GN v NTCL & RAOT, 2013 NUCJ 22

NUNAVUT COURT OF JUSTICE La Cour de justice du Nunavut Citation: GN v NTCL & RAOT, 2013 NUCJ 22 Date of Judgment (YMD): 20130927 Docket Number: 08-04-172-CVC Registry: Iqaluit Plaintiff: THE GOVERNMENT OF NUNAVUT AS REPRESENTED BY THE DEPARTMENT OF COMMUNITY AND GOVERNMENT SERVICES and THE DEPARTMENT OF FINANCE -and- Defendants: NORTHERN TRANSPORTATION COMPANYLIMITED and REFINERY ASSOCIATES OF TEXAS, INC. ________________________________________________________________________ Before: The Honourable Mr. Justice E. Johnson Counsel (Plaintiff): John Poyzogopoulous Counsel (Defendant NTLC): Edward R.

Feehan Counsel (Defendant RAOT): Jonathan L.S. Hodes Location Heard: Iqaluit Nunavut Date Heard: September 4, 2013 Matters: Rules of the Supreme Court of the Northwest Territories, R.N.W.T, R-010-96, as duplicated for Nunavut by s.29 of the Nunavut Act, S.C. 1993, c. 28 , Rules 58, 219, 231, 237, 242, 265, 270 REASONS FOR JUDGEMENT (NOTE: This document may have been edited for publication) I.

INTRODUCTION [ 1 ] The Plaintiff filed two motions returnable on September 4, 2013, and after hearing argument judgment was reserved. [ 2 ] The first motion seeks a declaration that the Plaintiff received valid and absolute causes of action against the Defendants from the residents of Nunavut who received compensation from the Plaintiff pursuant to its compensation program for damage caused to snowmobiles and outboard motors by gasoline it sold between December, 2001, and April, 2002.

If this court finds that the assignment was not valid, the Plaintiff seeks to add as plaintiffs all the residents that received compensation. [ 3 ] The second motion seeks an order compelling the Defendant, Northern Transportation Company Limited (NTCL), to produce relevant documents pertaining to the supply of gasoline to the Kitikmeot Region of Nunavut.

If NTCL is unable to produce the documents the Plaintiff seeks an order compelling a non-party, Imperial Oil Ltd. (IOL), to produce the documents. [ 4 ] IOL was given notice of the motions but declined to participate and took no position on the arguments. [ 5 ] Shortly before the case management conference call on August 20, 2013, the Defendant, Refinery Associates of Texas (RAOT), reached a settlement with the Plaintiff under a Pierrenger agreement that will be coming to this court for approval in October. As a result, RAOT did not take an active

part in the argument. II. FACTS [ 6 ] In April, 1999, the Plaintiff entered into a three-year contract with the Defendant, NTCL, to supply petroleum products for the transport seasons of 2000, 2001, and 2002 (The Agreement). NTCL contracted with RAOT to supply the petroleum that was then delivered to the Plaintiff in ships owned by NTCL. [ 7 ] After delivery the Plaintiff sold the petroleum directly to Nunavut consumers or to other retailers for resale to the consumers. [ 8 ] The fuel was delivered and resold without any problems in 2000 and 2001.

However, from December, 2001, until April, 2002, the Plaintiff received complaints from consumers about damage to their two-stroke snowmobile and outboard engines. [ 9 ] The consumers blamed their engine problems on the gasoline they purchased from the Plaintiff. Expert testing and advice satisfied the Plaintiff that the consumers’ complaints were valid.

[10] The Plaintiff responded to the complaints by initiating a compensation program. It also resold any unsold gasoline back into themarket at a substantial discount. [11] In exchange for the compensation the consumers assigned any right of action to the Plaintiff. [12] In April, 2004, the plaintiff commenced this action against NTCL claiming damages of $4,500,000 for the cost of the compensationprogram and damages of $3,000,000 for the discounted gasoline. III. ARGUMENTS AND ANALYSIS A. First Motion (

i) Plaintiff’s Argument [13] The Plaintiff acknowledges that the assignments are not legal assignments under the Choses in Action Act, R.S.N.W.T. 1988, c. C-7, as duplicated for Nunavut by s.29 of the Nunavut Act, S.D. 1993, c.28, because they are not contractual obligations. Rather they areassignments of the tort claims the residents had against NTCL.

The Plaintiff seeks a declaration that the assignments of the tort actionsconstitute equitable assignments under the rules of equity as analyzed in: Frederickson v Insurance Corp. of British Columbia (1986), (BC CA), 3 BCLR (2d) 145, 17 CCLI 194, aff’d (SCC), [1988] 1 SCR 1089, 49 DLR (4th) 160;Willmott v Norton, 2001 BCSC 478, [2001] BCJ No 626; and Margetts (Next Friend of) v.

