



COURT OF APPEAL FOR ONTARIO

CITATION: Lilydale Cooperative Limited v. Meyn Canada Inc.,
    2015 ONCA 281

DATE: 20150422

DOCKET: C57995

Laskin, Cronk and Rouleau JJ.A.

BETWEEN

Lilydale Cooperative Limited

Plaintiff (Respondent)

and

Meyn Canada Inc., Mey-Can Equipment Ltd., and
    Meyn Food Equipment Inc.,
EMK NV and Elboma Moortgat Konstruktie NV

Defendants

(Appellants/Respondents
    by way of cross-appeal

Respondents
/
Appellants
    by way of cross-appeal)

and

Allied Boiler Services Inc. and Weishaupt
    Corporation

Third
    Parties (Respondents)

Derek V. Abreu, for the appellants/respondents by way of
    cross-appeal

Jamieson Halfnight and Anne Thompson, for the respondent
    Lilydale Cooperative Limited

Erin Hoult and David K. Badham, for the respondents/appellants
    by way of cross-appeal EMK NV and Elboma Moortgat Konstruktie NV

No one appearing for the respondents Allied Boiler
    Services Inc. and Weishaupt Corporation

Heard: December 2, 2014

On appeal from the order of Justice Andra Pollak of the Superior
    Court of Justice, dated April 2, 2014.

Laskin
    J.A.:

A.

Overview

[1]

The overriding question on this appeal is whether the motion judge erred
    in finding that Ontario law, rather than Alberta law, governed a contract
    between the appellant Meyn and the respondent Lilydale.

[2]

Meyn is a multi-national enterprise, incorporated in Canada under the
Canada
    Business Corporations Act
, R.S.C. 1985, c. C-44.

In Canada it operates
    only in Ontario. Lilydale is an Alberta corporation and operates a poultry
    processing plant in Edmonton. In 1993, Lilydale purchased from Meyn a fryer
    and oven system for its Edmonton plant. Lilydale used the fryer and oven
    system for 10 years, until January 2004, when a fire occurred in its plant. In
    January 2006, Lilydale sued Meyn in Ontario for negligence and breach of
    contract. It alleged that the fire and oven system was defective and caused the
    fire.

[3]

The parties jointly brought a motion by special case
[1]
on an agreed set of facts to determine whether Alberta or Ontario law applied
    to the tort and breach of contract claims. The issue is important because
    Alberta and Ontario have different ultimate limitation periods. Even taking
    into account discoverability, Albertas ultimate limitation period is 10 years;
    Ontarios is 15 years. The parties agreed that Lilydales cause of action arose
    no later than August 31, 1994. Therefore, as Lilydale did not sue until January
    2006, if Alberta law applied, its action was statute-barred; if Ontario law
    applied, it was not.

[4]

The motion judge found that Alberta law applied to the tort claim.
    Lilydale has not appealed that finding. The motion judge then found that
    Ontario law applied to the breach of contract claim. As the contract between
    Lilydale and Meyn did not have a choice of law clause, the motion judge applied
    the test for determining the applicable law, long recognized in our
    jurisprudence: which jurisdiction, Alberta or Ontario, had the closest and
    most real connection to the contract?

[5]

The motion judge considered the four criteria typically used to assess
    the closest and most real connection: the nature and subject matter of the
    contract; the place of performance of the contract; the place of contracting;
    and the residence and domicile of the parties. She held that the first two
    criteria favoured Ontario, and that the last two criteria were neutral. She
    therefore concluded that Ontario law governed Lilydales claim for breach of
    contract. Thus, the action was not barred by a limitation period.

[6]

Meyn acknowledges that the motion judge stated the right test, but
    contends that she misapplied it. On its appeal, Meyn raises two issues: did the
    motion judge err in holding that the nature and subject matter of the contract
    favoured Ontario rather than Alberta; and did she similarly err in holding that
    the place of performance of the contract favoured Ontario?

