Eastern Power Limited v. Ontario Electricity Financial Corporation [Indexed as: Eastern Power Ltd. v. Ontario Electricity Financial Corp.]
101 O.R. (3d) 81
2010 ONCA 467
Court of Appeal for Ontario,
Laskin, R.P. Armstrong and Lang JJ.A.
June 29, 2010
Damages -- Evidence -- Plaintiff attempting to address complex damages issue by calling two witnesses to give evidence on issue -- Raw data which was required to calculate damages belonging to defendant -- Defendant calling no witnesses on damages -- Trial judge finding that evidence of plaintiff's witnesses was not reliable -- Trial judge erring in dismissing plaintiff's claim on that basis -- Plaintiff clearly incurring significant loss as result of defendant's breach of contract -- Plaintiff not failing to adduce any evidence and not framing damages claim in inappropriate or misleading manner -- Plaintiff entitled to new trial on damages.
The plaintiff, an independent producer of electrical power, entered into an agreement to sell to the defendant electricity generated from its landfill site. The agreement provided that the rates to be paid were based on the defendant's avoided costs. (Avoided costs were costs that the defendant would have incurred to generate power if that power was not being supplied by a non-utility generator.) One component that the defendant used in its avoided costs calculations was an inter-area transmission credit. That credit reflected the defendant's assumption that non-utility generators supplying power to high- demand areas produced greater avoided costs than those who did not. In its avoided costs calculations for the plaintiff's project, the defendant did not include a credit for inter-area transmission. The plaintiff brought an action for breach of contract. The trial judge found that the defendant had breached the power purchase agreement by failing to include a component for inter-area transmission in the rat es it paid to the plaintiff. However, she declined to award any damages for that breach of contract because, having found the evidence of the two witnesses called by the plaintiff on the damages issue not to be reliable, she concluded that she had no reliable evidence from which to calculate those damages. She went on to say that, if she were wrong, she would award nominal damages of $5 million, inclusive of interest to the date of judgment, and a pro-rated amount for the remainder of the contract. The plaintiff appealed.
Held, the appeal should be allowed.
The trial judge did not err in concluding that the plaintiff was entitled to an inter-area transmission credit. She erred in failing to award the plaintiff damages for breach of the power purchase agreement. The plaintiff undoubtedly incurred a significant loss as a result of the defendant's breach of the agreement. Proving damages in this case was no easy task. All the raw data, information and methodologies required to do an avoided costs calculation belonged to the defendant, and the defendant refused to produce its own calculation of the damages the plaintiff would have suffered from its failure to include a credit for inter-area transmission. The plaintiff did not fail to adduce evidence. Nor did it frame its damages claim in an inappropriate or misleading matter. It attempted to resolve the inherently complicated and highly technical question of damages by tendering the evidence of its president and one qualified expert witness. In the [page82 ]circumstances, it was unjust to deny the plaintiff an a ward of damages. The court ordered a new trial on damages.
APPEAL by the plaintiff from the judgment of Bellamy J., [2008] O.J. No. 3722, 2008 CanLII 48132 (S.C.J.) dismissing an action for damages for a breach of contract.
Cases referred to Lombardo v. Caiazzo, [2006] O.J. No. 2286, 211 O.A.C. 270, 52 C.L.R. (3d) 187, 148 A.C.W.S. (3d) 1028 (C.A.); Martin v. Goldfarb (1998), 1998 CanLII 4150 (ON CA), 41 O.R. (3d) 161, [1998] O.J. No. 3403, 163 D.L.R. (4th) 639, 112 O.A.C. 138, 44 B.L.R. (2d) 158, 42 C.C.L.T. (2d) 271, 82 A.C.W.S. (3d) 175 (C.A.), consd Other cases referred to R. v. Find, [2001] 1 S.C.R. 863, [2001] S.C.J. No. 34, 2001 SCC 32, 199 D.L.R. (4th) 193, 269 N.R. 149, J.E. 2001-1099, 146 O.A.C. 236, 154 C.C.C. (3d) 97, 42 C.R. (5th) 1, 82 C.R.R. (2d) 247, 49 W.C.B. (2d) 595; Rosenhek v. Windsor Regional Hospital, [2010] O.J. No. 129, 2010 ONCA 13, 257 O.A.C. 283 Authorities referred to Bryant, Alan W., Sidney N. Lederman and Michelle K. Fuerst, The Law of Evidence in Canada, 3rd ed. (Toronto: LexisNexis, 2009) Watt, David, Watt's Manual of Criminal Evidence (Toronto: Thomson Carswell, 2008)
