Magic Sportswear Corp. v. OT Africa Line Ltd, 2004 FC 1165

Date: 20040823

Docket: T-1372-03

Citation: 2004 FC 1165

Halifax, Nova Scotia, this 23rd day of August, 2004

PRESENT: THE HONOURABLE MR. JUSTICE JOHN A. O'KEEFE

ADMIRALTY ACTION INREM

BETWEEN:

MAGIC SPORTSWEAR CORP. and BLUE BANANA

Plaintiffs

- and -

OT AFRICA LINE LTD., OT AFRICA LINE, and the Owners and Charters and all others interested in the Ship "MATHILDE MAERSK" and in the Ship "SUZANNE DELMAS"

Defendants

REASONS FOR ORDER AND ORDER

O'KEEFE J.

[1]        This is a motion by the defendants, OT Africa Line Ltd. and OT Africa Line, pursuant to Rule 51 of the Federal Court Rules, 1998/, S.O.R. 98-106, for:

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1.An order to set aside the order of Prothonotary Milczynski of December 15, 2003;

2.             An order granting the motion of the defendants, OT Africa Line and OT Africa Line Ltd., to stay this action;

3.             Costs of this motion and of the motion before Prothonotary Milczynski on a solicitor-client basis; and

4.             Such further and other relief as counsel may advise and this Honourable Court deems just.

[2]The Prothonotary stated the background and facts as follows (reported as 2003 FC 1513,

[2003] F.C.J. No. 1933 (QL)):

[2]         This action arises out of a claim for the partial loss of a cargo of goods that were shipped in a container by sea. The Plaintiffs, Magic Sportswear Corp., and Blue Banana, were the shipper and consignee of the goods respectively. The Defendants, OT Africa Line Ltd., and OT Africa Line were the carriers of the goods.

[3]            This motion is brought by the Defendants, who seek a stay of the action on the basis of the forum selection clause contained in the bill of lading for the shipment of the goods, and on the basis of the doctrine of forum non conveniens. The Plaintiffs argue that they are entitled, as of right, to have their claim adjudicated by this Court on the basis of section 46 of the Marine Liability Act or alternatively, also on the basis of forum non conveniens.

Facts

[4]                The Plaintiff, Magic Sportswear Corp., is a company incorporated in the United States that shipped 170 cartons of merchandise by container from New York City to the Plaintiff company Blue Banana in Monrovia, Liberia. The Plaintiffs claim that when the container arrived in Monrovia, 99 of the 170 cartons were missing.

[5]                The resolution of any factual dispute regarding the missing cargo will depend upon the evidence of witnesses present when the container was opened in Monrovia. The Plaintiffs state that all of these witnesses are located in Liberia. Other Plaintiffs' witnesses may be called from New York.

[6]                The Defendant, OT Africa Line issued the bill of lading for the shipment on February 5, 2002 at Toronto, Canada. The ocean freight payable for the

shipment was payable at Toronto, Canada. There is also evidence, and I find as a fact, that the Defendant OT Africa Line has offices, maintains a call centre and conducts business from offices in the Toronto area and conducts business through an agency (Seabridge International Shipping Inc., or OTAL North America) in the greater Toronto area.

[7]            The Plaintiffs commenced their action for damages in the amount of $30,000.00 in this Court on August 1, 2003, and served OT Africa Line at their Toronto area office on August 15, 2003. The claim is actually a subrogated claim by a Toronto based insurance company that paid out under its policy with the Plaintiffs for the loss of goods.

[8]            On September 3, 2003, OT Africa Line commenced proceedings in the High Court of Justice in England for a determination that it was not liable for the Plaintiffs' loss. Notice of these proceedings was served on the Plaintiffs, who, on October 28, 2003, filed an Acknowledgment of Service form that indicated that the [sic] they would be contesting the jurisdiction of the English courts. The Plaintiffs have not, however, taken any further steps in that regard, but submit that they were awaiting the outcome of this motion.

[9]            On September 8, 2003, on a motion made ex parte to the English court, the Defendants obtained an "anti-suit injunction" restraining the Plaintiffs from proceeding with this action, and then, on September 9, 2003, the Defendants filed this motion for a stay of the Canadian proceedings.

