[74] This contract was made in Belgium and performed entirely in Belgium. The Boiler was delivered by EMK to Meyn in Belgium where property in the Boiler passed to Meyn. In my view, the fact that Meyn may have made separate arrangements with EMK to arrange for shipping of the Boiler to Ontario is not material.

[75] There are significant factors that point to the law of Belgium as the law of the place with which the contract has the closest and most substantial connection and there are no significant factors that point to the law of Ontario.

[76] For these reasons, I have concluded that the law with which the contract between EMK and Meyn has the closest and most substantial connection is the law of Belgium.

Has EMK shown that summary judgment should be granted because there is no genuine issue requiring a trial on the question of whether Meyn has satisfied its burden under ULIS Article 40 to show that there was a lack of conformity of the Boiler which relates to facts of which EMK knew, or of which EMK could not have been unaware, and which EMK did not disclose?

[77] Foreign law is a question of fact to be proved by a competent and qualified expert witness. Each of EMK and Meyn provided evidence concerning Belgian law from qualified expert witnesses.

[78] EMK’s expert, Professor Johan Erauw, is a Professor Emeritus of Law at the University of Ghent and a member of the bar of Belgium. Professor Erauw actively practices international commercial law as arbitrator and as advisor to lawyers.

[79] Meyn’s expert, Jean-Francois Germain, is a partner with a law firm in Belgium and a member of the Bar of Brussels. Mr. Germain is also a teacher at a university in Brussels and the author of numerous publications in the field of contract law.

[80] The experts agree that, where Belgian law is the applicable law to the contract between Meyn and EMK, Meyn’s claims against EMK are subject to the Uniform Law on the International Sale of Goods (“ULIS”) which was ratified into Belgium’s civil law effective from August 18, 1972 for contracts concluded after that date.

[81] According to Professor Erauw, the Belgian courts interpret treaties or international rules, such as ULIS, in an autonomous way, with respect for their international character, based on criteria other than national law. Belgian courts are not bound by the rule of stare decisis in applying ULIS and may consider any available international sources, such as decisions of foreign courts or commentary by foreign authors. Mr. Germain agrees, and he expresses the same point in a different way, by saying that the provisions in ULIS should be interpreted according to the meaning usually given to them in the trade concerned, in other words, in accordance with principles of international trade. Both experts relied upon decisions of foreign courts and commentary by foreign authors.

[82] ULIS introduces time restrictions on buyers for the bringing of claims against sellers based on alleged non-conformities. In particular, ULIS Article 39 prescribes a maximum period of two years from the date of delivery for the bringing of claims based upon such defects, unless there was an agreed guarantee covering a longer period (not relevant here) or the exception in ULIS Article 40 applies. ULIS Article 39 (1) provides, in the relevant part:

The buyer shall lose the right to rely on a lack of conformity of the goods if he has not given the seller notice thereof promptly after he discovered the lack of conformity or ought to have discovered it. … In any event, the buyer shall lose the right to rely on a lack of conformity of the goods if he has not given notice thereof to the seller within a period of two years from the date on which the goods were handed over, unless the lack of conformity constituted a breach of a guarantee covering a longer period.

Article 39 covers any type of non-conformity on which a buyer may rely to seek a remedy or claim for damages. Article 39 applies to both the patent and latent defects.

[83] There is no evidence suggesting that Meyn notified EMK of any non-conformity at any time before the fire at Lilydale’s plant in 2004. Unless Meyn is able to rely on the Article 40 exception in ULIS, its claim against EMK is out of time.

[84] ULIS article 40 is an exception to ULIS article 39. ULIS article 40 states:

The seller shall not be entitled to rely on the provisions of Articles 38 and 39 if the lack of conformity relates to facts of which he knew, or of which he could not have been unaware, and which he did not disclose.

[85] The experts agree that the buyer must first prove his entitlement to rely on Article 40 of ULIS. Mr. Germain expressed the opinion that if the buyer proves circumstances that may reveal that the seller had the requisite knowledge of facts under Article 40, there may be a shift in the burden of proof that would require the seller to prove that he did not have the requisite knowledge.

[86] The words in Article 40 “of which he could not have been unaware” are in contrast to words used in Article 38, referring to whether the seller “knew or ought to have known” of the possibility of redespatch of goods. Article 13 of ULIS provides that the expression “a party knew or ought to have known”, or any similar expression, refers to what should have been known to a person in the same situation.

[87] According to Professor Erauw, the time to consider the seller’s undisclosed knowledge of non-conformity would have to be when the goods were handed over. Professor Erauw states that application of Article 40 ULIS is conditional upon the buyer proving that the seller was grossly negligent as to the conformity of the goods delivered and that he remained silent while he knew, at the time of handing over the goods, of the breach of conformity that is alleged to have caused damage. Professor Erauw’s opinion is that there must be an element of subjective knowledge by the seller of the non-conformity at the time the goods were delivered.

[88] Mr. Germain provided an opinion that Article 40 is intended to target either bad faith or gross negligence on the seller’s part relating to its knowledge of the non-conformity. Mr. Germain also noted that in one case simple negligence was sufficient for a finding that the seller had the requisite knowledge for the Article 40 exception to apply. According to Mr. Germain, there is no requirement for subjective knowledge by the seller of the non-conformity for Article 40 to apply.