R. Nairn Waterman and Bruce W. Cameron, for appellant. Timothy Pinos and Emily Larose, for respondent.
The judgment of the court was delivered by
LASKIN J.A.: --
A. Overview
[1] The appellant, Eastern Power Limited, is an independent producer of electrical power. In 1994, Eastern Power signed a 20-year power purchase agreement with Ontario Hydro, the predecessor of the respondent Ontario Electricity Financial Corporation. Under the agreement, Eastern Power agreed to sell to Ontario Hydro, at specified rates, electricity generated from its landfill site in the Keele Valley in Vaughan, just north of the City of Toronto.
[2] In 1998, Eastern Power sued Ontario Hydro, claiming that it committed numerous breaches of the power purchase agreement. The trial took 23 days. In a thorough and well-reasoned decision, Bellamy J. dismissed all of Eastern Power's claims save one: a claim for an "inter-area transmission credit". The trial judge concluded that Ontario Hydro breached the power purchase agreement by failing to include a component for inter- area transmission in the rates it paid to Eastern Power. However, the trial judge declined to award any damages for this [page83 ]breach of contract because she concluded that she had no reliable and credible evidence from which to calculate those damages. She went on to say that, if she were wrong, she would award nominal damages of $5 million, inclusive of interest to the date of judgment, and a pro-rated amount for the remainder of the contract.
[3] Eastern Power's appeal is narrow. It submits that the trial judge erred in law in not awarding damages for Ontario Hydro's failure to include an inter-area transmission credit in the rates paid to Eastern Power. It seeks an award of $8.5 million. Alternatively, Eastern Power seeks a new trial or a reference on damages.
[4] Ontario Hydro defends the appeal by asserting that (i) Eastern Power was not entitled to an inter-area transmission credit; (ii) the trial judge was correct to conclude she had no reliable and credible evidence to assess damages; and (iii) Eastern Power ought not to be allowed a second chance to prove damages.
[5] The appeal, therefore, raises these three issues: (1) Was the trial judge correct in concluding that Eastern Power was entitled to an inter-area transmission credit? (2) If the trial judge was correct, did she err in failing to award Eastern Power damages for breach of the power purchase agreement? (3) If the trial judge did not err, is Eastern Power entitled to a reference or a new trial on damages?
B. Background
[6] The history and background to this litigation is discussed extensively and admirably in the reasons of the trial judge. There is no need to repeat her discussion. I will refer only to those matters material to the appeal.
(1) The power purchase agreement
[7] Ontario Hydro was created in 1906. For the next 75 years, it supplied all of Ontario's electricity. By the early 1980s, however, Ontario's increasing demand for electricity began to overtake Ontario Hydro's ability to satisfy it. To meet the expected shortfall, Ontario Hydro contracted with private companies that generated electricity. These private sources of electricity are called non-utility generators. Eastern Power is one of many non-utility generators that have entered into supply agreements with Ontario Hydro. [page84 ]
[8] In May 1993, Ontario Hydro made a written offer to purchase electricity generated from Eastern Power's site in the Keele Valley. Although the offer was made on a take-it-or- leave-it basis, the parties bargained over its terms for seven months. The power purchase agreement eventually signed in January 1994 incorporated many changes beneficial to Eastern Power, including over $3 million worth of betterments. The agreement stipulated that Eastern Power would supply electricity to Ontario Hydro for 20 years.
(2) "Based on Hydro's avoided costs"
[9] The rates to be paid to Eastern Power were set out in the agreement. At Eastern Power's request, the agreement included two types of rates: "buy back rates for all energy" and "monthly capacity rates".