[7]

The respondent EMK
[2]
cross-appeals against Meyn. Meyn has crossclaimed against EMK in the contract
    action, and EMK seeks an order dismissing the crossclaim if the main appeal is
    allowed. EMK supports Meyns position on the main appeal and raises a third
    issue: did the motion judge err in holding that the residence and domicile of
    the parties was a neutral criterion, rather than one favouring Alberta?

[8]

Meyn also seeks to leave to appeal the motion judges costs order. The
    motion judge awarded Lilydale costs of $35,000. Meyn contends that she ought to
    have ordered no or nominal costs, or costs in the cause, because the parties
    brought the motion for their joint benefit and because success on the motion
    was divided.

B.

Did the
    motion judge err in finding that Ontario law applied to Lilydales breach of
    contract claim
?

(a)

The test for determining the applicable law

[9]

Meyn and Lilydale did not include in their contract a clause for the law
    that would govern disputes between them. Absent such a clause, the motion judge
    applied the test first set out by the Supreme Court of Canada nearly 50 years
    ago in
Imperial Life Assurance Co. of Canada v. Segundo Casteleiro Y
    Colmenares
, [1967] S.C.R. 443. All parties agreed that this was the
    appropriate test. In
Colmenares
, relying on English authority, Ritchie
    J. set out the closest and most real or most substantial connection test, at p.
    448:

It now appears to have been accepted by the highest Courts in
    England that the problem of determining the proper law of a contract is to be
    solved by considering the contract as a whole in light of all the circumstances
    which surround it and applying the law with which it appears to have the closest
    and most substantial connection.

This test was adopted by the Privy Council in
Bonython v.
    Commonwealth of Australia
, [1951] A.C. 201, where Lord Simonds said at p.
    219:

... the substance of the obligation must be determined by
    the proper law of the contract,
i.e.
, the system of law by reference to
    which the contract was made or that with which the transaction had its closest
    and most real connexion.

[10]

For
    the criteria that inform this test, Ritchie J. turned to Cheshires text on
private international law
:

The many factors which have been taken into consideration in
    various decided cases in determining the proper law to be applied, are
    described in the following passage from
Cheshire on Private International
    Law
, 7th ed., p. 190:

The court must take into account, for instance, the
    following matters: the domicil and even the residence of the parties; the
    national character of a corporation and the place where its principal place of
    business is situated; the place where the contract is made and the place where
    it is to be performed; the style in which the contract is drafted, as, for
    instance, whether the language is appropriate to one system of law, but
    inappropriate to another; the fact that a certain stipulation is valid under
    one law but void under another  the economic connexion of the contract with
    some other transaction  the nature of the subject matter or its
situs
;
    the head office of an insurance company, whose activities range over many
    countries; and, in short, any other fact which serves to localize the contract.

[11]

The
    motion judge focused on four criteria: the nature and subject matter of the
    contract, the place of performance of the contract; the place of contracting,
    and the domicile and residence of the parties. The motion judges finding that
    the place of contracting was neutral is not contested on this appeal. Her
    findings on the other three criteria are in issue. I turn to them now. I do so
    with the standard of appellate review in mind. The motion judges balancing of
    the four criteria she considered called for the exercise of her discretion.
    Unless, in exercising her discretion, she made an error of law or an
    unreasonable finding of fact or balanced the criteria in an unreasonable way,
    this court should not interfere.

(b)

The nature and subject matter of the contract

[12]

The
    motion judge characterized the contract as one for the design, delivery, and
    installation of the System for Lilydale. She held that this criterion pointed
    to Ontario.

[13]

Both
    Meyn and EMK contend that the motion judge mischaracterized the nature of the
    contract. They say it was simply a contract for the sale and installation of a
    piece of equipment. And, as Meyn shipped the equipment FOB,
[3]
title passed and the sale was effected on delivery in Alberta. Thus the subject
    matter of the contract shows that Alberta had the closest connection to it.

[14]

I
    do not agree with this contention. Both Meyn and EMK have recharacterized the
    nature of the contract, contrary to the agreed statement of facts. Paragraph 11
    of the agreed statement provides:

In the summer of 1993, Lilydale solicited a proposal from Meyn
    for a fryer and oven system for use at the Plant in Edmonton. On August 6,
    1993, Meyn faxed a proposal from Mississauga, Ontario, to Lilydale in Edmonton,
    Alberta, regarding the design and sale of a fryer and oven system by Meyn to
    Lilydale.