[89] The interpretation of “could not have been unaware” as it is used in ULIS Article 40 is addressed in Stefan Kroll, Loukas Mistelis and Pilar Perales Viscasillas, UN Convention on Contracts for the International Sale of Goods (Portland: Hart Publishing, 2011):

Different views exist about the interpretation of “could not have been unaware”. According to some commentary and case law, the lack of conformity must be obvious and thus gross negligence will not be sufficient. The reference has been interpreted as a mere facilitation of the difficulty in proving actual knowledge, rather than as an alleviation of the required standard of knowledge to gross negligence.

The prevailing and better view is to interpret the notion as to include cases of gross negligence. In light of the rationale of Art. 39, i.e. to give a seller the chance to adequately react to a previously unknown lack of conformity, it seems appropriate to deny a seller the benefit of relying on Art. 39 in all cases where his lack of necessary information is due to his own gross negligence.

[90] I agree with Professor Erauw that more than simple negligence, a purely objective standard, must be shown for the Article 40 exception to apply. Both Professor Erauw and Mr. Germain use the term “gross negligence” to describe the level of knowledge that a seller must have if he did not actually know of the non-conformity, although Professor Erauw’s opinion is that a level of subjective knowledge is required. I agree with the passage from Kroll’s text that the inclusion in Article 40 of the words “of which he could not have been unaware”, in addition to the word “knew”, when describing the required state of mind of the seller for Article 40 to apply, means that Article 40 could apply when the buyer has proven something less than actual, subjective, knowledge of the non-conformity by the seller. If the seller lacked actual knowledge of the non-conformity because the seller was grossly negligent in the manufacturing process in circumstances leading to a defect in the product, this, in my view, would be sufficient for Article 40 to apply to deny the seller of the benefit of relying on Article 39.

[91] EMK submits that whether or not an element of subjective knowledge of the non-conformity on the part of the seller is required, Meyn has not adduced any evidence to demonstrate that there is a genuine issue requiring a trial on the question of whether EMK had the requisite knowledge for the ULIS Article 40 exception to apply.

[92] In paragraph 13 of its Third Party Claim, Meyn pleads the particulars of its allegations against EMK, made in the alternative to its denial that the fire was caused or contributed to by defects in the Boiler, misinstallation of the thermal oil circulation pump, or the installation of an incorrectly sized burner or process unit, as alleged in the Amended Statement of Claim. Meyn pleads, among other things, that EMK:

a. Manufactured the Boiler “to include a metal plug(s) in the outer and/or middle coils, rendering one or more of the coils useless and prone to corrosion failure by stagnant and acidic oil;

b. Failed to remove the metal plug(s) during or after fabrication and assembly; and

c. Failed to notify Meyn and Lilydale of the presence, or the possibility of the presence, of the metal plug(s) and failed to provide Meyn with information on how to detect the presence of the metal plug (s) and remove same.

[93] On this motion, Meyn provided evidence from Clarence Lui, a partner in the law firm that represents Meyn in this litigation. Mr. Lui provided evidence of information that he received from Jamieson Halfnight, the lawyer who represents the plaintiff in this action. Paragraph 11 of Mr. Lui’s affidavit reads:

11. Jamieson Halfnight also advised me on March 30, 2017, and I verily believe, that the expected evidence of Sofina’s expert at trial will be that:

(a) A steel metal plug was present in a section of tubing between the outer coil and manifold of the Heater (“the Plug”);

(b) The Plug was very likely welded into the tubing at the time of manufacturing; and

(c) The presence of the Plug in the Heater caused or contributed to the fire that occurred on January 29, 2004 at 9620 56th Avenue in Edmonton, Alberta.

[94] Meyn did not provide any other evidence to support the existence of a defect in the boiler that would amount to a lack of conformity between the Boiler and the contract. Meyn also did not provide any other evidence to show that EMK knew of facts, or that there were facts of which EMK could not have been unaware, relating to a defect or non-conformity of the Boiler.

[95] EMK submits that Mr. Lui’s evidence does not satisfy Meyn’s obligation to put its best foot forward on this motion. EMK submits that this evidence amounts to no evidence at all with respect to the existence of a defect, or whether EMK had the requisite knowledge of any such defect that it failed to disclose, or whether any such defect caused or contributed to the fire. EMK submits that Meyn’s failure to tender evidence from a person with personal knowledge regarding any alleged defect in the Boiler, or EMK’s alleged knowledge of such a defect, should lead the court to draw an adverse inference.

[96] EMK points to the fact that Meyn requested an opportunity to conduct expert testing on the Boiler before the hearing of this motion and, nevertheless, Meyn has not adduced any evidence from an expert about any alleged defect in the Boiler. On this basis, EMK submits that there is no genuine issue requiring a trial on the question of whether Meyn can rely on the ULIS Article 40 exception. EMK submits that, therefore, this court should find that Meyn’s claim is time-barred pursuant to ULIS Article 39.

[97] Meyn submits that a fair and just adjudication of whether the exception in ULIS Article 40 applies in the context of this third party claim cannot take place prior to trial, where the evidence from the plaintiff is absent. Meyn submits that these concerns make summary judgment an inappropriate vehicle for determination of whether the exception in ULIS Article 40 applies. Meyn submits that I am unable to make the necessary findings of fact on the evidentiary record on this motion concerning whether ULIS Article 40 applies and, therefore, I am not able to reach a fair and just determination on the merits of this issue. Accordingly, Meyn submits that there is a genuine issue requiring a trial.

