COURT FILE NO.: CV-13-1937-00

DATE: 2019 02 28

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Alcos Machinery Inc. Plaintiff/Defendant by Counterclaim

AND:

Del Industrial Metals Inc. and Bloorguard Investment Company Limited and Bloorguard Investment Company Limited, Defendants/Plaintiff by Counterclaim

BEFORE: Trimble J.

COUNSEL: Sean Flaherty, Counsel, for the Plaintiff/Defendant by Counterclaim

Jeffrey Kriwetz, Counsel, for the Defendants/Plaintiff by Counterclaim

HEARD: January 9 to 13, 15 to 19, 22 to 26, 29 to 31, and February 1 and 2, 2018, with written closing submissions received.

REASONS FOR JUDGMENT

Table of Contents

INTRODUCTION.. 3

RESULT.. 5

1. A Note on Evidence. 5

2. Background. 7

a. The Parties. 7

i. Del Metals. 7

ii. Alcos Machinery Inc. 9

b. The Tension Leveling Line. 10

i. The TLL’s Purpose. 10

ii. Del’s Existing Line. 12

iii. The Alcos TLL Line. 12

3. THE CONTRACT. 16

a. Principles of Interpretation. 16

b. Negotiations. 18

4. Did Del Breach the Contract?. 37

a. Final Acceptance Tests. 37

b. Complaints. 52

c. Condition Precedent 56

c. Conclusion. 57

a. A Difficult Relationship. 59

b. Failure to Provide an Elongation Measurement System.. 61

c. Cannot Process Heavy Gauge HRPO and Stainless Steel Coils. 62

d. Cannot operate at 200 or 300 FPM... 65

e. Failures in the Shear 66

f. Lack of Training and Failure to Provide Standard Settings (Recipes) for the TLL. 68

g. Scrap was too high. 70

5. If Del breached contract, what damages must it pay?. 71

a. Contract Price. 71

b. Extras. 71

ITEM 1: STACKER RE-DESIGN.. 74

ITEM 2: ADDITIONAL REQUEST FOR DIGITAL WIDTH AND LENGTH READOUTS. 74

ITEM 3: CHANGE IN FOUNDATION DRAWINGS. 75

ITEM 4: ALIGNING AND LEVELING THE ENTRY BRIDLES, LEVELER AND EXIT BRIDAL 76

ITEM 5: REASSEMBLY OF THE STACKER AT THE DEL PLANT. 76

ITEM 6: BROCK SOLUTIONS' INVOICE FOR EXTRA STARTUP CHARGES. 77

ITEM 7: ALCOS' INVOICE FOR EXTRA STARTUP CHARGES. 78

ITEM 8: A CLEANING FLATTEN OR AUTO GREASE LUBRICATION SYSTEM... 80

ITEM 9: ALIGNMENT OF STACKER.. 80

6. If Alcos breached the contract, what damages must it pay?. 81

a. Lost Profit, Past and Future. 82

b. Out Of Pocket Expenses. 85

c. Alcos’ Defence re Consequential Losses. 86

COSTS. 88

INTRODUCTION

[1] On February 23, 2011, the Plaintiff, Alcos Machinery Inc. made a proposal to Del Industrial Metals Inc. regarding Del’s purchase of an Alcos 72 ins. x. 0.135 ins. x 60,000 pounds Tension Leveling & Cut-To-Length Line (TLL). Del accepted the proposal on February 23, 2011, culminating a year of negotiation over the contract’s terms.

[2] The line was installed between April and July, 2012, and Del began operating it in August. As will be seen, Del never accepted the TLL. Alcos sues for payment of the last 5% of the contract price, or $312,936.53. It takes the position that Del prematurely ended the final approval testing, which is in breach of the contract. It also sues for “extras” of $265,499.15.

[3] Del admits that it stopped final testing of the TLL before final testing was completed. Its position is that the TLL could not meet the contractual performance requirements; namely, it could not process heavier gauged hot rolled, pickled and oiled (HRPO) coils, nor heavy gauge stainless steel coils into flat sheets that remained flat when processed by Del’s customers. Further, the TLL could not process the coils at the speeds specified in the contract. Del says that Alcos is in breach of the contract for, among other reasons, breaching the Sale of Goods Act implied warrantees of fitness. By counterclaim, Del seeks significant damages including its loss of profit, as follows:

Lost Profit until April 30, 2017 $1,658,000.00

Out of Pocket Expenses $ 379,540.91

Contract metal processing by Third Parties $ 28,212.37

Lost Profit April 30, 2017 - January 1, 2018 $ 352,666.67[^1]

TOTAL $2,418,419.95

[4] In addition, Del seeks future loss of profit of $529,000 per annum.

[5] In response, Alcos takes the position that Del has failed in its onus. It has failed to prove that the TLL cannot perform according to specifications. Del’s case is based on its allegations that the panels produced were not flat, a term that is not contained in the contract. Del says that the term regarding flatness is implied in the contract, having been made a clear requirement in the negotiations leading up to the contract.

[6] Alcos says that, even accepting Del’s characterization of the contract, Del still fails to meet his onus to prove that the TLL failed to produce consistently "flat" sheets. Del led some evidence that some sheets were not flat. There is no indication of how many sheets are not flat (expressed either in a whole number or percentage) notwithstanding that during the commissioning process Del ran 80 to 100 coils on the TLL which it put to inventory or shipped to customers.

[7] Further, Alcos says that Del fails to meet its onus to prove that elongation was not achieved as specified by the contract, notwithstanding that after the end of the commercial relationship between the parties, Del had an elongation measurement system along with a slippage detection system installed on the TLL. For the five years before the trial, Del had the ability to, perhaps was, but could have measured the TLL’s performance against the elongation standard in the contract. Those records, if they exist, were not put into evidence.

RESULT

[8] For the reasons set out below, Alcos shall have judgment against Del for:

Contract Balance: $ 312,936.53

Extras: 97,882.42

Total: $ 410,818.95

[9] The Counterclaim is dismissed.

1. A Note on Evidence

[10] There are several evidentiary issues that arose through the trial which I have considered, generally, in these reasons.

[11] First, at the beginning of trial Alcos provided me with a single volume of documents, and asked that I mark it as an exhibit. Del provided a nine volume book of documents and asked that I mark it as an exhibit. Counsel agreed on the authenticity of the documents in the volumes, agreed that they were sent and received, and agreed that the copies are accurate reproductions of the originals. Counsel did not agree that I could accept every document in the volumes for the truth of the documents’ contents.

[12] I ruled that I while would mark Alcos' documents as Exhibit 1 and the Del’s 9 volumes of documents as Exhibit 2A to 2I, I would not accept any document for the truth of its contents, or consider any document in reaching my decision that was not properly proved. I would ignore those documents in the binders that were not properly proved.

[13] Second, I was struck by the absence of evidence where it should exist. For example, I discussed, above, that Del installed an elongation measuring system, and a slippage measuring system on the TLL, after the relationship with Alcos was at an end. I agree with Alcos’ position that for the last 4 ½ years Del has had the ability to measure elongation and slippage of the coils in the TLL, but entered into evidence no records generated by those to measurement systems. There was no evidence that these two measurement systems could not do their jobs. Del appears to have been able to determine whether the TLL could meet the contractual performance standard.

[14] Third, for every coil that was processed, Del generated a “Processing Form” which was filled out by the TLL’s operator at the time a coil was processed. It recorded the properties of the coil, its weight, number of sheets produced from the coil, whether the sheets cut from the coil were put into inventory or sent to a customer, and if the latter, the customer to whom it was sent. The Processing Forms for the coils run in the Final Acceptance Tests (Exhibit 4) also indicated if there was a problem with the coil and what was done with it.

[15] The Processing Forms are linked to other inventory documents such as inventory tags, which permit Del to determine the coil from which a specific sheet was cut, when it was processed, and what happened to all of the remaining sheets cut from the coil.

[16] It is uncontested that between the end of July 2012, and October 2, 2012 (when the Final Acceptance Testing began), Del processed between 80 and 100 coils on the TLL. The Processing Forms for those 80 to 100 coils were not introduced as evidence.

[17] I do not draw a specific adverse inference from the failure to product the two types of documents, above. Rather, their absence in the evidence in this matter is one fact that I consider with all other evidence (or lack thereof) in this case.

2. Background

a. The Parties

i. Del Metals

[18] Del Metals, formed in 1991, it is in the business of selling and processing metal. It conducts its business out of three plants: Brampton, Mississauga, and Montréal. Del started as a family business, but, by approximately 2014, was owned by two people: Cam Jobin (president, major shareholder, and son of Arthur Jobin, the founder), and Paul Legendre (VP, sales and procurement, minority shareholder). During all times relevant to this action, Del was operated by Camile Jobin, Paul Legendre, Richard Hill (CFO) and Mike Catanna (IT consultant). Up until his death on January 17, 2015, Arthur Jobin was chairman, working 3 to 4 days a week.

[19] Del’s business has two distinct parts. First, Del is a distributor and vendor of metal pipe, bars, and beams, used mainly in the construction industry, but produced by others. Del performs no processing function on this line of goods.

[20] Second, Del processes metal coils (predominantly steel) into flat sheets which it sells to its customers for use in their manufacture of their products. Del does not produce its own steel, or metal coils. It purchases coils from the market, purchasing only prime or above prime coils.

[21] Before 2012, Del did all of its metal processing on its heavy stretcher leveling machine located at its Brampton plant. On this machine, Del processed coiled steel of a relatively heavy gauge or thickness into flat sheets. Del’s customers turn these sheets into a large array of further processed steel parts including such things as appliance panels and automobile body parts.

[22] Beginning in 2008, Del began to develop the business plan which would allow it to enter a new market: processing lighter gauge steel, aluminum, copper, and stainless steel coils into flat sheets, to be used for such things as barbecue and small appliance parts, and HVAC ducting. It developed a business plan in order to secure financing for the expansion of its business, obtained that financing, and entered into a lease for property in Mississauga because there was no room for expansion at its Brampton plant.

[23] Beginning approximately 2 years before Del signed the contract, it entered into discussions with two different manufacturers of metal coil processing equipment, one of which was Alcos, to purchase a processing line to deal with the lighter gauge materials required for this new market.

ii. Alcos Machinery Inc.

[24] Alcos, too, is a family-run business which designs and manufactures metal coil processing equipment, including leveling, slitting, cutting, and processing equipment. Alcos was founded in April, 1984 by Hasan Albulak, an M. Eng., who spent his life in the sheet metal industry. Mr. Albulak is Alcos’ President. Burak Albulak is Hasan’s son. For the five years preceding the trial, Burak Albulak was the director of operations. Before that, he was the operations manager. While his title changed, his role did not: he oversaw the operations of the company in all its aspects including engineering, production, and was involved in sales. He ensured the designs met specifications and oversaw the scheduling of jobs. He received his B. Eng. from the University Western Ontario in 2000, although he is not yet a full professional engineer.

[25] Del and Alcos were not strangers. Art Jobin and Hasan Albulak were acquainted for many years through business. Del had used Alcos to make modifications to its heavy stretcher line in the Brampton plant. Alcos was a Canadian company with a good reputation.

b. The Tension Leveling Line

[26] This litigation concerns Del’s purchase of an Alcos 72 ins. x. 0.135 ins. x 60,000 lbs. Tension Leveling & Cut-To-Length Line (TLL).

i. The TLL’s Purpose

[27] The purpose of the TLL is to take coiled metal and turn it into flat sheets for use by others in manufacturing.

