ONTARIO
SUPERIOR COURT OF JUSTICE
OTTAWA COURT FILE NO.: 12-54685
DATE: September 2, 2015
B E T W E E N:
FINCANTIERI CANTIERI NAVALI ITALIANI S.P.A. and FINCANTIERI MARINE SYSTEMS NORTH AMERICA INC.
Andrew Lenz and Jessica Barrow, for the Plaintiffs/Respondents
Plaintiff/Respondents
-and-
ANMAR ENERGY LTD., and ANMAR MECHANICAL AND ELECTRICAL CONTRACTORS LTD.
H. James Marin, for the Defendants/Moving Party Anmar Mechanical
Defendants/Moving Party Anmar Mechanical
HEARD: April 22, 2015
REASONS FOR DECISION
James J.
Introduction
[1] This is a motion for summary judgment for an order dismissing the action against Anmar Mechanical and Electrical Contractors Ltd. (“Anmar Mechanical”).
[2] The respondents are related companies. Fincantieri Marine Systems North America Inc. (“FMSNA”) is part of the Fincantieri group of companies and markets industrial products such as steam turbines in North America. Its office is located in the Chesapeake, Virginia. Fincantieri Cantieri Navali Italiani S.p.A. (“FC Italy”) is also part of the Fincantieri group of companies. It manufactures steam turbines and other devices associated with the production of energy.
[3] Anmar Mechanical carries on business as a mechanical and electrical contractor based in Sudbury, Ontario. Anmar Mechanical is a well-established business with over 2000 employees. Anmar Energy Ltd. (“Anmar Energy”) also has its office in Sudbury, Ontario. Anmar Energy was incorporated on October 13th, 2009.
[4] FMSNA commenced an action against Anmar Energy on May 14th, 2012) (the “first action”) for breach of contract, misrepresentation and unjust enrichment. About a month later FMSNA and FC Italy commenced another action against both Anmar Energy and Anmar Mechanical (“the second action”). The claims and allegations are virtually the same in both actions.
[5] This motion for summary judgment has been brought in the second action wherein Anmar Mechanical has been named as a defendant.
[6] The first action alleges that there was a contract made between FMSNA and Anmar Energy on October 15th, 2009 (the “original contract”) wherein Anmar Energy is alleged to have agreed to purchase a steam turbine generator. The second action makes a similar allegations except that FC Italy was made an additional plaintiff and Anmar Mechanical was made an additional defendant on the basis that they were also as parties to the alleged contract.
[7] In the first action the FMSNA alleged that although the original contract was agreed to and binding, there was an understanding between FMSNA and Anmar Energy that another contract would be entered into between them which would include terms relating to among other things, warranty, disclaimer of liability, payment schedules, liquidated damages and arbitration rights. FMSNA defined this additional contract as the “second contract”.
[8] Anmar Mechanical denies that a binding contract was agreed to.
[9] As will become apparent, differentiating between Anmar Mechanical and Anmar Energy is an important aspect of this motion. There appears to have been a lackadaisical approach to making corporate distinctions at various times by both sides, with potentially significant consequences. Without losing sight of the importance of this distinction, I will at times refer to Anmar generically for the sake of convenience or where it is ambiguous which company was involved.
The Participants
[10] Guilio Grossi was the chief executive officer of Anmar Mechanical. Other members of his family own the shares in this company. Mr. Grossi was also the president of Anmar Energy.
[11] Emilio Rigato was Anmar’s project manager.
[12] Robert Baril was Anmar’s project engineer.
[13] Paolo Tavella was the division manager for steam turbines with FMSNA.
[14] Jeremy Jones was a steam turbine engineer with FMSNA.
[15] Nicola Bongiorni was the head of sales & marketing for steam turbines with FC Italy.
[16] Pöyry (Montreal) Inc. (“Pöyry”) was the firm hired by Anmar as its consulting engineers on the project. Tony Saitta was Pöyry’s project engineer. Later Kevin Barry became Pöyry’s project manager. Bob Spinner was Pöyry’s project engineer.
The Facts
[17] In early 2009 Anmar Mechanical became involved in the Becker Co-Generation Project in Hornepayne, Ontario. The Becker Project had as its objective the establishment of a facility to produce and sell electrical power to the Ontario Power Authority (“OPA”) for distribution by Hydro One Networks (“Hydro One”). The Grossi family had an indirect ownership interest in 1720127 Ontario Inc., operating as Becker Co-Gen Plant through a 25% ownership interest in Olav Haavaldsrud Timber Co. Anmar Mechanical was the project manager for the construction of the facility.