[98] In Hyrniak, Karakatsanis J. wrote, at para. 51, that “[t]here may be cases where, given the nature of the issues and the evidence required, the judge cannot make the necessary findings of fact, or apply the legal principles to reach a just and fair determination”.

[99] Karakatsanis J. also addressed the inquiry into the interest of justice that a motion judge must undertake when deciding whether to use the new fact-finding powers in Rule 20.04(2.1). Karakatsanis J. wrote, at para. 60:

The “interest of justice” inquiry goes further, and also considers the consequences of the motion in the context of the litigation as a whole. For example, if some of the claims against some of the parties will proceed to trial in any event, it may not be in the interest of justice to use the new fact-finding powers to grant summary judgment against a single defendant. Such partial summary judgment may run the risk of duplicate of proceedings or inconsistent findings of fact and therefore the use of the powers may not be in the interest of justice. On the other hand, the resolution of an important claim against a key party could significantly advance access to justice, and be the most proportionate, timely and cost-effective approach.

[100] In Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450 at paras. 33-37 the Court of Appeal cited this passage from Hryniak and held that the motion judge had erred in failing to assess the advisability of the summary judgment process in the context of the litigation as a whole. The Court of Appeal analyzed the summary judgment process that was followed in the complex situation in that case and concluded that the process risked inconsistent findings and substantive injustice.

[101] In this case, I agree with EMK that Meyn has not put forward any admissible evidence concerning any alleged defect in the Boiler or concerning whether EMK had the requisite knowledge that would allow Meyn to rely upon the exception in ULIS Article 40 to the requirement for written notice of any non-conformity under ULIS Article 39. The statement at paragraph 11 of Mr. Lui’s affidavit is merely a statement of information that the plaintiff’s lawyer expects that an expert witness called to give evidence at trial for the plaintiff will give. This is not admissible evidence of any defect in the Boiler, and it is not evidence that shows or tends to show that EMK had the requisite knowledge to allow Meyn to rely upon the ULIS Article 40 exception.

[102] Nevertheless, if summary judgment were to be granted in favour of EMK in the third party action, the issue of whether the fire was caused by a defect in the Boiler supplied by EMK would not be resolved. This is because the plaintiff will try to prove at the trial of the main action against Meyn that a defect in the Boiler included in the system supplied by Meyn caused or contributed to the damages that the plaintiff alleges that it suffered as a result of the fire. It is conceivable that findings of fact could be made by the trial judge that the Boiler was defective when it was supplied to Meyn. Depending on the findings made at trial, they could affect whether an inference could be drawn that EMK was grossly negligent in manufacturing the Boiler, and whether it could be inferred that EMK could not have been unaware of the defect. These findings could, therefore, affect whether the exception in ULIS Article 40 could have applied if EMK had remained a party.

[103] The additional complication that is introduced by motions for summary judgment in third party proceedings was addressed by the Court of Appeal in Hamilton (City) v. Thier + Curran Architects Inc., 2015 ONCA 64. In that case, two third parties, both contractors on a construction contract, brought motions for summary judgment for dismissal of the claims for contribution and indemnity made against them by the defendant. The motion judge agreed that the evidence supporting negligence on the parts of the third parties was so tenuous that there was no genuine issue for trial, and he granted summary judgment dismissing the third party claims.

[104] In Thier, the two contractors were also claimants against the City of Hamilton, another third party, and the City had alleged in its defence that they caused or contributed to the delays and costs of the project. Consequently, the summary judgment did not resolve the issue of responsibility of the two contractors for any construction delays.

[105] The Court of Appeal in Thier allowed appeals from the motion judge’s dismissals of the third party claims and held that the issues in the third party claims are inextricably linked to the issues in the main actions, and that summary judgment did not permit a fair and just determination of the third party claims on their merits.

[106] The Court of Appeal in Thier, at para. 18, acknowledged that the third parties were procedurally entitled to move for summary judgment, but noted a caveat to the appropriateness of such a motion:

Summary judgment is available in the case of third party claims. Rule 20.09 of the Rules of Civil Procedure so provides, and in Bongiardina v. York (Regional Municipality) this court observed that nothing in Rule 20 suggested that third party claims were to be considered on a different footing from the main action. That said, in Bongiardina this court issued a caveat:

[15] There might well be cases in which it would be inappropriate to bring a motion for summary judgment in respect of a third party claim. For example, if the third party claim could not be resolved without detailed knowledge of the factual circumstances that gave rise to the main action, a motion for summary judgment would be premature.

[107] In his reasons in Thier, Brown J.A. described the situation (one that arises in this case) in which a defendant in an action involving a third party is caught in the middle between the plaintiff and the third party, with a defendant really only knowing whether it has a claim against a third party for contribution and indemnity when it learns whether it has successfully defended the main action. Brown J.A., citing the decision of Sharpe J., as he then was, in Ese Sports Co. v. Continental Insurance Co. (1995), 1995 CanLII 19512 (ON CJ), 31 C.C.L.I. (2d) 184 (Ont. Gen. Div.), wrote:

That situation poses a tactical difficulty for the defendant: it would hardly be in its interests to show a powerful case of wrong-doing against the third party on a motion for summary judgment when that would only go to bolster the case of the plaintiff against it in the main action.

