COURT OF APPEAL FOR ONTARIO

CITATION: Aluma Systems Inc. v. Resolute FP Canada Inc., 2020 ONCA 792

DATE: 20201214

DOCKET: C67733

Before: Strathy C.J.O., Rouleau and Coroza JJ.A.

BETWEEN

Aluma Systems Inc.

Plaintiff (Appellant)

and

Resolute FP Canada Inc.

Defendant (Respondent)

Counsel: Catherine Willson, for the appellant Roderick W. Johansen, for the respondent

Heard: November 27, 2020 by video conference

On appeal from the judgment of Justice Clayton Conlan of the Superior Court of Justice, dated October 30, 2019, with reasons reported at 2019 ONSC 6293, and from the costs order, dated December 11, 2019, with reasons reported at 2019 ONSC 7184.

REASONS FOR DECISION

[1] The appellant appeals the quantum of damages awarded in its action for breach of contract. If the appeal is allowed, it seeks a variation of the costs order.

[2] The appellant carries on business as a seller and lessor of scaffolding equipment. The respondent operates a pulp and paper mill facility in Thunder Bay, Ontario.

[3] For some 17 years, the appellant provided the respondent with the rental of scaffolding equipment and other services. In May 2014, the respondent terminated the appellant’s services and hired a new supplier.

[4] A dispute arose over the termination of the parties’ relationship. One of the issues concerned the appellant’s scaffolding that had been used in a part of the respondent’s operations called the “blow tank”. That scaffolding had become contaminated over the years by a “black liquor”. After the termination of the appellant’s services, the blow tank scaffolding was stored with other scaffolding in the respondent’s yard before the appellant arranged for its return.

[5] The appellant brought an action against the respondent for damages, including: the costs of demobilizing and shipping the rented scaffolding; rental charges for some of the scaffolding between the time it was taken down and its return to the appellant; and damage to the contaminated blow tank scaffolding.

[6] The trial judge heard evidence over seven days, including fact and expert witnesses on both sides. He conducted a detailed review of the evidence and made findings of fact based on his acceptance of some parts of the evidence of some witnesses, and his rejection of some parts of the evidence of other witnesses.

[7] The trial judge dismissed the claim for demobilization and shipping costs, allowed the claim for the rental charges, and allowed only a portion of the claim for the contamination, which he calculated at $78,429.08. This was based on his conclusion that 40% of the scaffolding had to be scrapped. He applied that percentage to the overall value of the equipment, as provided by one of the appellant’s witnesses.

[8] The appellant submits that the trial judge made a legal error in his assessment of damages for the contaminated blow tank scaffolding. It compares the facts of this case to a basket of apples, some of which contain poison and some of which do not. Because all apples are inherently suspect, the basket has no value. The appellant claims that since the contaminated portions of the scaffolding could not be separated from the uncontaminated portions, it should have been awarded damages based on 100% of the value of the scaffolding.

[9] The trial judge found otherwise. He observed that the evidence was “not very tight” and that some “rough justice” was required.

[10] We agree with these observations. The appellant bore the onus of proving its damages, and the evidence was conflicting. The trial judge was required to do the best he could to quantify the monetary damages so that the appellant could be put in the position it would have been in, but for the respondent’s breach of contract.

[11] The trial judge accepted the evidence of the respondent’s scaffolding expert that the scaffolding was contaminated by as much as 20% at the time it was taken out of service. He found that there was a further deterioration of the equipment while it sat, unwashed and unprotected, in the respondent’s yard for another seven to eight months, mixed with the other scaffolding. He concluded that damages should be assessed on the basis that 40% of the blow tank scaffolding would have to be scrapped due to contamination.

[12] There was evidence before the trial judge to establish that the scaffolding at issue had some value, rather than no value, as the appellant suggests. For instance:

• the appellant incurred transportation costs of $27,758 to ship the scaffolding back to its premises, costs it would not likely have incurred if the equipment had no value;
• the appellant offered to sell the equipment to the respondent’s new scaffolding supplier for $173,515;
• the new scaffolding supplier valued the scaffolding at $70,000 and its wholesale value at $51,708; and
• the appellant rejected the respondent’s offer to purchase the scaffolding for $25,000 and to pay any costs incurred to dispose of it.

[13] In these circumstances, including the failure to the appellant to provide more compelling evidence of its damages, such as what efforts, if any, it had made to separate the contaminated portions of the scaffolding from uncontaminated portions, the trial judge was required to do the best he could with the evidence available.

[14] The appellant’s submission on appeal is that the trial judge made a palpable and overriding error in failing to recognize that all of the blow tank scaffolding had to be scrapped as a result of contamination. The appellant submits that this was the uncontradicted evidence of its expert witness, Rosenthal.

[15] We do not accept this submission. While the trial judge found that Rosenthal was an excellent witness, he discounted Rosenthal’s evidence because it was based solely on his examination of photographs. He never actually saw the scaffolding. The trial judge found that the photographs depicted not just the blow tank scaffolding, but other “much more heavily contaminated” scaffolding from another area of the respondent’s operation.

[16] Instead, the trial judge accepted the evidence of the respondent’s expert, Leroux, who was the superintendent for the respondent’s new scaffolding supplier. Leroux had actually inspected the scaffolding both before and after it was dismantled. He testified that when he inspected the blow tank scaffolding before it was dismantled, most of it was “fine”, although it was dirty from being in the mill for many years. He testified that after it was dismantled, the materials were “in good shape”, although they were dirty. He estimated that 10 to 20% of the scaffolding had black liquor on it.

[17] The trial judge accepted this evidence. He also accepted the evidence of another expert witness called by the respondent, Sissons, who had inspected the scaffolding before it was taken down and said that it was, overall, "clean" with "minor" black liquor in some places.

[18] The trial judge's findings of fact and conclusion that damages should be assessed on the basis that 40% of the blow tank scaffolding would have to be scrapped are fully supported by the evidence. He indeed did the best he could, given the quality of the evidence. The appellant has demonstrated neither palpable nor overriding error.

[19] For these reasons, the appeal is dismissed. It is therefore unnecessary to address the appellant's submissions concerning the costs of trial. In oral submissions, the appellant raised a concern about the omission of a provision in the formal judgment concerning prejudgment interest. If the parties are unable to resolve this issue (which should be a simple matter), it can be raised with the trial judge by way of a motion to amend the judgment.

[20] The parties may make written submissions as to the costs of the appeal, to be served and filed with the Registrar. Those submissions shall not exceed three pages in length, exclusive of the costs outline. The respondent's submissions shall be filed within fifteen days of the release of these reasons, and the appellant shall have ten days thereafter to file a response.

“G.R. Strathy C.J.O.”

“Paul Rouleau J.A.”

“S. Coroza J.A.”