[15]

In
    other words, the parties agreed that the contract was not simply for the sale
    of a good; it was a contract for the
design
and sale of a fryer and
    oven
system
(my emphasis). The other facts agreed to by the parties
    amply supported this characterization. The system consisted of a number of
    different components. Meyn ordered these components from various suppliers and
    arranged for them to be shipped to Lilydale. Meyn also had to design the
    system. All of this  the ordering of the components and the design  was done
    in Ontario. The motion judges finding that the nature and subject matter of
    the contract was more closely connected to Ontario was a reasonable finding.

(c)

The place of performance of the contract

[16]

The
    place of performance of the contract is related to its subject matter and, for
    determining the applicable law, is perhaps the most important criterion. The
    motion judge concluded that most of the contract was performed in Ontario 
    Meyn had to design the system, choose the components and arrange to obtain
    them. It did all of this in Ontario; it performed virtually no work in Alberta.

[17]

Meyn
    and EMK submit that the motion judge erred in her finding on this criterion.
    They make three related points. First, they maintain that the obligations
    imposed by the contract were performed in Alberta. Under the contract, Meyn was
    obligated to deliver the fryer and oven system to Lilydales plant in Edmonton
    and arrange for installation and start-up by a qualified technician. The
    parties agreed that delivery, installation, and start-up took place at
    Lilydales plant in Edmonton. Indeed, under the contract that was the only
    place these obligations could be performed.

[18]

Second,
    they argue that the motion judge erred by failing to infer that Meyn performed
    work in Alberta. They point out that under rule 22.05 of our
Rules of Civil
    Procedure
, a motion judge on a special case is entitled to draw reasonable
    inferences from the agreed facts, and they contend the motion judge wrongly
    refused to draw any inferences.

[19]

Third,
    Meyn and EMK argue that numerous cases have held that in a contract for the
    sale of goods, where the goods are shipped from one jurisdiction to another,
    the jurisdiction where delivery and installation and start-up take place is
    normally the jurisdiction whose law governs the contract  in this case,
    Alberta. They point, for example, to
Rôtisserie Mays Ltée v. Stoel-Tek
    Inc.
(1990)
, 104 N.B.R.
    (2d) 255 (N.B. Q.B.), and
Oleet Processing Ltd. v. Puratone Corp.
,
    2010 SKQB 69, 352 Sask. R. 190.

[20]

I
    do not agree with any of these three points. On their first point, Meyn and EMK
    have again failed to take into account that this contract was not just for the sale
    of a piece of equipment, but also for the design of a system. And as I have
    said, the system was designed in Ontario. Thus this contract was partly
    performed in Alberta, and partly performed in Ontario. Another judge might have
    found that performance of contract favoured Alberta instead of Ontario. But the
    motion judges finding that most of the contract was performed by Meyn in
    Ontario was a reasonable finding, supported by the agreed statement of facts.

[21]

On
    Meyns and EMKs second point, the motion judge was well aware she was entitled
    to draw reasonable inferences from the agreed facts. She chose not to do so
    because Meyn and Lilydale disagreed on what inferences should be drawn. She did
    not err because she did not accept Meyns view of what inferences were
    reasonable.

[22]

Indeed,
    Meyn wanted her to infer it performed some work on the contract in Alberta. Yet
    the evidence on whether it did so was unclear. The agreed statement of facts
    says that the only work performed in Alberta by anyone other than Lilydale was
    by the third party, Allied Boiler, who went to the plant for a single day and
    mounted the burner and gas train to the boiler.

[23]

On
    Meyns and EMKs final point, I accept that in several cases of
    multi-jurisdictional contracts for the sale of goods the place of delivery has
    been held to be the place of performance. But this is not a general rule. See,
    for example,
General Refractories Co. of Canada v. Venturedyne Ltd.
, 2002
    Carswell Ont. 36 (S.C.), at paras. 116-18. A motion judge has discretion to
    determine in any given case whether the place of delivery should be controlling.
    And as I have said, this was not simply a contract for the sale of goods. It
    had a design component, and that component was performed in Ontario.

