Court File and Parties

COURT FILE NO.: CV-17-576437 DATE: 20190514 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Nexen Energy, Plaintiff AND: ITP SA, Defendant

BEFORE: Master P.T. Sugunasiri

COUNSEL: B. Berg and M. Shapiro, Counsel for the Plaintiff G. Pratte and C. Muir, Counsel for the Defendant

HEARD: May 14, 2019

Reasons for Decision

Overview

[1] In July of 2015, a pipeline in the Athabasca oil sands in Alberta ruptured and released 5,000 cubic meters of boiler feed water and produced emulsion into the surrounding environment (the “Release”). The pipeline was one of three designed and built in conjunction with Nexen’s newly constructed satellite facility that was meant to provide additional bitumen for upgrading and processing at its existing Long Lake Facility.

[2] ITP is a French company that provided its “pipe in pipe” (PIP) technology to Nexen for the pipeline project. A PIP is a double-walled pipeline system with an inner and outer pipe. ITP’s technology uses a micro-porous insulation between the inner and outer pipe, which can be coupled with heating wires if necessary. ITP provided its service under a negotiated Purchase Order agreement (“PO”).

[3] Nexen commenced identical actions in Alberta and Ontario against ITP and other project participants for contract and tort damages suffered from the Release. None of the parties operate in Ontario. However, the PO identifies Ontario as the exclusive dispute resolution forum “with respect to any matters set forth herein”.

[4] The parties have agreed to stay the Ontario action in favour of Alberta. However, ITP would like to rely on the forum selection clause to have Ontario determine a discreet issue of law before the Ontario action is stayed.

[5] Despite Mr. Pratte’s able submissions, I grant Nexen an immediate stay of the Ontario action. Having agreed to attorn to Alberta to resolve the dispute between the parties, it is in the interests of justice and judicial economy to have all matters adjudicated there.

Relevant Background Facts

[6] According to Nexen, the Release was caused by a rupture of the inner pipe of ITP’s PIP system, which in turn led to a rupture of the outer pipe and a discharge into the environment. On June 2, 2017, Nexen commenced actions in Ontario and Alberta. It seeks $450 million plus further amounts to be proven at trial including lost revenue. It also seeks $45 million for environmental cleanup costs against ITP. It grounds its claims in breach of contract, negligence, negligent misrepresentation, gross negligence, failure of a duty to warn, and a breach of the Alberta Sale of Goods Act. ITP has defended the Alberta action but not the Ontario one. In its Alberta defence, it pleads the forum selection clause in the PO.

[7] The parties agree that there is a valid forum selection clause that governs disputes related to matters set out in the PO. The clause states:

This Purchase Order shall be interpreted with, and shall be governed by, the laws of the Province of Alberta and the federal laws of Canada applicable therein…and the Contractor and the Owner irrevocably attorn to the exclusive jurisdiction of the courts of the Province of Ontario, in the City of Toronto…with respect to any matters set forth herein.

[8] Section 18 of the PO sets out terms with respect to the allocation of liability, liability for consequential damage and monetary limits. In addition, it appears that a claim for gross negligence may be exempt from some of the limits on liability contemplated by the section.

[9] In April of 2018, ITP delivered a Notice of Motion in the Ontario proceeding under Rule 21.01(1) seeking the Court’s ruling on the interpretation of subsections 18(e) and (f) of the PO which it asserts limits ITP’s potential liability to Nexen and scope of damages. In particular, it seeks a declaration that the PO’s consequential damages clause precludes Nexen’s claim for consequential damages in its entirety. This would eliminate Nexen’s claim for lost profits over the course of several years which ITP states would be in the millions of dollars.

[10] In response, Nexen moved to stay its own action in Ontario such that ITP’s preliminary motion would move to Alberta. Pleadings have been exchanged in the Alberta action and the parties are at the stage of drafting a Complex Litigation Plan under the supervision of Justice Dickson who has been managing the case since June of 2018.

Law and Analysis

[11] In the normal course, commercial players who negotiate a forum selection clause should be held to their bargains. This give certainty to commercial dispute resolution and allows sophisticated parties to determine their own path. If a commercial party wishes to deviate from a forum selection clause, it must show strong cause as to why the court should not enforce it. Even where it can do so, it must persuade the court that the forum it suggests is the most convenient one. [1]

[12] The circumstances of this motion are different. The issue here is not whether there is strong cause to deviate from the forum selection clause or whether Alberta is the more convenient forum. ITP has agreed to have the action adjudicated in Alberta. But for ITP’s Rule 21 motion, the parties agree to the stay. The issue before me is whether ITP can use the forum selection clause to pick and choose where different parts of the claim against it are adjudicated. In my view, it cannot. I explain below.

Can ITP use the forum selection clause to adjudicated part of the claim in Ontario?