[108] In KWH Pipe v. Corix Water, 2014 ONSC 1443, a third party moved for summary judgment to dismiss the claim against it in an action arising from a leak on a section of polyethylene pipe. The moving party submitted that the record was devoid of anything beyond mere speculation that the pipe was fractured while in its care and, therefore, there was no genuine issue for trial on the third party claim against it. The motion judge agreed that there was no evidence linking causation for the fracture of the pipe to this third party, but concluded that it would not be fair and just to grant summary judgment in these circumstances because this would effectively result in a finding of fact that of the three parties involved in the litigation who admitted care and control of the pipe, the moving party did not cause the pipe to be fractured. This is an example of the court dismissing a motion for summary judgment because the nature of the proceeding was such that a decision on the third party’s motion for summary judgment would not be fair and just to the responding party.

[109] Having regard to these authorities, when I assess the advisability of the summary judgment process in the context of the litigation as a whole, I conclude that I am unable to reach a just and fair determination of the issues raised on this part of EMK’s motion for summary judgment.

[110] I reach this conclusion because:

a. The question of whether the damages suffered by the plaintiff from the fire at its plant were or were not caused or contributed to by a defect in the Boiler sold by EMK to Meyn will not be finally determined on this motion for summary judgment.

b. The issues raised in the third party action against EMK are intertwined with the issues in the main action against Meyn. There is a risk that a summary judgment in the third party action against EMK on the ground that there is no genuine issue requiring a trial on the question of whether EMK was grossly negligent in the manufacture of the Boiler could be inconsistent with findings of fact made at the trial of the main action as to the cause of the fire: see Marrocco v. Heft, 2017 ONSC 654, at para. 53.

c. The evidence that Meyn intends to rely upon at trial in respect of its claim against EMK will likely be the evidence to be tendered by Lilydale. I regard this case as an exceptional case, because for Meyn to comply with the usual requirement of “leading trump”, and putting its best foot forward by tendering all of the evidence available to it that EMK was grossly negligent, would require it to act against its own interests in the main action.

d. Because of the circumstances in which Meyn finds itself in this case, caught in the middle, I do not regard a summary judgment process that calls upon Meyn to act against its interests in the main action as one that will result in a fair and just adjudication of Meyn’s claim against EMK.

[111] I have concluded that, in these circumstances, granting summary judgment in favour of EMK on the basis that Meyn has not tendered evidence to show that there is a genuine issue requiring a trial on the question of whether EMK had the requisite knowledge for the ULIS Article 40 exception to apply will not provide a fair and just adjudication of Meyn’s Third Party Claim against EMK.

[112] This part of EMK’s summary judgment motion is dismissed.

Has EMK shown that summary judgment should be granted because there is no genuine issue requiring a trial on the question of whether Meyn’s claim was brought within a short delay / time as required by Article 1648 of the Belgian Civil Code?

[113] Even if the court were to conclude that the exception in ULIS Article 40 applies, a buyer’s claim can be barred under another provision in Belgian law, Article 1648 of the Belgian Civil Code.

[114] Belgian law has a general limitation period for claims based on contractual obligations of 10 years. Belgian law also has a special time period for claims based on non-conformity of goods where such non-conformity is based on a latent defect that is of a fundamental nature.

[115] Article 1648 of the Belgian Civil Code in the chapter on sales law provides (as translated by Professor Erauw):

Proceedings resulting from actionable defects must be instituted by the buyer, as soon as possible [or in a short time], depending on the nature of the defects and customary practice in the place where the sale was made.

Mr. Germain translated the requirement as within a “short delay”.

[116] According to Mr. Germain, to satisfy the requirement under Article 1648, the claim must be lodged with the court. Notification of a complaint is not enough. According to him, the determination of what constitutes a “short delay” depends on the unfettered discretion of the judge who determines the delay, who is to consider all of the circumstances, including the type of contract, the nature of the merchandise sold, the nature of the defect, custom, the capacity of the parties, and the acts the parties have taken within and outside of the legal process. According to Mr. Germain, a case-by-case analysis is required and, according to the case law, it is rare for a “short delay” to exceed one year and, in certain cases, a period of a few months will be considered excessive. According to Mr. Germain, based upon a majority of the case law and literature, the starting point of the short delay is discovery of the defect by the buyer.

[117] According to Professor Erauw, the time periods that are applied are generally limited to between six months and a maximum of two years from the date the buyer discovered the defect. The length of time depends upon the type of contract and claim and the circumstances of the delay in commencing the action. Professor Erauw agrees with Mr. Germain that a case-by-case analysis is required.

[118] The relevant chronology of events is:

a. On March 10, 2006, Meyn was served with Lilydale’s claim in the Ontario action and in the Alberta action.

b. On May 12, 2006, Meyn sent EMK’s counsel copies of its Statement of Defence in the Alberta action and its Third Party Notice indicating that Meyn was claiming indemnity and contribution in respect of any claim which may be obtained by Lilydale against it. The Third Party Notice was issued by the Clerk of the Court of Queen’s Bench of Alberta on May 12, 2006.

c. On November 12, 2006, Meyn moved to stay the Ontario action on the ground that Alberta was the convenient forum and/or the Ontario action was an abuse of process because of the extant Alberta action. This motion was dismissed on February 13, 2007, and an appeal of the order dismissing the motion was dismissed by the Court of Appeal on February 21, 2008.

d. On May 22, 2008, Meyn served EMK and Lilydale with its Statement of Defence and Crossclaim in the Ontario action.

e. On July 3, 2009, the Alberta action was formally discontinued by Lilydale.

f. On December 7, 2016, Meyn served its Fresh as Amended Statement of Defence and its Third Party Claim against EMK.

