Will the Muscutt Test be Grounded in Newfoundland & Labrador? Universal Helicopter v. Rolls-Royce et al.

The recent decision of the Newfoundland & Labrador Trial Division in Universal Helicopters Newfoundland Limited v. Rolls-Royce Corporation, 2009 NLTD 125 (CanLII), (2009), 888 A.P.R. 284, 288 Nfld. & P.E.I.R. 284, 56 C.B.R. (5th) 201, 2009 NLTD 125, 2009 CarswellNfld 202 (N.L. T.D.) (“Rolls-Royce”) reinforces arguments in favour of legislative reform in the area of jurisdiction, if not the uniform adoption of the Uniform Law Conference of Canada’s model Uniform Court Proceedings and Jurisdiction Transfer Act (Enacted by B.C. (2003); Sask. (’97); Yukon (2000); N.S. (2003)).

Background

The plaintiff, Universal Helicopters, a Newfoundland & Labrador corporation with corporate headquarters in Goose Bay, Newfoundland, owns various helicopters and provides air transport and travel support to the mineral exploration industry. The defendant, Rolls-Royce Corporation, a Delaware corporation with its head office in Indianapolis, Indiana, USA, manufacturers different types of automotive and aircraft engines, including helicopter engines. The defendants, Howmet Corporation (Howmet) , a Delaware corporation with its head office in Cleveland, Ohio and its subsidiary, Howmet Castings and Services Inc. (Howmet Castings), also a Delaware corporation, with head offices in La Porte, Indiana, are wheel manufacturers. Neither Rolls-Royce nor the Howmet defendants have offices in Newfoundland and Labrador.

The wheel was sold to Rolls-Royce under an agreement between Rolls-Royce, Howmet and Howmet Castings, which provided that Rolls-Royce was to be indemnified and held harmless for any claims and/or damages resulting from Howmet and Howmet Castings’ failure to comply with its obligations under the agreement. The agreement further provided that it is to be construed in accordance with the laws of Indiana. After purchase of the wheel, Rolls-Royce conducted finished machine work on it and completed certain inspections for anomalies in Indiana. The wheel was then sold to Acro Aerospace Inc., a British Columbia company which installed the third stage turbine wheel in Universal’s helicopter during an overhaul, conducted in British Columbia in October 1999.

On July 12, 2007, Universal’s Bell 206 L-4 helicopter, powered by a Rolls-Royce Allison Model 250/C30P engine, crashed outside of Cole Harbour, Nunavut. There were no personal injuries. The alleged cause of the accident was a defective third wheel, resulting from a fatigue crack occurring during the manufacturing process of the wheel casting.

Universal Helicopters brought an action in negligence for costs incurred, salvage costs, and lost profits against Rolls-Royce as seller, Howmat Castings as manufacturer and Howmat as supplier of wheel. The Defendants each brought an application to stay the proceedings for lack of jurisdiction. Rolls-Royce also argued forum non conveniens in the event the Court found jurisdiction simpliciter.

The Court dismissed the defendants’ applications, finding that there was a real and substantial connection between the cause of action alleging damages and economic loss and Newfoundland and Labrador. Dymond, J. further held that Rolls-Royce did not satisfy the burden of showing that another jurisdiction would be a more convenient forum to have the action heard, being the place where the wheel was manufactured in Indiana, U.S.A.

Is the Rolls-Royce decision a Jurisdictional Lemon?

The Court’s jurisdictional analysis in Rolls-Royce is quixotic. On the one hand, the Court’s analytical approach reflects a sound theoretical underpinning to jurisdiction simpliciter by adopting a “reasonably restrained” approach to jurisdiction. In fact, Dymond, J. cites at length the analysis of Belobaba, J. in Black v. Breeden, in respect of the Muscutt factors for establishing a “real and substantial connection” and the Ontario formulation of the forum non conveniens test (at paras. 40-42) (see earlier post here). Moreover, at paragraph 43, Justice Dymond also highlights Justice Belobaba’s criticisms of the Muscutt factors (citing Belobaba, J. in Black v. Breeden at para. 31), noting that:

“[46] The Court of Appeal of Newfoundland and Labrador has yet to rule on the Muscutt criteria in a manufacturer’s liability case alleging tort. Several trial division judges, however, have referred to the Muscutt factors. Orsborn, J., as he then was, in the case of Sobeys Land Holdings Ltd. v. Harvey & Co., 2006 NLTD 67; Adams, J., in GRI Simulations Inc. at paras. 37-72; and most recently Butler, J. in Brake v. Phelps Drilling Company, 2009 NLTD 91, at paras. 38 – 57 referred to the Muscutt factors.

