COURT FILE NO.: CV-14-121494
DATE: 20190114
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
CANADIAN NATIONAL RAILWAY COMPANY
Plaintiff
– and –
ACF INDUSTRIES LLC, GENERAL ELECTRIC RAILCAR SERVICES CORPORATION and KEMIRA WATER SOLUTIONS CANADA INC.
Defendants
No one appearing for the Plaintiff
J. Madhany, for the Defendant ACF Industries LLC, J. Manson and A. Cofman, for the Defendant General Electric Railcar Services, V. Krkachovski, G. Harper and J. Grant, for the Defendant Kemira Water Solutions Canada Inc.
COURT FILE NO.: CV-14-121494-A1
AND BETWEEN:
CANADIAN NATIONAL RAILWAY COMPANY
Plaintiff
– and –
ACF INDUSTRIES LLC, GENERAL ELECTRIC RAILCAR SERVICES CORPORATION and KEMIRA WATER SOLUTIONS CANADA INC.
Defendants
– and –
GATX CORPORATION
Third Party
No one appearing for the Plaintiff
J. Madhany, for the Defendant ACF Industries LLC, J. Manson and A. Cofman, for the Defendant General Electric Railcar Services, V. Krkachovski, G. Harper and J. Grant, for the Defendant Kemira Water Solutions Canada Inc.
P. Mantas, for the Defendant GATX Corporation
COURT FILE NO.: CV-14-121494-A2
BETWEEN:
CANADIAN NATIONAL RAILWAY COMPANY
Plaintiff
– and –
ACF INDUSTRIES LLC, GENERAL ELECTRIC RAILCAR SERVICES CORPORATION and KEMIRA WATER SOLUTIONS CANADA INC.
Defendants
– and –
KEMIRA WATER SOLUTIONS INC.
Third Party
No one appearing for the Plaintiff
J. Madhany, for the Defendant ACF Industries LLC, J. Manson and A. Cofman, for the Defendant General Electric Railcar Services
V. Krkachovski, G. Harper and J. Grant, for the Defendant Kemira Water Solutions Canada Inc.
COURT FILE NO.: CV-14-121494-A3
AND BETWEEN:
CANADIAN NATIONAL RAILWAY COMPANY
Plaintiff
– and –
ACF INDUSTRIES LLC, GENERAL ELECTRIC RAILCAR SERVICES CORPORATION and KEMIRA WATER SOLUTIONS CANADA INC.
Defendants
– and –
H.C. CHANDLER & SON INC.
Third Party
No one appearing for the Plaintiff
J. Madhany, for the Defendant ACF Industries LLC, J. Manson and A. Cofman, for the Defendant General Electric Railcar Services
D. McInnis, for the Defendant H.C. Chandler & Son Inc.
HEARD: December 6 & 7, 2018
REASONS FOR DECISION
EDWARDS j.:
Overview
[1] On January 22, 2010, a tankcar was loaded in Illinois with approximately 89,000 kilograms of ferric sulphate which was destined for the Canadian National MacMillan yard in Toronto, Ontario. The tankcar arrived at the MacMillan yard on February 8, 2010. On the morning of February 9, 2010, Canadian National Railway (“CNR”) reported that while pulling cars in the MacMillan yard two cars derailed, including tankcar ACFX73936 (“the tankcar”) which was loaded with the ferric sulphate. The tankcar had split completely in two, approximately at the mid-point of the car. The entire load of ferric sulphate was released from the car.
[2] The various motions argued before me dealt with the following:
a) whether the engineering report of the Transportation Safety Board of Canada (“the TSB”) is admissible in these proceedings;
b) if the actual report of the TSB is not admissible, are there parts of the report which may be admissible;
c) whether an indemnity clause in a lease agreement, to which further reference will be made, would require the party providing the indemnity to not only indemnify the indemnitee for the indemnitor’s negligence, but would also require the indemnitor to indemnify the indemnitee for the indemnitee’s own negligence;
d) whether summary judgment should be rendered in favour of GATX Corporation (“GATX”), and whether summary judgment should be rendered in favour of the Defendant Kemira Water Solutions Canada Inc. (“Kemira”).
The Facts
The Parties
[3] CNR commenced this action on January 31, 2012 naming ACF Industries LLC (“ACF”), General Electric Tankcar Services Corporation (“GERS”) and Kemira. The main action was settled at a mediation, and as such CNR is no longer involved in the litigation.
[4] ACF was the manufacturer of the tankcar. GERS was the owner and lessor of the tankcar, and Kemira was the lessee of the tankcar.
[5] There are two third party claims brought by Kemira. The first is brought against GATX. GATX was responsible for the inspection, maintenance and repairs to the tankcar.
[6] A second third party claim was brought by Kemira against H.C. Chandler & Son Inc. (“HCC”). HCC was responsible for the inspection, maintenance and repair to the interior rubber lining of the tankcar.
[7] In addition to the third party claims brought by Kemira there is also a third party claim brought by GERS as against Kemira for contribution and indemnity for any amounts that GERS may be ordered to pay in the main action.
The TSB Report and the Experts
[8] Subsequent to the failure of the tankcar, the TSB’s Ontario Regional Office tasked the TSB Operational Services Branch Engineering Laboratory to examine the failed tankcar on-site. An on-site examination was conducted by the TSB, as well as other engineering tests which ultimately resulted in the Operational Services Engineering Report that was released on November 23, 2010 (“the TSB Engineering Report”).
[9] In addition to the TSB Engineering Report, the TSB released a “Railway Investigation Report” which was authorized for release by the TSB on September 28, 2011. The preface to the Railway Investigation Report states:
The Transportation Safety Board of Canada (TSB) investigated this occurrence for the purpose of advancing transportation safety. It is not the function of the Board to assign fault or determine civil or criminal liability. [Emphasis added.]
[10] The release of both TSB Reports occurred at a time period before any of the parties had engaged experts of their own with the task of determining what had caused the tankcar to fail and split in two. Expert reports have now been filed with the court along with the voluminous motion materials. Included in the reports filed by the parties are copies of the two TSB Reports. Those reports have been filed and are relied upon by Kemira. Kemira has also filed as part of its evidentiary record a report of its own expert, Robert Sparling (the Sparling Report). Mr. Sparling makes reference in his report to the TSB Reports. Kemira also filed as part of its evidentiary record a report that had been commissioned on behalf of HCC, authored by Dennis Turriff (the “Turriff Report”). Objection is taken by counsel for ACF and GERS to the admissibility of the Turriff Report on the basis of the report not having been appended to an affidavit of Mr. Turriff. The Turriff Report is before the court as an exhibit to the Sparling Report.
[11] In addition to the Sparling and Turriff Reports, counsel for both GERS and ACF jointly engaged the services of Glencor Engineering Ltd., which resulted in the filing of a report prepared by a R.J. Twigg (“the Twigg Report”) dated August 1, 2017.
[12] As one might readily appreciate, there are competing theories as to how the tankcar failed and split into two sections. The first theory is that the failure of the tankcar was caused by the infiltration of materials due to the degradation of the tankcars interior rubber liner which weakened the shell of the tankcar over time, in a process known as “hydrogen embrittlement”, until its eventual failure. If this theory was ultimately accepted by the court it would in all likelihood become the responsibility of Kemira.