[28] Steel mills process raw metal into a number of shapes, including bars, billets, slabs, rods, and coils. Coils vary in thicknesses and width. They are created either by rolling the raw steel flat while it is hot or cold, and then rolling the steel into a coil. Those coils cannot simply be unrolled and turned into refrigerator doors or automobile panels. The surfaces of the steel are irregular, the edges of the steel coils are rough and irregular, and the coils have “memory.” All of these are addressed in the leveling process.

[29] The most significant of coiled metal’s characteristics is memory. Memory is the propensity of the metal, once uncoiled, to return to its coiled state. This is caused by tension within the metal, at the molecular level.

[30] Memory can be eliminated by “leveling”, a process by which the metal is passed through a series of rollers and is deflected beyond its yield point. The yield point is that point at which the metal relaxes and loses its propensity to return to its previous coiled shape. Passing the steel or metal strip between the leveling rollers while the whole strip is under tension is more effective at eliminating memory than levelling alone.

[31] Once the uncoiled metal has been worked beyond its yield point and the memory eliminated, it must be flattened again through another series of rollers. Once the uncoiled metal is leveled and flattened it is cut into sheets.

[32] If the uncoiled metal has been properly leveled, the sheets that are cut from the leveled coil will be flat and will remain flat once they are cut further. If the coil is not properly leveled, while the sheets cut from it may appear flat, they maintain memory. Therefore, when the sheets are cut, the cut pieces will show the memory by bowing out of a flat position.

[33] The metal predominantly used in leveling lines is steel. That steel may be untreated, galvanized, painted, or oiled (to prevent rusting). The line, however, can be used for other metals such as copper, aluminum, or stainless steel.

[34] The amount of force, deflection, and tension required to eliminate memory in the material depends on the properties of the material; mainly, the type of metal, width, thickness or gauge, and the yield point of the metal. The stronger the metal (for example, steel versus copper) and/or the wider or thicker material, the higher the yield point will be and, therefore, the more deflection and tension is required to eliminate memory.

ii. Del’s Existing Line.

[35] There are several configurations of a processing line that manufacturers use to level metal.

[36] In order to understand the TLL line, one must have a basic appreciation of Del’s existing line.

[37] Del’s heavy stretcher line was designed to uncoil heavy gauge steel coils, flatten them, remove the “memory” and cut the coiled and processed steel into sheets at customer specified lengths. This line was not a continuous line. The coil is unrolled and straightened and fed into the stretcher. When the desired length of coil is within the stretcher, the uncoiling stops. The stretcher clamps the end of the coil and a spot within the length of the uncoiled portion, and applies tension while rollers roll the steel between the clamps. The sheet is then cut from the processed section of the coil. Once the sheet is removed, the process repeats itself.

iii. The Alcos TLL Line

[38] The TLL is a metal processing line made up of several parts. Its purpose, too, is to take a steel or metal coil purchased from a steel mill, unroll it, flatten it, remove the “memory”, trim the processed coil’s edges, cut the coil into specified lengths, and stack those sheets onto pallets for shipping or inventory. The metal the TLL processes is of a lighter gauge, but not limited to steel. It can process steel, copper, and aluminum.

[39] Unlike Del’s heavy stretcher line, the TLL line is a continuous line. Once the first coil is fed into the line, the lead end of every subsequent coil is fastened or “stitched” to the end of the previous coil so that the machine can run continuously. In order to provide a continuous feed of coils, there is a machine which held an inventory of coils, and fed that inventory into the line.

[40] The TLL is a combination of machines, some produced by Alcos, some produced by others. Its component parts are set out in the scope of proposal under the contract.

[41] The coils to be processed are placed on a turnstile in the order in which they are to be processed on the line. The turnstile places the coils onto a coil car which loads them onto the uncoiler’s spool. The uncoiler has an automatic brake control system that provides back tension on the strip as the coil diameter changes, thereby maintaining uniform back pressure on the strip. The strip is then unrolled into the TLL.

[42] When the coil leaves the uncoiler, it passes through a stitcher, the purpose of which is to fasten the rear end of one coil to the front or leading end of the subsequent coil. It does so by overlapping the two slightly and then punching them with a die that connects the two ends, mechanically.

[43] The coil enters the leveling unit, next. The levelling unit has four large polyurethane coated rollers called bridles at either end of the unit. The polyurethane coating on the bridles provides traction on the metal strip. The bridle rolls are arranged with two rolls offset over two rolls, offset such that the strip comes into the bridles and snakes around them. It passes in a reverse fashion through the exit bridles. The polyurethane coating and the severe angles that the metal strip is wrapped around the bridle rollers provides the necessary traction on the strip. The entry bridles and the exit bridles work at slightly different speeds in order to provide the tension on the strip necessary for the leveling process.

[44] The leveling unit itself is located between the two bridal assemblies. The leveler contains a number of adjustable opposing rollers. The rollers are offset so that when the strip passes between the upper and lower rollers, the strip must bend up and down as it passes through the rollers. The amount that the roller deflects the metal strip is adjustable, and provides the necessary bending, which, along with the tension, provides the necessary deflection to reach the yield point of the metal, thereby eliminating memory.

[45] On top of the first roller of the entry bridle, and the first roller of the exit bridle, there is a pinch roller. This roller comes down on top of the metal as it comes in contact with the bridal. It holds the metal strip in place, but also, helps provide tension.

[46] The rollers within the leveler are attached to the structure above and below the strip. The top of the leveler is hinged on one side such that the top of the leveler can be opened like a hinged box for maintenance. It also can be opened to permit the stitch, which is thicker than either of the strips, to pass through the leveler and not to damage the rollers.

[47] After the strip leaves the leveler, it passes through a loop pit which permits it to sag in order to provide some play in the strip for the slowing and speeding of the shear. Immediately following the loop, a device squares the strip to the shear blade, after which the strip is fed into the high-speed rotary shear.

[48] The rotary shear has two effective components. The first is an assembly which rises and falls. It contains a rotary sheer and raises and lowers the shear to the strip. The rotary sheer is a drum containing blades which turns at or faster than the speed at which the metal strip is moving. The purpose of this assembly is to permit the cutting to be done without stopping the strip. If the cutting blade for the strip operated merely as a guillotine, the strip would have to stop to permit the cut. This would require the use of clutches and gears. The rotary sheer dispenses with the need of having a blade that stops and starts, rises and falls, and a strip that stops and starts in order to be cut.

[49] Once the cut, panels leave the shear unit, they proceed by conveyor belt to machine that crops the sheet. The sheets proceed further down the conveyor and, if they are determinedly unsatisfactory, they are diverted to a scrap bin.

[50] The panels continue down the conveyor system towards an indexing sheet stacker. The purpose of this machine is to stack the cut metal sheets onto a pallet either for packaging and shipping, or for placing into inventory. The machine receives the cut sheets, supports them by small arms or fingers and a jet of air from below. Once the panel is squarely within the stacker, the stacker drops gently onto the panel below. It is “indexed” in that it can count the sheets as required by the programmer.

[51] The TLL is surrounded by a safety cage designed and installed by others. It is designed such that when the cage is opened, for example when an operator needs to get to the line, the TLL automatically stops.

[52] The TLL is designed to work at a rate of approximately 200 ft. /m when processing heavier gauge material and at 300 ft. /m when processing lighter gauge material. The speed of material in feet per minute is determined by the rate at which the shear operates.

3. THE CONTRACT

a. Principles of Interpretation

[53] In interpreting a commercial contract such as the one at issue here, the following principles apply:

1. One must interpret the wording in the contract, using the ordinary meaning of the words (unless those words are a term of art or unique to a trade or business), without doing undue violence to the language used, and without resulting in absurdity (see: G.H.L. Fridman, The Law of Contract in Canada (6th ed., 2011), p. 436 - 7);

2. The intention of the parties should be determined objectively, that is to say, to determine what the parties have agreed to by using the their language as it would appear to the ordinary man (see: Fridman, at p. 437);

3. Where the contract is between sophisticated commercial players who have had the full opportunity to negotiate and consider the terms of the proposed contract, the court should assume that the parties agree to the terms of the contract. The court will not interfere lightly the words the parties have used (see Tilden-Rent-A Car v. Clendenning (1978), 19 OR. (2d) 501 (C.A.), at para. 22);

4. Because contractual interpretation involves issues of mixed fact and law, it is an exercise in which the principles of contractual interpretation applied to the words of the written contract. Those words must be considered in light of the factual matrix surrounding the contract (see: Creston Moly Corp. v. Sattva Capital Corp., 2004 SCC 53, at para. 50);

5. While the surrounding circumstances (factual matrix) should be considered in interpreting the contract, they must never be allowed to overwhelm the words of the agreement. The purpose of using surrounding circumstances is to deepen the decision-makers' understanding of the mutual and objective intentions of the parties as expressed in the words of the contract. The words must always prevail and be grounded in light of the entire contract. Surrounding circumstances are an interpretive aid only, and cannot be used to deviate from the text such that the court effectively creates a new agreement. Evidence of surrounding circumstances should consist only of objective evidence of the background facts at the time of the execution of the contract, that is, knowledge that was, or reasonably ought to have been within the knowledge of both parties at or before the date of contracting (see: Sattva, para. 57-58);

6. Generally, terms can be implied into a contract based on a) custom or usage, b) as the legal incidents of a particular class or kind of contract, or c) based on the presumed intention of the parties where the implied term is necessary to give business efficacy to a contract or as otherwise meeting the “officious bystander” test, that is, be a term which the parties would say, if asked, that they had obviously assumed. The question is not what reasonable parties would have agreed to, but what these parties agreed to. That is why an implied term must have a degree of obviousness to it and if there is any evidence to a contrary intention on the part of either party, the implied term should not be found. Ultimately in determining the intention of the parties, the express terms must govern. (see: M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd., [1991[ SCR 619, at para. 27-28);

7. Contra proferentem may apply to assist in resolving ambiguity in a contract where that ambiguity has two possible meanings equally consistent with the language. In that case, the meaning shall be that which is the most contrary to the interests of the party who most benefits from the clause. However, the maxim only applies where the other party had no meaningful opportunity to participate in the negotiation of a contract, where, in effect, there is an in equality of bargaining power. (See: Fridman, page 456).

b. Negotiations

[54] Both of the parties to this contract are sophisticated commercial actors, familiar with their business and, to some extent, with the others.

[55] Alcos holds itself as being an experienced manufacturer and service provider in the metal coil processing business. It designed and built its own stacking unit, and its own tension levelling unit. It designed, modified, and serviced processing systems and lines, comprising its and others’ parts. Hasan Albulak and Burak Albulak both conceded that the purpose of their machine was to create metal panels from coils that were flat and free from memory. Further, they understood that Del’s customers would probably want memory free panels so that the panels would not warp when they were cut.

[56] Del had been in existence by the time of this contract for over 20 years. It had a recognized place in the metal processing industry. Art Jobin was a recognized leader in the steel coil processing world.