[119] The starting point for the calculation of the “short time” is the date of discovery of the defect by the buyer. In the case of an intermediary buyer (such as Meyn) against its supplier (such as EMK) the short time will commence at the time the intermediary buyer is sued by its customer. In this case, the starting point for the calculation of the “short time” is the date that Meyn was served with Lilydale’s claim, March 10, 2006.

[120] The “short time” requirement refers to the commencement of a legal action to enforce the right, not the mere notification of a complaint. Meyn submits that issuance and service by Meyn of the Third Party Notice in the Alberta action two months and a few days after Meyn was served with the Statement of Claim in the Alberta action was well within the “short period” and stopped the running of this period of time. Meyn relies upon Article 2246 of the Belgian Civil Code which provides that “[a] summons, even one brought before the wrong court, stops the limitation period”.

[121] The evidence of Professor Erauw was that the Belgian Supreme Court had decided that the period of time described in Article 1648 as a “short time” or “short delay” was not a limitation period. Professor Erauw’s opinion is that Article 2246 of the Belgian Civil Code is not applicable to Article 1648 because it is not a limitation period.

[122] Mr. Germain, in his supplementary report dated May 30, 2017, expressed the opinion that the rules on interrupting the statute of limitations apply to Article 1648 in any case. In his second supplementary report, Mr. Germain gave his opinion that there is controversy under Belgian law as to whether Article 1648 is a limitation period that is unresolved. Mr. Germain’s opinion is that nothing turns on this because the rules on interpreting statutes of limitations should, in any event, be applied by analogy to Article 1648.

[123] EMK also submits that even if Article 2246 applies, the period of time under Article 1648 is only interrupted if the claim was brought in the wrong court, one that lacked jurisdiction. EMK submits that there is no question that the Alberta court did not lack jurisdiction. Lilydale’s claim in Alberta did not proceed because it was bought outside of the limitation period under Alberta law.

[124] In support of this submission, EMK relies upon evidence from Mr. Germain on his cross-examination. Mr. Germain was asked about his opinion in respect of Article 2246 of the Belgian Civil Code:

91 Q. Article 2246 provides that a limitation period may be stopped when a court proceeding is commenced, even if the court before which the proceeding is brought does not have jurisdiction?

A. Exactly.

92 Q. You agree that Article 1648 of the Belgian Civil Code, as a matter of Belgian law, is not a limitation period?

A. This is a controversial question in Belgium, so we have advice stating that it is not a time limitation period and advice and decision stating that it is a time limitation period. The Supreme Court stated that Article 1648 is not a limitation period, indeed.

93 Q. You agree with me, Mr. Germain, that it is in a judge’s discretion to determine what constitutes a short time under Article 1648?

A. Yes.

94 Q. It is your understanding, Mr. Germain, that the Alberta Court was found to lack of jurisdiction over the claims in this matter?

A. Yes, that is my understanding.

95 Q. If your understanding was incorrect and the Alberta Court did have jurisdiction over the claims in this matter, then Article 2246 would not be relevant?

A. Yes.

[125] EMK submits that based upon this evidence, Article 2246 of the Belgian Civil Code is irrelevant. EMK also submits that the policy rationales of Article 2246 have no application where Meyn’s Third Party Notice against EMK in the Alberta action was not issued to preserve a claim against EMK because, to Meyn’s knowledge, the Alberta limitation period had expired. EMK submits that Meyn’s Alberta Third Party Notice was filed for the purpose of building a record on its forum motion in Ontario. EMK submits that, in any event, Meyn did not plead its claim based upon ULIS Article 40 in the Alberta action at any time, nor in the Ontario action until December 2016.

[126] Professor Erauw agreed on cross-examination that one of the policies behind Article 2246 is that a seller has notice of a legal claim even if it is brought in the wrong court. He also agreed that another policy behind Article 2246 is that a buyer cannot be said to have renounced his or her claim if he or she attempted to pursue it in another court.

[127] On this motion, I do not find it to be necessary to decide whether Article 1648 of the Belgian Civil Code is or is not a limitation period under Belgian law, or whether, under Belgian law, Article 2246 of the Belgian Civil Code applies to Article 1648. Where a buyer advances a claim based upon non-conformity of goods based upon a latent defect that is of a fundamental nature, in order to satisfy the requirement of Article 1648, the buyer must institute proceedings in a court.

[128] On the evidence before me, Meyn instituted a legal proceeding in the Court of Queen’s Bench of Alberta on May 12, 2006, only two months and a few days after Meyn was served with Lilydale’s statements of claim in the Alberta action and the Ontario action. Meyn claimed indemnity and contribution from EMK on the ground that if the fire was caused by any defects in the equipment which Meyn supplied to Lilydale, EMK is in breach of the terms of sale to Meyn and in breach of the duties of care owed to Meyn and Lilydale, particulars of which include the allegations of defects in design, fabrication and inspection as alleged in the Statement of Claim.

[129] Meyn commenced its crossclaim against EMK in the Ontario action on May 22, 2008 and, on this day, Lilydale’s Alberta action against Meyn and EMK had not yet been discontinued, and the proceeding commenced by Meyn’s Third Party Notice in Alberta against EMK had not been formally terminated.