[13] The second theory as to why the tankcar failed and split in two is attributed to manufacturing deficiencies in the form of non-normalized steel and an oversized weld which left the tankcar susceptible to fracture while in operation in below freezing conditions. When the tankcar split into two sections the weather in Toronto on February 9, 2010 was well below freezing. If the second theory is ultimately accepted by the court as to the cause of the failure of the tankcar, it would in all likelihood then become the responsibility of either ACF and/or GERS, and/or GATX.
[14] There are three experts, that being the experts retained by Kemira, GATX and HCC, who appear to agree that the cause of the tankcar rupture was attributable to the use of poor quality steel during the manufacturing process that underwent a ductile brittle transition while operating at temperatures below zero degrees Celsius. As well, it is suggested the failure was caused due to an oversized weld effected during the manufacturing process that was located at the attachment point of an air brake pipe bracket and the shell of the tankcar, which resulted in the initiation and growth of fatigue cracks thus rendering the shell of the tankcar more susceptible to facture.
[15] The one dissenting opinion is that contained in the Twigg Report retained on behalf of ACF and GERS. Mr. Twigg essentially maintains that the failure of the tankcar was attributable to the failure of the tankcar’s rubber liner, thus allowing hydrogen embrittlement to occur.
Admissibility of the TSB Reports and the Turriff Report
[16] ACF and GERS object to the inclusion of findings, conclusions and opinions of the TSB, found in the evidentiary record for summary judgment brought by Kemira against ACF and GERS, and by GERS against Kemira. The essence of the argument in this regard is that the TSB Reports and their contents are not admissible in civil proceedings, by virtue of section 32 and 33 of the Canadian Transportation Accident Investigation and Safety Board Act, S.C. 1989, c. 3 (“the TSB Act”).
[17] ACF and GERS also object to the inclusion of the Turriff Report filed by Kemira as part of its summary judgment motion. As previously noted, Mr. Turriff is an expert retained by the third party HCC. Kemira filed the Turriff Report as an exhibit to a report sworn by its own expert, Mr. Sparling. The Turriff Report is being relied upon by Kemira for the truth of its contents.
[18] Because the Turriff Report has not been properly introduced into evidence and because Mr. Turriff is thus shielded from cross-examination, counsel for ACF and GERS object to the Turriff Report being referenced by Kemira in connection with its motion for summary judgment.
Position of ACF and GERS Regarding the TSB Reports
[19] Counsel for GERS and ACF rely on sections 32 and 33 of the TSB Act, which provide:
S. 32 Appearance of Investigation
Except for proceedings before and investigations by a coroner, an investigator is not competent or compellable to appear as a witness in any proceedings unless the court or other person or body before whom the proceedings are conducted so orders for special cause. [Emphasis added.]
S. 33 Opinions inadmissible
An opinion of a member or an investigator is not admissible in evidence in any legal, disciplinary or other proceedings.
[20] As it relates to the opinion of an investigator in section 33, it is argued it contains an absolute prohibition against the use of a TSB investigator’s opinions and conclusions in a civil proceeding. As such it is argued that the TSB opinions and conclusions as they relate to the cause of a transportation occurrence, such as the one that occurred in this case, cannot be used in a civil proceeding under any circumstances.
[21] In reliance of this argument I was referred to what I believe is the only decision that reviews the application of section 32 and section 33 of the TSB Act, specifically a decision of Pitfield J. in Cole v. E&B Helicopters Ltd., 2008 BCSC 12. I will refer to this decision in my analysis.
[22] Counsel also rely on section 32 to preclude the use of any facts or photographs that might be referenced and contained in the TSB Report from becoming evidence on the Kemira summary judgment motion. In that regard, counsel point to the fact that there is no special cause that would warrant the admission of any of the facts and related-type evidence contained within the TSB Report. For there to be special cause, it is argued by counsel for GERS and ACF that counsel for Kemira would have to put evidence before the court that would demonstrate special cause, allowing for the admission of the facts portion of the TSB Report as distinct from any opinions or conclusions found in the TSB Report.
Position of GERS and ACF Regarding the Turriff Report
[23] As it relates to the Turriff Report, counsel for GERS and ACF argue that if a party seeks to rely on an expert report for the truth of its contents on a summary judgment motion, the report must be proffered in a manner that will permit cross-examination of the expert. Because the Turriff Report was appended to the Sparling Report it would have been impossible to cross-examine Mr. Turriff. Complicating matters, of course, is the fact that the Turriff Report was not commissioned by counsel for Kemira or by Mr. Sparling. The report was commissioned by counsel for HCC.
[24] In order for the Turriff Report to be admissible on a summary judgment motion, counsel argue that it must be appended to an affidavit of the expert as an exhibit, together with a copy of the expert’s curriculum vitae and a Form 53 Acknowledgment of Expert Duty. While an Acknowledgment of Expert Duty was produced in the courtroom, the report signed by Mr. Turriff remains appended as an exhibit to the affidavit of Mr. Sparling.
Position of Kemira as it Relates to the TSB and Turriff Reports
[25] While Mr. Krkachovski on behalf of Kemira acknowledges the absolute prohibition contained in section 33 as it relates to opinions of a TSB investigator, he draws a distinction between the facts found in the TSB investigator’s reports and the opinions found in those same reports.
[26] In support of his position that the TSB Report should be entered into evidence, Mr. Krkachovski correctly refers to the fact that the investigator for the TSB undertook independent testing. Mr. Krkachovski correctly points out that all of the experts retained by the parties reference factual findings made by the TSB investigator in their own reports. Given that the TSB investigator did a significant amount of fact finding that underpins some or all of the various experts’ reports filed in this matter, Mr. Krkachovski suggests that it would be impossible for the experts to arrive at their own opinions and conclusions without reference to the factual findings made by the TSB.
[27] As for the position taken by GERS and ACF as it relates to the Turriff Report, Mr. Krkachovski suggests that because Mr. Turriff is not his expert he has no ability to comply with Rule 53.
[28] Mr. Krkachovski relies on a decision of the Divisional Court in Ontario New Home Warranty Program v. Montgomery (1987), 20 C.P.C. (2d) 295 (Ont. S.C. (Div. Ct.)), where the Divisional Court at paragraph 18 stated:
…So long as the deponent accurately sets out the source of the information and her belief in the reliability and accuracy of the information, she has complied with the requirements of the rule.
[29] By analogy, Mr. Krkachovski argues that because his expert Mr. Sparling sets out the source of his information and belief, specifically the information contained in the Turriff Report, that this establishes the reliability and accuracy of the Turriff Report thereby enabling Kemira to enter into evidence the Turriff Report as an exhibit to their own expert’s report.
[30] Dealing with the argument that the information contained in the Turriff Report is nothing more than hearsay, Mr. Krkachovski relies on Makou v. Sada, 1994 CarswellOnt 4487, for the proposition that information contained in an affidavit based on information and belief as hearsay may be considered by the motion judge.