[57] Del determined its own needs, designed its own business plan, and set its own contractual requirements in terms of the kind of product it wanted to run on its new line and the results it wanted to achieve. Del decided to purchase a tension leveling line without consulting Alcos, as opposed to purchasing another stretcher leveling line to run the new range of lighter gauged products. It did not share its business plan with Alcos, or consult Alcos about the specifications that it wanted and stipulated.

[58] Once Del defined what it needed, it did not put its purchase out to tender. Rather, it approached two manufacturers (Herr-Vos and Alcos), presented them with the criteria they wished the machine to achieve, and specified the kinds of metal coils that they wanted to process, including dimension, gauge, yield strength and tensile strength. Herr-Vos and Alcos responded to Del’s request for proposal.

[59] The negotiations were conducted by Art Jobin, Paul Legendre, and John Fox from Del, and Hasan Albulak and Thomas Griffiths from Alcos. The negotiations took over a year and resulted in the final proposal of February 10, 2011. Even after the final proposal was sent, Del demanded further changes. These included changes to the final acceptance tests such as changing the time in which to do the tests, and eliminating the clause that allowed Alcos to deem the final acceptance tests as being successful if Del refused to provide the coils or attend at the final acceptance tests. Del accepted the proposal on 23 February 2011.

[60] Del’s representatives testified that its business plan, which was not produced at the trial, provided that Del would transfer from the stretcher leveler line in Brampton to the TLL in Mississauga, 400 tons of lighter gauge steel processing per month, including 14 gauge hot rolled pickled and oiled (HPRO), cold rolled, and stainless steel. This represented 10% of the production of the Brampton plant and the transfer would shorten the backlog on the stretcher levelling line from 2 to 4 days, to 1. Del said that this transfer to the TLL line was one of the main justifications for the investment. The transfer of 400 tons would give the new TLL line a base load of existing business from which it could immediately begin production. Del said that they told Hasan Albulak and Burak Albulak of this plan. Hasan Albulak and Burak Albulak do not remember hearing this, but admit that it was reasonable that some transfer would take place.

[61] Del says that Alcos made a number of representations, orally and in writing, that induced it into entering the contract. It appears that Del is arguing not that the contract should be set aside because of misrepresentations on which it relied and which induced it into entering into the contract. Rather, it appears to argue that the pre-contract discussions are relevant to its position with respect to implied terms in the contract. I will deal with these alleged representations, now, since they are alleged to have been made during the pre-contract discussions.

[62] Del submits that in the pre-contract conversations, largely between Mr. Legendre and Hansan Albulak, Mr. Legendre said that Del was looking for a line that processed material of a quality comparable to the stretcher leveling line in Brampton. Del says that Mr. Legendre told Hasan Albulak the following things:

1. Del wanted to transfer 400 ton of production per month from its existing stretcher line to the TLL.

2. Del was operating with a 2 to 3 shift backlog on the stretcher leveling line and wanted to transfer 8 to 18-gauge coils to the TLL including HRPO cold rolled, galvanized and stainless steel.

3. Del wanted to grow business in the light gauge metal area, including appliance parts, and HVAC ducting.

4. He showed Hasan Albulak the HMI screen on the stretcher leveler which provided read outs for load levels and tension levels. He told Hasan Albulak that Del needed a readout on the TLL’s HMI that showed the elongation that was being achieved on the material, similar to the readout on the stretcher leveler so that the operator would know how much the material was being stretched.

[63] Del also takes the position that:

1. It told Alcos many times that it wanted the TLL to generate panels that were “panel flat”, “commercially flat”, and “dead flat”, and Alcos agreed that the line would do this.

2. Alcos represented that the line would process heavier gauges with in the specifications at 200 ft. /m and the lighter gauge is at 300 ft. /m.

[64] Hasan Albulak said in cross-examination that he did not remember seeing the HMI display on the stretcher leveling line. He had seen the stretcher leveler and seen it work. Alcos had done modifications to the stretcher clamps. Hasan did not know or could not remember that the stretcher leveling line had an elongation measuring system. He agreed that such a thing is simple to install on a stretcher line. He did not recall anyone discussing with him installing an electronic or automatic elongation measurement system on the TLL. It was not in Alcos’ proposal. Had Alcos been asked to install an elongation measuring system, Hasan said it would have been part of the proposal.

[65] Hasan and Burak Albulak did not recall discussing the transfer of 10 to 18 gauge HRPO, stainless, and galvanized steel from the existing stretcher line to the new line. They did agree however, that the TLL had the capacity to level these gauges of materials.

[66] With respect to flatness, both Albulaks were cross-examined extensively on the question. Both were adamant that “flatness” was not a defined term of the contract or one that had a generally accepted meaning in the industry. They accepted that “dead flat”, “commercially flat”, and “panel flat” were terms used in the coil processing industry. Without a specified contractual definition or an accepted definition in the industry, were flatness a contractual criterion, there would be no way to measure it, and no way to determine if the specification for flatness was met. That is why Alcos set a performance specification of elongation of up to 2% depending on the thickness and the yield strength and the dimensions of the material being processed. Elongation is the main determinant of eradication of memory, and it can be measured. Both of the Albulaks agreed that the end product of the line was to be memory free sheets produced from the coiled steel that Del’s customers could use and which would not deform in the customers’ manufacturing process.

[67] Cam Jobin was not in any direct pre-contract discussions with Alcos in which there was discussion about such things as an automated elongation measurement system. He said that he assumed that because Alcos was selling “a state-of-the-art” TLL, it would have included an elongation measuring system.

[68] There was no document introduced at trial that Del specified that the TLL must include an automated elongation measurement system.

[69] Cam Jobin and Mr. Legendre said that there were many discussions between the parties about the contract. Mr. Legendre was the most directly involved on behalf of Del. He said that the majority of those discussions were reduced to writing. Cam Jobin was less specific, but the thrust of his evidence is that there was much said that was not recorded.

[70] Mr. Legendre was a more thoughtful witness. Since he was directly involved with Alcos in the pre-contract discussions, I prefer his evidence that most of the discussions in the pre-contract period were reduced to writing.

[71] I find that Del did not request, specify, or discuss with Alcos that the TLL should have an elongation measuring system. Del was aware that such a system existed as there was one on its stretcher line. Given that Del is a sophisticated commercial entity in the metal coil processing business, if it wanted an elongation measuring system as part of the TLL it ought to have specified it.

[72] I accept that Alcos gave assurances to Del that the TLL could process the materials, widths and thicknesses specified in the contract. I also accept as a general proposition that Alcos knew that Del wanted the TLL to generate flat metal sheets that would remain flat when processed by Del’s customers. I do not accept, however, that Alcos undertook that the line would produce “dead flat” or “commercially flat” panels as part of the pre-contract negotiations that would stay flat once processed by Del’s customers. Why do I say this?

[73] Del specified what it wanted. It received proposals from Alcos and Herr-Voss. Both of those proposals specified a performance standard of elongation of the strip up to 2% depending on the material, its thickness and width, and its yield strength. Any term regarding flatness were not terms that could be measured and hence performance under the contract could not be measured. There was no generally acceptable measure for flatness.

[74] Del could have demanded flatness as a performance standard, and defined it. Del had a definition of what “flat” meant. Mr. Legendre, when discussing customer complaints about non-flat sheets, referred to a series of photographs at Exhibit 2, volume 4, tab 180, the first photograph of which, showed a piece of steel with a meter applied to it which read .01480. Mr. Legendre said that this reading meant that the sheet “measured flat.”

[75] Del could have used another specification. It had an example in the Herr-Vos proposal which said that startup and commissioning were completed when the equipment is functional and “a salable product has been produced.” This could have been specified as the performance standard for the TLL, along with a definition. It was not.

c. What Does the Contract Say?

[76] The contract was entered into on February 23, 2011.

[77] At the time the contract was entered, Del did not have a building for the TLL. It took Del almost a year to enter into a lease agreement. Foundation work was required to the floor of the new leased premises to support the TLL. This was completed during February and March 2012. Delivery and installation of the components began in April, 2012 and was completed by the end of July 2012.

[78] The relevant contract terms are extracted and appended to these reasons. More generally, the contract provides as follows

1. In the preamble and scope of proposal, the line is referred to as an “ALCOS ‘State of the Art’ 72 ins. x 0.135 ins. 60,000 lbs. Tension Leveling & Cut to Length Line.”

2. In the specifications, under the heading “process material” the TLL is said to be able to process cold rolled, galvanized steel, pre-painted steel, stainless steel, HRPO steel, and aluminum, in material widths of 24 inches to 72 inches, and thicknesses of .015 inches to 0.135 inches. With stainless steel grades 304 and 313, the maximum thickness is 105 inches unless the stainless steel coil is 60 inches wide in which case, the stainless steel can be 0.135 inches thick.

3. The line parameters are set at line speeds of 300 ft. /m for light gauges and 200 ft. /m heavy gauges.

4. Elongation of the strip is “up to 2%” depending upon combination of Max. Yield strength, thickness and width of the material.”

5. The minimum and maximum width, thickness, yield strength and shear strength and the line speed for heavy gauges is also set out.

6. The machinery was FOB Alcos’ shipping dock, although Alcos unloaded the equipment at Del’s plant.

7. Installation, and the provision of all required utilities and cabling was Del’s responsibility.

[79] The contract provided for a startup, commissioning, and final acceptance testing.

[80] Startup – While Del was responsible to install the equipment, Alcos was responsible for startup. The startup was to be performed with the customer and will include customer satisfaction with the machinery and that all machinery meets the contract specifications under a no-load condition. Alcos was to ready the machinery for commissioning. Once all deficiencies have been corrected to Alcos' satisfaction, they would proceed to commissioning.

[81] Commissioning – commissioning the machinery was to be done by Alcos, and would include mechanical and electrical synchronization and a full load test. The customer’s personnel would perform the full load tests under full supervision and guidance of Alcos. The purpose of commissioning was to ensure the machinery has power, strength, and capability to process all products as outlined in the contract specifications, but not for the purpose of meeting output and quality requirements. During the commissioning phase, Alcos will train the customer’s personnel on the machinery. During the commissioning, the products processed shall be in compliance with the products specified in the contract. If there are any deficiencies or defects that become apparent, Alcos will correct these defects immediately. Once Alcos determines the commissioning has been successfully completed, reasonable notice would be given to the customer by Alcos of its intention to continue into Final Acceptance Tests.

[82] Operator Training - the customer is to identify technically competent operators whom Alcos will train during the commissioning process primarily in a “hands-on” approach. It is expected that those trained, will train others within the customer’s workforce. Upon completion of training, the operator's training certificate is to be issued.

[83] Final acceptance – Final Acceptance Testing was to begin on completion of commissioning. The customer’s personnel was to perform the final acceptance tests under the supervision of Alcos' personnel. Once the Final Acceptance Testing has been successfully completed, Alcos will issue a final acceptance certificate.

[84] If any failures occurred during the final acceptance tests, Alcos will correct any deficiencies in the machinery and, in its discretion, replace or repair defective parts if the failures are solely attributable to Alcos' actions or omissions. Once the necessary corrections, repairs, or replacements are completed, the final acceptance tests that failed will be re-run in the same manner as the first final acceptance tests, and the final acceptance tests will be completed. The customer is obliged to provide 20 coils within the capability of the line, representing a cross-section of the product that the line is specified to handle.