Relevant Statutory Provisions and Rules

[3]         Subsection 46(1) of the Marine Liability Act, S.C. 2001, c. 6, states:

46. (1) If a contract for the carriage of goods by water to which the Hamburg Rules do not apply provides for the adjudication or arbitration of claims arising under the contract in a place other than Canada, a claimant may institute judicial or arbitral proceedings in a court or arbitral tribunal in Canada that would be competent to determine the claim if the contract had referred the claim to Canada, where

46. (1) Lorsqu'un contrat de transport de marchandises par eau, non assujetti aux règles de Hambourg, prévoit le renvoi de toute créance découlant du contrat à une cour de justice ou à l'arbitrage en un lieu situé à l'étranger, le réclamant peut, à son choix, intenter une procédure judiciaire ou arbitrale au Canada devant un tribunal qui serait compétent dans le cas oÿ le contrat aurait prévu le renvoi de la créance au Canada, si l'une ou l'autre des conditions suivantes existe:

(a) the actual port of loading or discharge, or the intended port of loading or discharge under the contract, is in Canada;

a) le port de chargement ou de déchargement - prévu au contrat ou effectif - est situé au Canada;

(b) the person against whom the claim is made resides or has a place of business, branch or agency in Canada; or

b) l'autre partie a au Canada sa résidence, un établissement, une succursale ou une agence;

(c) the contract was made in Canada.

c) le contrat a été conclu au Canada.

[4]            Subsection 50(1) of the Federal Courts Act, R.S.C. 1985, c. F-7 states:

50. (1) The Federal Court of Appeal or the Federal Court may, in its discretion, stay proceedings in any cause or matter

50. (1) La Cour d'appel fédérale et la Cour fédérale ont le pouvoir discrétionnaire de suspendre les procédures dans toute affaire:

(a) on the ground that the claim is being proceeded with in another court or jurisdiction; or

a) au motif que la demande est en instance devant un autre tribunal;

(b) where for any other reason it is in the interest of justice that the proceedings be stayed.

b) lorsque, pour quelque autre raison, l'intérêt de la justice l'exige.

[5]         Rule 51(1) of the Federal Court Rules, 1998, supra states:

51. (1) An order of a prothonotary may be appealed by a motion to a judge of the Trial Division.

51. (1) L'ordonnance du protonotaire peut être portée en appel par voie de requête présentée à un juge de la Section de première instance.

Issues

[6]            The two issues in this matter are:

What is the applicable standard of review? Should the Prothonotary's decision be set aside?

1. 2.

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Analysis and Decision

[7]         Issue 1

What is the applicable standard of review?

MacGuigan J.A. of the Federal Court of Appeal stated the following, with respect to the

standard of review to be applied to an appeal of a prothonotary's decision, in Canada v. Aqua­

Gem Investments Ltd., [1993] 2 F.C. 425 (C.A.):

I also agree with the Chief Justice in part as to the standard of review to be applied by a motions judge to a discretionary decision of a prothonotary. Following in particular Lord Wright in Evans v. Bartlam, [1937] A.C. 473 (H.L.) at page 484, and Lacourcière J.A. in Stoicevski v. Casement (1983), 43 O.R. (2d) 436 (Div. Ct.), discretionary orders of prothonotaries ought not to be disturbed on appeal to a judge unless:

(a)                they are clearly wrong, in the sense that the exercise of discretion by the prothonotary was based upon a wrong principle or upon a misapprehension of the facts, or

(b)            they raise questions vital to the final issue of the case.

Where such discretionary orders are clearly wrong in that the prothonotary has fallen into error of law (a concept in which I include a discretion based upon a wrong principle or upon a misapprehension of the facts), or where they raise questions vital to the final issue of the case, a judge ought to exercise his own discretion de novo.