Analysis
The TSB Report
[31] Section 33 of the TSB Act contains an absolute prohibition with respect to the use of a TSB investigator's opinions and conclusions in a civil proceeding. The opinions and conclusions of the TSB investigator as it relates to the cause of the transportation occurrence cannot be used in a civil proceeding under any circumstance. This is made abundantly clear not only by the wording of the section, but also as a result of the decision of Pitfield J. in Cole where at paragraph 23 he stated:
The conclusions and opinions of the Investigator resulting from his observations and tests are not admissible in evidence by virtue of s. 33 of the Act. He cannot be required to testify regarding the question of whether what he observed corresponded to what he would expect to have observed, whether the components he identified were those that should have been found in the helicopter, or whether the manner of installation corresponded to acceptable standards. Those are matters of opinion in respect of which he is neither competent nor compellable. Opinions in respect of such matters will likely be based upon the Investigator’s observations, photographs and test results, but must be provided by expert witnesses who are not TSB investigators.
[32] To the extent that the experts retained by Kemira - or for that matter any of the parties to this litigation rely on the conclusions and opinions of the TSB investigator, those conclusions and opinions are inadmissible by virtue of section 33 of the Act.
[33] The real issue, in my view, is the extent to which the TSB Reports can be used by any of the parties where the experts retained by any of the parties have relied upon observations, tests and test results, obtained by the TSB investigators. This issue then engages section 32 of the Act, and in particular the question of whether or not special cause can be shown which would compel this court to reach the conclusion that the TSB investigator is, in fact, a competent witness solely for the purposes of testifying with respect to his observations, tests and test results.
[34] There is no specific motion before me to determine whether special cause has been shown by Kemira. In Cole, Pitfield J. engaged in an analysis of the words special cause and its meaning in section 32, and noted various relevant questions the court may consider in its assessment of whether special cause had been shown. Those questions are set out at paragraph 20 of Cole and include the following:
How relevant and probative is the evidence?
Is the evidence available from other sources?
Does the interest in the proper administration of justice outweigh the interest of administrative convenience afforded investigators by rendering them neither competent nor compellable?
Is there a serious likelihood of injustice if the evidence is not adduced?
[35] As all of the experts engaged by the various parties before this court have relied to varying extents on the observations, tests and test results of the TSB investigators, it seems to me incongruous that this court should not determine the question of special cause. The TSB investigator was the first person on site with authority who made observations, conducted various tests and obtained the results from those tests. In my view, that evidence is both relevant and probative and cannot be obtained from any other source. In my view, it will not be any significant administrative inconvenience to allow for such evidence to be placed before the court. As such, it is the ruling of this court that while the actual TSB Reports by themselves are not admissible given the complete bar set forth in section 33 of the Act, the observations, tests and test results, including any photographs that may have been taken at the scene and any photographs taken thereafter by the TSB investigators are properly admissible, and can be relied upon by any of the parties and/or the parties’ experts.
The Turriff Report
[36] Kemira relies on the Turriff Report not merely for the fact that it exists but also for the truth of its contents. The Turriff Report has not been tendered in an affidavit sworn by Mr. Turriff, which would adopt the report as his own sworn testimony.
[37] In this case, if Kemira seeks to rely on the Turriff Report for the truth of its contents in a summary judgment motion, it must be proffered in a manner that permits for cross-examination of Mr. Turriff.
[38] The only means by which Kemira, therefore, can place the Turriff Report before the court in a manner where the court can rely upon the report for the truth of its contents, would be if Mr. Turriff executed an affidavit and attached the report as an exhibit, as well as filing a Form 53. As Strathy J. (as he then was) in The Toronto Dominion Bank v. Schrage, 2009 CanLII 45444 (ON SC), at paragraph 39 held:
…On a motion for summary judgment the court is entitled to insist on sworn evidence and, in the case of experts, that the evidence be given by the expert and not filtered through the hearsay evidence of the party.
Strathy J. makes clear that this is not “mere formality”.
[39] The question then is, should this court entirely disregard the information contained in the Turriff Report knowing full well that it exists, and that if the Turriff Report was properly before the court any or all the parties would be entitled to rely on Mr. Turriff’s opinions. HCC is not participating in these summary judgment motions. As such, the Turriff Report was not filed through counsel for HCC. Rather, it is Kemira that seeks to rely on an expert’s report obtained by counsel for HCC.
[40] In these circumstances, the only means by which counsel for Kemira can get the evidence of Mr. Turriff before this court would be to serve on Mr. Turriff a subpoena pursuant to Rule 39.03 of the Rules of Civil Procedure (“the Rules”). Mr. Turriff would have been compelled to attend at that examination, and at the examination Mr. Turriff could have identified his report and adopted his report as his evidence. Through this means, counsel for Kemira could then obtain the information that he requires from the Turriff Report in support of his motion for summary judgment.
[41] The Rules are to be interpreted liberally so as to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits (see Rule 1.04). As well, I note in Rule 2.01 that a failure to comply with the Rules is an irregularity and does not render a “…document …a nullity”. The court may also grant all necessary amendments or other relief on such terms as are just to secure the just determination of the real matters in dispute. In my view, Mr. Krkachovski can still proceed under Rule 39.03 to serve a subpoena on Mr. Turriff and get the report properly before the court. Fundamentally, however, the opposing parties cannot be prejudiced by the application of Rule 2.01 of the Rules. If any of the parties wish to have Mr. Turriff cross-examined prior to the determination of the summary judgment motion they may do so. Failing such a request I will accept the report of Mr. Turriff and consider that report along with all of the other experts’ reports whose reports have now been properly filed with this court.
[42] If Mr. Krkachovski does proceed utilizing Rule 39.03 and Mr. Turriff is produced for cross-examination, the cost of that cross-examination will be borne by Kemira including any professional fees that Mr. Turriff may charge for his attendance.
The Indemnity Issue
Facts
[43] On February 1, 1999, GERS and Eaglebrook Inc. (“Eaglebrook”) entered into an agreement entitled “Car Leasing Agreement No. 2020-83” dated March 3, 1998 (the “Lease Agreement”). On July 10, 2000, GERS and Eaglebrook executed a Rider relating to the tankcar (the “Rider”). Eaglebrook was the predecessor in interest to Kemira who, by way of an amendment to the Lease Agreement on October 26, 2007, assumed the role of lessee of the tankcar. GERS remained the lessor of the tankcar.
[44] The Lease Agreement contains an indemnity clause at paragraph 12 which states as follows:
Lessee must indemnify Lessor from any losses, liabilities, expenses (including without limitation, the reasonable cost of investigating and defending against any claim for damages), fines or penalties, including losses related to damage caused to or by materials placed in the Car(s), which may at any time be imposed upon, incurred by or asserted or awarded against Lessor in connection with: (a) the use, operation, possession, storage, abandonment or return of the Car(s) during the term of this [Lease] Agreement, except any loss, liability or expense which accrues on the Car(s): (i) while such Car is in a repair shop chosen by Lessor undergoing repairs; and (ii) for which a railroad(s) has assumed full responsibility; (b) any present or future applicable law, rule or regulation, including without limitation, common law and environmental law, related to the release, removal, discharge or disposition, whether intentional or unintentional, of any materials from or placed in a Car during the term of this [Lease] Agreement.