[18] The initial dealings between the parties respecting this project commenced in or about March 2009. On March 24th, 2009 Tony Saitta of Pöyry sent an e-mail to Giuseppe.Scarfi @fincantir.it requesting a quote for a steam turbine and generator for Anmar Mechanical for a site located in Hornpayne, Ontario.
[19] A month later Paolo Tavella responded with a quote for a 15MW turbine for €5,450,000, subject to contract. The parties had further discussions. By September the capacity of the proposed turbine had increased to 20.75MW. A set of technical specifications were provided by FMSNA on September 15th. On October 7th Tavella wrote to Rigato and Grossi saying he needed a purchase order because “I gave directions, three weeks ago, to put this project in line”.
[20] On October 15th, Anmar sent a fax consisting of four pages to FMSNA. The first page was a transmittal sheet bearing the letterhead of Anmar Mechanical with the notation “Please see the attached Purchase Order”.
[21] The next page was a letter from Anmar Energy to FMSNA dated October 9th, 2009 (a few days before its incorporation) stating that an agent was not required on this purchase and requesting to deal directly with FMSNA.
[22] The third page is another letter also dated October 9th from Anmar Energy (four days before its incorporation) to FMSNA stating,
Please accept this correspondence as our Letter of Intent to purchase one (1) Steam Turbo-Generator Set Type SOCE for our Becker Project in Hornepayne, Ontario… Delivery, Drawing Approval Schedules and Invoicing will initiate from this Letter of Award… Our formal purchase Order will incorporate the agreed upon Technical & Commercial Terms of Payment… Our Purchase Order will include the following documents referred to as attachments: Letter of Award, As Sold proposal OM0908501 Revision 2, dated September 29, 2009, Local Design Conditions
[23] The last page of the fax was a one page “purchase order” from Anmar Energy dated October 15th, 2009 for 1 steam turbo-generator, set type SOCE for €5,214,000.
[24] Tavella responded immediately to Grossi at his Anmar Mechanical email address and to Rigato at a personal email address (erigato@shaw.ca) stating that all contractual documents would have to be finalized before FMSNA could accept the purchase order.
[25] The next day he wrote again noting that the purchase order referred to the wrong unit and the price was different. This discrepancy continued to play out over the next several weeks. FMSNA sent a revised technical specification to Rigato on November 11th.
[26] On November 24th Rigato wrote to Nicola Bongiorni complaining that engineering work should have started immediately upon the delivery of the purchase order and that FC Italy was causing delays. Bongiorni responded that he was prepared to work with Anmar to meet its requirements, that Fincantieri had started work to provide required information and that a meeting was planned for the following week with Anmar to finalize the contract documentation including the scope of supply, the price and general commercial terms.
[27] On December 15th Rigato wrote to Bongiorni summarizing the state of the discussions and appeared to agree to FMSNA issuing an invoice for 5% of the contract price which was done on December 31st for €260,700.
[28] On January 12th Bongiorni wrote to Baril with a status report and noted the need to complete the outstanding contractual issues. Later in January Baril wrote to Bongiorni suggesting that he would be in a position to provide a finalized purchase order within a week, then on January 29th wrote that he was “sorry not to be able to send you the draft PO yet since I had promised it for today but I am waiting to get comments back anytime now and as soon as I receive these, I will send you the document. The formal PO will follow soon after.”
[29] By March 15th Anmar had not sent the requested documentation and Lorenzo Parodi of FC Italy sent a reminder regarding the overdue purchase order and requested authorization to issue a second invoice as production had started. On March 18th Anmar requested that the invoices (there were now two) be re-submitted in the name of Anmar Energy which was done. Payment of the first invoice was made by Anmar Mechanical on March 24th.
[30] On April 14th Pöyry’s project engineer wrote to Parodi stating that foundation information from FMSNA was late despite numerous requests and gave notice of a potential delay claim.
[31] On May 6th Baril wrote to Bongiorni advising that there were two outstanding issues preventing the finalization of the purchase order that he expected to have resolved within a day.
[32] On May 18th Baril advised Bongiorni that there was still one point regarding the liquidated damages clause that had to be resolved by Rigato.
[33] On May 21st Anmar Energy gave notice “to all concerned parties” that work on the project was suspended due to an issue with the project’s interconnection to the provincial hydro grid and that the “project will resume pending resolution of this issue.”
[34] When work eventually resumed, the capacity of the turbine was significantly reduced because of issues related to connecting the generating facility to the grid. Anmar Energy ultimately purchased a smaller unit from a different supplier.