[47] I am in agreement that Moran gives Universal Helicopters a real and substantial connection on the basis of foreseeability of damages, based on the stream of commerce connection to the cause of action for legal damages occurring in this jurisdiction arising from lost profits, recovery of salvage and damages to aircraft. I am guided by the decision of LeBlanc, J. in PCI Chemicals. However, I will assess whether the Plaintiff has established a real and substantial connection to this forum, Newfoundland and Labrador, based on the Muscutt factors.”

Based upon the Court’s analysis of the Muscutt factors, a real and substantial connection existed among the Court, the lis and the defendants.

On the other hand, the Court’s forum non conveniens analysis is more problematic.

Apparently, there are two iterations of the forum non conveniens test in Newfoundland and Labrador courts. The first version of the the forum non conveniens test cited is from the decision in SRI Simulations Inc v. Oceaneering International, 2005 NLTD 157 (CanLII) which lists the following nine (9) factors:

(a) the relative ease of access to sources of proof;
(b) the availability of compulsory process for attendance of unwilling witnesses;
(c) the cost of obtaining attendance of willing witnesses;
(d) whether a view would be appropriate to the action;
(e) other practical problems that make the trial of a case easy, expeditious and inexpensive;
(f) the enforceability of a judgment if one is obtained;
(g) the relative advantage and obstacles to a fair trial;
(h) whether one party proposes to inflict upon the other expense or trouble not necessary to his own right to pursue his remedy;
(i) unless the balance is strongly in favor of the defendant, taking into consideration all of the above factors, the plaintiff’s choice of forum should prevail.

Note: there is no reference to applicable law or choice of law in any of the above-referenced factors. There is also no consideration of the lex loci delicti commissii in the Court’s jurisdictional analysis.

The provenance of the Court’s forum non conveniens test is more intriguing. The Court cites as authority the decision of Dunn, J. in Burton v. Global Benefit Plan Consultants Inc. 177 Nfld. & P.E.I.R. 60, 543 A.P.R. 60, 177 Nfld. & P.E.I.R. 60, 543 A.P.R. 60 (Nfld. TD) (unavailable on CanLII). However, further research confirms that the Burton decision cited the earlier decision of Cumming, J. in Berrick King Surveys Ltd. v. All Seasons Hovercraft Inc. (1988), 72 Nfld. & P.E.I.R. 309, 223 A.P.R. 309 , 1988 CarswellNfld 92 (Nfld. TD) (also not available on CanLII). The Berrick King decision cites McQuaid, J. in Notsa Engineering Ltd. v. Coles Express (1981) 30 Nfld & P.E.I.R. 181 at pages 187 and 188, which is the source of the forum non conveniens criteria relied upon in the Burton decision. Quaere: the precedent for the forum non conveniens test? The U.S. Supreme Court decision in Gulf Oil Corp. v. Gilbert, 330 U. S. 501 (1947) (USSC)! It is important to reproduce what the US Supreme Court actually held in Gulf Oil Corp. v. Gilbert:

“An interest to be considered, and the one likely to be most pressed, is the private interest of the litigant. Important considerations are the relative ease of access to sources of proof; availability of compulsory process for attendance of unwilling, and the cost of obtaining attendance of willing, witnesses; possibility of view of premises, if view would be appropriate to the action, and all other practical problems that make trial of a case easy, expeditious, and inexpensive. There may also be questions as to the enforceability of a judgment if one is obtained. The court will weigh relative advantages and obstacles to fair trial. It is often said that the plaintiff may not, by choice of an inconvenient forum, “vex,” “harass,” or “oppress” the defendant by inflicting upon him expense or trouble not necessary to his own right to pursue his remedy. [Footnote 8] But, unless the balance is strongly in favor of the defendant, the plaintiff’s choice of forum should rarely be disturbed.