[45] The Lease Agreement contains a governing law clause at paragraph 21, which indicates that the Lease Agreement is to be governed by the laws of the State of Illinois.
[46] The Rider contains a clause which states as follows:
GE RAILCAR IS NOT THE OWNER OF THE LINING OR PLAN AND MAKES NO WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, AS TO THE ADEQUACY, CORRECTNESS, OR SUITABILITY OF THE PLAN FOR THE COMMODITY(IES) TRANSPORTED IN THE CARS. IN NO EVENT SHALL GE RAILCAR ASSUME ANY LIABILITY FOR ANY CONSEQUENTIAL OR INCIDENTAL DAMAGES ARISING FROM THE USE, APPLICATION OF OR RELIANCE UPON THE PLAN, AND LESSEE EXPRESSLY AGREES TO INDEMNIFY AND HOLD HARMLESS GE RAILCAR FROM AND AGAINST ANY AND ALL LIABILITY FOR ANY DAMAGES WHATSOEVER, ASSERTED, INCURRED OR IN ANY WAY ARISING IN CONNECTION WITH THE PLAN.
[47] On October 26, 2007, GERS and Kemira U.S. executed an agreement entitled “Amendment No. 1 to Car Leasing Agreement No. 2020-83” (“Master Lease Amendment”).
[48] The Master Lease Amendment specifically refers to the Master Lease (dated March 3, 1998) and Rider No. 6 (dated July 10, 2000). Pursuant to the terms of the Master Lease Amendment, the Master Lease was amended such that Kemira U.S. became the lessee of the tankcar. GERS remained the lessor of the tankcar.
[49] The Master Lease, Rider No. 6, and the Master Lease Amendment were all properly executed and were in force at the time of the incident. Each of these agreements governed the relationship between GERS and Kemira with respect to the tankcar at the time of the incident. Again, Kemira does not dispute these facts.
[50] The Master Lease and the Master Lease Amendment each provide that they are to be governed by the laws of the State of Illinois. Rider No. 6 expressly incorporates the Master Lease by reference. Accordingly, each of the above agreements is subject to Illinois law.
[51] Kemira has obtained an expert opinion from Manuel Sanchez, an attorney licensed to practice law in the State of Illinois who states that in the absence of clear and unequivocal language to the contrary, an indemnity contract will not be construed as indemnifying against a party’s own negligence.
[52] In support of its position GERS has filed expert evidence from Mr. Robert Chemers, an Illinois attorney with over 42 years’ experience on the state of the law in Illinois with respect to contractual indemnification clauses in general, as well as the validity and interpretation of the indemnification provisions at issue on this motion.
GERS’ Expert Evidence with Respect to the Interpretation of Illinois Law
[53] Mr. Chemers has provided an opinion on the interpretation of the various leases and contractual documents as a matter of Illinois law. Neither Mr. Chemers nor Mr. Sanchez were cross-examined.
[54] Mr. Chemers’ opinion can be summarized as follows.
[55] Mr. Chemers opines that the Master Lease Rider No. 6 and the Master Lease Amendment are all governed by Illinois law.
[56] Mr. Chemers opines that under Illinois law an indemnity agreement is a contract and is subject to the rules of contractual interpretation. When construing contractual provisions under Illinois law, a court’s primary objective is to give effect to the party’s intent at the time the contract was made. Such intentions are to be ascertained from the contractual language; where the contractual language is unambiguous it should be given its plain and ordinary meaning.
[57] Mr. Chemers opines that the leading case in Illinois on contractual indemnification is Buenz v. Frontline Transportation Company, 227 Ill. 2d 302 (2008), a decision of the Illinois Supreme Court. In Buenz, the court considered whether the indemnification language at issue in that case was sufficient to force party A to indemnify party B for party B’s own negligence. The language of the indemnification provision at issue read as follows:
[Frontline] shall indemnify [COSCO] against, and hold [COSCO] harmless for any and all claims, demands, actions, suits, proceedings, costs, expenses, damages, and liability, including without limitation attorney’s fees, arising out of, in connection with, or resulting from the possession, use, operation or returning of the equipment during all periods when the equipment shall be out of the possession of [COSCO]. [Emphasis added.]
[58] Mr. Chemers opines:
The Supreme Court of Illinois in Buenz unmistakably rejected the [earlier] Westinghouse rule, namely, that an indemnification agreement that promised indemnification for “any and all” liability was not sufficiently clear to provide indemnification for liability arising from the indemnitee’s own fault. The presumption under the Westinghouse rule was that an agreement promising indemnification for “any and all” liability without more would not indemnify a party for its own negligence. The burden fell on the party seeking indemnification under Westinghouse to show that other language in the agreement, in addition to an “any and all” reference, reflected a clear and unambiguous intent to provide such indemnification.
Under the Supreme Court’s decision in Buenz, the presumption appears to be reversed. Under Buenz, an indemnification agreement promising indemnification for “any and all” liability is presumed to provide indemnification for the indemnitee’s own fault, unless there was other language in the agreement that reflects a more limited intention. [Emphasis added.]
[59] Mr. Chemers observes that the court in Buenz noted that the provision at issue “contains no limiting language to suggest that the indemnity provided is not intended to cover claims resulting from COSCO’s own negligence,” and therefore “the express language…clearly and explicitly provides indemnification for COSCO’s own negligence”.
[60] Mr. Chemers opines:
The “any losses, liabilities, expenses” language found at paragraph 12 of the [Master Lease], as in Buenz, is not accompanied by any limiting language that would “suggest that the indemnity provided is not intended to cover claims resulting from [the indemnitee’s] own negligence.” …The indemnity clause here, as in Buenz, is very broad; the words “any losses, liabilities, expenses…” are all inclusive and do not limit the scope of the agreement. The express language of the [Master Lease] clearly and explicitly provide indemnification for GERS’ own negligence.
Pursuant to Buenz, it is my opinion that the indemnity clause of the Agreement provides for indemnity for GERS’ own negligence, whether GERS was 1 percent at fault, 100 percent at fault, or anywhere in between.
[61] Mr. Chemers also provides an opinion with respect to the indemnification by Kemira for any amounts that must be paid by GERS pursuant to its own agreement with ACF to indemnify ACT. Mr. Chemers opines:
In connection with the foregoing, the opinion I have rendered with respect to Kemira’s obligation to indemnify GERS for its own negligence […] would also extend to Kemira’s obligation to indemnify GERS in the event that it is determined by the Court there are losses involved in the […] accident which may have been caused by ACF but which must be paid by GERS pursuant to an indemnification agreement between GERS and ACF, which too would be subject to indemnification by Kemira as “losses, liabilities, expenses” which may “at any time be imposed upon, incurred by or asserted or awarded” against GERS in connection with Kemira’s use, operation, or possession of the tank car. In addition, if GERS is called upon to indemnify ACF then that indemnity obligation to pay on behalf of ACF would be a loss, liability or expense imposed upon, incurred by or asserted or awarded against GERS in connection with any applicable law, rule or regulation, either common law and environmental law, “related to the release, removal, discharge or disposition … of any materials from or placed in” a train car during the term of the Agreement.