Timmer Estate, 1999 ABCA 268, 178 DLR(4th) 577. [14] These cases establish the principle that an assignment of a cause of action involving injury to economic interests is valid in equityprovided that the assignee has a pre-existing property interest or a legitimate commercial interest in the litigation and does violate thelaws of champerty and maintenance.

In analyzing the assignment a court looks to whether the assignment can be fairly seen as promptedby a desire to advance the cause of justice, rather than intermeddling for a collateral reason. [15] The Plaintiff submits that it had a genuine pre-existing and commercial interest in the assignors’ causes of action against theDefendants because it had a legal, moral and financial interest in resolving the claims of the assignors and had its own claim against theDefendants in relation to the same subject matter. [16] In equity, assignees were generally required to name assignors as parties in order to proceed with the legal action. [17] Relying on Canadian Bank of Commerce v La Brash, (SK KB), [1918] 1 WWR 8, 39 DLR 398; Bercovitz Estatev Avigador, [1961] OJ No 20, OWN 59 [Bercovitz]; and Freudmann-Cohen v Tran, (ON CA), [2004] OJ No 1699,238 DLR (4th) 428 [Freudmann], the Plaintiff argues that a court may permit an action to proceed without the necessity of adding theassignors as party plaintiffs. [18] NTCL did not raise, as a defence, the Plaintiff’s lack of standing to bring the assigned claims.

The assignors have completelysurrendered to the Plaintiff all rights of recovery for the amounts reimbursed creating an absolute assignment of legal rights making thejoinder of the assignors unnecessary. None of the assignors have personally filed claims and could not do so in the future because thelimitation period to commence an action has expired. [19] There is no suggestion that NTCL was prejudiced by the failure to add the assignors as plaintiffs or by being denied discovery rightsagainst the assignors.

The Defendants have never requested to discover the assignors although entitled to do under Rule 242 of the Rules of the Supreme Court of the Northwest Territories, R.N.W.T, R-010-96, as duplicated for Nunavut by s.29 of the Nunavut Act,S.C. 1993, c. 28 [Rules]. The Plaintiff has stepped into the shoes of the assignors and is in no better position than the assignors whileNTCL is in no worse position in defending the claims. NTCL can continue to assert any defences that it would have had if the assignorshad sued.

Therefore, there is nothing to be gained by adding the assignors as plaintiffs and the “justice of the case” does not require it. (ii) NTCL Argument [20] NTCL acknowledges that there is a wide discretion for a court to determine that the tort claims have been equitably assigned.However, the assignment must be based on something. Although the Plaintiff asserts that it had a legal, moral and financial interest inresolving the claims of the assignors it does not explain what that legal interest was.

The only legal interest that the Plaintiff appears tohave is based on its belief that it had some liability as a retailer of gasoline. If this assumption is correct then it would give rise to certaindefences and rights to NTCL. These include the right to third party the Plaintiff, the right to advance a betterment argument with regardto the settlements made with the assignors, and the right to demand documents and obtain discovery from the assignors. [21] The only reason that the issue was raised by NTCL was because it wishes those rights to be preserved so that they can be argued attrial if necessary.

One of the arguments flowing from the assumption that the Plaintiff believed it had some liability is that it is a jointtortfeasor. This could result in NTCL having the right to third party the Plaintiff. NTCL does not want to be met with the argument attrial that the Plaintiff is not a third party. The only way around this problem is for the 2,700 assignors to be added as Plaintiffs.

However,this can be avoided if this court recognizes that these arguments may be advanced at trial as if the assignors had been added as Plaintiffs,and that it is not necessary to go through the formality of filing a third party claim. (iii) Analysis [22] I am satisfied that I have the discretion to decide whether it is necessary to include the 2700 assignors as Plaintiffs in order to permitthe Plaintiff to pursue the claims for the money paid out to the assignors.

In Bercovitz, Porter J. reviewed the available jurisprudence andconcluded that the courts do not always insist on proceeding in the name of the assignor, particularly where the failure to abide by theprocedure does not result in an injustice. This case fits the exception and it would be an unnecessary expense of time and money at thislate stage of the legal action to engage in adding plaintiffs or amending pleadings to satisfy a procedural rule that was described in

Freudmann, at paragraph 31, as “shrouded in mystery and history”. [23] However, NTCL has raised some valid potential problems that could restrict its defence of the action. These may be resolved in theapproval of the Pierrenger agreement. I will therefore permit NTCL to raise at trial any defence and third party notice that could haveflowed from adding the assignors as Plaintiffs. NTCL may also be entitled to further documentation and the right to discover someassignors depending on further discussion between the parties. Either party may apply by way of motion for further orders on this issue. B. Second Motion (

i) Plaintiffs Argument [24] The Agreement required NTCL to supply petroleum products to three regions in Nunavut. These regions were as follows: (

a) Baffin Region - Also known as Region 1; (

b) Keewatin Region - Also known as Region 2; and (

c) Kitikmeot Region – Also known as Region 3. [25] The Agreement incorporates, by reference, the Canadian General Standard Board (CGSB) specifications for unleaded gasoline (CGSB specifications) and provides that the gasoline supplied was to conform with the CGSB specifications as amended from time totime. [26] Paragraph 6.1.9 of Can/CGSB 3.5-99 provided that all gasoline retailed in Canada had to contain a deposit control additive (DCA)that met certain specifications. [27] NTCL purchased the gasoline that it supplied to Regions 1 and 2 from RAOT.