[85] Reading these sections as a whole, it is apparent that “commissioning” and “final acceptance” refer to separate objectives.

[86] “Commissioning” refers to testing designed to determine that the TLL works mechanically and electrically under a full load. It ensures that the TLL has the power, strength, and capability to process all products as outlined in the contract specifications but does not guarantee quality. The commissioning tests are designed to surface defects in the TLL so that they can be repaired. The commissioning process is specifically not for the purpose of meeting output and quality requirements.

[87] “Final Acceptance Testing” refers to the process by which the TLL is certified in terms of meeting the contractual requirements before the TLL is finally accepted by the customer. If the TLL does not meet specifications, including specifications as to elongation on the full line of coils contemplated in the contract, Alcos must repair it so that it does.

[88] There is an ambiguity in the final acceptance tests portion of the contract. It says that “the customer’s personnel will perform final acceptance tests…” The section then provides “once these parameters have been successfully completed, Alcos and the customer’s representatives will sign the final acceptance certificate confirming this accomplishment and the final acceptance of machinery.”

[89] The final acceptance provision does not specifically state what the tests are or define what a successful test is. It does not say what the “parameters” are that have to be successfully completed, in what constitutes successful completion.

[90] Further, the 5th paragraph under Final Acceptance Tests provides that if “any failures occur” during the final acceptance tests, Alcos will correct any deficiencies, and, once the necessary corrections have been made, the “final acceptance tests or required portions [of them] will be repeated promptly in the same manner as in the first final acceptance tests.” The contract does not define what constitutes a failure, nor does it determine who has the right to declare a failure.

[91] Read as a whole and in the context of the whole agreement, however, the Final Acceptance Test provisions provide that the final acceptance tests are to be run in the presence of Alcos and Del. The final acceptance tests must be run and successfully completed in order to complete the contract. Successful completion is defined as meeting the performance standard within the contract on the 20 coils stated, on a consistent basis, when the TLL is operated properly. If the TLL has difficulties meeting the contractual performance requirements of the contract, Alcos must remedy the problem and the tests on the failed coils repeated, until the TLL produces sheets that comply with the performance standard on the 20 coils.

[92] The Final acceptance tests do not contemplate running the final acceptance tests on the 20 coils anew, nor adding more coils (other than replacing the failed coils).

d. Implied Terms

[93] Del argues that there were implied terms in the contract; namely a) that the TLL would process heavy gauge stainless steel and HRPO coils; b) that all metal sheets that the TLL produced would be flat and would stay flat after the customer used them for the customers intended purpose, and would be memory free, and c) that the TLL would measure elongation. Del’s argument is based on its view of the pre-contract discussions.

[94] I agree that there is one implied term: that the TLL, when operated properly, would elongate the coils having the properties and dimensions specified, up to 2%, such that the sheets produced by the TLL would be memory free. This is a reasonable term which gives business efficacy to the contract.

[95] All other issues raised in pre-contract discussions are not representations. Rather, they were made contractual provisions; for example, that the TLL can run HRPO coils of defined properties became a specific term of the contract.

[96] There was no implied term in the contract concerning flatness.

[97] Del says that it made it clear and unequivocal to Alcos that the TLL had to produce sheets that were flat coming off the line and remained flat when they were processed by the customer. That is the key pre-contractual discussion that Del says is an implied term of the contract.

[98] I accept that the question of flatness was discussed in the pre-contract discussions. Both Hassan and Barack Albulak said that they do not remember the discussions with the detail as advanced by Del’s representatives. They admit, however, that the purpose of the TLL is to produce memory free sheets from the coils it processes, on a consistent basis. Memory is eliminated by elongation beyond the metal’s yield point. Therefore, the best measure of eradication of memory is elongation. Elongation was set in the contract as the performance standard.

[99] The contract could have specified that the TLL be equipped with an elongation measurement system. Alternately, the contract could have provided that a sample or samples of sheets will be taken from each coil, and slit to test for memory.

[100] This contract provided for neither sort of test to measure performance to the commonly understood purpose of the machine. I cannot imply a term in the contract with respect to how the consistent production of memory free sheets was intended to be measured, as I do not have any evidence that suggested a common understanding as to what measure of performance testing existed between the parties. Implying a method for testing whether the TLL consistently produced memory free sheets is tantamount to re-writing the contract.

[101] Alcos says that memory is eliminated from the sheets through leveling. The measure of adequate leveling is elongation of the strip. All witnesses who expressed an opinion on the subject agreed that 2% elongation was sufficient to remove memory from the materials to be processed according to the contract. The amount of necessary elongation of any particular strip within the “up to 2%” specification in the contract depended on the thickness and width, and yield strength of the specific coil being run.

[102] All witnesses who were asked about it said that the most definitive test to determine whether a leveled sheet is memory free is to slit or laser curt it into strips. If there is memory in the sheet, although the sheet appears to be flat, the strips cut from it will deflect.

[103] When the Albulaks were cross-examined on the question of flatness, they both said that phrases like “flat”, “panel flat” or “commercially flat” are layman’s terms used in the industry. Those terms, however, had no meaning in engineering. In order for flatness to be a contract term, flatness would have to be defined. For example, the contract could have specified that the panel should have no more than a specified measurement of deviation when placed on an industry recognized flat table. They agreed, however, that slitting or laser cutting the panels will test for the presence of memory.

[104] Del is a sophisticated commercial entity. The emails and correspondence in the pre-contract discussions indicate Del’s high level of expertise in metal processing and in the properties, the metal to be processed. The emails showed a high level of attention to detail regarding what Del wanted in the contract. It sought specifications and clarifications with respect to many statements in Alcos' proposal. It demanded that specific lines be removed.

[105] I conclude that Del could have insisted that the contract provide that sheets produced by the line would be flat and will remain flat after the customer processed.

[106] Alternately, Del could have required that:

a. the contract include a definition of flatness. Del had a concept of what it considered “flat”. Mr. Legendre said that the meter shown measuring a sheet found at Exhibit 2, volume 4, tab 180, which read “.01480” meant that the sheet, “measured flat.”

b. the final acceptance tests would not be complete until it was satisfied, through independent testing, that the sheets produced by the TLL were memory free.

c. Alcos perform to the same performance standard as was promised by Herr-Vos; namely, that commissioning of the equipment was completed when the equipment “is functional and a salable product has been produced.”

[107] More important, Del, as part of its detailed review of the Alcos' proposal, could have insisted that an elongation measuring system be installed on the TLL. There are several reasons why I say this.

[108] First, Del is a sophisticated commercial player, and an expert in its field of metal coil processing. Those involved in the pre-contract negotiations each, were experts in the field:

1. Art Jobin, Del’s main contact during contract negotiations and the founder of the company, was, by all accounts, a “grandfather” of the industry. His son, Cam Jobin, president of Del at the time of trial, referred to Art Jobin as “a titan in the business.”

2. Cam Jobin, president of the company at the time of trial, had been working in his father’s various companies since high school. Since graduating university with a degree in financing, he has worked at metal processing companies, usually with his father. He and his father started Del in 1991. He worked with various cut to length lines beginning in 1995.

3. Paul Legendre, Del’s vice president of sales and procurement, has been in the steel business for 24 years by the time of trial, which means at the time of the contract he was in the business for 18 years.

4. John Fox is a retired engineer that Del had retained for numerous projects in the 15 years before the contract was entered into. Fox’s business was in steel processing lines including hot rolling lines and slitting lines. He was the consultant for the purchase and installation of Del’s stretcher leveling, cut to length line.

[109] These factors, alone, ought to have driven Del to make sure the contract contained everything that it wanted, including an elongation measuring system.

[110] Second, Del had an elongation measuring system on its existing stretcher line. It was clearly aware of the issue in the pre-contract discussions. Mr. Legendre says that during the pre-contract discussions, he showed Hasan Albulak the HMI screen on the existing stretcher leveler line and told Hasan Albulak that Del wanted a readout of elongation measurement. Given its attention to detail in the proposal on other matters, Del could have, and ought to have specified an elongation measuring system had it wished one.

[111] Third, the 5 February, 2010 Herr-Vos proposal provided that its line would have an elongation measurement system.

[112] The Herr-Vos proposal, itself, is of limited evidentiary value. No one from Herr-Vos testified. I cannot accept the proposal for the truth of its contents. I can consider the proposal, however, as a document Del received in the same month that it received Alcos' proposal, and the terms of which were within Del’s knowledge at the time it was engaged in negotiations with Alcos.

[113] The Herr-Vos proposal contains a number of provisions of relevance to Del’s allegations against Alcos:

1. Like the Alcos proposal the Herr-Voss proposal does not refer to “flatness”. It contains the same performance standard for flatness as the Alcos proposal; namely, elongation “up to 2%, based on material thickness, width and yield strength”.

2. It includes a digital elongation device which would display the actual elongation to the operator.

3. It defines completion of the contract as when "a salable product has been produced."

[114] Del’s representatives said that they went through Herr-Vos' proposal and compared it to the Alcos proposal. I assume it did so with the same detail as it reviewed the Alcos proposal.

4. Did Del Breach the Contract?

a. Final Acceptance Tests

[115] There is some dispute as to when commissioning ended and the final acceptance tests began, born from the lack of precision by these two sophisticated commercial players in their use of contractual terms. This imprecision is remarkable and unfathomable, especially as the positions of the parties hardened as they each were attempting to document their files.

[116] At some points, Del took the position that the final acceptance tests were never begun. They never left the commissioning phase. At other points, Del thought that the final acceptance tests had begun.

[117] Alcos, at varying times, uses the phrase “commissioning” and “final acceptance” interchangeably.

[118] Notwithstanding these positions, Del must have considered that the Final Acceptance Tests began when it created the 20 Coil Commissioning Schedule for The New Line (Exhibit 1, tab 33) and provided the 20 coils for testing purposes. The only provision in the contract that provided for 20 coils is the Final Acceptance Tests provision.

[119] Alcos takes the position that the Final Acceptance Tests began on October 2, 2012, following Hasan Albulak’s email of September 27, 2012 in which Hasan said that once the precision feed role problem was cured, he wished to proceed to “process the coils within the specifications.” That Final Acceptance Tests began in October was also the trial evidence of Hasan and Burak Albulak, supported by Mr. Legendre.

[120] There is no doubt that the commissioning stage or phase was protracted. At the end of the July, Del requested that it begin processing production runs of coils on the TLL. It appears that the production began in early August and continued through to the end of September. Eighty to 100 coils were processed. During this time, Alcos was also doing its commissioning.

[121] At the beginning of October, as required by the contract, Del selected 20 coils representing a cross-section of what was to be processed on the TLL and listed them on the 20 Coil Commissioning Schedule for the New Line document (Exhibit 1, tab 33).

[122] There is a fundamental difference in the positions of the parties with respect to whether the coils were run in Final Acceptance Testing, and the extent to which they were successfully run.

[123] Alcos’ position is that the Final Acceptance Tests were commenced. Sixteen coils listed on the Coil Commissioning Schedule were run successfully. Two coils were removed because of defects. Two coils, representing heavy gauged HRPO coils remained to be processed.