[62] Mr. Chemers also provides an opinion with respect to the indemnification provisions of Rider No. 6. He opines:
Based on what was set forth earlier in this letter, and based on the express holding of the Supreme Court of Illinois in Buenz, it is unmistakable that Kemira as the successor to Eaglebrook “expressly” agreed to indemnify and hold GERS harmless from and against “any and all liability for any damages whatsoever” which are “asserted, incurred or in any way arising in connection with the plan”.
It is evident through the express, clear, explicit and unambiguous language of the indemnity provision found under the heading “Maintenance” in Rider No. 6, that any claim brought against GERS in connection with the lining or lining qualification plan for the tank car in question would be subject to indemnification and being held harmless by Kemira.
[63] In sum, GERS submits that Mr. Chemers’ opinion is clear: as a matter of Illinois law the indemnification provisions in the Master Lease and Rider No. 6 are valid and enforceable. As a matter of Illinois law, they mean that Kemira must indemnify GERS for any liability that may be imposed upon or incurred by GERS in this case, including GERS’ own negligence and also any liability that GERS is forced to assume according to other indemnification language.
[64] Simply put, due to the broad indemnification language contained in the Master Lease and Rider No. 6, counsel for GERS argues there is no conceivable liability for which GERS could be liable but for which Kemira would also not have to indemnify GERS:
(a) if Kemira (or any other parties) is found directly liable, then the indemnification provisions are not required;
(b) if GERS is found liable, then Kemira is obligated to indemnify GERS under the Buenz rule;
(c) if ACF is found liable, but pursuant to an indemnification agreement between ACF and GERS, GERS must indemnify ACF, then Kemira must still indemnify GERS – GERS’ liability flows downhill to Kemira in any event.
Kemira’s Expert Evidence
[65] Kemira’s expert, Mr. Manuel Sanchez, attempts to rebut Mr. Chemers’ expert evidence; however, for the following reasons counsel for GERS submits that Mr. Sanchez’s opinion is flawed; the court should prefer Mr. Chemers’ opinion.
[66] First, Mr. Sanchez purports to suggest that “it is well settled that indemnity contracts are strictly construed and will not be construed as indemnifying against a party’s own negligence unless such a construction is required by the clear and explicit language of the contract.” Mr. Sanchez sites McNiff v. Millard Maintenance Service Co., 303 Ill. App. 3d 1074, in support of this proposition.
[67] In his rebuttal report, Mr. Chemers states:
Also, the reference to McNiff…is suspect as it pre-dates Buenz…, which controls as it is a decision of the Supreme Court of Illinois. In addition, McNiff did not involve indemnity for one’s own negligence. In fact, the Supreme Court in Buenz commented about McNiff and Westinghouse:
[b]oth cases merely stand for the proposition that when an indemnity contract expressly limits itself to the negligence of the indemnitor, courts will not strain, simply because the contract contains “any and all” language, to read into that contract indemnification for an indemnitee’s own negligence.
The Supreme Court in Buenz noted that the McNiff court’s finding is specifically supported by the limiting language within the contract. Buenz, 227 Ill. 2d at 313.
[68] Second, counsel for GERS argues that Mr. Sanchez also purports to rely on principles emanating from a much older decision, Westinghouse Electric Elevator Co. v. LaSalle Monroe Building Corp., 395 Ill. 429 (1946). Mr. Chemers’ opinion makes clear that Westinghouse has been overtaken by Buenz.
[69] Third, Mr. Sanchez also discusses the provisions of an Illinois statute, the Construction Contract Indemnification for Negligence Act, and essentially concludes that this statute has no application to the facts of this case (a point with which Mr. Chemers agrees).
[70] Fourth, Mr. Sanchez also discusses the concept of “contractual contribution” which he says is void and unenforceable in Illinois as it is contrary to public policy. He opines, essentially, that if a court were to construe the indemnification language in the Master Lease as a “contractual contribution claim”, such a claim would be void and unenforceable under the Illinois Contribution Act.
[71] Mr. Chemers responds as follows:
I have also considered Attorney Sanchez’s opinion in connection with the paragraph 12 Indemnity provision in the Agreement, and it misses the point as he relies on authorities which are not only distinguishable but are not relevant to any discussion of express contractual indemnification.
Attorney Sanchez also references cases which […] in any event do not involve indemnification, but rather contribution based on substantially different language than paragraph 12 of the Agreement.
In that connection, both Pierre Condominium Ass’n v. Lincoln Park West Associates, LLC, 378 Ill. App. 3d 770 (1st Dist. 2007) and Sandlin v. Harrah’s Illinois Corp., 2016 IL App (3d) 150018, involved contribution, not indemnity. Each involved a contractual provision which when distilled to its essence, required A to indemnify B for any negligent act or omission of A. Paragraph 12 of the Agreement, however, clearly requires Kemira [A] to indemnify GERS [B] for GERS’ [B’s] own negligent conduct. Cases involving contribution have no application to this issue.
[72] Finally, Mr. Sanchez discusses implied warranties, which it is argued are not relevant to the issues in dispute on this motion.
[73] In short, counsel for GERS submits that Mr. Chemers’ interpretation of Illinois law as it relates to the matters at issue on this motion ought to be preferred.
Position of GERS
[74] GERS in this motion moves for summary judgment and argues that whatever the cause of the tankcar failure Kemira must fully indemnify GERS, by virtue of the broad indemnification provisions contained in the Lease Agreement and contractual documents surrounding Kemira’s long-term lease of the tankcar from GERS.
[75] GERS argues that because the leases and contractual documents are all governed by Illinois law, and because both parties to this motion have filed expert evidence on how the operative indemnification language is to be interpreted and applied according to Illinois law, that this case is appropriate for summary judgment and that this court should interpret Illinois law in accordance with the expert opinion obtained by GERS.
[76] It is the position of GERS that this court should order Kemira to repay GERS the sum of $433,333.34, representing the amount that GERS has already contributed to the settlement with the Plaintiff. Alternatively, GERS seeks a declaration that Kemira is obligated to fully indemnify GERS in respect of any amounts that this court ultimately orders GERS to pay to any other party in these proceedings.
[77] GERS argues that the application of the indemnification provisions in this case, properly interpreted under Illinois law, are clear. The bottom line is that as a matter of Illinois law, Kemira is obligated by the broad indemnification language in the Master Lease to indemnify GERS for all liability. This includes GERS’ own negligence, because following the Buenz decision there is no limiting language in the relevant indemnification provision. It also includes any liability that GERS is forced to assume by virtue of any indemnification provisions as between ACF and GERS, for the same reason.