[130] In these circumstances, considering the nature of the claim advanced by Lilydale, the number of years that had passed since the fryer and oven system had been installed, and the number of parties involved, I conclude that the commencement of the proceeding in Alberta by the issuance of a Third Party Notice occurred within a short time from the date that Meyn had notice of Lilydale’s claim. The Alberta court had jurisdiction over these claims and, through service of Meyn’s Third Party Notice in the Alberta action, EMK was given notice of the claim that Meyn was making. The fact that Lilydale’s Alberta action was discontinued in July 2009 (effectively terminating Meyn’s third party proceedings against EMK in Alberta) does not affect whether Meyn complied with the requirements of Article 1648.

[131] EMK submits that the first time Meyn alleged the facts required to found an Article 40 exception was in its Third Party Claim of December 2016 - after it received notice of EMK’s intended motion for summary judgment. EMK submits that Meyn’s previous crossclaim relied solely on allegations of negligence and domestic sale of goods law. EMK submits that Meyn’s allegations in the Third Party Claim that EMK “knew or could not have been unaware” of a defect in the Boiler and “did not disclose” same to Meyn are a pleading of a new cause of action. EMK submits that, therefore, neither Meyn’s May 2006 Third Party Notice in the Alberta action nor its May 2008 crossclaim in the Ontario action qualify as a proceeding “resulting from actionable defects” using Professor Erauw’s translation of Article 1648. EMK submits that Meyn’s December 2016 Third Party Claim is the first time a claim was made for the Article 40 exception, and that this claim is barred as having been commenced outside of the 10 year limitation period under Belgian law for a claim based on contractual obligations.

[132] In his June 7, 2017 report, Professor Erauw states that ULIS Article 40 does not itself provide a time restriction for commencement of an action, and that Belgian law on time restrictions is only relevant where Meyn proves that it is entitled to rely on the Article 40 exception to the Article 39 notice requirement. Under Belgian law, a buyer in Meyn’s position is confronted with two obstacles, either of which can operate to bar its claim. Meyn must both (i) establish that it qualifies for the ULIS Article 40 exception to the ULIS Article 39 notice requirement, and (ii) satisfy the time restriction in Article 1648 of the Belgian Civil Code for commencement of a legal proceeding in a court “resulting from actionable defects”.

[133] I do not agree with EMK that because the Third Party Notice in the Alberta action does not refer to ULIS Article 40, or to the factual requirements for this exception to apply, the commencement of this proceeding does not satisfy the requirement in Article 1648 of the Belgian Civil Code that a legal proceeding be commenced within a short time following Meyn’s discovery that there may have been a latent defect in the system that it sold to Lilydale. Article 1648 does not refer to ULIS Article 40. ULIS Article 40 itself does not provide any time restriction for a claim that this exception applies. These are two separate requirements. I conclude that EMK has failed to show that it is entitled to summary judgment because Meyn did not satisfy the time requirement in Article 1648 of the Belgian Civil Code.

[134] I therefore dismiss the part of EMK’s motion for summary judgment which is based upon Article 1648 of the Belgian Civil Code.

[135] My conclusions on these two issues relating to the application of Belgian law to the facts of this case are sufficient for me to decide EMK’s motion for summary judgment. If I am found to have erred in concluding that Belgian law, and not Ontario law, is the law that has the closest and most substantial connection to the contract between Meyn and EMK, I go on to address EMK’s motion for summary judgment on the assumption that Ontario law applies.

Has EMK shown that summary judgment should be granted because there is no genuine issue requiring a trial on the question of whether Meyn has satisfied its burden under CISG Article 40 (an Ontario law) to show that there was a lack of conformity of the Boiler which relates to facts of which EMK knew or could not have been unaware, and which EMK did not disclose?

[136] The United Nations Convention on Contracts for the International Sale of Goods (“CISG”) was incorporated into Ontario law and in force effective May 1, 1992. At the time EMK sold the Boiler to Meyn in December 1993, the CISG govern contracts for the sale of goods that met the requirements of Article 1(1)(b), which states:

This Convention applies to contracts of sale of goods between parties whose places of business are in different States:

… (b) when the rules of private international law lead to the application of the law of a Contracting State.

[137] The CISG applies to the contract between EMK and Meyn, if it is governed by Ontario law, because it is a contract for the sale of goods between parties, EMK and Meyn, whose places of business are in different States (Belgium and Canada).

[138] Article 39(2) of the CISG gives a buyer a maximum of two years from the date of delivery to give notice of any lack of conformity to the seller, failing which notification the buyer is prohibited from bringing a claim (unless it can prove the CISG Article 40 exception).

[139] CISG Article 40 is substantially identical to ULIS Article 40. CISG Article 40 states:

The seller is not entitled to rely on the provisions of articles 38 and 39 if the lack of conformity relates to facts of which he knew or could not have been unaware and which he did not disclose to the buyer.

[140] As with ULIS Article 40, the burden is on the buyer to establish the exception (including that the seller knew about the defects in the delivered goods or could not have been unaware of those defects). It is not sufficient for the buyer to prove ordinary negligence. The knowledge requirement in CISG Article 40 is one of knowledge (“knew”) or implied or constructive knowledge (“could not have been unaware”).