[124] Alcos submits that Del terminated the Final Acceptance Testing before the final two coils could be run. Before restarting the Final Acceptance Testing, however, Del insisted that Alcos remedy every item on its Action Register (the name applied to Del’s deficiency list from which the parties worked). Only once that was done would Del provide the final coils for Final Acceptance Testing. By doing this, Alcos says that Del breached the contract. The Albulaks both said that the Action Register contained a mix of warranty items and commissioning items, the former of which could wait until after commissioning before being remedied.

[125] Alcos bases its position that the 16 coils processed successfully on notations made on the Coil Commissioning Schedule. Burak Albulak said that the only document that he and Sean Kerr worked from during the Final Acceptance Testing was the Coil Commissioning Schedule. Sean Kerr, who was a Del’s production supervisor at Del, checked off each coil as it was loaded on the machine and then initialed beside of each coil after it was successfully run on the TLL. If there is no checkmark and no initial, the coil was not successfully run and a notation was made as to why the coil was not successful. Burak Albulak referred to notations beside coils 9 (a hot rolled coil that was outside the TLL’s specifications and record) and coil 14 (which had a flatness issue that was a manufacturer’s defect). The one exception to this according to Burak Albulak was coil number 13.

[126] Del’s position is that it stopped running the final acceptance tests because it was clear, based on the coils that were run, that the TLL could not handle the heavy gauges coils of HRPO and stainless steel. Del’s position is that the final acceptance provisions in the contract permit the final testing to be interrupted so that problems in the final testing could be remedied, before Final Acceptance Testing continued. Del was merely insisting that deficiencies would be remedied before Final Acceptance Testing would continue.

[127] Del says that, based on Mr. Legendre’s and Mr. Kerr’s evidence, the Coil Commissioning Schedule was merely a document Mr. Legendre created to keep track of the coils it was using in the Final Acceptance Testing. Mr. Kerr said that his initialing beside the coil was merely to indicate that it was run.

[128] Del bases its position that the Final Acceptance Tests failed on its Processing Forms (Exhibit 4).

[129] Processing Forms are created by the TLL operator when a coil is run. They indicate the properties of the coil, the size and dimensions of the sheets created, and show what was done with them (for example, put into inventory or given to a specific customer). Del says that those documents show that there were problems with flatness, a number of sheets that had to be quarantined or put on hold because of quality concerns, and the level of waste.

[130] Del’s behavior after October 10, 2012 became very problematic.

[131] The gravamen of Del’s evidence is that it was trying everything reasonable to move the completion of the TLL forward, and that it was Alcos that was not cooperating.

[132] The evidence shows that after October 10, however, Del was frustrating the process. It did not share information with Alcos that substantiated Del’s position.

[133] Following August 2, 2012, it is clear that Cam Jobin was concerned that the dispute with Alcos was getting out of hand and might become litigious. On that day, he instructed some of Del’s staff on the project to document everything.

[134] I find that the only document that Del gave Alcos that addressed whether the coils that were run during, and passed Final Acceptance Tests was the Coil Commissioning Schedule at Exhibit 1, tab 33 as annotated by Sean Kerr.

[135] There is no evidence that Del gave Alcos copies of the Processing Forms generated October 2 to 10 or thereafter, or that, Burak Albulak was made aware of the problems listed on the Processing Forms. Mr. Albulak was present for the running of the first 16 coils in the final acceptance phase. He said that the only document he had to work from, and the only document that Sean Kerr had in his hand was the Coil Commissioning Schedule.

[136] Brian Jeffels is a senior operator with Del. He operated the TLL from the beginning until May 2013, and then after August 2015. According to the Processing Forms (Exhibit 4), Mr. Jeffels ran 14 of the 17 coils processed during the Final Acceptance Tests for which Processing Forms were produced. He did not say that he gave these forms to Alcos or discussed with Alcos the problems he experienced with the line. He did not indicate that anyone else discussed the issues raised on the Processing Forms with anyone at Alcos.

[137] Mr. Jeffels reviewed emails concerning the Final Acceptance Testing that he sent between October 2 and October 10. Most of these dealt with things like the processing speed. Most of those emails addressed what Burak Albulak did to address the problems identified during the running of those tests. None of those emails dealt with what was listed on the Processing Forms, notwithstanding that pages 4, 8, 9, 10, and 12 of Exhibit 4 indicated a problem with “surface critical”, and page 14 and 15 indicated a bow at the end of the coil. None of those forms or emails specifically addressed an issue of flatness.

[138] Mr. Jeffels and Mr. Kerr gave oral give evidence about periodic flatness problems with sheets coming off the TLL. That evidence, however, was general in nature and not related specifically to the final acceptance tests. That evidence appears to have related to the period of August to September when Del was running the production coils.

[139] Del’s concerns about flatness and the final acceptance tests failing relates to coil 17, an HRPO 0.119 in. thick by 72 in. wide coil which was run for its Final Acceptance Test on October 11, 2012 (see Exhibit 4, page 16). After Del ran that coil, it stopped testing because of a flatness problem.

[140] There is a dispute as to whether Alcos was present for this test. I find that no one from Alcos was at this test, invited to be present, or told that it was going to occur.

[141] The only witness that put Burak Albulak at the test is Mr. Legendre. The other Del employees present (Fox and Kerr) do not remember if Burak Albulak was present. Burak Albulak said that he was not present. The Processing Form for coil 17 indicates that only Legendre, Kerr, Fox, and the operator, Sean Philip, were present when this coil was run. This is the only Processing Form in Exhibit 4 that indicates who was present.

[142] If Burak Albulak was present when coil 17 was run, there would have been no need for Cam Jobin to call and email Hasan Albulak on October 11, 2012 to discuss the concerns that Del had. Cam Jobin could have spoken to Burak Albulak. Further, Burak Albulak sent an email to Cam Jobin advising that it was Burak Albulak’s understanding that the only products that had not been run during the final acceptance tests were coils 17 and 18. This email only makes sense if Burak Albulak was not present when coil 17 was run.

[143] Following October 11, Del took the position that the TLL could not and has not run heavy gauge HRPO and stainless coils successfully such that the sheets produced are flat and stayed flat.

[144] For the period before October 11, both Messrs. Kerr and Jeffels indicated that there had been some flatness problems. This evidence was general. Mr. Kerr said that, generally, the sheets off the TLL appeared flat. His emails between August 2 and October 10 do not raise flatness as a continuing issue. On August 8, 2012 at 5:13 p.m. he reported to Cam Jobin that they produced one coil that day which had produced quality sheets. In his trial evidence, Mr. Kerr said that slippage of the bridles was noticed the first time an oily coil was run. He pointed this out to Burak Albulak but does not recall Burak Albulak's response. He gave no date. Mr. Kerr said that regarding the 80 to 100 coils that were run prior to the Final Acceptance Testing, they had inconsistent results. He did not say as part of that general statement that part of the inconsistency was a flatness problem. The emails indicate that there were other problems, not flatness.

[145] Brian Jeffel’s evidence with respect to flatness was also non-specific. He indicated, generally, that they were never able to get flat sheets. He gave no time reference for this. He identified other problems. He said that he ran some coils off a heavier gauge and some had waves on the driver side of the coil and were inconsistent. They had no successful run of complete coils. He said that of the 80 to 100 coils run in August and September 2012, 85% of those were light gauge. When he gave evidence about flatness problems and slippage because of oily coatings that evidence came in response, generally, to questions concerning complaints that had been received, all of which came after October 31, 2012. He said, however, that he discussed slippage with Burak Albulak many times. He does not recall what Burak Albulak said.

[146] The issue of flatness is not addressed on the Action Registers revised August 1 and September 25, the two that were generated during the commissioning phase when production runs were being conducted.

[147] From October 2012 to February, 2013, Alcos and Del communicated frequently, mostly by email, speaking at cross purposes. Alcos demanded that the final acceptance tests be completed. Del insisted that it would provide the final coils for Final Acceptance Testing only after Alcos remedied every alleged deficiency on Del’s Action Register to Del’s satisfaction. Alcos insisted that the Action Register contained a mixture of commissioning and warranty items (identifying the items as such). Alcos promised to work on the list of commissioning items first, leaving the warranty items until after commissioning was completed.

[148] An example of Alcos’ position is a December 10, 2012, 6:44 p.m., email from Burak Albulak to Cam Jobin, Hasan Albulak, and others at Del saying that they were in the Final Acceptance Test phase of the project per the contract, and all products were processed satisfactorily accept the 10 and 11 gauge steel in 72 inch in width. Alcos wanted to complete this portion of the contract. Burak Albulak stated that most of what was listed on the most recent Action Register was covered by the warranty and would be completed upon final acceptance of the line. This was in conformity with the contract.

[149] It appears that, during this period, the only significant work Alcos did was to replace a bent roller in January 2013.

[150] Del did not tell Alcos what specific work it was doing on the TLL after October 10, 2012, what coils it was processing, and the results it was achieving on wide, heavy gauge HRPO coils.

[151] The first indication to Alcos regarding Del’s complaint that the TLL failed final acceptance tests came in an email from Cam Jobin to Hasan Albulak on October 11, 2012 at which point Cam Jobin said to Hasan Albulak “Hassan – as per our conversation – we have completed 18 of the 20 coils intended for commissioning – we have not had success in running the last two coils.” This email follows Del’s running of coil 17 listed on the Coil Commissioning Schedule, the Processing Form for which is found at page 16 of Exhibit 4. Alcos was not invited to attend, or informed of this event. It was not given any information about the results of the test.

[152] Del ran 10 gauge x 72 in. wide coils on the TLL on November 1 and 2, 2012, and said they were unsuccessful. Alcos was not invited to attend, or informed of these events. It was not given any specific information about the results of the test. The Processing Form from those coil runs were not put into evidence.

[153] On November 2, Cam Jobin sent Hasan Albulak an Action Register updated October 22 which said on p. 5 “10 gauge x 72 in wide has not been run successfully.” He did not mention that Del ran that coil on the TLL on October 11, a fact of which Mr. Jobin was aware.

[154] Del raised the issue of the 10 gauge coil again in an email dated January 10, 2013, 6:20 p.m. from Cam Jobin to Hasan and Burak Albulak with copies to others. Mr. Jobin said that the TLL was incapable of processing 0.105-0.134 in x 72 in wide HRPO coils. The yield loss was far above industry-standard. More serious was that coil memory was not removed once the coil was sheeted. Mr. Jobin said that Del had run many coils and was field testing with negative results both internally and from customers. Mr. Jobin did not say that he had, in fact, run the 10 gauge coil or what the results were. Mr. Jobin asked that Hasan Albulak address the items listed in his memo with “a firm action plan including scheduling timeline.”

[155] Del’s response to Alcos’ perceived inaction and indifference to Del’s concerns was to issue a Memorandum of Agreement (MOA) dated January 25, 2013, which it sent to Alcos on January 30. Del’s evidence was that this MOA was its attempt to identify critical problems with the TLL (which Alcos had requested that Del do) which, if successfully addressed, would lead to the final acceptance of the TLL.

[156] Alcos reviewed the MOA and considered it as Del’s attempt to change the terms of the contract. For example, the MOA said that commissioning was not yet completed, when it was, and the parties had moved on to Final Acceptance Testing. It insisted that another 12 coils had to be run on the TLL of certain specifications, and that Alcos would adjust the equipment so that it produced “dead flat, stress free steel sheets.” Flatness would be assessed, first, on Del’s flatness table. Next, the sheets would be shared and the sheared pieces checked for flatness on Del’s flatness table. Third, other sheets cut from the same coil were to be laser cut by a third party and the cut pieces checked for flatness on Del’s flatness table. The test would be considered a success only if after all these processes the panels and the cut portions of the panels remained flat.