[10] The agreement provided that "these rates are based on Hydro's avoided costs" and expressly gave Eastern Power the right to ask for a recalculation of the rates. For energy rates, the provision is set out in s. 2.2 of Schedule A of the agreement:
These rates are based on Hydro's "avoided costs" prevailing on May 11, 1993. The Generator may request Hydro, on not more than two occasions prior to the Commercial In-service Date, unless otherwise approved by Hydro, to recalculate the "Buy- Back Rates for all Energy" based on the then current "avoided costs". The Generator may, in its sole discretion, select the preferred set of rates. The similarly worded provision for capacity rates is found in s. 3.4 of Schedule A: These Rates are based on Hydro's "avoided costs" prevailing on May 11, 1993. The Generator may request Hydro, on not more than two occasions prior to the Commercial In-service Date, unless otherwise approved by Hydro, to recalculate the "Monthly Capacity Rates" based on the then current "avoided costs". The Generator may, in its sole discretion, select the preferred set of Rates.
[11] The interpretation of the words "based on Hydro's avoided costs" became a critical issue at trial. To appreciate the dispute, it is necessary to understand the meaning of "avoided costs".
[12] Avoided costs are costs that Ontario Hydro would have incurred to generate power if that power was not being supplied by a non-utility generator. According to the evidence accepted by the trial judge, avoided costs did not represent a precise a number, but rather a median or average number drawn from a range of possibilities after taking into account several assumptions, inputs and values. Importantly, Ontario Hydro did not disclose its avoided costs calculations to a non-utility generator. To do [page85 ]so would reveal what the trial judge called Ontario Hydro's "bottom line".
[13] Nonetheless, at trial, Eastern Power contended that the phrase "based on Hydro's avoided costs" meant equal to Hydro's avoided costs. In other words, Eastern Power argued that it was entitled to be paid rates equivalent to 100 per cent of Ontario Hydro's avoided costs.
[14] The trial judge rejected this contention. She concluded [at para. 112] that the phrase "does not have independent contractual force or effect with respect to fixed dollar and cent rates in the agreement". Instead, the words were "there simply to set up the recalculation provision in the contract to show that avoided costs are a starting point or a foundation for the rate". The trial judge reasoned that Ontario Hydro always tried to pay rates that were lower than its avoided costs in order to obtain a cost benefit for Ontario ratepayers. Her interpretation of the words "based on Hydro's avoided costs" was not challenged on appeal.
(3) Eastern Power's right to ask for a recalculation of the rates
[15] The clauses in the power purchase agreement stipulating that Eastern Power's rates were "based on a Hydro's avoided costs" gave Eastern Power the right to request that Ontario Hydro recalculate those rates. The trial judge found -- and her finding is not challenged on appeal -- that Ontario Hydro had a duty to conduct the recalculation in good faith. As I will discuss, the right to ask for a recalculation forms part of Eastern Power's claim that the rates it was paid ought to have reflected an inter-area transmission credit.
(4) Inter-area transmission credit
[16] One component or input that Ontario Hydro used in its avoided costs calculations was an inter-area transmission credit. This credit reflected Ontario Hydro's assumption that non-utility generators supplying power to high-demand areas produced greater avoided costs than those who did not. By November 1992, Ontario Hydro provided an inter-area transmission credit to those projects that reduced electricity power loads in the Greater Toronto Area (the "GTA").
[17] However, in its avoided costs calculations for Eastern Power's project, Ontario Hydro did not include a credit for inter-area transmission. At trial, Eastern Power argued that it should have been given a credit for inter-area transmission in Ontario Hydro's avoided costs calculations. Ontario Hydro responded in [page86 ]part by arguing that Eastern Power's project did not affect electricity loads in the GTA.
[18] The trial judge accepted Eastern Power's argument and rejected Ontario Hydro's contrary argument (at para. 201):
I conclude that on the evidence Eastern Power has proven on a balance of probabilities that the Keele Valley project serviced and continues to service loads in the GTA. Therefore, the rates payable to Eastern Power under the Keele Valley [power purchase agreement] should have incorporated a component for inter-area transmission. Ontario Hydro challenges this conclusion.
C. Analysis
(1) Was the trial judge correct in concluding that Eastern Power was entitled to an inter-area transmission credit?