[35] The connection issues appear to have some significance in relation to the position taken by the respondents on this motion. The connection of a privately-owned power generating facility to the provincial power grid requires the preparation of a connection impact assessment (“CIA”). A CIA for this project was initially prepared by Hydro One in December 2008. It was revised in May 2009 because 17221027 Ontario Inc. (referred to as the “Generator” for the purposes of the CIA) proposed an increase in the size of the generator from 9.8 MW to 15.63 MW. The CIA specified that when the size of the generating facility is greater than 10 MW, a system impact assessment (SIA) is required.
[36] A Part One SIA was prepared on June 5th, 2009. Its scope was limited to identifying the impact of the proposed generating facility on the local transmission system surrounding the proposed connection point. It referred to a Part Two SIA which would ensure that the proposed facility would not compromise the overall reliability of the grid and that adequate transmission capacity was available.
[37] Also, the Part One SIA noted that the Generator would have to comply with all applicable Market Rules and the Distribution System Code requirements and went on to indicate that the complete list of requirements and their specifics would be identified during the Part Two SIA.
[38] The record on this motion does not contain details of discussions that took place between the proponent of the project and the regulatory authorities subsequent to June, 2009 nor the extent to which Anmar may have been involved in the discussions, but a settlement of the issues was achieved, over which settlement privilege has been claimed.
[39] The record before me indicates the project went ahead later in 2010 after the size of the generator was reduced. There is an absence of evidence regarding the point in time when the proponent of the generating facility ought to have reasonably known that the project was going to be re-configured on a smaller scale, or when this information became available to Anmar, and whether there was a delay in communicating this information to the respondents to their detriment.
[40] The timing of the preparation of the CIA and SIA in the first part of 2009 identifying potential interconnection issues may be material to the timing of the notice given by Anmar Energy in May, 2010 that the project was going to be suspended because of those issues.
Position of the Moving Party
[41] Anmar Mechanical says that although the parties were negotiating for the purchase of a turbine from FMSNA, these negotiations fell through before a contract was made.
[42] Anmar Mechanical also says that FMSNA knew it was dealing with Anmar Energy only. The moving party points to several instances where Anmar Mechanical’s name appeared initially on documents but FMSNA changed the references to Anmar Energy at the request of Anmar Mechanical, for example, on the invoices sent by FMSNA for payment.
[43] Anmar Mechanical says that it made no misrepresentations and it was not unjustly enriched by the expertise, information and documentation flowing from FMSNA. There is no genuine issue that warrants the continuing presence of Anmar Mechanical as a party.
Position of the Respondents
[44] The respondents say that the delivery of the initial purchase order resulted in the formation of a contract and that the subsequent fleshing out of the terms would constitute a second contract.
[45] The respondents also say that Anmar Mechanical deliberately and improperly delayed the finalization of terms.
[46] The respondents also say that Anmar Mechanical made two misrepresentations. The first was that Anmar Mechanical knew but failed to disclose that there was a problem relating to the access to the grid. The second misrepresentation alleged by the respondents relates to the ongoing failure of Anmar Mechanical and Anmar Energy to proceed in good faith to finalize a commercially-reasonable contract.
[47] In addition, the respondents claim that the Anmar companies were unjustly enriched when they used the specifications provided by the respondents to assist in the acquisition and installation of the subsequently-acquired generator supplied by General Electric.
Discussion and Analysis
[48] Since January, 2014 motions for summary judgment have been governed by the statement of principles set out in Hryniak v. Maudlin [2014] SCC 7. Briefly stated, they are as follows:
a) Summary judgment must be granted whenever there is no genuine issue requiring a trial;
b) There will be no genuine issue requiring a trial when the motion judge is able to reach a fair and just determination on the merits of the motion;
c) If there appears to be a genuine issue requiring a trial, the motion judge should determine if the need for a trial can be avoided by using the new powers under Rules 20.04(2.1) and (2.2);
d) The use of these powers is discretionary, provided their use is not against the interest of justice;
e) The question of whether or not it is in the “interest of justice” for the motion judge to exercise the new fact finding powers provided by Rule 20.04(2.1) depends on the relative evidence available at the motion and at the trial, the nature, size, complexity and cost of the dispute.
[49] The moving party advances a very simple proposition on this motion, namely, there was never a contract and if a contract had been concluded, it would have been with Anmar Energy, not Anmar Mechanical. In my view, this is an oversimplification of the true state of affairs. Anmar Mechanical had an indirect ownership interest in the project. It was also the project manager without the benefit of a written contract (although Mr. Grossi had sworn there was a written contract). It was funding the project by working capital of $10,000,000 (see Moving Party’s Supp. Motion Record, Tab 1, p. 5), and by providing temporary financing to Anmar Energy by paying at least the first invoice from the respondents. A Request for Proposals prepared by 1721027 Ontario Inc. in June, 2009 contained an organizational chart that showed that the construction contract would be performed by Anmar Mechanical.