[157] The January 25 MOA also contained a number of things that Del required Alcos to do that were clearly Brock Solutions’ responsibility under separate agreements with Del. Brock Solutions was the company that designed the computer control system that operates the TLL.

[158] By reply of February 2013, Hasan Albulak wrote to Cam Jobin rejecting the MOA because Hasan Albulak viewed it as Del’s attempt to rewrite the contract by inserting new terms and performance criteria, and requiring Alcos to run many more coils than originally stipulated in the original contract. Alcos insisted on completing the Final Acceptance Tests which Del refused to do. Mr. Albulak noted that the TLL had been running in production for many months and Del had been benefiting from the line while Alcos had continued to work and been frustrated in the Final Acceptance process.

[159] Del responded by issuing a slightly amended MOA. Hasan Albulak’s responded by email dated November 21, 2013, sending Del Alcos’ invoices for extras totaling $234,955 plus HST.

[160] The parties agreed that by the end of 2013, their business relationship was at an end.

[161] Del’s position is that under the Final Acceptance Testing provisions of the contract, the contract recognized that there could be failures during the course of testing. If the failures were Alcos' fault, Alcos would remedy the problem. After the problem was addressed, Final Acceptance Testing would be resumed, with the failed tests repeated. I agree with this interpretation. Del did not follow it.

[162] Del argues that the list of coils at Exhibit 1, tab 33 was merely a list of coils. The check marks and initials were placed there by Sean Kerr only to indicate that those coils had to put on the machine. They do not signify that the coil was run successfully. Whether a coil was run successfully is determined by the Processing Forms (Exhibit 4) which were produced for each of the coils. Using those documents, Del submits as follows:

1. Coil 12, an HRPO 0.075 inch thick by 60 inch wide coil resulted in a significant number of pieces (70) being put on hold because of waviness;

2. Coil 14, an HRPO 0.105 inch thick by 60 inch wide coil could not be processed properly. 51 pieces were quarantined because they were not flat. The remainder of the coil was removed and was later successfully processed on the stretcher leveler;

3. Coil 15, an HRPO 0.119 inch thick by 48 inch wide coil had 7 pieces quarantined because they were not flat;

4. Coil 16, an HRPO 0.119 inch thick by 60 inch wide coil had 21 pieces quarantined because they were not flat;

5. Coil 17, an HRPO 0.119 inch thick by 72 inch wide coil, had all pieces quarantined because they were not flat, and coil 19, a galvanized 0.033 inch thick by 63 inch wide coil had 53 pieces quarantined.

[163] Del’s position is that the machine could not process heavy gauge material or heavy gauged HRP0 material and the amount of scrap produced was substantially higher than the 1% industrial average.

[164] Del says that it issued the MOA in order to try and get the machine operating properly. The Memorandum was not intended, nor did it purport to amend the contract. Rather, Del wanted it as a clear framework for completion of the final acceptance tests.

[165] In addition to finding that the Coil Commissioning Schedule was the only document Del gave Alcos that addressed what coils were being run during the Final Acceptance Tests, I also accept Alcos' position that the Coil Commissioning Schedule (Exhibit 1, tab 33) for the TLL line was, in fact, the document which indicated that coils had passed the final acceptance test. I say this for the following reasons:

1. The only form that Sean Kerr and Burak Albulak worked from during the Final Acceptance Tests was the Coil Commissioning Schedule, according to Messrs. Kerr, Burak Albulak, and Fox.

2. The Processing Forms (Exhibit 4) were prepared by the operators, not my Mr. Kerr.

3. Burak Albulak said that he never received the Processing Forms (Exhibit 4). Del produced no evidence that they were forwarded to him or that the information recorded in them was provided to Burak Albulak.

4. Mr. Legendre did not recall having any discussions with Burak Albulak about the results of Final Acceptance Test or the information contained on the Processing Forms. One would have expected Mr. Legendre to have raised concerns if he had any with respect to the coils immediately after they were processed.

5. No one spoke to Burak Albulak about any concerns with the coils at the time of the final acceptance tests.

[166] In light of this finding, I conclude that as of October 10, 2012, subject to coils number 9 and 14 having been removed from the Coil Commissioning Schedule by agreement, Del indicated to Alcos that the remaining 16 coils were run successfully. It appears that Del’s position changed based on the Processing Forms created by the operators. I was directed to no email or other correspondence that indicated that these Processing Forms were given to anyone at Alcos. No evidence was led that indicated that the details of the Processing Forms also were given to Alcos.

b. Complaints

[167] As indicated above, the issue of the flatness of the sheets created by the TLL was first raised obliquely in an email on October 11, 2012. Further, Del’s decision to suspend Final Acceptance Testing (based on its run of coil 17) was first announced in that email. The flatness issue and other issues with the TLL were discussed in a meeting on October 18, 2012. This discussion appears to have been spurred by Del’s processing coil 17, although this was not communicated to Alcos. Del raised the issue of flatness again in detail in an email dated January 11, 2013, in which Cam Jobin referred to customer complaints.

[168] After Del had suspended final acceptance tests on October 11 when it ran coil 17, and after the meeting of October 18, 2012, Del began to receive complaints from customers concerning sheets that they had received and processed, which Del says had been processed on the TLL. The first two of these complaints came in emails both received on October 31, 2012, one from Denis Lebert at Haas, and the other from Alex Stobo at Peel Door. Del says that it lost a significant customer as a result of this - Haas.

[169] Del says that while it ran the 80 to 100 coils on the TLL during August and September, 2012, problems with the sheets were not immediately apparent. Sheets which appeared flat were placed into inventory and later sold to Del’s customers.

[170] The testimony at trial about this 80 to 100 coil production run during the commissioning phase involved little more than the acknowledgment that 80 to 100 coils were run. Messrs. Kerr and Jeffels gave evidence concerning these coils, but that evidence was imprecise. Better evidence is available. Del’s evidence was that Processing Forms are completed for every coil that is processed. The Processing Forms marked as Exhibit 4 indicate what was done with the sheets that were cut from the coil including whether any sheets were held or quarantined because of defect, and sometimes, stating what the defect was. Some forms in Exhibit 4 indicate specific defects that were found in the sheets that were produced from the coil.

[171] There were no Processing Forms put into evidence with respect to the 80 to 100 coils processed on the TLL before the final acceptance tests began. In the absence of any of these Processing Forms, I conclude those 80 to 100 coils were processed without any unusual problems. Had there been problems, I conclude that Del would have raised the issue.

[172] Mr. Legendre said that of the 80 to 100 coils, 85% were light gauge and 15% were heavier gauge. Most of the sheets produced by the TLL were put into inventory. Mr. Legendre saw some of them run. He said that the sheets produced were not consistently flat. There was often a problem with coil waving. Some coils were wavy to the eye.

[173] With respect to customer complaints, Mr. Legendre, referring to Exhibit 2, volume 4 beginning at tab 172, which contained emails and photographs concerning flatness issues raised by the following customers:

1. October 31, 2012 – Haas Enterprises - complained that the most recent shipment of 12 gauge had pieces that were not lying flat when laser cut. They bowed. Del responded that the shipment that was currently in transit was thoroughly inspected and should meet the customers’ requirements. Mr. Legendre said that the complaint was related to products run on the TLL line. Del attempted to reestablish a customer relationship in January 2013. The former customer indicated that they were having problems with HRPO material. Hass said that unless Del could guarantee that there would be no issue with flatness, they would not order anything further from Del other than galvanized metal or satin coated metal.

2. October 31, 2012 – Peel Door – the customer sent one photograph purporting to show how a 12 gauge 72 in x 122 in sheet bowed both before and after laser cutting. The customer did not have the tag from the shipment but inquired why this might happen. On November 5, 2012, Peel Door sent a photograph showing a number of 12 gauge 72 in x 100 in sheets purporting to show them bowing, and asking if something had been done to Del’s process.

3. February 26, 2014 – Superior Metal – showing bowing on HRPO, 14 and 16 gauge 40 in and 48 in sheets. The client continued to use them but was unhappy.

4. April 17, 2013 – Agora Manufacturing – saying the “last few shipments” of 14 gauge HRPO 48 in x 120 in, and 12 gauge HRPO 72 in wide have bowed upon being cut, which caused the client to cancel a 15,000 pound potential order.

5. May 2, 2013 – Eurobex Manufacturing – 40 sheets of 12 gauge galvanized 48 in x 79.375 in galvanized appeared flat but bowed when cut. They used 20 sheets and returned 20 sheets.

[174] As a result of these complaints, Mr. Legendre said that Del decided to start checking inventory for flatness. Because there was no elongation measurement on the TLL, Del decided to shear some of the TLL’s sheets in inventory to test for flatness. Mr. Legendre reviewed a series of photographs (Exhibit 2, volume 4, tab 180), the first photograph, of which, showed a piece of steel with a meter applied to it, reading .01480 which, Mr. Legendre said, “measured flat.” Based on the results of its investigation, Del decided to isolate TLL product and determine how waviness and bowing could be remedied.

[175] All of the documents concerning customer complaints are of little evidentiary value. I cannot accept the emails and photographs as proof of their contents. None of the authors of the emails or the photographers were called to give evidence. Those at Del who saw the product or dealt directly with the customer were not called gave evidence of their direct involvement with these complaints. Mr. Legendre did not inspect the products that were complained of. He did not conduct inspections at the plant to go through inventory of heavy gauge material to check for bowing and waving in sheets from the same coils as those sheets which were the subject of the complaint. That was done by others. Therefore, most of his evidence and most of the correspondence and photographs concerning defects are hearsay. I can only consider them to the extent that it informed decisions that Del took afterwards.

[176] In any event, even if I could accept these emails and photographs for the truth of their contents (for example that a bundle of sheets in a photograph were cut from coils processed through the TLL), I was not provided any quantitative analysis that permitted me to understand how many complaints were received, how many sheets were affected, or what percentage the sheets were defective compared to the total production of the TLL of heavy coils.

c. Condition Precedent

[177] Alcos says that completing the final acceptance tests is a condition precedent to completion of the contract. Del’s refusal to complete Final Acceptance Testing prevented Alcos from investigating Del’s concerns, adjusting or repairing the machines, and ensuring that the TLL produced as required by the contract.

[178] Ferguson J.’s, decision in TNT Canada Inc. v Parmalat Dairy & Bakery Inc. [2004] O.J. No. 74 (SCJ), at paras. 117 – 129, contains a concise statement of the law with respect to conditions precedent. As a general rule, party A’s failure to meet a condition precedent is either an absolute defence to party B for not performing its part of the bargain, or suspends party B’s obligation to perform its part of the bargain until party A performs the condition precedent. If the requirement in the contract is not a condition precedent, then if party A’s conduct makes party B’s performance under the contract more difficult, then party B still has the obligation to act reasonably, in all the circumstances, in an effort to fulfill its duty.

[179] A condition precedent is generally seen as something that must be fulfilled before an obligation arises for the other party. If party A’s failure to do what is required to do merely makes party B’s performance more difficult, then it is not a condition precedent.