[19] While Eastern Power's argument focuses on its right to damages, Ontario Hydro's argument focuses principally on Eastern Power's entitlement to an inter-area transmission credit. Ontario Hydro submits that the trial judge's finding on this claim "is in complete conflict with her careful and accurate findings on all other issues in the action, none of which have been appealed by [Eastern Power]".
[20] Ontario Hydro's submission has two branches: (i) Eastern Power was not entitled to a credit for inter-area transmission under the power purchase agreement; and (ii) even if Eastern Power was entitled to this credit, it was not, as a result, entitled to higher rates. I do not agree with either branch of Ontario Hydro's submission.
[21] On the first branch of its submission, Ontario Hydro contends that an inter-area transmission credit is merely a component of its own internal avoided costs calculations. It is not referred to in the power purchase agreement and therefore does not give rise to any contractual obligation on the part of Ontario Hydro or any contractual entitlement on the part of Eastern Power. Ontario Hydro also contends that the trial judge erred in taking judicial notice that Eastern Power's project was in the GTA and that, in the absence of evidence it was in the GTA, Eastern Power had no right to this credit.
[22] Ontario Hydro is correct in asserting that the power purchase agreement does not expressly refer to an inter-area transmission credit. And the trial judge does not explicitly say why she concluded that Ontario Hydro's failure to give this credit to Eastern Power amounted to a breach of the agreement.
[23] It seems to me, however, that the absence of an express reference in the agreement does not resolve the question of [page87 ]Eastern Power's contractual entitlement to this credit. I infer from the trial judge's reasons that she viewed the relevant clause -- "these rates are based on Hydro's avoided costs" -- as requiring Ontario Hydro's rate calculations to incorporate all the various components, including credits, to which Eastern Power was entitled. Thus, although the trial judge rejected the proposition that the clause dictated a particular rate, the clause nevertheless stipulated a "foundation" or "starting point" for the rates to be paid to Eastern Power. That starting point had to embrace all the components of Ontario Hydro's avoided costs calculations. In an appropriate case, one of those components was an inter-area transmission credit. Accordingly, if Eastern Power was entitled to this credit, Ontario Hydro was contractually obliged to take it into account.
[24] Eastern Power was entitled to this credit if its Keele Valley project reduced electricity loads in the GTA. At paras. 197-99 of her reasons, the trial took judicial notice that Eastern Power's project was in the GTA:
It is true that there was no evidence led at trial as to what regions were considered to be part of the greater Toronto area, either in 2007 or earlier in 1993. The notion of an entity known as the GTA is relatively recent but, for many years now, it has found its way into everyday parlance in this community. I am prepared to take judicial notice that in 2007 there are areas around Toronto that are known collectively as the GTA and that these areas include the regional municipalities of Durham, Halton, Peel, Toronto and York Region.
The Keele Valley project is located in the city of Vaughan, in York Region, which is located immediately north of Toronto. From just in front of its site, a line was constructed to connect to an existing Hydro line on Dufferin Street which then connected to the Armitage transformer station just south of Newmarket.
While there was no specific evidence about what constituted the GTA in 1993, there was evidence that when the contract between Hydro and Eastern Power received Order-in-Council approval in 1994, Hydro had already acknowledged, in writing, the existence of an entity known as the greater Toronto area. I have no reason to believe that this entity did not include York Region then as it does now. There was certainly no evidence to suggest that Hydro had a unique definition of the GTA which excluded York Region, the area immediately north of Toronto.
[25] Ontario Hydro argues that the trial judge's use of judicial notice did not meet the standard in R. v. Find, 2001 SCC 32, [2001] 1 S.C.R. 863, [2001] S.C.J. No. 34, at para. 48:
[T]he threshold for judicial notice is strict: a court may properly take judicial notice of facts that are either: (1) so notorious or generally accepted as not to be the subject of debate among reasonable persons; or (2) capable of immediate and accurate demonstration by resort to readily accessible sources of indisputable accuracy. (Citations omitted) [page88 ]
[26] Courts have often taken judicial notice of geographic locations within their jurisdiction: see Watt's Manual of Criminal Evidence (Toronto: Thomson Carswell, 2008) at p. 112; Fuerst, Lederman and Bryant: The Law of Evidence in Canada, 3rd ed. (Toronto: LexisNexis, 2009) at p. 1270. The trial judge, perhaps, took a generous view of judicial notice in this case, but I would not interfere with her use of it. That the Keele Valley project was located in a region considered part of the GTA as far back as 1993 could, I think, be generally accepted as a fact not subject to debate among reasonable persons. On appeal, Ontario Hydro does not present us with any reason to believe otherwise.
