Date: 19990505
Docket: T-477-98
BETWEEN:
JOHN E. CANNING LTD.
Plaintiff
- and -
TRIPAP INC.
Defendant
T-110-98
BETWEEN:
McKEIL MARINE LIMITED
Plaintiff
- and -
JOHN E. CANNING LTD.
Defendant
- and -
TRIPAP INC.
Third Party
REASONS FOR ORDER
LEMIEUX J.:
[1] The plaintiff, John E. Canning Ltd., ("Canning") in action T-477-98, brought a rule 369 motion in writing for an order, pursuant to rule 105 of the Federal Court Rules, 1998, SOR/98-106, that action T-477-98 in which Tripap Inc. ("Tripap") is defendant, be consolidated or heard at the same time as action T-110-98 in which McKeil Marine Ltd. ("McKeil") is the plaintiff, Canning is the defendant and Tripap has been third partied by Canning.
[2] Alternatively, Canning seeks an order from this Court staying action T-110-98 ("the McKeil action") pending the determination of action T-477-98 ("the Canning action") or pending an action commenced by Tripap Inc. as plaintiff in the Quebec Superior Court where Canning is the defendant ("the Tripap action").
[3] Rule 105 of the Federal Court Rules, 1998 reads:
| 105. The Court may order, in respect of two or more proceedings,
|
105. La Cour peut ordonner, à l'égard de deux ou plusieurs instances
|
THE PROCEEDINGS
(a) Background
[4] Canning is a buyer and seller of wood operating in the Province of Prince Edward Island.
[5] McKeil is engaged in the business of transporting goods by water as a common carrier.
[6] Tripap is engaged in the manufacturing of newsprint with facilities at Three Rivers, Quebec.
[7] Canning, in March 1997, entered into a multi-year contract to supply wood to Tripap ("the wood supply contract").
[8] In April 1997, Canning entered into a separate contract of affreightment with McKeil for the carriage of Canning's wood to Tripap's Three Rivers facility during shipping periods extending to year 2001 ("the transportation contract").
[9] After a few months of contract performance, matters fell apart. Each of the two contracts was terminated for various reasons. The wood supply contract was terminated by Tripap in June 1997; the transportation contract was terminated in December 1997 by Canning. Hence, the two actions in this Court and in the Quebec Superior Court.
(b) The McKeil action " T-110-98
[10] McKeil initiated the first proceeding by the filing of a statement of claim in this Court naming Canning as a defendant. That statement of claim was issued on January 23, 1998, alleging unlawful termination of the transportation contract by Canning as well as breach of that contract in 1997 by Canning's failure to offer for carriage the minimum quantities of wood provided for in the contract.
[11] Canning defended and counterclaimed. While admitting the existence of the contract for the carriage of wood, Canning took issue with its terms and scope as well as the freight rate calculations upon which McKeil's damages were based. More critically, Canning alleged that McKeil fundamentally breached or repudiated the contract by not supplying barges on time or otherwise by not fulfilling its contractual obligations entitling Canning to terminate the contract in December 1997. Moreover, in the alternative, Canning stated that when it and McKeil entered into the contract, McKeil knew and understood that Canning would only be able to continue the contract so long as Tripap honoured its obligations to Canning and because Tripap breached its contractual commitments to purchase Canning's wood, the transportation contract was frustrated.
[12] In its counterclaim against McKeil, Canning basically repeated the allegations in its defence and alleged special damages for McKeil's breach of contract or repudiation.
[13] McKeil's reply took issue with all of the allegations made by Canning, denied breaches and invoked force majeure as an alternative.
[14] On March 23, 1993, Canning issued a third party notice to Tripap attaching in Schedule A a copy of the McKeil statement of claim and in Schedule B, Canning's statement against Tripap in which Canning asserted the existence of the wood supply contract, the entry of the transportation contract with the knowledge and concurrence of Tripap; the unlawful termination of the wood supply contract by Tripap with the consequent frustration of the transportation contract; the duty or obligation, in the circumstances, for Tripap to indemnify and save Canning harmless or contribute to any awards which Canning may be ordered to pay McKeil in the action.
[15] On June 16, 1998, Tripap put in a third party defence to the McKeil statement of claim basically saying that it had no knowledge about the allegations McKeil made against Canning and did not participate and is not a party to the McKeil contract.
[16] On June 16, 1998, Tripap filed its third party defence to Canning's claim denying Canning's allegations or saying that it had no knowledge of them including a denial by Tripap that Tripap intervened or participated in business dealings between Canning and McKeil. Tripap added that in February 1998, it had instituted a legal proceeding in the Quebec Superior Court against Canning for $545,527.00 claiming that Canning was unlawfully withholding contract advances in that amount paid by Tripap under the wood supply contract in order to obtain discounts.