[50] Against this background, Anmar Mechanical conducted discussions/negotiations/dealings with the respondents for months prior to the incorporation of Anmar Energy. By contrast, Anmar Energy may have only existed on paper. It was newly-incorporated, perhaps as a single-purpose entity, it is not clear whether it had any employees and Anmar Mechanical paid its bills, or at least the bill from the respondents. An inference could be drawn (but I am not) that Anmar Energy was simply the alter ego of Anmar Mechanical.
[51] In addition, it is difficult to reconcile the contents of the email from Mr. Baril to Mr. Bongiorni on November 24th, 2009 with the position now taken that there was never a contract. In the email Mr. Baril is clearly pushing the respondents to pick up the pace of their work when he says:
I would like to reiterate the importance for your company to start right a way (sic) the engineering for this project… We are experiencing serious delays due to the lack of engineering cooperation coming from Fincantieri…Fincantieri has clearly changed its business approach. Your “new” approach to dealing with these contract issues is not realistic, specially (sic) since this “new” approach was initiated after the agreement (emphasis added) and without any warning to ANMAR.
[52] One might also wonder why Anmar paid an invoice from the respondents for €260,700 if there was no contract. Recall, however, that the letter of intent (also referred to as the Letter of Award) from October 15th, 2009 specifically addressed the issue of commencement of invoicing. Might this be construed as an implicit acknowledgement that contract relations had been formed?
[53] These observations should not be taken to ignore or gloss over potential problems with the legal positions asserted by the respondents but it is Anmar Mechanical’s motion for summary dismissal. In my view the respondents have raised genuine issues that require a trial. At this stage I need not assess the likelihood of success at trial beyond determining that the issues raised are genuine.
[54] Having made this determination, I am also of the view that the interest of justice precludes utilizing the enhanced powers available to the judge presiding at a motion for summary judgment in the circumstances here. Sometimes justice requires that the case unfold by way of the trial narrative with oral testimony and cross-examination in the presence of the trier of fact. The case raises complicated factual and legal issues. Credibility will be a significant factor. The monetary value of the respondents’ claim is not yet clear but will likely be substantial. This is not a case where the proportionality doctrine elevates the need for summary disposition. At paragraph 33 of Hryniak, Karakatsanis, J. poses the question: Is the added expense and delay of fact finding at trial necessary to a fair process and just adjudication? My answer on these facts is in the affirmative.
[55] The moving party’s position on the motion has two elements. Firstly it requests that the court find that Anmar Mechanical is not a party to a contract. Secondly, it states that if the court determines there is no genuine issue regarding Anmar Mechanical’s status as a party to a contract, then the subsidiary questions are whether the claims for misrepresentation and unjust enrichment ought to be dismissed as well (see Moving Party’s Factum, para. 59). Having determined the first question in the affirmative, considering how the moving party has framed its position, it is unnecessary to address the subsidiary questions. In the alternative, I would hold that there is a genuine issue requiring a trial arising from the delay in announcing in May, 2010 that the project was to be placed on hold although the critical issue of the size of the generator appears to have been known since as early as the previous June, perhaps even earlier.
[56] The decision in Hyrniak underscores the importance of endeavoring, where possible, to use the time and attention invested by the judge hearing the motion to the parties’ benefit where there are unresolved issues following the disposition of the motion. Having given this direction due consideration in this case, I conclude that this is not appropriate here for two reasons. Firstly, I don’t view this case as suitable for a disposition by way of a trial of an issue or for use of the hybrid/summary trial procedure. Secondly, as a circuiting judge based outside Ottawa, experience suggests that scheduling visiting judges for long trials can be difficult and itself a source of delay. I would say even more so where, as here, the trial will proceed with a jury.
[57] In the result, the motion is dismissed with costs. On the issue of costs, the parties delivered envelopes containing their positions on costs at the conclusion of oral argument. The envelopes are, as yet, unopened. The respondents, in their factum, requested an opportunity to make costs submissions. Accordingly, if the parties wish to make further costs submissions they may do so within the next thirty days on a schedule agreed to by counsel.
Mr. Justice Martin James
DATE RELEASED: September 2, 2015
OTTAWA COURT FILE NO.: 12-54685
DATE: September 2, 2015
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
FINCANTIERI CANTIERI NAVALI ITALIANI S.P.A. and FINCANTIERI MARINE SYSTEMS NORTH AMERICA INC.
Plaintiff/Respondents
-and –
ANMAR ENERGY LTD. and ANMAR MECHANICAL AND ELECTRICAL CONTRACTORS LTD.
Defendants/Moving Party Anmar Mechanical
REASONS FOR JUDGMENT
Mr. Justice Martin James
DATE RELEASED: September 2, 2015