[180] In this case, completing the Final Acceptance Testing was a condition precedent to determining whether the TLL produced memory free sheets from the coils of metal of the properties specified, and therefore whether the contract could be completed. Alcos could not ensure that the TLL performed to specification unless it was present when all the tests were run. If any tests failed, Alcos had to be given the opportunity to adjust or repair the TLL, run another coil of the same properties until the coil ran successfully, and then run the remaining coils in the Final Acceptance Tests. It is not a question that Del’s refusal to complete the Final Acceptance Test creating more difficulty for Alcos in completing the contract. Alcos could not ensure that the TLL performed according to specifications absent seeing the full Final Acceptance Tests run and the nature of the failures.

c. Conclusion

[181] Based on the foregoing, I find that Del breached the Final Acceptance provisions of the contract. Del’s breach represented the breach of a condition precedent which prevented Alcos from completing the contract. Del’s breach constitutes a full defence to Alcos.

[182] Del was within its rights to halt the Final Acceptance Testing if a problem arose, insist that the problem be remedied if it was Alcos’ fault, then continue the Final Acceptance Tests, re-running those coils those that were necessary to be re-run because of the problem.

[183] Up until October 10, 2012, as far as Alcos knew, the final acceptance tests were successful according to the Coil Commissioning Schedule. Del ceased the Final Acceptance Testing based on its run of coil 17 (as listed on Exhibit 1, tab 33) on 11 of October 2012 (see Exhibit 4, page 16).

[184] Del’s breach of the Final Acceptance Testing provisions of the contract takes three forms:

1. Del conducted a final acceptance test on coil 17 in Alcos’ absence and without his knowledge;

2. Del based its decision to suspend Final Acceptance Testing on its testing of coil 17;

3. Del suspended Final Acceptance Testing without providing to Alcos the full information available to it concerning its suspension of the final acceptance test;

4. Del refused to allow Alcos to pair or remediate the problem that led to the failure of the Final Acceptance Testing on coil 17, and to re-run a replacement coil and complete the tests.

[185] Because of its breaches, Alcos was not able to exercise its contractual right to conduct its own investigation, fix the problem, and complete Final Acceptance Testing.

[186] In addition to its breach of the contract, Del, by its Memorandum of Agreement, inappropriately tried to impose further terms into the contract, for example testing 12 more coils and imposing the requirement that they be “flat.”

[187] Alcos is entitled to damages as discussed below.

5. Did Alcos Breach the Contract

[188] Del alleges that Alcos breached the contract.

[189] Whether Alcos breached the contract is moot given my finding that Del’s conduct constituted a breach of a condition precedent which prevented Alcos from completing the contract.

[190] Had I found that Del did not breach the contract, I would have found that Alcos did breach the contract. I set my reasons for this finding, below.

a. A Difficult Relationship

[191] There were many difficulties with this project that arose from the fact that Alcos' design, a unique configuration of existing machinery with unique control software, that had no track record and with which nobody had any experience.

[192] Commissioning took much longer than expected. In part, this was due to a number of issues for which Alcos was responsible including software programming for which Brock Solutions was required to find a solution, mechanical and computer programming related issues with the shear, performance of the stitcher, a gearbox failure which caused 3 to 4 week's delay, by itself, and a bent roller.

[193] Del became impatient with Alcos and remedied the gearbox problem, itself, through its own resources and connections.

[194] There were other difficulties which were Del’s responsibility. For example, there was a one year delay in commencing installation of the TLL created by Del having to find a suitable building and reinforce the floor. There were several change in plans which required Alcos to re-do its drawings several times. There was an issue with the lubrication system caused by Del using the wrong oil or dirty oil. Some of the conveyors were not aligned. The most time-consuming problem was that the stacker had to be disassembled outside the building and then reassembled inside the building, due to tight tolerances and space requirements within the building. There was also a recurrent problem caused when someone opened the security, which caused the TLL to stop and lose tension.

[195] The Action Registers itemized a plethora of problems, many of which are probably usual to a job such as the installation of the TLL, and which do not represent a breach of contract. Many others, represent improvements or additions to what was specified in the contract. Those do not represent breaches of contract.

[196] I address the alleged defects in the TTL that Del says are breaches by Alcos, in the following sections of these reasons.

b. Failure to Provide an Elongation Measurement System

[197] The contract stipulates that TLL would elongate the strip of metal being processed “up to 2% depending upon combination of Max. Yield strength, thickness and width of the material.” That is the performance standard agreed to.

[198] All parties agreed that elongation of the material being processed up to 2% would be more than ample to remove the stresses or memory in the material, and that the amount of elongation for any specific strip depended on the strip’s dimensions and the metals properties.

[199] The TLL contains no system or device for measuring and reporting on the elongation of the specific coil being run as achieved at any given point by the leveler portion of the TLL. The contract contained no specification or requirement that the TLL have such a device or system.

[200] Del says that Alcos’ failure to provide an elongation measuring and reporting system is a breach of the contract. Alcos says that an elongation measurement system could have been provided if Del had requested one and it had been specified in the contract. It was not.

[201] For the same reasons as I found that there was no implied term of the contract that the TLL have an elongation measuring system, I also find that there is no breach of the contract for the failure to have one.

c. Cannot Process Heavy Gauge HRPO and Stainless Steel Coils

[202] Notwithstanding my finding that Del breached the contract by not completing the Final Acceptance Testing, I am satisfied that Del has proven a balance of probabilities that the TLL cannot process heavy gauge HRPO and stainless steel coils thereby produce memory free sheets of metal.

[203] This finding, however, is limited to the TLL’s inability to process HRPO and stainless coils as designed, and as it functioned at February, 2013. I do not reach the conclusion that it never could successfully process those coils, as Alcos was never given the opportunity to observe, investigate and remedy any defect. While it was never addressed, Alcos may have been able to modify the TLL such that it could process these coils. Because of Del’s breach of the contract, we will never know.

[204] I reached this finding for two reasons. First, I accept Del’s position that coil 17, which Del ran on October 11, 2012, and the coils it ran on November 1 and 2, 2012, did not produce memory free sheets.

[205] Second, I accept the evidence of engineer David Withrow that the bridle rolls do not maintain sufficient tension to provide effective elongation of the strip. This is so largely because the bridle rolls, as built, when running HRPO coils, become coated in oil which reduces their friction coefficient making tension levels inadequate.

[206] Mr. Withrow’s opinion and evidence was not free from blemish. He made several sloppy errors in his report that he had to correct in his oral evidence. Further, his answers tended to be categorical. For instance, when he was asked whether the TLL was fit for its purpose, his response was “absolutely not.” When he was asked about whether the shear could perform on the full range of product, as specified in the contract, his response was “absolutely not.” In cross-examination, he was forced to back-track from his categorical answers. For example, he corrected himself to say that the TLL would have more difficulty processing thicker HRPO and stainless coils.

[207] Further, Mr. Withrow was not given the full calculations and drawings with respect to the shear. He was not aware that the shear sped up in order to get out of the way as the cut material left the shear and the uncut material entered the shear. He relied on the SMS reports Del commissioned, but which were never introduced into evidence.

[208] With respect to the operation of the shear, more significantly, Mr. Withrow's opinion is unhelpful and unreliable. In concluding that the shear did not cut properly, he relied on Del’s representations to him that the shear could not cut. Therefore he did not need to study or understand the shear. In defence of his statement that the shear motor could not cut heavier gauge stainless steel, he said he reached this conclusion based on a “mental calculation.” He did not need to do an actual calculation. This is a feeble response.

[209] Finally, he was never asked if the TLL could be modified so that it could function according to specifications, how long those modifications would take, and at what cost.

[210] The only other expert who gave evidence was Wesley Diaz. In his opinion the TLL generated adequate power and tension to process all of the material specified.

[211] I prefer Mr. Withrow’s evidence over that of Mr. Diaz notwithstanding my reservations concerning Mr. Withrow’s testimony. Mr. Diaz is not a professional engineer, although he has experience in designing TLLs. He was not asked to do anything other than check Alcos’ calculations. He did not review the contract. Most importantly, he did not have a look at the line itself. He conceded that if he were trying to solve a problem with the line, to commission it, or been asked if it ought to have been designed or built differently, he might need to see the TLL in action. Mr. Diaz conceded that tension could be lost because the bridle rolls were oily, but he could not calculate the specific effect of oily bridle rolls.

[212] In reaching my conclusion about the TLL’s ability to maintain tension, I have not considered the evidence I have reviewed, above, with respect to consumer complaints, the Herr-Vos proposal, or the SMS reports. The SMS report provided an analysis of the TLL’s problems, and recommended changes. No one from SMS testified.

d. Cannot operate at 200 or 300 FPM

[213] Del’s position is that the TLL could never work above 250 ft./m on light gauge coils or above 175 ft./m on heavy gauge coils because the strip would bind in the shear. Del’s witnesses that offered an opinion said that they were never able to operate at 300 ft./m. The one exception to this was Mr. Fox, who said that he saw it run at that speed.

[214] I am satisfied based on the evidence of Messrs. Kerr and Jeffels, who were in regular contact with the TLL (Mr. Jeffels was a regular operator on the machine) that the machine never operated at above 250 ft./m without problems. In this respect, the line did not meet specification. However, speed at which the line operates was determined by the operation of the shear. Therefore, the failure to achieve 300 ft./m is not a breach of the contract, absent a finding that the shear fails to meet its specification.

e. Failures in the Shear

[215] Del says that the shear has never worked as specified. It cannot cut heavy gauge stainless cleanly. It creates a downward bend at the corners. Further, with speeds over the 250 FPM, the strip bound against the sheer.

[216] I do not find a breach of contract in this respect. I can only conclude that if the shear does not work properly, thereby slowing the processing speed, that relates to Del’s activities, not the capabilities of the TLL.

[217] Sylwester Tyc, from Brock Solutions and the designer of the original control software, said that the shear was very precise and required exact timing. If it is running too fast, the shear tears the material, leaving burrs and lips on the cut material. If it is running too slowly, the incoming material hits it, causing damage to the shear and strip.

[218] Mr. Ulloa, a designer of control systems Del retained to assist it, looked at the shear issue. Because he did not have the password to look at and adjust the command codes for the shear, on May 8, 2014, he designed programing to change shear operation, by sending false information to the shear. This caused further shear problems. A year later, Mr. Tyc resolved these issues.

[219] Further, Del installed replacement blades for the shear which caused further problems as the blades were different from the original.

[220] Expert evidence with respect to the power and function of this shear was provided by engineers Withrow and Diaz.

[221] I have already stated why I prefer the evidence of Mr. Withrow over that of Mr. Diaz.

[222] I did not give Mr. Withrow’s opinion with respect to the alleged failures in the shear any weight because of the evidence on which he relied.

[223] Mr. Withrow admitted that the shear is relatively unique. The shears with which he is familiar have no screw jacks and their drive shafts are configured differently. Mr. Withrow did not study the shear on the TLL. He did not realize that the sheer speeds up after the cut is completed in order to get out of the way of new material entering the shear. He was not given the full specs and drawings for each component of the sheer. The shear that he inspected had already been modified from the shear Alcos designed and built.