And at paragraph 98:

The question before the prothonotary in the case at bar can be considered interlocutory only because the prothonotary decided it in favour of the appellant. If he had decided it for the respondent, it would itself have been a final decision of the case: A-G of Canada v. S.F. Enterprises Inc. et al. (1990), 90 DTC 6195 (F.C.A.) at pages 6197-6198; Ainsworth v. Bickersteth et al., [1947] O.R. 525 (C.A.). It seems to me that a decisiop which can thus be either interlocutory or final depending on how it is decided, even if interlocutory because of the result, must nevertheless be considered vital to the final resolution of the case. Another way of putting the matter would be to say that for the test as to relevance to the final issue of the case, the issue to be decided should be looked to before the question is answered by the prothonotary, whereas that as to whether it is interlocutory or final (which is purely

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a pro forma matter) should be put after the prothonotary's decision. Any other approach, it seems to me, would reduce the more substantial question of "vital to the issue of the case" to the merely procedural issue of interlocutory or final, and preserve all interlocutory rulings from attack (except in relation to errors of law).

[8]            This same approach was adopted by the Supreme Court of Canada in ZI. Pompey

Industrie v. ECU-Line N. V., [2003] 1 S.C.R. 450, 2003 SCC 27">2003 SCC 27, at paragraph 18:

Discretionary orders of prothonotaries ought to be disturbed by a motions judge only where (a) they are clearly wrong, in the sense that the exercise of discretion was based upon a wrong principle or a misapprehension of the facts, or (b) in making them, the prothonotary improperly exercised his or her discretion on a question vital to the final issue of the case: Canada v. Aqua-Gem Investments Ltd., [1993] 2 F.C. 425 (C.A., per MacGuigan J.A., at pp. 462-63....

[9]           In the present case, the Prothonotary exercised her discretion to refuse a stay of proceedings, which is not a question vital to the final issue of the case Tian Sheng Co. v. Great Tempo S.A., [1998] 3 F.C. 418 (C.A.), leave to appeal to S.C.C. refused, [1998] S.C.C.A. No. 287 (QL). Consequently, I should not exercise my discretion de novo, instead I must now determine whether the Prothonotary was "clearly wrong in the sense that the exercise of discretion by the prothonotary was based upon a wrong principle or upon a misapprehension of the facts".

[10]       Issue 2

Should the Prothonotarv's decision be set aside?

The defendants submit that the Prothonotary erred by concluding that the plaintiffs had not attorned to the jurisdiction of the High Court of London and further, that the Prothonotary erred in finding that Canada was a convenient forum for the hearing of the matter.

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[11]         The contract of carriage between the parties contained the following forum selection clause:

25. LAW AND JURISDICTION

(1)                Any claim or dispute whatsoever arising in connection with the carriage under the Bill of Lading shall exclusively be governed by English law and determined by the High Court of London.

(2)                In the event that anything herein contained is inconsistent with any applicable international convention or national law which cannot be departed for private contract the provisions hereof shall to the extent of such inconsistency but no further be null and void.

[12]       Clause 24 states:

24. U.S.A./CANADA CLAUSE

If the Bill of Lading covers the transportation of the goods to or from ports of the United States of America or Canada this Bill of Lading shall be subject to United States Carriage of Goods by Sea Act 1936 and/or subject to Carriage of Goods by Water Act 1936 of Canada which shall be incorporated herein and the provisions of said act shall govern before loading and after discharge and throughout the entire time the goods are in the custody of the Carrier. If anything herein contained to be invalid or unenforceable under the provisions of said act such circumstances shall not affect the validity or enforceability of any other part or term of this Bill of Lading. The Carrier shall not be liable in any capacity whatsoever for loss, damage or delay of goods while the goods are not in his actual custody.

[13]       Effect of the Marine Liability Act

For ease of reference, section 46 of the Marine Liability Act, supra, is reproduced:

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46. (1) If a contract for the carriage of goods by water to which the Hamburg Rules do not apply provides for the adjudication or arbitration of claims arising under the contract in a place other than Canada, a claimant may institute judicial or arbitral proceedings in a court or arbitral tribunal in Canada that would be competent to determine the claim if the contract had referred the claim to Canada, where

46. (1) Lorsqu'un contrat de transport de marchandises par eau, non assujetti aux règles de Hambourg, prévoit le renvoi de toute créance découlant du contrat à une cour de justice ou à l'arbitrage en un lieu situé à l'étranger, le réclamant peut, à son choix, intenter une procédure judiciaire ou arbitrale au Canada devant un tribunal qui serait compétent dans le cas oÿ le contrat aurait prévu le renvoi de la créance au Canada, si l'une ou l'autre des conditions suivantes existe:

(a) the actual port of loading or discharge, or the intended port of loading or discharge under the contract, is in Canada;

a) le port de chargement ou de déchargement - prévu au contrat ou effectif - est situé au Canada;

(b) the person against whom the claim is made resides or has a place of business, branch or agency in Canada; or

b) l'autre partie a au Canada sa résidence, un établissement, une succursale ou une agence;

(c) the contract was made in Canada.

c) le contrat a été conclu au Canada.

[14]         The plaintiffs claim that this clause has the effect of granting the Federal Court jurisdiction to hear the present claim for loss of cargo and deprives the Court of the discretion to grant a stay pursuant to section 50 of the Federal Courts Act, supra. The defendants, on the other hand, argue that this clause only grants this Court jurisdiction simpliciter and still allows the Court to take the next step of conducting a forum non conveniens analysis.

[15]

The Prothonotary, at paragraphs 15 and 16 of her decision, stated:

[15]          At paragraph 37 of ZL Pompey, the Supreme Court states that "section 46(1) of the Marine Liability Act ... has the effect of removing from the Federal Court its discretion under s. 50 of the Federal Court Act to stay proceedings because of a forum selection clause where the requirements of s. 46(1)(a), (b) or (c) are met" (emphasis added). Likewise, at paragraph 13 of the Incremona-Salerno, the Federal Court of Appeal states:

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The effect of the subsection is to remove from this Court its discretion under section 50 of the Federal Court Act to stay proceedings on the ground of a jurisdiction or arbitration clause where the requirements of paragraphs 46(1)(a), (b) or (c) are met. In the case at bar, if the Motion Judge is correct in his view of the matter, paragraph 46(1)(a) would prevent the appellants from obtaining a stay based on clause 25 of the bill of lading [which provided for disputes to be adjudicated in Hamburg, Germany], since the port of discharge was the port of Halifax. Consequently, if subsection 46(1) applies to these proceedings, the appellants' stay applications will likely be dismissed. [emphasis added]

[161          These passages make clear that section 46 of the Marine Liability Act negates the determinative effect of forum selection clauses that would otherwise require adjudication in a jurisdiction other than Canada. They do not displace the jurisdiction of this Court under section 50 of the Federal Court Act to exercise its discretion in the appropriate circumstances to order a stay of proceedings, including consideration of the doctrine of forum non conveniens.

[16]         The Prothonotary adopted the approach that section 46 of the Marine Liability Act, supra only removed from the Court its discretion under section 50 of the Federal Courts Act, supra to stay proceedings based on a forum selection clause and not its "jurisdiction under section 50 of the Federal Court[s] Act to exercise its discretion in appropriate circumstances to order a stay of proceedings, including consideration of the doctrine of forum non conveniens."

[17]The Prothonotary's reasoning limited the scope of the decision of the Supreme Court of

Canada in Z.I. Pompey Industrie, supra, which reads at paragraphs 37 and 38:

T 37 Section 46(1) of the Marine Liability Act, which entered into force on August 8, 2001, has the effect of removing from the Federal Court its discretion under s. 50 of the Federal Court Act to stay proceedings because of a forum selection clause where the requirements of s. 46(1)(a), (b), or (c) are met. This includes where the actual port of loading or discharge is in Canada. In this case, there would be no question that the Federal Court is an appropriate forum to hear the respondents' claim but for the fact that s. 46 does not apply to judicial proceedings commenced prior to its coming into force: Incremona-Salerno Marmi Afni Siciliani (I.S.M.A.S.) s.n.c. v. Ship Castor (2002), 297 N.R. 151, 2002 FCA 479, at paras. 13-24. Section 46 of the Marine Liability Act is therefore irrelevant in this appeal.