[27] Having taken judicial notice of that fact, the trial judge then relied on the evidence of a Hydro employee to find that Eastern Power's project could service the loads in Vaughan and Richmond Hill. She concluded, at para. 200, that "[t]his would reduce Hydro's load in the GTA, thereby affecting Hydro's avoided costs". I see no error in her finding or in her conclusion. Accordingly, I am not persuaded that the trial judge erred in holding that Eastern Power was contractually entitled to an inter-area transmission credit.
[28] That brings me to the second branch of Ontario Hydro's submission: its contention that even if Eastern Power was entitled to an inter-area transmission credit, it was not, as a result, entitled to higher rates. Ontario Hydro argues that the trial judge had no evidence from which to conclude the rates paid to Eastern Power would have increased if an inter-area transmission credit was factored into the avoided costs calculations. Ontario Hydro maintains this position because of its mandate to negotiate a ratepayer benefit for the people of Ontario.
[29] Ontario Hydro's contention runs up against the trial judge's finding, at paras. 112-13 of her reasons, that the provision stating "these rates are based on Hydro's avoided costs" and the provision giving Eastern Power the right to request a recalculation of those rates are connected. If Ontario Hydro omitted to include in its avoided costs calculations a component it ought to have included, that omission would give Eastern Power the legitimate right to request a recalculation of its rates. Ontario Hydro would then have a duty -- as found by the trial judge -- to conduct the recalculation in good faith. Logically, this would mean that as Ontario Hydro's avoided costs increased because of the credit, so too would the rates paid to Eastern Power. To hold otherwise would render Eastern Power's right of recalculation meaningless.
[30] For these reasons, I would not interfere with the trial judge's finding that Ontario Hydro's failure to give Eastern Power a credit for inter-area transmission amounted to a breach [page89 ]of the power purchase agreement for which Eastern Power was entitled to be compensated.
(2) Did the trial judge err in failing to award Eastern Power damages for breach of the power purchase agreement?
[31] Eastern Power called two witnesses on its damages claim: the company's president, Greg Vogt, and an expert, Dr. Alan Rosenberg. Ontario Hydro did not call any expert evidence on Eastern Power's damages claim. Instead, it maintained that Eastern Power had the onus of proving it had suffered a loss, and that it had not met this onus.
[32] The trial judge largely rejected the evidence of Mr. Vogt and Dr. Rosenberg. She held that she could not rely on Mr. Vogt's calculations and she did not trust Dr. Rosenberg's opinions on damages. She concluded, at para. 335 of her reasons, that Eastern Power had presented her with "no reliable evidence . . . regarding the quantum of damages".
[33] In reaching this conclusion, the trial judge relied on the judgment of this court in Martin v. Goldfarb (1998), 1998 CanLII 4150 (ON CA), 41 O.R. (3d) 161, [1998] O.J. No. 3403 (C.A.). That case, as Finlayson J.A. noted, at para. 74, "involves circumstances where, by the appellant's own conduct, the court is not furnished with evidence necessary to properly dispose of the damages portion of the case".
[34] In the light of this passage from Martin v. Goldfarb, the trial judge held that she had "no choice" but to dismiss Eastern Power's claim. She went on to hold that if she were wrong in her interpretation of Martin v. Goldfarb, she would award nominal damages of $5 million, inclusive of interest up to the date of judgment, and a pro-rated amount for the remainder of the contract.
[35] Eastern Power challenges the trial judge's decision not to award damages. Although framed in different ways, the essence of Eastern Power's challenge is that once the trial judge found a breach of the agreement, she had a duty to assess damages "despite any difficulty in securing complete evidence or applying a mathematical measurement". Her failure to do so, according to Eastern Power, amounted to an error of law. I generally agree with this submission.