[78] Accordingly, GERS argues that Kemira is obligated to indemnify GERS for the $433,333.34 already paid by GERS in settlement of CNR’s claim. GERS says that ultimately this court will be asked to determine which of the Defendants are liable in connection with this loss. And when that happens, no matter what the court decides, the result will be that the terms of the indemnification provisions operate to transfer all of GERS’ liability to Kemira. The $433,333.34 paid by GERS qualifies as a “loss, liability or expense” “imposed upon, incurred by or asserted or awarded against GERS”, which therefore is subject to indemnification by Kemira. Kemira may be able to recover some or all of this amount from other parties by way of Kemira’s cross-claims and third party claims in this action; however, that is not GERS’ concern. GERS argues that it should not have to remain in this action until the final liability split is determined at trial, particularly in these circumstances where the effect of the indemnification language is that GERS can never be obligated to pay out of its own pocket in connection with the subject loss.
Position of Kemira
GERS Owes Kemira an Implied Warranty of Fitness Pursuant to the Lease Agreement
[79] All leasing agreements entered into by parties governed by the laws of the State of Illinois are accompanied by an implied warranty that, in the event the lessor has reason to know of any particular purpose for which the goods are required and for which the lessee is relying on the lessor’s skill or judgment to select or furnish suitable goods, the goods will be fit for that purpose.
[80] Here, GERS had knowledge of the purpose for which Kemira required the tankcar. In particular, GERS had knowledge that Kemira required the tankcar in order to ship ferric sulphate as this use was explicitly referenced in the Rider to the Lease Agreement. The Rider explicitly states that GERS provided Eaglebrook Inc. (subsequently Kemira) with a car that was “correct for service with the following commodities…FERRIC SULFATE SOLUTION [sic]”.
[81] It is clear that GERS had been made explicitly aware of the purpose for which Kemira required the tankcar. Furthermore, given GERS’ prominent role within the railroad industry, Kemira relied on GERS’ skill or judgment in order to provide it with a tankcar that was fit for its required purpose. Instead, as noted above, GERS furnished Kemira with a tankcar that it knew, or ought to have known, was susceptible to failure in cold weather conditions in contravention of the implied warranty, and now seeks to hide behind the creative reconstruction of an indemnity clause in the Lease Agreement (which is contrary to Illinois law) in order to shift liability for this failure solely onto Kemira.
[82] It is the position of Kemira that there remains a genuine issue requiring a trial, particularly as it relates to the issue of (i) whether the indemnity clause within the Lease Agreement requires that Kemira indemnity GERS for acts of GERS’ own negligence; (ii) whether GERS’ negligence caused or contributed to the tankcar failure; and, (iii) whether GERS, in its role as lessor, fulfilled the implied warranties it owed to Kemira pursuant to the Lease Agreement under the laws of the State of Illinois.
[83] Lastly, GERS, as lessor, was required to provide Kemira, as lessee, with a tankcar that was fit for its purpose in the transportation of dangerous goods. However, as is the case with the arguments pertaining to contractual indemnity, there remains dispute as to the interpretation of the applicable law in the State of Illinois.
Analysis
[84] The recent decision of Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, has not changed the law in terms of the onus on the moving party who seeks summary judgment, nor has it changed the obligation on the responding party. In that regard, the law is clear that the moving party has the onus of establishing that there is no genuine issue requiring a trial and that Kemira must present its best case or risk losing. See Pizza Pizza Ltd. v. Gilespie, 1990 CanLII 4023 (ON SC), 1990 75 OR (2d) 225.
[85] As for the evidence that this court must consider I have the two competing legal opinions commissioned by GERS and Kemira in the form of the Mr. Chemers’ and Mr. Sanchez’s opinions, which come to opposite conclusions as to whether or not the indemnity provided by Kemira not only indemnifies GERS for Kemira’s negligence, but also indemnifies GERS for its own negligence.
[86] The law is also clear that while foreign law must be proved as a fact in this court, the interpretation of foreign law where the expert legal evidence conflicts is a question of law which must be determined on a motion for summary judgment. See Bank of Nova Scotia v. Wassef, 2000 O.J. No. 4883.
[87] Most recently, Myers J. in Li v. Li, 2017 ONSC 1611 dealt with a somewhat similar summary judgment motion involving competing expert opinions as it related to the law of India. At paragraph two, Myers J. stated:
…The issue that is the subject matter of the experts’ opinions is proof of foreign law. While our law treats the issue as one of fact, subject to proof on evidence, the evidence amounts to legal argument. The process of determining which legal argument has better support in law on the evidence is closer to resolving an issue of law than it is to making a finding of fact that an event occurred or did not occur on contested eyewitness evidence. Accordingly, in my view, it is in the interests of justice to resolve the narrow legal issue before me summarily.
[88] Both Mr. Chemers and Mr. Sanchez provided the court not only with their legal opinions, but also the case law upon which their legal opinions were based. Essentially, Mr. Chemers argues that Mr. Sanchez’s opinion should not be accepted by the court because of Mr. Sanchez’s reliance on the earlier Westinghouse decision that has been overtaken by the decision of the Supreme Court of Illinois in Buenz. Buenz, it is argued, stands for the proposition that an indemnification agreement promising indemnification for “any and all” liability is presumed to provide indemnification for the indemnitee’s own fault unless there is other language in the agreement reflecting a more limited intention.
[89] In Westinghouse, the indemnity in question provided:
…the indemnitor agrees to indemnify and hold the owners wholly harmless from any damages arising out of any acts or omissions by the Contractor.
As the Supreme Court in Illinois in Buenz noted, this limiting language “clearly indicates that the agreement provided indemnity only for acts or omissions by the indemnitor”.
[90] The language of the indemnity agreement in Buenz was different in that it provided for an indemnity for “any and all claims…” Those words by themselves, as the Supreme Court of Illinois in Buenz noted, were not determinative of the question of whether the indemnity provided indemnity not only for the indemnitor’s negligence but also the indemnitee’s negligence. In Buenz, the Supreme Court of Illinois stated:
As our appellate court aptly put in the past, “[t]he words ‘any and all’ are all inclusive; their conciseness does not limit their scope; their coverage would not have been extended by making them more specific”.
[91] In Buenz, dealing with the Westinghouse decision the Supreme Court of Illinois stated:
Our finding does not contradict public policy, however. As we recognized in Westinghouse, when an agreement clearly and explicitly provides indemnification for an indemnitee’s own negligence, it should be construed accordingly. The agreement at issue in this case is specific and clear enough to provide indemnification for claims arising out of COSCO’s negligence (the indemnitee’s negligence).
[92] Mr. Sanchez, on behalf of Kemira, points out in his supplementary report that since the Buenz decision which is heavily relied upon by Mr. Chemers on behalf of GERS, that there have been three cases that cite Westinghouse and note that Westinghouse is still good law. In Bituminous Casualty Corporation v. Plano Moulding Company, 2015 IL App (2d) 140292, the Appellate Court of Illinois for the Second District dealing with an indemnity agreement and citing Buenz stated:
…It is well settled that indemnity contracts are strictly construed and will not be construed as indemnifying against a party’s own negligence unless such a construction is required by the clear and explicit language of the contract…
[93] Bituminous dealt with a bill of lading that provided for the following indemnification:
Merchant warrants that the stowage and seals of the containers are safe and proper and suitable for handling and carriage and indemnifies Carrier for any injury, loss or damage caused by breach of this warranty. [Emphasis added.]