X38 Indeed, s. 46(l) would appear to establish that, in select circumstances, Parliament has deemed it appropriate to limit the scope of forum selection clauses by facilitating the litigation in Canada of claims related to the carriage of goods by water having a minimum level of connection to this country. Such a legislative development does not, however, provide support for the fundamental jurisprudential

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shift made by the Court of Appeal in the case at bar. To the contrary, s. 46(1) indicates Parliament's intent to broaden the jurisdiction of the Federal Court only in very particular instances that [page473] can easily be ascertained by a prothonotary called upon to grant a stay of proceedings pursuant to the forum selection clause of a bill of lading. Section 46(1) in no way mandates a prothonotary to consider the merits of the case, an approach in line with the general objectives of certainty and efficiency, which underlie this area of the law.

The Prothonotary also narrowly construed the Federal Court of Appeal's decision in Incremona­Salerno Marmi Affini Siciliani (I.S.M.A.S.) s.n.c. v. Castor (The), [2003] 3 F.C. 220, 2003 FCA 479 in deciding that subsection 46(1) of the Marine Liability Act, supra, did not displace the jurisdiction of this Court to order a stay of proceedings on the basis of Canada being a forum non conveniens.

[18]          I have reviewed the Prothonotary's decision and I would come to the same conclusion as the Prothonotary.

[19]Firstly, I agree that subsection 46(1) of the Marine Liability Act, supra grants this Court

jurisdiction simpliciter to hear a claim if any of the conditions contained in paragraphs 46(1)(a),

(b) or (c) are met despite a forum selection clause that states otherwise. I am supported in this

conclusion by ZI Pompey Industrie, supra at paragraph 38 and the discussions of the context of

subsection 46(1) of the Marine Liability Act, supra, contained in the House of Commons

Debates, No. 058, 1st Sess., 37^thParl. (9 May 2001), at page 1645 where Mr. Norman Doyle, the

member for St. John's East, stated in part:

One change that sparked debate in committee was the provision of clause 46 that would extend Canada's legal jurisdiction to deal with the cargo claims of Canada's importers and exporters. Representatives of the shipping lines did not want

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Canadian jurisdiction specified, preferring instead to have clauses on arbitration and judicial proceedings in their contracts of carriage.

Indeed a culture has grown up that sees most of these disputes resolved in British boardrooms and British courts. That suits the big shipping lines and the British legal profession just fine. However I would submit that a small Canadian exporter would be badly outclassed going up against the big boys in that kind of a setting, so we are supportive of asserting Canadian jurisdiction.

[20]Also of interest are the remarks of Mr. James Gould, the then President of the Canadian

Maritime Law Association when he appeared before the House of Commons Standing

Committee on Transport and Government Operations (Canada, House of Commons, Evidence

of the Standing Committee on Transport and Government Operations, (27 March 2001) at 1205

to 1210). Mr. Gould stated in part as follows:

The CMLA strongly supports the adoption of the jurisdiction clause set out in clause 46 of Bill S-2. In a way, it reflects the provisions of articles 21 and 22 of the Hamburg Rules, which, as you know, are already part of our law, since they're already a schedule to our existing Carriage of Goods by Water Act. They just haven't been proclaimed in force.

Our valued constituent member, the Shipping Federal of Canada, and another one, the Chamber of Shipping of British Columbia, while otherwise supportive of the bill, have spoken here against the jurisdiction clause. Our reasons for supporting the jurisdiction clause, in summary, are that it provides Canadian claimants with an option - and it's just that, an option - to sue or arbitrate in Canada in circumstances in which there is a substantial connection with Canada. It would provide an advantage to Canadian exporters and importers whose only other option might be to abandon their claims or sue or arbitrate claims in a foreign jurisdiction.

Particularly, advancing low or medium-sized claims can be subject to very significant inconvenience and disproportionate cost if one is forced to litigate or arbitrate in a foreign jurisdiction. In England, for example, you may have to hire a solicitor. It makes one a bit envious, but it could be from £ 250 to £ 300 or more per hour. If you require a barrister, that's additional, and they're the same or even higher. Even the hotel costs there are higher than here, so it can be very expensive.

I also understand that in Japan, for example, even though the contract may be made in English amongst or with Japanese parties, all documents have to be translated into the Japanese language before proceeding, which in itself can be quite a burden.