(c) The Canning action " T-477-98
[17] On March 23, 1998, Canning filed in this Court a statement of claim against Tripap Inc. Its claim is also a simple one. Canning alleges a multi-year wood supply contract between it and Tripap executed in March 1997; its unlawful termination by Tripap on June 9, 1997 with resultant significant losses and damages including but not limited to lost sales, lost profits, damage to its reputation and significant expenses including barge and equipment expenses.
[18] After a few preliminary skirmishes, on November 23, 1998, Tripap responded with its defence and counterclaim to the Canning action on the premise, without admission, that this Court had jurisdiction in the matter.
[19] In the statement of defence, Tripap took issue with Canning's contract interpretation, asserted the lawfulness of contract termination, questioned the scope of damages, and raised the lack of mitigation and the justification for barge expenses.
[20] Tripap then requested the Court to declare that it did not have any jurisdiction to hear Canning's action. In this respect, Tripap pointed to the nature of the contract between Canning and Tripap, the contract terms, the McKeil action in court file T-110-98, Canning's allegations and counterclaim in that action and the action taking place before the Quebec Superior Court.
[21] In the event that the Court held that it had jurisdiction, Tripap filed a counterclaim in which Tripap basically claims the repayment of advances made by Tripap to Canning which is the same claim as before the Quebec Superior Court.
ARGUMENTS
[22] In support of its motion for consolidation and stay, Canning argues that the actions have common questions of law and fact because they "involve claims arising out of agreements relating to the carriage of wood in or on a ship" and the Canning claim against Tripap includes the amount of the McKeil claim against Canning. Canning asserts commonality of witnesses "for the most part".
[23] McKeil opposes Canning's motion saying that McKeil is neither a party to the Canning action in this Court nor in the Tripap action before the Quebec Superior Court; the only link is that McKeil's barges were to carry Canning's wood to Tripap; there is no commonality in legal issues, in factual questions, in the nature of the claims, in the causes of action and in the ultimate resolution of the conflict between the parties. McKeil argues that consolidation would increase time and expense for examination on discovery and trial. In respect of the stay of its action pending resolution of the Canning action and the Tripap action, McKeil asserts prejudice. McKeil suggested that the Canning third party claim in its action be severed and consolidated with Canning's action because the rights and obligations between Canning and Tripap could all be resolved in one action.
[24] In reply, Canning anchors its argument on commonality of legal and factual
issues: (a) in respect of the wood supply contract on McKeil's representations and encouragement; (b) in respect of the transportation contract on Tripap's knowledge and concurrence; and (c) in general, in respect of both contracts, the knowledge of all of the parties to a common project or endeavour. Canning also argued against severance of its third party claim against Tripap and the consolidation of that claim in the Canning action.
[25] Tripap's response to Canning's consolidation and stay request was to link its position in this matter with the challenge it was making to the Court's jurisdiction in the Canning action.
ANALYSIS
| (a) The consolidation request |
[26] Consolidation of two actions will usually be ordered when the issues raised by the pleadings in the action are sufficiently familiar or common so as to achieve the objectives of consolidation namely: the general interest of justice, its proper administration and the true interests of the parties.
[27] The underlying policy objectives in consolidation is the avoidance of a multiplicity of proceedings and the promotion of expeditious and inexpensive determination of those proceedings. Common parties, common legal and factual issues, similar causes of action, parallel evidence and the outcome of one case as likely resolving the other case are the factors which the Court looks to in determining whether consolidation will be ordered or not (see Eli Lilly and Co. v. Apotex Inc. and Eli Lilly and Co. v. Apotex Inc., 55 C.P.R. (3d) 429, and Mon-Oil Ltd. v. Canada (1989), 27 F.T.R. 50.
[28] In my view, Canning has not made out a case for consolidation; none of the pre-conditions for a consolidation order exist in the two actions.
[29] McKeil is not a party in the Canning action against Tripap.
[30] There is no substantive commonality of legal and factual issues in the two actions. The McKeil action is a claim for breach of a transportation contract with Canning. Canning has, in defence and counterclaim, raised legal issues concerning contract scope, term, calculation of damages, repudiation, breach and frustration. McKeil, in reply, has raised force majeure. The Canning action against Tripap raises completely different issues. It relates to the supply of wood by Canning to Tripap, it focusses on Tripap's alleged unlawful termination and damages incurred by Canning.
[31] As a result of these disparities in issues, both factual and legal, discoveries and trial will not, in my view, be simplified through consolidation. The resolution of the Canning action will not resolve the McKeil action nor the Tripap action. On the contrary, consolidation would tend to lengthen and muddle both actions.
[32] Canning says that there are common issues relating to McKeil's representations which induced it to enter the wood supply contract with Tripap, relating to concurrence by Tripap in the transportation contract, and common knowledge by all of the parties to both contracts.
