ATS Automation Tooling Systems Inc. v. Chubb Insurance Co., 2019 ONSC 5073

CITATION: ATS Automation Tooling Systems Inc. v. Chubb Insurance Co., 2019 ONSC 5073

                                                                                                COURT FILE NO.: CV-16-554961

DATE: 20190830

SUPERIOR COURT OF JUSTICE – ONTARIO

RE:                 ATS Automation Tooling Systems Inc. and IWK (Thailand) Ltd., Plaintiffs

AND:

Chubb Insurance Company of Canada, Defendant

BEFORE:      Nishikawa J.

HEARD:        May 30, 2019

ENDORSEMENT

Overview and Procedural Background

[1]               The Appellants appeal the decision of Master Short dated November 2, 2018 dismissing the Plaintiffs’ motion for a stay of their action against the Respondent in favour of arbitration in India:  ATS Automation Tooling Systems Inc. v. Chubb Insurance Company of Canada, 2018 ONSC 6139 (CanLII) (the “Decision”).

[2]               The factual and procedural history of this proceeding are described in detail in the Decision and need not be repeated here.  In brief, IWK (Thailand) Ltd. (“IWK”) sold and shipped certain machinery from Thailand to the purchaser, Dr. Reddy’s Laboratories Ltd. (“DRL”), in India.  The machinery was found to be irreparably damaged when it arrived at DRL’s inland warehouse.  There is a dispute as to whether the machinery was damaged during shipment by sea from Thailand to India or during transit inland, and who bears the risk for the loss.

[3]               DRL, who had paid for the machinery in full, took steps to commence an arbitration against IWK in India for its losses.

[4]               IWK’s parent company, ATS Automation Tooling Systems Inc. (“ATS”) made a claim on a commercial marine cargo insurance policy that it obtained for the shipment from Chubb Insurance Company of Canada (“Chubb”).  Chubb denied the claim on the basis that the damage occurred during inland transit, which was not covered by the policy.

[5]               The Appellants commenced this action against the Respondent in Ontario, alleging that Chubb breached the terms of the policy by denying coverage.  The Appellants then brought a motion to stay their action on the basis that an arbitration was pending in India.  The Appellants’ position is that both proceedings would address the issues of where the damage occurred and when the risk passed, giving rise to the possibility of inconsistent results.

[6]               The Respondent brought a motion for summary judgment dismissing the Appellants’ claim.  The parties could not agree on the scheduling of both motions.  At a chambers appointment, Akbarali J. directed that the stay motion be heard before the summary judgment motion.

[7]               The Appellants submit that the Master erred in refusing a stay because he incorrectly applied the test for a stay and made findings that were not supported by the evidence.

Analysis

[8]               The decision to grant or refuse a stay is an exercise in discretion and ought not to be interfered with unless the Master made an error of law, exercised his or her discretion on the wrong principles or misapprehended the evidence such that there is a palpable and overriding error:  Zeitoun v. Economical Insurance Group2008 CanLII 20996 (ON SCDC), [2008] 236 O.A.C. 76 (Div. Ct.)[2008] O.J. No. 1771, at paras. 40-41, aff’d 2009 ONCA 415 (CanLII).

[9]               In the Decision, the Master found that there was no existing arbitration hearing scheduled in India and that “there is no evidence that there ever will be arbitration in India; and, even if there ever was arbitration in India, Chubb would not be a party to it.”  (Decision, at para. 69).

[10]           The evidence on this issue was equivocal.  DRL initiated an arbitration in the wrong forum in India and had to withdraw it.  When this appeal was heard, DRL had not yet recommenced an arbitration in the proper forum but the limitation period, which would expire on July 21, 2019, had not yet passed.  Since the status of an arbitration in India would be relevant to this appeal, and for the sake of certainty, I requested that counsel advise me after that date whether an arbitration was commenced in the proper forum in India.  At a case conference on August 15, 2019, counsel confirmed that no arbitration had been commenced.

[11]           The limitation period has now passed and no arbitration was commenced in India. Accordingly, there can be no stay in favour of arbitration.

[12]           The Master did not err in exercising his discretion to refuse a stay.  The Master referred to and applied the correct principles from the relevant case law on whether to grant a stay where one of the parties to the action is not a party to the arbitration agreement.  Specifically, he considered: (i) whether the issues in the arbitration were substantially similar; (ii) whether continuing the action would work an injustice; and (iii) whether staying the action would not cause prejudice to the responding party.  (Decision, at paras. 50-71).

[13]           The Master went on to consider the “more appropriate method to addressing these disputes” (at para. 74) and referred at length to the principles applicable to summary judgment motions. This may have gone further than necessary or appropriate.  The issue before the Master was not the preferable procedure, as between arbitration in India and a summary judgment motion in Ontario, but whether, based on the applicable principles, a stay should be granted.  However, the Master’s comments do not impact the correctness of the Decision, as they were clearly obiter and were made after the Master’s determination not to grant a stay.

[14]           Where the parties to a dispute have entered into an arbitration agreement, “the jurisprudence — both from this Court and from the courts of Ontario — has consistently reaffirmed that courts must show due respect for arbitration agreements and arbitration more broadly, particularly in the commercial setting.”  Telus Communications Inc. v. Wellman2019 SCC 19 (CanLII), at para. 54.

Conclusion

[15]           Based on the foregoing, I dismiss the Appellants’ appeal.  The Respondent may proceed with its motion for summary judgment, if it remains necessary.

Costs

[16]           The Respondent submitted a costs outline for a total of $5,873.10 on a partial indemnity scale, including disbursements and HST.  The Appellants’ costs, at $14,086.03, were significantly higher.

[17]           Pursuant to the Courts of Justice Act, R.S.O. 1990, c. C.43, s. 131(1), the court has broad discretion when determining the issue of costs. The overall objective of fixing costs is to determine an amount that is fair and reasonable for the unsuccessful party to pay in the circumstances, rather than an amount reflective of the actual costs incurred by the successful litigant: Boucher v. Public Accountants Council for the Province of Ontario et al. (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291 (C.A.). Rule 57.01(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg 194 [Rules], sets out the factors to be considered by the court when determining costs.

[18]           I have considered these factors, and the principle of proportionality in R. 1.01(1.1) of the Rules, while keeping in mind that the court should seek to balance the indemnity principle with the fundamental objective of access to justice.  The Respondent was entirely successful in this matter. The Respondent’s view is that the motion was an exercise in excessive caution, because the Appellants are simply preserving a contingent claim.  Since DRL is not pursuing the arbitration against IWK, there may be no claim at issue.

[19]           Based on the foregoing, I fix the Respondent’s total costs at $5,873.10 on a partial indemnity basis, inclusive of disbursements and HST.