Court File and Parties

COURT FILE NO.: 01-CV-218464 CM3

DATE: 20180206

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: ATOMIC ENERGY OF CANADA, Plaintiff

AND:

ALLIANZ GLOBAL RISKS US INSURANCE COMPANY, formerly ALLIANZ INSURANCE COMPANY OF CANADA, Defendant

BEFORE: Cavanagh J.

COUNSEL: Ahab Abdel-Aziz and David Woodfield, for the Plaintiff

Brian J.E. Brock, Q.C. and Eric J. Adams and Melissa J. Miles, for the Defendant

HEARD: February 5, 2018

Endorsement

[1] This trial was scheduled to begin on February 5, 2018 for 7 weeks.

[2] The action involves a claim by the plaintiff, Atomic Energy of Canada Limited (“AECL”), for (i) a declaration that it is entitled to full indemnity for all losses, damages and expenses sustained in the course of, or related to, construction, installation, reconstruction or repair to its property including two Maple Reactors and an Isotope Production Facility and all work incidental thereto (the “MMIR Project”) pursuant to a Course of Construction Policy of Insurance issued by the defendant Allianz Insurance Company of Canada (“Allianz”); and (ii) payment by Allianz to AECL of the amount required to be paid pursuant to the terms of the said policy.

[3] At the opening of this trial I heard a motion by Allianz for relief arising from (i) the disclosure by AECL on January 11, 2018 of the existence of physical evidence relevant to the issues of liability at the trial, and (ii) production by AECL after January 11, 2018 of additional documents.

[4] After hearing submissions on behalf of the parties and reviewing the briefs of materials that were filed, I granted the request by Allianz for an adjournment of the trial. These are my reasons.

[5] This action was commenced in 2001. The representative of AECL was examined for discovery between March 2010 and October 2015. The action was scheduled to proceed to trial on May 29, 2017 but, at the request of AECL, it was adjourned by Wilson J. to begin on February 5, 2018, peremptory to both parties. AECL requested the adjournment so that it could seek leave to deliver an amended Statement of Claim.

[6] On May 29, 2017, AECL brought a motion to amend its Statement of Claim. By order dated September 19, 2017, Akbarali J. granted leave to AECL to amend its Statement of Claim. An Amended Statement of Defence and Amended Reply were also delivered.

[7] On October 13, 2017, the parties agreed to further discovery to be conducted by way of written interrogatories. The parties exchanged written questions on discovery on October 31, 2017. Allianz answered the questions asked of it on December 5, 2017. AECL provided responses to the written interrogatories on December 5 and December 19, 2017, and it maintained a number of refusals.

[8] On January 4, 2018 Allianz brought a motion for an order (i) compelling AECL to answer written questions on discovery that were refused; and (ii) should AECL provide new substantive evidence in response to any of the questions refused, for an adjournment of the trial, if required, with costs thrown away.

[9] On January 5, 2018, counsel for AECL advised that it would answer the questions that had been refused. By letter dated January 11, 2018, AECL provided answers to these questions. Allianz requested additional information in response to these questions, and additional information was provided by AECL. At the time that I heard the motion by Allianz, the position taken by AECL was that it had fully answered all of the outstanding questions. Allianz took the position that there were still some answers that required additional clarification and further information.

[10] At issue in the action is the cause of the failure of shut-off rods at the MMIR Project. AECL has pleaded that particles were introduced into the operating systems of the MMIR Project because of deficient installation work and that these particles caused the shut-off rods to fail.

[11] On January 11, 2018, AECL advised that it has in its possession particles that are identified in its pleading, and that the particles are being stored at the offices of AECL’s legal counsel. After inquiries by Allianz, AECL advised that it also has piston rods and other components in its possession. AECL has also produced a significant number of additional documents during the period of time after January 11, 2018, some of which relate to the particles and other physical evidence.

[12] AECL provided evidence that its external legal counsel only became aware of the existence of the physical evidence on or about December 15, 2017. This was not challenged by Allianz.