[141] As with ULIS Article 39, there is no evidence that Meyn provided to EMK notification of the alleged lack of conformity that is now relied upon within the time prescribed by CISG Article 39. Therefore, Meyn is prima facie time barred from seeking remedies or claiming damages based on the alleged defect, unless it can prove that (i) it is entitled to rely on the CISG Article 40 exception, and (ii) such claim was brought within the applicable limitation period.

[142] EMK submits that there is no genuine issue requiring a trial with respect to CISG Article 40 because Meyn did not adduce evidence demonstrating such an issue. EMK submits, as it did in respect of ULIS Article 40, that Meyn has failed to put its best foot forward and to “lead trump”, despite its obligation to do so. EMK submits that it is not necessary for me to make any findings regarding liability for the fire or any potential defect present in the Boiler to decide this motion and, therefore, there is no risk that granting summary judgment will result in findings that are inconsistent with findings to be made in the main action.

[143] In respect of EMK’s submissions concerning CISG Article 40, I adopt my reasons for concluding that I am unable to reach a just and fair determination of the issues raised on EMK’s motion for summary judgment in reliance on ULIS Article 40. The question of whether the damages suffered by the plaintiff from the fire at its plant were or were not caused or contributed to by a defect or non-conformity in the Boiler supplied by EMK to Meyn would not, even if Ontario law were found to apply to the contract, be finally determined on EMK’s motion for summary judgment.

[144] I am not satisfied that there is no risk that there would not be findings at the trial that would be inconsistent with granting summary judgment in favour of EMK. Based upon the authorities to which I have referred, including Hyrniak, Baywood, Thier and KWH Pipe, I am not satisfied that, in the context of the litigation as a whole, it would be just and fair to require Meyn to provide evidence on this motion, against its own interests in the main action, to support a conclusion that EMK knew or could not have been unaware of a lack of conformity of the Boiler.

[145] For these reasons, if I had found that Ontario law governs the contract between Meyn and EMK, I would not have granted EMK’s motion for summary judgment on the ground that Meyn failed to give notice under CISG Article 39 and that Meyn failed to provide evidence to show that that there is a genuine issue for trial as to whether EMK had the requisite knowledge for the exception in CSIG Article 40 to apply.

Has EMK shown that summary judgment should be granted because there is no genuine issue requiring a trial on the question of whether Meyn’s claim was commenced after the expiry of the limitation period under Ontario law?

[146] EMK submits that under Ontario law, the limitation period for Meyn’s claim against EMK is governed by s. 18 of the Limitations Act which applies to and bars Meyn’s claim against EMK.

[147] Meyn’s Third Party Claim states:

1. The defendants … claim against the third parties … for:

(a) Full contribution, indemnity and other relief over in respect of any amounts, including legal costs, which may be awarded to the plaintiff as against Meyn in the main action, if any;

(b) Damages for breach of contract in a sum equivalent to any amounts that Meyn’s found liable to the plaintiff in the main action, if any;

[148] Section 18 of the Limitations Act applies to claims that arise in both tort and contract: Canaccord Capital Corporation v. Roscoe, 2013 ONCA 378 at paras. 24, 29.

[149] EMK submits that Meyn’s Third Party Claim is in substance a claim for contribution and indemnity. I agree. Accordingly, both subparagraphs 1(a) and (b) of the prayer for relief in Meyn’s Third Party Claim are governed by s. 18 of the Limitations Act.

[150] Section 18 of the Limitations Act provides:

For the purposes of subsection 5(2) and section 15, in the case of a claim by one alleged wrongdoer against another for contribution and indemnity, they day on which the first alleged wrongdoer was served with the claim in respect of which contribution and indemnity is sought shall be deemed to be the day the act or omission on which that alleged wrongdoer’s claim is based took place.

[151] EMK submits:

a. The appropriate time for commencing claims for contribution and indemnity has already been determined in this action on the motion by Allied in which D. Wilson J. granted Allied’s motions for summary judgment – against both EMK and Meyn – on the basis that the third party claims for contribution and indemnity were issued outside of the two-year limitation period prescribed by s. 18 of the Limitations Act. Meyn is bound by this decision and precluded from relitigating whether the discoverability principle applies to claims for contribution and indemnity that are governed by s. 18 of the Limitations Act.

b. In any event, even if Meyn is not bound by the decision of D. Wilson J. on the Allied motion for summary judgment, Meyn’s Third Party Claim is barred by s. 18 of the Limitations Act because the discoverability principle does not apply to claims for contribution and indemnity that are subject to s. 18.

c. Even if, contrary to the decision of D. Wilson J., the discoverability principle in s. 5(1) of the Limitations Act applies to a claim for contribution and indemnity that is subject to s. 18 of the Limitations Act, Meyn has not rebutted the presumption that applies under s. 5(2) of the Limitations Act that it discovered its claim against EMK on the day on which Meyn was served with Lilydale’s claim.

d. Meyn knew that a proceeding would be an appropriate means to seek to remedy its injury, loss or damage on the day that it was served with Lilydale’s claim and not, as Meyn submits, when the forum motion was finally decided.

e. There would have been no prejudice to Meyn in the forum motion if Meyn had pleaded in the Ontario action before the motion was finally decided.