Furthermore, Canada would not be alone in adopting such legislation. On the contrary, as already mentioned this morning, there are a number of very important

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countries that have already enacted provisions similar to clause 46. They include Australia and New Zealand, which bluntly say you can litigate or arbitrate there, and that any provision to the contrary is void. I think that's the way it's put.

You also have the four Nordic countries of Sweden, Denmark, Finland, and Norway - all shipowning countries, which is of some significance - the Republic of South Africa, and the People's Republic of China, which is a huge market.

[21]          While these comments of a witness before a standing committee are not determinative this context supports my interpretation of subsection 46(1) of the Marine Liability Act supra, and is consistent with the reasoning contained in paragraph 37 of the Supreme Court of Canada's decision in Z.I. Pompey Industrie, supra. While the Marine Liability Act, supra, clearly denies this Court discretion to grant a stay based on a forum selection clause (a jurisdiction simpliciter issue), I do not read the ZI. Pompey decision or the debates in Parliament as broadly as the interpretation urged by the plaintiffs. While this Court is undoubtedly a competent forum to hear this matter, it still remains to be determined whether it is the most convenient forum.

[22]As well, I am of the view that the Prothonotary's analysis of forum non conveniens was

not clearly wrong nor did she exercise her discretion based upon a wrong principle or upon a

misapprehension of the facts. The Prothonotary correctly noted the factors to be considered

when deciding whether or not to exercise her discretion to grant a stay of the action filed in this

Court (at paragraph 18):

In this case, taking into account all of the facts and surrounding circumstances relating to the shipment of goods from New York to Monrovia, including the value of the goods, the fact that the true Plaintiffs are in Canada, the Defendants have business interests in Canada, and most particularly the fact that most if not all of the material witnesses will come from Monrovia and/or New York, (which factor favours neither England nor Canada), I find that the most convenient and appropriate forum for the determination of the Plaintiffs' claim, including the interpretation and application of English law, is this Court.

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[23]       As part of the forum non conveniens analysis, the Prothonotary held that the plaintiffs had not attorned to the jurisdiction of the High Court of Justice in England (at paragraph 19 of her decision):

With respect to the Defendants' argument that the Plaintiffs have attorned to the jurisdiction of the High Court of Justice in England, I do not accept such argument. Although the Notice of Acknowledgement signed and fled by the Plaintiffs with the High Court required them to file materials to contest jurisdiction within 28 days of filing, the annotations to the English Rules of Procedure indicate that the determination of the issue may be made at a later date. There may also be a practical reason for the Plaintiffs' failure to defend in the English courts, and that is simply the cost associated with pursuing a $30,000.00 claim in that jurisdiction outweighing the benefit of even a successful result.

[24]1 am of the opinion that the Prothonotary did not make an error in the Aqua-Gem, supra,

sense in this respect. In my view, the Prothonotary correctly applied the factors to find that the most appropriate forum for the determination of the plaintiffs' claims is this court.

[25]       The defendants' motion (appeal) is therefore dismissed.

[26]       The plaintiffs shall have their costs of the motion.

ORDER

[27]       IT IS ORDERED that:

1.        The defendants' motion (appeal) is dismissed.

2.        The plaintiffs shall have their costs of the motion.

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"John A. O'Keefe"

J.F.C.

FEDERAL COURT OF CANADA

TRIAL DIVISION

NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET:                                            T-1372-03

STYLE OF CAUSE:                             MAGIC SPORTSWEAR CORP. and BLUE BANANA

-and­

OT AFRICA LINE LTD., OT AFRICA LINE,

and the Owners and Charters and all others interested in the Ship "MATHILDE MAERSK"

and in the Ship "SUZANNE DELMAS"

PLACE OF HEARING:                        Toronto, Ontario

DATE OF HEARING:                          February 23, 2004 REASONS FOR ORDER AND ORDER OF O'KEEFE J. DATED:                                                August 23, 2004 APPEARANCES:

Marc D. Isaacs

FOR PLAINTIFFS

C. William Hourigan

FOR DEFENDANTS

SOLICITORS OF RECORD:

Strathy & Associates Toronto, Ontario

FOR PLAINTIFFS

Fasken Martineau DuMoulin LLP Toronto, Ontario

FOR DEFENDANTS