[13] Following receipt of the information from AECL on January 11, 1018, Allianz delivered an Amended Notice of Motion and requested an order precluding AECL from relying upon or entering into evidence the documents contained in its Further Supplementary Affidavit of Documents as well as an order precluding AECL from relying upon or entering into evidence at trial the particles and an order precluding AECL from relying upon or entering into evidence at trial the piston rods and SOR components which AECL. Allianz still sought the relief that had been requested on its initial motion.

[14] In its factum for this motion, Allianz requested an order that AECL be precluded from relying upon the physical evidence at trial or entering into evidence the documents disclosed after January 11, 2018. In the alternative, Allianz requested an order that the trial be adjourned on terms and with costs, and to permit Allianz with an opportunity to review, discover on and receive expert advice in relation to the physical evidence and documents that were recently disclosed. Allianz requested that the court refuse to allow AECL to rely upon the newly disclosed evidence, such that the peremptory trial date can be maintained.

[15] At the hearing of Allianz’ motion, counsel for Allianz submitted that whether or not an order was made precluding AECL from relying upon or entering into evidence the physical evidence, Allianz was requesting an adjournment of the trial in order to (i) arrange for an expert to inspect and analyze the particles and other materials included in the physical evidence that had been located and deliver an additional expert report, if needed; and (ii) conduct further discovery with respect to the physical evidence and the additional documents that had been produced since January 11, 2018. Counsel for Allianz submitted that Allianz would be unfairly prejudiced if it was forced to proceed with the trial without conducting the further expert analysis of the physical evidence and undertaking the additional discovery, and he submitted that this could not be done according to a schedule that would preserve the dates that had been set aside for trial.

[16] In response to questions from me, counsel for AECL advised that in order to allow the parties to proceed with the trial, AECL would agree not to enter into evidence the particles or other physical evidence that had been located (with the exception of physical evidence the existence of which had been disclosed in an expert report delivered in 2016). AECL was willing to have a representative attend for further discovery immediately, so that most of the time that was set aside for this trial would not be lost.

[17] Counsel for Allianz reiterated in reply that his client needed to undertake an inspection and analysis of the particles and, perhaps, other parts of the physical evidence, and that this simply could not be completed within a timeframe that would allow the time that had been set aside for trial to be used. Counsel also reiterated that additional oral examination for discovery on the documents that had been produced on and after January 11, 2018 would be needed.

[18] AECL does not wish to have the trial of the action delayed again, but it does not submit that it will suffer prejudice if the adjournment is granted.

[19] The motion by Allianz and its request for an adjournment resulted from the late disclosure by AECL of the existence of the particles and other physical evidence, and late production by AECL of documents, some of which related to the physical evidence. There was an undertaking given on the examination of AECL’s representative on May 1, 2015 to provide “evidence” that the failure of the shut-off rods resulted from the failure of a contractor to work according to specification and from the introduction of debris as a result of their failures. The physical evidence and some of the documents produced on and after January 11, 2018 constitutes such evidence. AECL is responsible for its failure to fulfill this undertaking in a timely way.

[20] This is an important case for both parties. Both sides agree that the particles are of central importance to the trial, although AECL submits that the physical particles will play a very limited role in the trial itself.

[21] I conclude that it would be unjust to force Allianz to proceed with the trial of this action now, without providing an opportunity for it to obtain expert advice concerning and, if necessary, an analysis of the particles and other physical evidence, and to conduct additional discovery with respect to the physical evidence and the documents produced on and after January 11, 2018. I am satisfied that it would not be reasonably possible for Allianz to complete this work in the coming days and still make use of time that was set aside for this trial. I therefore grant Allianz’ request for an adjournment of the trial of this action. Although the position taken by Allianz at the hearing of its motion with respect to the need for an adjournment differs from the position expressed in its factum, I note that the request for an adjournment was included by Allianz as part of the relief requested in its Notice of Motion and in its Amended Notice of Motion.

[22] Allianz requested an opportunity to make written submissions as to costs. Allianz is to make its submissions within two weeks from February 5, 2018. AECL is to make responding submissions within two weeks thereafter.

Cavanagh J.

Date: February 6, 2018