That gasoline did not contain a DCA and alsocontained olefin levels of 33.7% higher. [28] The Plaintiff has provided NTCL with two expert reports that conclude that the absence of DCA and the high level of olefins in thegasoline were the likely cause of the damage that arose from the use of the gasoline. [29] Evidence available to date suggests that the gasoline delivered to Region 3 (the Region 3 Gasoline) was from a different supplier (i.eImperial Oil) than RAOT.

That gasoline was supplied under the identical agreement and specifications as the subject gasoline but nodifficulties were experienced with that gasoline and no damages are being asserted as a result of using that gasoline. [30] Although the Plaintiff has requested that NTCL produce its files pertaining to the delivery of gasoline to Region 3, NTCL has notcomplied with its request. [31] The Plaintiff seeks an order compelling NTCL to supply the following documents: (

a) the contracts and/or agreements of purchase and sale between NTCL and Imperial Oil for the supply of gasoline to Region 3 for theperiod 1996-2002; and (

b) the specifications provided to Imperial Oil for the supply of gasoline to Region 3 between 1996 and 2002; (

c) composite test results and certifications that the gasoline supplied to Region 3 complied with specifications provided to or preparedby NTCL that have not already been produced between 1996 and 2002; (

d) communications between NTCL, its representatives, consultants or agents and Imperial Oil during the period 1996 to 2002. [32] The Plaintiff argues that Rule 219 of Rules, as interpreted in Fullowka v.

Royal Oak Mines Inc. (NWT SC),[1998] NWTJ No 73, [1998] N.W.T.R. 217 at para 5 [Fullowka], requires parties to litigation to produce all relevant documents.Relevant documents are all documents that “may tend to advance the case of the party seeking discovery”. [33] An issue for trial will be whether NTCL had an obligation to deliver gasoline that contained DCA or whether the Plaintiff wasobliged to add DCA following delivery.

Another issue for trial will be whether NTCL had an obligation to limit olefin levels, andwhether the high level of olefins and lack of DCA resulted in the subject gasoline causing damages. [34] The Plaintiff’s claim is for damage arising from the gasoline delivered to Regions 1 and 2. That gasoline had a high level of olefinsand did not contain DCA. NTCL’s supplier of that gasoline was RAOT. [35] Based on all information available to date, NTCL’s supplier for Region 3 was Imperial Oil.

That oil appears to have contained aDCA and the level of olefins in that gasoline is unknown at this point. [36] The Plaintiff maintains that NTCL had the obligation to deliver gasoline with a DCA and an acceptable level of olefins. NTCLdenies these obligations. [37] The evidence that may be available on whether Imperial Oil in fact included DCA and the level of olefins is relevant to thedetermination of NTCL’s obligations in Regions 1 and 2 because NTCL supplied Region 3 Gasoline under the identical Agreement usedto supply gasoline to Regions 1 and 2.

The information would also be relevant in understanding why the Region 1 and 2 gasoline causedproblems, while the Region 3 gasoline did not. [38] The Plaintiff therefore requests this court to order NTCL to produce the relevant information and to attend an examination fordiscovery to answer questions pertaining to the supply of gasoline to Region 3.

[ 39 ] In the alternative, if NTCL is unable to produce the documentation, the Plaintiff seeks an order under Rule 231 of the Rules compelling Imperial Oil to review its files and produce all relevant documentation. As interpreted in Kitikmeot Dental Services Ltd. v.

Kobaisy, [1998] NWTJ No 5 , 24 CPC (4th) 360 [Kitikimeot] and Base v Moisey, 2004 NWTSC 34 , 2004 CarswellNWT 32 , this rule permits the production of documentation from a non-party where the documents are probably relevant to a material issue. [ 40 ] The Plaintiff submits that it has satisfied the factors identified in these cases so that this court should issue the appropriate orders for production of the relevant documents. [ 41 ] The Plaintiff also seeks discovery of a representative of Imperial Oil pursuant to Rule 265 and 270 of the Rules . (ii) NTCL Argument [ 42 ] NTCL does not oppose this motion but argues the orders sought by the Plaintiff are overly broad.