[24]

For
    these reasons, the motion judges finding that the place of performance of the
    contract pointed more to Ontario than Alberta was a reasonable finding.

(d)

The domicile and residence of the parties

[25]

The
    motion judge found that this criterion was neutral because Meyn is a resident
    of Ontario and Lilydale was resident in Alberta. Meyn does not contest her
    finding. But EMK does.

[26]

EMK
    submits that this criterion favours Alberta because domicile and residence are
    not synonymous. As Lilydale is an Alberta corporation with its place of
    business in Alberta, both its domicile and residence point to Alberta. But as Meyn
    is a Canadian corporation with its place of business in Ontario, only its
    residence points to Ontario. This submission has little merit. The motion judge
    was justified in looking only to the residence of each company and in finding
    that, as they cancel each other out, this criterion was neutral.

(e)

Conclusion on the applicable law

[27]

The
    motion judges findings on the relevant criteria were reasonable, as was her
    overall conclusion that the closest and most real connection to the contract
    was Ontario.

[28]

Nonetheless,
    EMK argues that the motion judges conclusion is inconsistent with the
    principles of order, fairness, and comity that underlie private international
    law. This argument was not made before the motion judge and I doubt we should
    consider it on appeal. But even if we do consider it, I see nothing unfair in
    requiring Meyn to adhere to the substantive law of Ontario, the law of its home
    jurisdiction in Canada. Meyn, a multi-national enterprise, could have inserted
    a choice of law clause in its contract with Lilydale. Had Meyn done so, it
    would undoubtedly have chosen Ontario, the only province in Canada where it
    operates. It seems to me more than a little ironic that despite its own close
    connection to Ontario, Meyn would seek to take advantage of Alberta law.

[29]

I
    would dismiss Meyns appeal from the motion judges holding that Ontario is the
    jurisdiction with the closest and most real connection with the contract.

C.

Did the
    motion judge err in awarding Lilydale its costs of the motion
?

[30]

The
    motion judge awarded Lilydale costs of the motion on a partial indemnity basis
    in the amount of $35,000. Meyn asked for leave to appeal on the question
    whether Lilydale is entitled to costs. It makes two submissions: the motion was
    brought jointly, for the benefit of both parties; and Lilydale was only partly
    successful on the motion, as its tort claim was found to be statute-barred. On
    either ground, Meyn submits that costs should be in the cause, or Lilydale
    should at most be entitled to nominal costs.

[31]

I
    would deny leave to appeal costs. The motion judge exercised her discretion
    reasonably in awarding Lilydale costs. Although the parties brought the motion jointly,
    the proceedings were adversarial. At stake was Lilydales ability to maintain
    its action. And, although its tort claim was found to be statute-barred, it can
    continue with its breach of contract claim. Its success in preserving its claim
    in contract entitled it to costs.

D.

Conclusion

[32]

I
    would dismiss Meyns appeal and EMKs cross-appeal. The motion judge did not
    err in concluding that Ontario law governs Lilydales breach of contract claim.
    I would also deny Meyn leave to appeal the motion judges costs order. Lilydale
    is entitled to the costs of the appeal against Meyn and EMK jointly in the
    agreed on amount of $20,000, inclusive of disbursements and applicable taxes.

Released: April 22, 2015 (J.L.)

John Laskin J.A.

I agree. E.A. Cronk J.A.

I agree. Paul Rouleau J.A.





[1]
Under Rule 22 of the
Rules of Civil
    Procedure
,
R.R.O. 1990, Reg. 194, the parties may state a question
    of law in the form of a special case for the opinion of the court. The special
    case proceeds on an agreed statement of facts. Its purpose is to ask the court
    to decide a question that may dispose of all or part of a proceeding or shorten
    the hearing.



[2]
EMK NV and Elboma Moortgat Konstruktie NV are not separate entities; EMK NV is
    an abbreviation of Elboma Moortgat Konstruktie NV.



[3]
Free on board.