Factors of public interest also have place in applying the doctrine. Administrative difficulties follow for courts when litigation is piled up in congested centers instead of being handled at its origin. Jury duty is a burden that ought not to be imposed upon the people of a community which has no relation to the litigation. In cases which touch the affairs of many persons, there is reason for holding the trial in their view and reach, rather than in remote parts of the country where they can learn of it by report only. There is a local interest in having localized controversies decided at home. There is an appropriateness, too, in having the trial of a diversity case in a forum that is at home with the state law that must govern the case, rather than having a court in some other forum untangle problems in conflict of laws, and in law foreign to itself.”

For more recent American jurisprudence on forum non conveniens, see, Sinochem Int’l Co., Ltd. v. Malaysia Int’l Shipping Corp., No. 06-102, 549 U.S. _____ (U.S.S.C.)

Why, then, are some Newfoundland and Labrador judges relying upon the US Supreme Court decision in Gulf Oil Corp. v. Gilbert when some of their brethren rely upon more recent Canadian precedents for the forum non conveniens test?

In Bradbury Estate v. Manufacturers Life Ins. Co. et al., 2006 NLTD 17 (CanLII) Barry, J. held:

[7] The parties accept that, as set out by Woolridge J. in Mundaca Investment Corp. v. Keats reflex, (1996), 144 Nfld. & P.E.I.R. 77 (NLTD), at p. 80, the courts look at the following factors when considering whether it is appropriate to order a stay:

(a) where the evidence is situate;
(b) whether foreign law applies, and, if so, whether the foreign law is different from the present jurisdiction;
(c) with which countries the parties are connected;
(d) whether the defendants generally desire trial in the foreign country, or are only seeking procedural advantages, and;
(e) whether the plaintiffs would be prejudiced by having to sue in the foreign court.

This same test was applied by Handrigan, J. in Walter Critch v. Ceda-Reactor Ltd, 2009 NLTD 41 (CanLII) at paras. 5-6 (citing Alteen v. Informix Corp. 1998 CarswellNfld 105, 164 Nfld. & P.E.I.R. 301, 507 A.P.R. 301, 21 C.P.C. (4th) 228, 164 Nfld. & P.E.I.R. 301(NLTD) at para 6 per Wooridge, J.). See also, Ring v. The Queen #2, 2007 NLTD 213 (CanLII).

What is the appropriate forum non conveniens test for Newfoundland and Labrador courts to apply?

Guidance from the Supreme Court of Canada is a start. In Teck Cominco Metals Ltd. v. Lloyd’s Underwriters, 2009 SCC 11, [2009] 1 S.C.R. 321, McLachlin, CJ, in considering the effect of s.11 of the CJPTA on the forum non conveniens test held as follows:

[22] Section 11 of the CJPTA was intended to codify the forum non conveniens test, not to supplement it. The CJPTA is the product of the Uniform Law Conference of Canada. In its introductory comments, the Conference identified the main purposes of the proposed Act, which included bringing “Canadian jurisdictional rules into line with the principles laid down by the Supreme Court of Canada in Morguard Investments Ltd. v. De Savoye, [1990] 3 S.C.R. 1077, and Amchem Products Inc. v. British Columbia (Workers’ Compensation Board), [1993] 1 S.C.R. 897” (Uniform Law Conference of Canada — Commercial Law Strategy (loose-leaf), at p. 3). Further, the drafters of the model Act confirmed that s. 11 of the CJPTA was intended to codify the common law forum non conveniens principles in “comments to section 11”:

11.1 Section 11 is meant to codify the doctrine of forum non conveniens, which was most recently confirmed by the Supreme Court of Canada in Amchem Products Inc. v. British Columbia (1993). The language of subsection 11(1) is taken from Amchem and the earlier cases on which it was based. The factors listed in subsection 11(2) as relevant to the court’s discretion are all factors that have been expressly or implicitly considered by courts in the past. [p. 11]

Section 11 of the CJPTA thus constitutes a complete codification of the common law test for forum non conveniens. It admits of no exceptions. [emphasis added]

The learned Chief Justice adds:

“…the fact that a prior assertion of jurisdiction is [not] a factor of overwhelming significance. … I do not consider that [Ingenium Technologies Corp. v. McGraw-Hill Cos., 2005 BCCA 358, 49 B.C.L.R. (4th) 120] laid down a new test for the determination of forum non conveniens in cases where a foreign court has assumed jurisdiction in parallel proceedings.”