[13] Neither party has provided me with jurisprudence that contemplates the partial use of a forum selection clause. The parties agree that if a party wishes to deviate from such a clause, it must show that there is strong cause to do so and that the alternative forum is clearly better. In the unique circumstances of this case, there is strong cause to deviate from the clause, stay the Ontario action, and send ITP’s motion to Alberta. ITP cannot use the forum selection clause to “slice and dice” the case.

[14] ITP argues that it is entitled to rely on its bargain and that there are no special circumstances, as required in the jurisprudence, to disallow it from bringing its motion in Toronto. It states that the motion relates to a discreet issue between it and Nexen.

[15] I accept ITP’s evidence that it purposely chose Ontario as its dispute resolution venue with respect to disputes about the PO. However, there are four special circumstances that override the forum selection clause, especially in the selective way ITP wishes to use it. First, the parties are now quite far from the bargain they made. While on the one hand Nexen has attorned to Ontario by commencing an action there, [2] ITP has attorned to Alberta by defending there (despite it pleading the forum clause in its defence) It has not brought a motion in Alberta to enforce the forum selection clause and stay the Alberta action as against it. In fact, ITP does not object to the action being tried entirely in Alberta but for the one sliver of the pie that it seeks to have adjudicated in Ontario. In effect, ITP has resiled from its initial bargain to have all matters set out in the PO adjudicated in Ontario.

[16] Second, the identical Alberta action is actively case managed by Justice Dickson. Under Alberta’s rules, Justice Dickson is the default judge to hear all motions within that action (see r. 4.14(2) of the Alberta Rules of Court). There is no judicial economy in having an Ontario judge dive into this complex litigation, however narrow the issue, when there is already a judge in Alberta who has taken the plunge. Case Management Judge Dickson has a unique bird’s eye view of the case that can only enhance the court’s ability to address ITP’s motion.

[17] Third, there are potentially parts of Nexen’s claim against ITP that are not covered by the forum selection clause nor the limits on liability set out in subsection 18(e) and (f) of the PO. As set out above, there is a carve out for gross negligence in the limits of liability section and it is certainly arguable that the issue of gross negligence is not covered by the forum selection clause. I adopt Nexen’s position that regardless of what an Ontario judge rules, parts of Nexen’s claim against ITP is likely to continue in Alberta. This bifurcated approach is in my view an inefficient use of scarce judicial resources given the very viable option ITP has of bringing its motion in Alberta.

[18] Finally, this is a multiparty proceeding in which only ITP and Nexen are subject to a forum selection clause. This could lead to the possibility of inconsistent findings on material facts and can be a reason to avoid a forum selection clause. [3] ITP argues that the circumstances underlying the formation of the PO has nothing to do with the circumstances giving rise to the alleged breach or alleged tortious conduct. As such, there would be no risk of inconsistent findings. I agree with ITP that there is a lower risk of inconsistent findings in these circumstances. However, the factual matrix underlying the interpretation of subsections 18(e) and (f) includes the commercial context in which the PO was formed. [4] The commercial context involves other parties, most of whom have no standing before the Ontario court.

[19] Having identified the special circumstances that disallows ITP from using the forum selection clause to bifurcate the proceedings, there is no doubt that Alberta is the more convenient forum for the motion. First, the PO is governed by the laws of Alberta. While Ontario courts are perfectly capable of applying Alberta law, there is no doubt that domestic courts are better equipped to interpret domestic laws.

[20] Second, there is no discernible prejudice to ITP to have its motion heard in Alberta. It has already appointed Alberta counsel who is dealing with the robust process that is unfolding there including discussions about the Complex Litigation Plan.

[21] Third, all affiants providing evidence for ITP’s motion appear to reside outside of Ontario. No one has a connection to Ontario. If the motion is in Alberta, at least some of the affiants would be located there. This would reduce the cost of litigation to the parties.

[22] I also note that the mere fact that it is rare that a Plaintiff would bring a motion to stay its own action does not preclude Nexen from seeking the relief. In any event, it is not the stay that is in issue between the parties, but rather its timing.

[23] In sum, I conclude that there are special circumstances that preclude ITP from selectively applying its forum selection clause. Using the clause to bifurcate these proceedings runs contrary to the goals of maximizing judicial economy, efficiency and consistency. Having found special circumstances, Alberta is clearly the more convenient forum for ITP’s motion.

Disposition

[24] For the foregoing reasons, I allow the motion and permanently stay the action in Ontario pursuant to section 106 of the Courts of Justice Act.

Costs

[25] Nexen is presumptively entitled to its partial indemnity costs. If the parties cannot resolve the issue of costs, Nexen may deliver its costs outline and submissions of no more than three pages double spaced, by September 13, 2019. ITP may similarly respond by October 4, 2019.

Original signed Master Sugunasiri Date: August 14, 2019