[36] I acknowledge that the trial judge had a difficult problem. She recognized that Eastern Power had expended considerable time and money in trying to prove its damages. Yet she rejected as unreliable the damages evidence Eastern Power had put forward. Without evidence she felt she could rely on, she resorted to the burden of proof and concluded that Eastern Power had not proven its damages on a balance of probabilities. [page90 ]
[37] Although the trial judge's decision not to award damages is perhaps understandable, I find her resolution of this issue to be both unsatisfactory and inconsistent with what this court ultimately decided in Martin v. Goldfarb.
[38] The trial judge's decision not to award damages is unsatisfactory for at least two reasons. First, Eastern Power undoubtedly incurred a significant loss as a result of Ontario Hydro's breach of the agreement. That it did so can be seen in the alternative relief the trial judge awarded -- a "nominal" damages award in excess of $5 million. An amount of this magnitude goes well beyond what we normally think of nominal damages.
[39] Second, proving damages in this case was no easy task. At a minimum, a credit for inter-area transmission had to be factored into Ontario Hydro's avoided costs calculations for Eastern Power's project, and the resulting increase in avoided costs had to be translated into a reasonable rate increase. Yet all the raw data, information and methodologies required to do an avoided-costs calculation belonged to Ontario Hydro. And Ontario Hydro refused to produce its own calculation of the damages Eastern Power would have suffered from Hydro's failure to include a credit for inter-area transmission. In the light of these two circumstances, it strikes me as unjust to deny Eastern Power an award of damages for Ontario Hydro's breach of the agreement.
[40] Moreover, I do not consider the trial judge's refusal to award damages to be faithful to this court's decision in Martin v. Goldfarb. In that case, the plaintiff, Martin, sued his lawyer and the lawyer's law firm for damages arising from a breach of fiduciary duty. The trial judge found a breach of duty and awarded Martin substantial damages. This court set aside the trial judge's award. Finlayson J.A. held that the award was speculative and lacked adequate supporting evidence. In so concluding, he distinguished two classes of cases, at para. 75:
The distinction . . . is that where the assessment is difficult because of the nature of the damage [to be] proved, the difficulty of assessment is no ground for refusing substantial damages even to the point of resorting to guess work. However, where the absence of evidence makes it impossible to assess damages, the litigant is entitled to nominal damages at best.
[41] On the first category, Finlayson J.A. observed, at para. 74:
For example, a future contingency which cannot be accurately characterized and calculated should not prevent the award of substantial damages where a breach has been made out and damages flowing from that breach have been established to the satisfaction of the court.
[42] In Finlayson J.A.'s opinion, however, Martin's claim fell into the second category: cases where assessment is "impossible" because evidence is "available but not adduced". Martin's [page91 ]approach to damages was "misguided" because he equated his personal losses to those suffered by his corporations, effectively jumping ahead of all other creditors involved in the company's bankruptcy proceedings. As a consequence of Martin's strategy, this court held that he called no evidence from which his personal losses could be assessed.
[43] Yet this court did not award Martin nominal damages, nor did it deny him recovery altogether. Instead, recognizing that the personal damages Martin suffered were substantial, the court ordered a new trial on damages to permit him to prove his personal losses. In other words, the significant loss Martin incurred outweighed his failure to adduce evidence of that loss and entitled him to something more than nominal damages. This is the interpretation of Martin v. Goldfarb recently adopted by this court in Rosenhek v. Windsor Regional Hospital, 2010 ONCA 13, [2010] O.J. No. 129, 257 O.A.C. 283 (C.A.) [at paras. 37-38]:
In Martin, Finlayson J.A. drew a distinction between damages that are difficult in nature to assess, an assessment that must be undertaken despite the need for "guess work", and damages that are unproven due to a failure to adduce available evidence. In the latter case, only nominal damages should be awarded.
However, even in Martin, Finlayson J.A. declined to award nominal damages based on insufficient support for the damage claim; instead, he referred the damages back to the trial judge on the grounds that the plaintiff had adduced enough evidence to prove a significant loss. The principle appears to be that nominal damages are not appropriate where a substantial loss has been demonstrated, even if evidence proving quantum is lacking.