[33] To warrant consolidation there must be substantive commonality of legal and factual issues and remedy. McKeil's alleged representation to Canning about Tripap relates to the wood supply contract and not the transportation contract. Tripap's concurrence relates to the transportation contract and not the wood supply contract. The separate alleged representations by McKeil and Canning are integral to distinct actions.
[34] In their motion, Canning asked for an order that the two actions be heard together or perhaps sequentially. I am of the view of Rothstein J. (as he then was), in the Eli Lilly and Co. (supra) case, that such an order is best addressed when the parties are ready to have their matter set down for hearing. Moreover, Tripap has asked that the Canning action be dismissed on grounds that this Court lacks jurisdiction. Tripap's motion is still outstanding.
[35] In reply to Canning's motion, McKeil suggested that the best way to proceed was to sever Canning's third party claim against Tripap in the McKeil action and to consolidate that claim with Canning's action against Tripap.
[36] Severance is permissible under rule 106. Rule 106 relates to the hearing of two or more claims in a single proceeding which would cause undue complication or delay or would prejudice a party.
[37] In the circumstances of Canning's motion for consolidation, a decision on severance is inappropriate at this time for the following reasons. First, I consider severance as an alternative to McKeil's objections on Canning's consolidation motion and I have refused Canning's motion to consolidate the two actions; second, the issue of severance is best dealt with after discoveries have been held and the actions are ripe for hearing; third, without basing my decision on this point, I am of the view that it would have been appropriate for McKeil to seek an order for severance in a separate motion rather than in a reply to Canning's motion to consolidate.
(b) The stay
[38] Canning seeks an order that the McKeil action be stayed pending the determination of Canning's action in this Court and/or the determination of the Tripap action in the Quebec Superior Court.
[39] The arguments advanced by Canning are essentially the same as those advanced for its rule 105 consolidation motion.
[40] Canning's motion for a stay engages subsection 50(1) of the Federal Court Act which reads:
| 50. (1) The Court may, in its discretion, stay proceedings in any cause or matter,
|
50. (1) La Cour a le pouvoir discrétionnaire de suspendre les procédures dans toute affaire_:
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(a) A stay of the McKeil action pending the Canning action in this Court
[41] The test governing this type of stay was enunciated by Wetston J. in Compulife Software Inc. v. Compuoffice Software Inc. (1977), 143 F.T.R. 19 where he said this at page 22-23:
| It is well established that a stay of proceedings should not be granted unless it can be shown that (1) the continuation of the action would cause prejudice or injustice, not merely inconvenience or additional expense, to the defendant, and (2) that the stay would not be unjust to the plaintiff. The onus is on the party requesting the stay to prove that these conditions exist.... |
| The court will exercise its discretion to grant a stay, under s. 50(1) of the Federal Court Act, only in the clearest of cases. In consideration of whether granting a stay would be unjust to the plaintiff or applicant, this court will be reluctant to interfere with any right of access, unless there is a risk of imminent adjudication in two different forums. |
[42] Mr. Justice Wetston's reasons in Compulife Software Inc. (supra), built upon previous decisions of this Court which are reflected, inter alia, in Mon-Oil Limited v. Canada, (supra), where Cullen J. adopted the test of Reed J. in action T-266-88:
| The applicant must also demonstrate that the respondent would suffer no appreciable prejudice or injustice if the stay is granted. As the applicable law points out it is not merely a balance of convenience test which is applied. The burden on the applicant is heavier than that. |
[43] Canning does not meet the test for a stay of McKeil's action in this Court until Canning's action in this Court is determined. First, Canning's motion is basically a mirror of its motion for consolidation which has not met with success. Second, given the lack of sameness in the two actions, I do not see the risk of conflicting adjudication. Third, and more important, a stay would prejudice McKeil appreciably.
| (b) Stay the McKeil action until the Tripap action in Quebec Superior Court is heard |
[44] Canning's motion for a stay of the McKeil action until the Tripap action is determined in the Quebec Superior Court, cannot succeed. In order for paragraph 50(1)(a) of the Federal Court Act to apply, McKeil's action in this Court must be identical or closely resemble in its essential elements the Tripap action in the Quebec Superior Court. (See Fruit of the Loom Inc. v. Chateau Lingerie Mfg. Co. Ltd. (1984), 79 C.P.R. (2d) 274.) Clearly, this is not the situation before me. McKeil is not a party in the Tripap action and McKeil's claim in this Court against Canning is fundamentally different than the Tripap claim against Canning in the Quebec Superior Court.
[45] In order for paragraph 50(1)(b) to apply, the stay must be in the interest of justice. I have already dealt with this point in my consideration of Canning's request to stay McKeil's action in this Court. McKeil would be fundamentally prejudiced and its access to this Court unduly limited.
[46] For these reasons, Canning's motion for consolidation and stay is dismissed in its entirety with costs to McKeil in any event of the cause.
"François Lemieux"
J U D G E
OTTAWA, ONTARIO
MAY 5, 1999