[152] Meyn submits:

a. The discoverability principle under s. 5 of the Limitations Act applies to claims for contribution and indemnity that are governed by s. 18 of the Limitations Act, and s. 18 introduces only a rebuttable presumption that Meyn’s claim was discovered on the day on which it was served with Lilydale’s claim, which it bears the onus to displace.

b. A proceeding against EMK would not have been an appropriate means to remedy Meyn’s claim until March 6, 2008, the date of the final determination of Meyn’s forum motion to stay the Ontario action, because if Lilydale was required to pursue its claims in Alberta then all of its claims would be statute barred because of Alberta’s 10 year ultimate limitation period that applies regardless of the applicable law of another jurisdiction.

c. Meyn (and EMK) did not plead in the Ontario action while the forum issue was being decided. Doing so may have been prejudicial to Meyn’s desired result in the forum dispute, and pleading would have been unnecessary if Alberta was found to be the appropriate forum.

d. D. Wilson J. was incorrect in her decision on the Allied motion for summary judgment that the discoverability principle does not apply to a claim for contribution and indemnity. The law regarding s. 5(1)(a)(iv) of the Limitations Act has changed since the Allied decision. Meyn is not bound by the decision of D. Wilson J. on the Allied motion, and is at liberty to argue on the motion before me that this decision was incorrectly made.

[153] I first address whether Meyn is bound by the decision of D. Wilson J. on Allied’s summary judgment motion and precluded from relitigating her decision. If so, Meyn would have commenced its Third Party Claim against EMK outside of the applicable two year limitation period under s. 18 of the Limitations Act.

[154] On Allied’s motion, D. Wilson J. decided that (a) the discoverability principle in s. 5 of the Limitations Act does not apply to claims subject to s. 18 of the Limitations Act; and (b) alternatively, even if the discoverability principle applies, EMK and Meyn failed to issue their third party claims against Allied within two years from discovery of the claim, and for EMK and Meyn to wait for the determination of the motion to stay the Ontario proceedings does not constitute a reasonable approach to the litigation.

[155] If I had found that Ontario law applies, I would conclude for the following reasons that Meyn is bound by the decision of D. Wilson J. and that it is precluded from relitigating the issues that were decided by D. Wilson J.:

a. The questions decided by D. Wilson J. are the same questions that are before me.

b. The decision of D. Wilson J. is final.

c. The questions decided by D. Wilson J. were fundamental to her substantive decision to dismiss the third party claims by Meyn and by EMK against Allied.

d. Although EMK was not a party to Meyn’s Third Party Claim against Allied and Weishaupt and, therefore, issue estoppel does not apply because of lack of mutuality, the integrity of the judicial process requires that Meyn be bound by the decision of D. Wilson J. Relitigation of the decision of D. Wilson J. is not necessary to enhance the credibility and effectiveness of the adjudicative process as a whole. The doctrine of abuse of process precludes Meyn from relitigating the decision of J. Wilson J. on the motion before me: Toronto (City) v. C.U.P.E., Local 79, 2003 SCC 63 at paras. 37, 38, 42, 43, 44, 46, 51, 52, 53, and 55.

[156] The fact that Meyn took no position on the motions heard by D. Wilson J. does not lead to the conclusion that it should not be bound by her decision. Meyn was affected by Allied’s summary judgment motion, and it was open to Meyn to participate on the motions heard by D. Wilson J. and to appeal her decision if, in Meyn’s judgment, it was made in error. Meyn may have had sound tactical reasons for its decision not to oppose Allied’s motion. EMK made submissions that, had they been accepted, would also have benefited Meyn. By choosing not to oppose Allied’s motion, Meyn is in no different a position than if it had participated fully. EMK is bound by the decision of D. Wilson J. on the issues that she decided, and it is precluded from relitigating these issues. There is no reason that Meyn should not be bound as well.

[157] I do not consider it to be necessary for me to decide whether, in view of decisions released at the trial and appellate levels since the decision on the Allied motions for summary judgment, D. Wilson J. correctly decided that the discoverability principle in s. 5 does not apply to claims for contribution and indemnity that are subject to s. 18 of the Limitations Act. I also do not consider it to be necessary for me to decide whether, as Meyn submits, EMK waived its right to rely on the limitation period defence before it brought its motion for summary judgment.

Disposition

[158] For the foregoing reasons, I make an order:

a. Dismissing EMK’s motion for summary judgment; and

b. Granting EMK’s motion for alternative relief and declaring that the contract between Meyn and EMK for the purchase and sale of the Boiler is governed by Belgian law.

[159] If the parties are unable to agree on costs, Meyn and EMK may make written submissions within 20 days, and these parties may make responding submissions within 15 days thereafter. If so advised, the parties may make very brief reply submissions within 5 days thereafter.

Cavanagh J.

Released: November 22, 2017

CITATION: Sofina Foods Inc. v. Meyn Canada Inc., 2017 ONSC 6957

COURT FILE NO.: 06-CV-30438000A3

DATE: 20171122

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

LILYDALE COOPERATIVE LIMITED SOFINA FOODS INC.

Plaintiff

– and –

MEYN CANADA INC., MEY-CAN CANADA EQUIPMENT LTD., and MEYN FOOD EQUIPMENT INC., EMK NV and ELBOMA MOORTGAT KONSTRUKTIE NV

Defendants

– and between –

ELBOMA MOORTGAT KONSTRUKTIE NV and EMK NV

Third Parties

REASONS FOR JUDGMENT

Cavanagh J.

Released: November 22, 2017