The Appellate Court of Illinois, having reviewed the jurisprudence, came to the following conclusion as it relates to the aforesaid language found in the bill of lading:
Here, the language in the bill of lading is clear and unambiguous. It clearly was the intention of the parties to the contract that defendant’s indemnification liability would be restricted to its breach of the warranties contained in the contract…
[94] From my review of the legal opinions provided and the case law that both experts have referred to and provided in their legal opinions, I have come to the conclusion that the indemnity agreement is a contract which is subject to contractual interpretation rules and that the court must give effect to the parties intent at the time that the contract was made. In arriving at the parties intentions, the court must look to the contract language and to give that language its plain and ordinary meaning.
[95] In that regard, I note that the indemnity does not provide as it does in Buenz that the lessee must indemnify the lessor against any and all claims for damages. Rather, the indemnity provides that the lessee must indemnify the lessor against any claims for damages, i.e. the words any and all are not found within the indemnity. Buenz, however, makes clear that the inclusion of the words any and all are not determinative. The court must still look to the parties’ intentions. In that regard the court, in my view, must look to Rider No. 6 which contains indemnification language that does include the words any and all liability, specifically Rider No. 6 provides:
…lessee expressly agrees to indemnify and hold harmless GE Railcar from and against any and all liability for any damages whatsoever…
[96] The difference in the language between the indemnity in the lease and in the Rider, in my view, must mean something. As a matter of contractual interpretation the parties provided for different language between the indemnity and the Rider, and the court must infer that the parties intended something different between the indemnity and the Rider. As such I am satisfied that Illinois law, when applied to the indemnity agreement in this case, does not provide that the indemnity shall provide an indemnity for the indemnitor’s own negligence. As such, it is the determination of this court that Kemira does not have to indemnify GERS in the amount of $433,333.34, and GERS is not entitled to a declaration that Kemira is obligated to fully indemnify GERS for any amounts that the court finds GERS liable to pay the other Defendants in connection with the issues raised in this proceeding.
GATX Motion for Summary Judgment Against Kemira
[97] GATX moves for summary judgment on three distinct grounds. The first ground arises out of Kemira’s pleading, where Kemira pleads that the cause of the accident was as a result of a design flaw in the tankcar’s weld and that GATX should have detected this problem. GATX, in response, argues that it was only hired to do limited work on the tankcar and did not work on or inspect the weld; was not hired to do anything with respect to the weld; and was not involved in the design or manufacture of the tankcar. GATX’s sole role with respect to the tankcar was doing some cleaning service equipment repair work and visual inspection of the tankcar, none of which it is argued could have detected a problem with the weld. Furthermore, GATX argues that it was never hired by Kemira; did not have a contract with Kemira but rather was contracted with HCC; but in any case the work which it did was strictly delineated by the owner, G.E., and the U.S. regulatory law.
[98] The second basis for GATX’s motion arises out of where the work was done in Texas and that it was done in accordance with U.S. federal regulations. GATX argues that the law that must be applied in this case is U.S. law, and that under the applicable U.S. law Kemira cannot sustain this lawsuit against GATX pursuant to a settled constitutional doctrine known in the U.S. as preemption. The doctrine of preemption stops any claim in tort against a party such as GATX for the work which it performed.
[99] The third basis upon which GATX moves for summary judgment arises out of the lack of any pleading against GATX by Kemira based on the settlement reached between the Defendants and CNR. Because Kemira has not pleaded anything against GATX arising out of the settlement, GATX now argues that it is too late to plead anything with respect to the settlement as Kemira is out of time to amend its third party claim to plead contribution and indemnity against GATX based on the settlement.
Kemira’s Claim Against GATX
[100] Kemira’s position, supported by the TSB Report and its own expert Mr. Sparling, is that the cause of the tankcar failure was related to a failure to install reinforcements for the brackets of oversized welds of the tankcar. Fundamentally, the cause of the tankcar failure was in relation to welds and had nothing to do with the liner of the tankcar.
[101] GATX takes the position that because it was not involved in the design or manufacture of the tankcar and as such had no role with respect to the welds, that GATX can in no way be found responsible for the failure of the tankcar. GATX’s role was solely with respect to undertaking service equipment work on the tankcar pursuant to a subcontract with HCC. GATX was never retained to conduct any inspection with respect to the structural integrity of the tankcar, specifically did no work or inspection on the welds, nor was it instructed to do anything in relation to the welds when it undertook its service of the tankcar. GATX’s sole role was that of conducting a visual inspection as opposed to a structural integrity inspection, and as such it could not have detected any problem with the welds when it undertook the servicing of the tankcar between March and July of 2008.
[102] The work which GATX did pursuant to a subcontract with HCC was delineated by the owner of the tankcar, G.E. The evidence filed on the motion by GATX, it is argued, makes clear that GATX could not and did not deviate from those G.E. instructions. The instructions did not call for a structural integrity inspection, nor did the instructions call for the installation of any reinforcement of the welds.
[103] GATX argues that it could not deviate from the G.E. instructions and was contractually bound to follow those instructions as it was bound by U.S. law, as set forth in U.S. federal regulations, to follow the instructions provided by the owner G.E.
[104] GATX argues that as it is highly regulated pursuant to U.S. federal law (laws which are in place for reasons of safety and consistency in the maintenance of rail cars), that GATX was bound to follow not only the G.E. instructions but also federal regulations. If GATX had not followed the federal regulations it would have been a violation of U.S. federal law.
[105] GATX argues that its duty and standard of care is framed by U.S. federal law, in that the evidence establishes that it met that duty by performing the work pursuant to G.E.’s written instructions.
The U.S. Doctrine of Preemption
[106] GATX, unlike Kemira, filed expert evidence with respect to the U.S. doctrine of pre-emption. GATX filed the expert evidence of Latane Montague, who is a U.S. lawyer qualified to give opinion evidence with respect to U.S. regulatory law for work done on rail cars. Kemira did not challenge the qualifications of Mr. Montague, nor did Kemira cross-examine Mr. Montague. Kemira did not file any responding expert evidence with respect to U.S. regulatory law for work done on tankcars, nor did Kemira provide any contrary expert evidence with respect to the U.S. legal doctrine of preemption. Mr. Montague notes in his expert opinion that under U.S. law where the federal government has provided legislation as is the case in this matter, that state and tort law must yield to federal legislation. This doctrine is known in the U.S. as preemption and, as such, would bar Kemira’s action in tort as against GATX. Fundamentally, Mr. Montague suggests in his expert opinion that Kemira could not sustain an action under U.S. law for the tort claims that it has made in the third party claim against GATX.
[107] Mr. Montague goes on in his expert opinion to note that U.S. federal law prevents third parties from pursuing any statutory or common law remedies against tankcar facilities like GATX, with the effect of imposing a different standard of care than that provided for under federal law. As such, Mr. Montague notes that Kemira could not institute an action in tort to impose additional inspection and maintenance obligations on GATX beyond those provided for in the G.E. instructions.