It cannot find any of the documentation sought by the Plaintiff and therefore, the question becomes whether Imperial Oil has these records and if it does what is it obligated to produce? [ 43 ] NTCL argues that the documentation requested for the years prior to 1999 is not relevant and it does not want to put Imperial Oil on a wild goose chase when the documents may not be admissible at trial. [ 44 ] Whether Region 3 Gasoline contained a DCA is irrelevant to the determination of the issue of whether NTCL should have added a DCA to the gasoline supplied to Regions 1 and 2.

Similarly, information about olefin levels is not relevant because the specifications did not limit the olefin levels in the gasoline. [ 45 ] Imperial Oil’s decision to add a DCA does not determine the question as to who had the responsibility to add a DCA. It may have been because they brand their gasoline because they have a proprietary DCA and detergent additive package that has nothing to do with the

interpretation of the requirements set in the CGSB amendments. Adding a DCA is not indicative of whether NTCL was obligated to do so as well. [ 46 ] If this court orders Imperial Oil to produce the documents requested, NTCL objects to any examination for discovery of a representative of Imperial Oil. (iii) Plaintiff’s Reply [ 47 ] The Plaintiff argued in reply that the information for the years before 1999 are relevant because that contract was preceded by a similar contract for the supply of gasoline to all three regions.

The Plaintiff’s review of the documentation produced indicated that the 1999-2002 contract was the first time that RAOT was involved and it raised issues of the specifications and the responsibility to add DCA. Those issues were discussed in the creation of the 1996 contract that was renewed in 1999 without much discussion. Accordingly, the earlier documentation may be relevant to those issues.

The net was cast widely because the Plaintiff did not want to miss something and the Plaintiff suggested that the best way to handle the issue was to have IOL hand over all the files so that they would not be inconvenienced and forced to make decisions on relevancy. [ 48 ] The Plaintiff was content with an affidavit from NTCL stating that it had reviewed its files and could not find the documentation requested. (iv) Analysis [ 49 ] As Vertes J. stated in Fullowka the threshold for the production of documents by a party is low.

As long as the documents may tend to advance the case of the party seeking the documents they should be produced. The rule for the production of documents by a third person has a similar low threshold. As Vertes J. stated in Kitikmeot at paragraph 8 : The Rule also refers to there being a “reason to believe that the document is relevant to a material issue in the action". The Rule does not require the demanding party to establish relevance, merely to provide reasons to believe that the document is relevant.

Relevance in this context (as perhaps in every other) simply means that it is likely to be logically probative. [ 50 ] The production of the documents does not mean they are necessarily admissible at trial. NTCL has suggested the outline of an argument that the documents are not relevant because there could be other reasons that IOL added a DCA. NTCL can advance those arguments at trial and the trial judge will rule on their admissibility at that time. [ 51 ] IOL has not taken a position on the argument and I am satisfied that the order requested by the Plaintiff should be granted.

I am also satisfied that the most efficient way to proceed is for IOL to produce all the files requested for the inspection of the Plaintiff at a time and place convenient to the parties. That will leave the Plaintiff with the laborious task of reviewing the files to see if there are any documents that they believe are relevant.

If they find those documents they can obtain copies and they may be added to the Compendium of Documents being prepared by the Plaintiff and NTCL. [ 52 ] The Plaintiff and NTCL shall have the right to further discovery of an officer of the other party on any documents that are produced from the IOL files. The Plaintiff may apply for a further order to examine an officer of IOL. IV.

CONCLUSION [ 53 ] The residents of Nunavut who received compensation from the Plaintiff validly and legally assigned their right of action to the Plaintiff and do not have to be named as Plaintiffs in this action. [ 54 ] NTCL may advance at trial any defences and arguments that could have been advanced if the residents had been added as Plaintiffs. [ 55 ] NTCL or IOL shall produce to the Plaintiff, within such time limits as are determined at the motion set for October 25, 2013, any

files that may contain: (

a) The contracts and/or agreements of purchase and sale between NTCL and Imperial Oil for the supply of gasoline to Region 3 between 1996 and 2002; (

b) The specifications provided to IOL for the supply of gasoline to Region 3 between 1996 and 2002; (

c) All composite test results and certifications that the gasoline supplied to Region 3 between 1996 and 2002 complied with specifications provided to or prepared by NTCL that have not already been produced; (

d) All communications between NTCL, its representatives, consultants or agents, and IOL relating to the supply of gasoline for Region 3 between 1996 and 2002; and (

e) All evidence and documents relating to the issue of whether the gasoline sold to the Plaintiff between 1996 and 2002 for Region 3 contained a deposit control additive. [ 56 ] The Plaintiff is awarded lump sum party-party costs of $1,250 inclusive of disbursements that shall be in the cause. Dated at the City of Iqaluit this 27th day of September, 2013. _______________________ Mr. Justice Earl D. Johnson Nunavut Court of Justice