Neither the lower nor the appellate courts mention that parallel proceedings are pending in the Indiana Southern District Court.

Given that Dymond, J. also relies upon Amchem Products Incorporated v. British Columbia (Workers’ Compensation Board), [1993] 1 S.C.R. 897, it is significant that Sopinka, J. in Amchem cited Lord Goff in Spiliada Maritime Corp. v. Cansulex Ltd., [1987] A.C. 460 as a jurisprudential cornerstone of the forum non conveniens test:

In Spiliada, supra, the House of Lords restated the rule and elaborated on its application. ..Mere loss of a juridical advantage will not amount to an injustice if the court is satisfied that substantial justice will be done in the appropriate forum. …Lord Goff provided some guidance with respect to the relevant factors that determine the appropriate forum. While not intending to provide an exhaustive list, His Lordship referred to the principal factors in his reasons at p. 478:


So it is for connecting factors in this sense that the court must first look; and these will include not only factors affecting convenience or expense (such as availability of witnesses), but also other factors such as the law governing the relevant transaction (as to which see Crédit Chimique v. James Scott Engineering Group Ltd., 1982 S.L.T. 131), and the places where the parties respectively reside or carry on business.” [emphasis added]

Hence, any formulation of the forum non conveniens test that omits consideration of the applicable law, is, respectfully, a flawed legal test.

In an oral decision given on October 13, 2009, Cameron, J.A. of the Newfoundland and Labrador Court of Appeal granted leave to appeal. In written reasons released October 13, 2009, http://www.canlii.org/en/nl/nlca/doc/2009/2009nlca58/2009nlca58.html the issue of forum non conveniens did not factor in the decision on leave:

“[27] This Court has said that even where one or more of the criteria in Rule 57.02(4) is established, in the final analysis the granting of leave is discretionary. The matter always involves the weighing of interference, by the appeal process, with the timely administration of justice against the interest of the intended appellants in having the matter resolved immediately. Bayer Inc. v. Pardy, 2005 NLCA 20 (CanLII), 2005 NLCA 20, para. 14 (leave to appeal to the Supreme Court of Canada refused, [2005] S.C.C.A. No. 211); Rees v. Royal Canadian Mounted Police, 2004 NLCA 18 (CanLII), 2004 NLCA 18, para. 4 (leave to appeal to the Supreme Court of Canada refused, [2005] S.C.C.A. No. 246). In light of the foregoing, particularly the fact that one ground is concerned with jurisdiction simpliciter, the fact that a finding of error of jurisdiction at the end of the trial would make any decision be null and void and the uncertainty evident regarding the proper approach to be taken to jurisdiction in this Province, when coupled with the facts that I was not advised that the trial of this action is imminent and an appeal in this Court can proceed relatively quickly, I am satisfied that this is a case where the interest in having the questions raised resolved immediately outweighs the delay which that process will cause.

[28] For these reasons I granted both applications for leave to appeal from the decision of the Trial Division judge. It should be noted, however, that the appellants will not be limited to argument based on the grounds upon which leave was granted. Security Home Mortgage Investment Corp. (in liquidation) v. Atlantic Leasing Ltd., 2001 NFCA 15 (CanLII), 2001 NFCA 15. The applicants shall file Notices of Appeal. “

Conclusion

It will be interesting to see if the Newfoundland and Labrador Court of Appeal decides to incorporate the Muscutt factors as its judicial test for jurisdiction simpliciter (notwithstanding that the Ontario Court of Appeal appears poised to modify or discard the Muscutt factors altogether: see, the Law Times article by Barry Glaspell, “Appeal Court revisits key ruling on jurisdiction over non-residents”) Whether or not the appeal court will also address the conflicted state of forum non conveniens in Newfoundland and Labrador is of equal, if not more immediate, concern.

Antonin I. Pribetic

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