GATX’s Motion for Summary Judgment - Analysis
[108] Kemira argues that the summary judgment motion brought by GATX must be dismissed for a number of reasons. First of all, it is argued that the motion is premature as examinations for discovery have not taken place, nor has there been complete documentary discovery. Kemira also argues that whether GATX should have discovered the fatigue cracks in the shell of the tankcar is a genuine issue requiring a trial, and that GATX owed Kemira a duty of care which has not been discharged by the evidence filed by GATX on its motion seeking summary judgment.
[109] The basic premise of Kemira’s position is that GATX did not put its best foot forward, because it did not produce the individual who had actually conducted the inspection of the tankcar in 2008. Rather, GATX produced an individual who did not have direct knowledge of the inspection. In that regard it is worth noting that the individual who in fact did do the inspection, believed to be a person by the name of Terry Nale (Nale), is no longer employed by GATX.
[110] Kemira takes the position that the cross-examination of the individual produced by GATX on the motion for summary judgment, establishes that there is a lot more information that may ultimately be produced with respect to what occurred with respect to the inspection of the tankcar.
[111] Kemira argues that this court should draw an adverse inference from the fact that GATX did not provide the evidence of anyone who had personal knowledge with respect to the actual inspection and maintenance of the tankcar which took place in 2008. In that regard, it is worth noting that Kemira did not file any evidence at all responding to the affidavit evidence of GATX.
[112] Kemira chose to place no evidence before this court responding to GATX’s motion for summary judgment. I have already commented earlier in these Reasons that the onus in establishing that there is no genuine issue for trial rests on the party moving for summary judgment. The responding party, however, also has an obligation to put its best foot forward, and in this case Kemira has placed no evidence before the court. It has been said in many cases in the past that the court may assume that the parties have placed before it, in some form, all of the evidence that will be available for trial when dealing with a motion for summary judgment. See Sweda Farms Ltd. v. Egg Farmers of Ontario, 2014 ONSC 1200, at paras. 33 and 34.
[113] If the court, therefore, is to assume that the parties have placed before it in some form all of the evidence that will be available for trial, and that the parties have advanced their best case with their record containing all of the evidence that the parties will respectively present at trial, what is this court to do with the rather unique situation faced where Kemira chooses to place no evidence before the court and simply relies on its argument that GATX produced a witness who had no direct knowledge with respect to the maintenance and inspection of the tankcar?
[114] Regardless of how one categorizes the evidence of GATX’s witness, Kemira must have known that it had an obligation to “lead trump”, failing which it risked having its action against GATX dismissed.
[115] Kemira pleads that the cause of the tankcar failure related to issues with respect to the welds on the tankcar. It relies on the opinion of Mr. Sparling and the TSB Report. As I have already ruled, Kemira nor any of the other parties can rely on any aspect of the TSB Report insofar as the opinions contained therein.
[116] Kemira argues that as part of the maintenance and inspection work that it conducted of the tankcar in 2008, GATX had an obligation to conduct an inspection that would have revealed the defective welds that ultimately led to the failure of the tankcar. The major flaw, in my view, with this argument, is that it presumes that in fact defective welds were such that GATX, through its inspection, would have revealed the so-called defective welds. There is no evidence before this court that in fact the defective welds were latent at the time of GATX’s inspection and maintenance of the tankcar in 2008. Regardless, there is no evidence before this court that in fact GATX had the type of obligation suggested by Kemira. Kemira has placed no expert evidence before this court that would suggest that GATX, having subcontracted with HCC to conduct the maintenance and inspection of the tankcar, had any obligation with respect to inspecting the welds on the tankcar. For this reason alone, in my view, GATX’s motion must succeed.
U.S. Doctrine of Preemption
[117] Mr. Montague, in his expert opinion provided on behalf of GATX, indicates that under U.S. federal law third parties are prevented from pursuing any statutory or common law remedies against tankcar facilities like GATX, and as such Kemira cannot institute an action in tort to impose additional inspection and maintenance obligations on GATX beyond those which are provided in the G.E. instructions.
[118] Kemira has put no contrary expert evidence before the court, and simply argues that GATX has not provided any evidence that it did what it was required to do pursuant to the G.E. instructions. As such, Kemira argues that it is not looking to impose additional obligations on GATX, and that fundamentally GATX failed to put any evidence before the court to suggest that it indeed complied with the instructions that were provided to it by G.E. while the tankcar was in GATX’s possession in 2008.
[119] GATX argues that it did what it was required to do as a result of the instructions it received from G.E., as well as its obligations to fulfill regulatory requirements of U.S. federal law. Kemira responds that the question still remains as to what exactly GATX did while the tankcar was being maintained in 2008, because there are no details with respect to the actual inspection that was conducted or what was done by Mr. Nale. Kemira argues that GATX’s motion must fail.
[120] For the same reasons that I have alluded to as it relates to the first aspect of GATX’s motion for summary judgment, Kemira’s position really amounts to nothing more than pure speculation. Kemira chose to conduct its response to GATX’s motion in the manner that it did by filing no responding evidence, and given that this court is to presume that Kemira has put its best foot forward - in this case Kemira has utterly failed to put any evidence before the court that would suggest that there is any genuine issue for trial as it relates to the second aspect of GATX’s motion based on the U.S. doctrine of preemption.
Kemira’s Failure to Plead Settlement
[121] When the settlement was achieved with the Plaintiff, GATX was not a party to the settlement of the main action.
[122] Kemira, in its third party claim against GATX, seeks contribution and indemnity for any amounts “found owing to the Plaintiff in the main action as against the Defendant Kemira”. Kemira also seeks damages for negligence and negligent misrepresentation for any award of damages made in favour of the Plaintiff as against Kemira. GATX takes the position that there is no claim by Kemira in its third party claim against GATX based on the settlement, and that it is now too late to plead such a claim given the applicable limitation period which has now past.
[123] Kemira responds that material facts have been plead in its third party claim, specifically by way of incorporation of and reference to the statement of claim and that the failure to plead the settlement is in no way a bar to Kemira’s third party action as against GATX.
[124] As it relates to this argument by GATX I am not satisfied that if this was the sole basis for GATX’s motion for summary judgment against Kemira, that the court would have found any deficiency in the pleading sufficient to bar Kemira’s right to seek relief to amend its third party claim to specifically plead the settlement. In my view, there would be no prejudice to GATX given its lengthy involvement in these proceedings and the fact that it has known about the settlement for some considerable period of time. As it relates to this aspect of GATX’s motion seeking summary judgment against Kemira, that aspect of GATX’s motion is dismissed. The GATX motion seeking summary judgment on the first and second grounds set forth above is, however, granted.
[125] As it relates to the costs of the various motions before this court the parties are, of course, encouraged to resolve those issues of costs, failing which the court will receive written submissions from the parties to be received no later than the end of January 2019, and limited to three pages in length.
[126] As I am case managing this action, I am ordering that there shall be a case conference to take place on a mutually convenient date at 8:30 a.m. some time prior to the end of February 2019, to discuss any issues arising out of these Reasons and to timetable this action so that it can be ready for trial in a timely fashion.
Justice M.L. Edwards
Released: January 14, 2019