[44] It seems to me that Eastern Power's damages claim does not fit easily into either category Finlayson J.A. described in Martin v. Goldfarb. While the claim was inherently difficult to assess -- indeed, one cannot determine exactly how much the rates would have increased if the parties had used the higher avoided-costs figure as the starting point in their negotiations -- the quantum could nevertheless have been estimated within a relatively narrow range if the court was assisted by reliable experts. Seen in this way, the claim may not be quite as nebulous as some of the future contingencies contemplated by Finlayson J.A.
[45] However, the absence of evidence in the case before us does not stem from a failure to adduce evidence. In Martin v. Goldfarb, Martin's "shoddy proffer of evidence" on the question of personal damages was a direct result of mischaracterizing his claim in a different, more favourable light (as damages of his corporations). Eastern Power, by contrast, did not fail to adduce evidence. Nor did it frame its damages claim in an inappropriate or misleading manner. Eastern Power attempted to resolve the [page92 ]inherently complicated and highly technical question of damages by tendering the evidence of its president and one qualified expert witness. The trial judge's conclusion that she had no credible evidence on damages reflected her view that Eastern Power's witnesses were unreliable, not Eastern Power's failure to adduce any evidence on the issue.
[46] Both Martin and Eastern Power suffered substantial losses. Despite Martin's failure to adduce evidence on the proper damages question, this court did not deny him compensation, but instead allowed him an opportunity to make out his damages claim. Eastern Power should not be put in a worse position for its attempt to address the complicated question of damages in this case.
[47] Ontario Hydro relies on this court's decision in Lombardo v. Caiazzo, [2006] O.J. No. 2286, 211 O.A.C. 270 (C.A.) for the proposition that a plaintiff ought not to be provided with a second opportunity to prove the damages they attempted to show at trial. In my view, the holding in Lombardo does not apply. That case concerned an action for the tort of conspiracy, which includes proof of damages as an essential element for establishing liability. The appellants had their action dismissed at trial because they had not proven the damages element of the conspiracy tort and unsuccessfully sought to challenge that finding on appeal. As Gillese J.A. explicitly notes in her reasons, however, the issue of whether the elements of a tort are made out is conceptually distinct from difficulties in proving the quantum of damages once liability for a civil wrong is established: see para. 17. On this latter point, Lombardo does not change the existing jurisprudence, including Martin v. Goldfarb.
[48] I therefore conclude that Eastern Power is entitled to be compensated for breach of the power purchase agreement. How then does the court give effect to this conclusion? As I see it, we have three options: (i) assess Eastern Power's damages ourselves; (ii) substitute the trial judge's "nominal" damages award; or (iii) order a new trial on damages. Eastern Power submits that we ought to assess damages. It argues that we have the necessary uncontested data to arrive at a reasonable figure. It asks for $8.5 million, which it says is the mid- point of the range established by the uncontested evidence. Alternatively, Eastern Power asks that we order a new trial on damages.
[49] This court is not in a position to assess damages. We have heard and reviewed but a snippet of a long trial involving complicated and highly technical evidence. Even if the raw data on which Eastern Power relies is uncontested, we have no reliable methodology to do the necessary calculations from that data. [page93 ]
[50] That leaves the options of substituting the trial judge's "nominal" damages award or ordering a new trial. Substituting the nominal damages award is an attractive option. The award of $5 million, inclusive of interest to the date of judgment, and a pro-rated amount for the remainder of the contract, effectively amounts to approximately $7 million -- a figure not far below the amount Eastern Power seeks. This award likely represents the trial judge's estimation of the loss, albeit discounted in Eastern Power's view.
[51] Substituting the trial judge's "nominal" damages award may not be a perfect solution, but it does have practical advantage of avoiding further litigation, which inevitably would be costly and time consuming. Still, in principle and consistent with Martin v. Goldfarb, Eastern Power is entitled to a new trial on damages, and that is the option I would order.
(3) Is Eastern Power entitled to a reference or a new trial on damages?
[52] For the reasons I have given above, I would order a new trial on damages.
D. Conclusion
[53] I would uphold the trial judge's finding that Ontario Hydro breached the power purchase agreement by failing to give Eastern Power an inter-area transmission credit. I would allow Eastern Power's appeal and order a new trial on damages. The parties may make written submissions on costs within 21 days of the release of these reasons.
Appeal allowed.