[224] When Mr. Withrow was asked about how he measured the blade deflection that he said he calculated for the shear, he said that he presumed that the screw jacks were part of the blade. Further, his deflection is a theoretical calculation based on his assumptions about the components. He was incorrect as to some of his assumptions about the components.

[225] Mr. Withrow did not see the shear’s alleged failure or difficulty in cutting. He simply accepted Del’s evidence that the shear could not cut. Therefore, he had no need to observe, study and understand how the shear worked, other than theoretically.

[226] He did not have access to the coding formulae.

[227] Finally, his answer in re-examination as to why he reached the opinion that the motor speeds for the leveler were inadequate was cavalier and unacceptable, casting doubt on the accuracy of other parts of his opinion.

[228] On the whole of the evidence, I conclude that Del failed to meet its onus to prove that the shear did not have enough power to cut the metal as specified in the contract.

f. Lack of Training and Failure to Provide Standard Settings (Recipes) for the TLL.

[229] Del says that its operators were not properly trained and that Alcos never provided it with a complete set of standard settings for the TLL according to type of metal and coil dimension. Del says that these are breaches of the contract.

[230] There is no breach of contract in respect of either of these items.

[231] The contract requires that Alcos train those that Del specifically identified as operators for the TLL, and provides that such training will be largely “hands-on” training, and that those trained would receive a trainer training certificate.

[232] The two operators who give evidence, Messrs. Kerr and Jeffels, both testified that they received training at the mockup at Brock Solutions. They both testified that Burak Albulak was at Del’s plant very frequently and was always responding to their questions and making suggestions as to what they should do in various circumstances. Further, for most of the commissioning period leading up to October, 2012, Frank Spadafora was also present providing training. Mr. Kerr said that they learned as they went and moved forward. He recognized it was a new piece of equipment but he received direction by Burak Albulak on almost a daily basis. Mr. Spadafora’s ability to train was limited because he had never dealt with this configuration before. His training was more on a theoretical level.

[233] Mr. Jeffels also said that most of the training was done by Burak Albulak after installation, with a further two weeks by Frank Spadafora.

[234] There was no qualified expert evidence on the level of training that was specifically required and whether the level of training provided fell short of that.

[235] Most of Del’s complaints regarding training the operators of the machine concerned Alcos' alleged failure to provide the default set points for the TLL (which Del called “recipes”) which were to be programmed into the control system for metals of varying types, yield strength and dimensions. Del’s view is that the computer should have come with preset settings that the operators could default to and then adjust depending on the specific coil being run. There was a tab on the HMI screen for the settings to be recorded in. That tab would not save the settings that the operators tried to input. Accordingly, Del’s operators had to maintain notebooks, at first, and then a Microsoft spreadsheet to record their setting adjustments.

[236] The parties agree that at some point after January 24, Burak Albulak gave the recipes for heavy gauge coils (Exhibit 5). Most experts agreed that the “recipes” would merely be the default settings for tension and deflection and that the operators would have to fine-tune the settings with every coil.

[237] In any event, Del breached the contract before it ended or could be completed. Therefore, Alcos cannot be criticized for not providing the balance of the “recipes.”

g. Scrap was too high

[238] Mr. Jobin’s evidence, and Del’s position, was that, traditionally, the rate of scrap in Del’s experience should be approximately 1%. That was the experience with its stretcher leveler line. Based on the Processing Forms (Exhibit 4), scrap rates were much higher with the TLL. In some cases, the whole coil was not usable. For example, with the coil recorded at page 11 of Exhibit 4, approximately 1/3 of the coil was scrap.

[239] I find no breach of contract with respect to the scrap issue for the following reasons:

1. There is no contractual provision that deals with the amount of scrap.

2. Del’s experience with scrap is based on their existing line which is a different line, altogether.

3. Scrap levels on the TLL, one would expect to be higher. If the machine stops and tension is reduced, the distance of coil between the entry and exit bridles would probably be affected. Because the stitch is a weak point, and because the coil that follows the stitch may be of a larger or smaller dimension or a stronger or weaker metal that too reduces the strength of the stitch. Therefore, from the time the stitch leaves the entry bridles to just before it enters the exit bridles, the tension must be reduced. Therefore, this would be an expected scrap amount.

4. Del provided no evidence as to what the scrap level or percentage would be normal on a line such as the TLL.

5. If Del breached contract, what damages must it pay?

a. Contract Price

[240] Alcos is entitled to judgment for the outstanding balance of the contract of $312,936.53.

b. Extras

[241] Dell says that Alcos is not entitled to payment of any extra amounts. It relies on paragraph 5 of the Alcos standard provisions on page 79 of the contract which says “… no changes other than minor improvements made by the seller without charge will be made except by mutual agreement both as to the cost and nature of the change, and only when approved in writing by each party.”

[242] Generally speaking, where a contractor performs work or supplies materials not called for in a fixed price contract, without instructions from the other party, either express or implied, the contractor is not entitled to charge for this additional work or services. Where contractor, however, performs work or supplies materials not called for by the contract at the instructions of the owner, express or implied, it is entitled to charge for additional work as an extra.

[243] What amounts to instructions from the owner depends on the circumstances relating to each item. For example, if the owner, without giving definite instructions, knows that the contractor is doing extra work or supplying extra materials, and stands by and approves of what is being done and encourages the contractor to do it, that would amount to an implied contract and the owner will be liable. This is so, notwithstanding that the contract may require certain formalities in relation to requests for extras (see: Chittick v. Taylor, 1954 CanLII 492 (AB KB), 12 W.W.R. (N.S.) 653 (Alberta S.C.), at paras. 8-10; and 2016637 Ontario Inc. o/a Balkan Construction v. Catan Canada Inc., 2013 ONSC 4727 at para. 13).

[244] Further, where an owner has acquiesced in the provision of the extra it may be found in the circumstances to have made an implied promise to pay for them, impliedly awaiting the contract’s written provision requiring written formalities as a condition precedent to payment (see: Colautti Construction Ltd. v. City of Ottawa, (1984) C.L.R. 264 (ON C.A.), at para. 30; DIC Enterprises Ltd. v. Kosloski (1987), 26 C.L.R. 85 (Sask. Q.B.), at para. 34; 2016637 Ontario Inc. o/a Balkan Construction v. Catan Canada Inc., supra, para. 14.

[245] Alcos has the onus to establish these claims on a balance of probabilities. Most of the evidence in respect of the claims for extras come from Hasan and Burak Albulak.

[246] The question, therefore, is whether, with respect to each extra claimed, was there an understanding between the parties to expect the extra as cost, or did Del, by its actions or inaction, acquiesced to the work being done?

[247] Del takes the position that Alcos never provided any supporting document for the amounts claimed in block on the invoices for the nine extras claimed. Therefore, Alcos should not recover.

[248] I do not accept this argument. The invoices for extras, on their face, are proof of the claim advanced unless, based on the examination and cross-examination of the witnesses, I was not satisfied that the invoice meets the balance of probability test with respect to the claimed invoice. The fact that Alcos did not produce underlying documents in support of the invoices, in and of itself, does not mean that the invoices should not be honored. My analysis might be different if I was given evidence that Del made the specific request for the underlying documents, and Alcos did not respond. As indicated below, I have no evidence to this effect.

[249] I deal with each “extra” as follows:

[250] ITEM 1: STACKER RE-DESIGN – invoice 6071 – $98,310. Alcos has failed to meet its burden with respect to this extra. Hasan Albulak's evidence was vague with respect to the redesign of the stacker. Extensive redesigning was done. Of that there is no doubt. Hasan Albulak could not recall with whom he had discussions about the technical aspects and the redesign issues. He said that he would have obtained verbal approval with either Art Jobin or John Fox. He conceded that the price for the redesign was not discussed with Del. When John Fox was examined, he indicated that Del did not request any upgrade. It was undertaken by Hasan Albulak on his own initiative.

[251] ITEM 2: ADDITIONAL REQUEST FOR DIGITAL WIDTH AND LENGTH READOUTS – invoice 6072 – $4,294. Del requested that additional digital displays be added to the operator station on operator five that showed the digital measurements of width and length of the sheets. These were not included in the original contract. Therefore, Brock had to make the change.

[252] Del does not deny that it requested the extra readout. Del opposes the charge as an extra because it was never advised that it would be an extra, nor was any purchase order issued by Del requested by Alcos.

[253] Del’s position is an acknowledgment that it requested something that was not specified in the contract. It received the benefit of its request. Alcos is entitled to be paid for it.

[254] ITEM 3: CHANGE IN FOUNDATION DRAWINGS – invoice 6073 – $29,945. Foundation drawings for the TLL had to be changed for time to accommodate changes requested by Del in order to fit the TLL between support columns and Crane locations at the Mississauga plant. This required additional engineering time to redesign the plans for foundation support for the TLL.

[255] Del’s position is that notwithstanding that Hasan Albulak said that backup documents for the hours claimed in support of this extra are available, no such records were produced. Further, Del says that the drawings provided were inaccurate and the evidence shows that there were delays in providing them. I was referred to Exhibit 2A, tabs 31 to 35, 39 to 43, as support for Del’s position in respect of this invoice. I have reviewed those documents.

[256] Del does not dispute that a number of versions of the foundation drawings were produced and delivered. I accept Del’s position that the various versions of the drawings contained some inaccuracies.

[257] I was shown no documents which allowed me to parse the time to redraft the foundation drawings to correct errors (Alcos’ responsibility) and to account for changes required to fit the TLL within Del’s physical space, in light of the presence of columns and cranes (Del’s responsibility). I am left to do the best that I can with the evidence before me. No evidence suggested that Alcos’ errors were significant, although Alcos did accept that the plans contained inaccuracies and errors. Therefore, I allow $20,000, all-inclusive for this item.

[258] ITEM 4: ALIGNING AND LEVELING THE ENTRY BRIDLES, LEVELER AND EXIT BRIDAL – invoice 6074 – $2,497.30. Installation of the TLL was Del’s responsibility. Alcos’ responsibility ended with the delivery and unloading of the equipment at Del’s plant. Del’s contractor, Donald Ryder, was unable to align the bridles and leveler.

[259] Del objects to this item on the basis that Alcos has provided no backup for the hours claimed despite Hasan Albulak's evidence that such records exist. In any event Del says that this was part of Alcos' responsibility.

[260] Installation of the TLL was Del’s responsibility. Del does not dispute that Alcos was required to assist Mr. Ryder in aligning and leveling the bridles and the leveler. Del does not take the position in its submissions that it asked Alcos to provide the backup document in terms of the hours claimed and that Alcos refused to do so. Del merely says that Alcos has not done so.

[261] I accept this as a reasonable extra.

[262] ITEM 5: REASSEMBLY OF THE STACKER AT THE DEL PLANT - invoice 6075-$3,796.80. After the stacker was manufactured and assembled for delivery, Del advised Alcos that the stacker would not fit through the loading bay door at Del’s Mississauga facility. Del asked Alcos to assist Mr. Ryder in disassembling of the stacker for shipping, and then reassembling it at the plant. The reassembly was completed on June 3, 2012.

[263] Del accepts that the stacker had to be taken apart and reassembled, but says that this is Alcos' responsibility. In any event, no backup documentation was provided. Del also complained of a discrepancy for this item in the summary of extras contained at Exhibit 1, tab 34 and the invoice at page 6 behind that tab.

[264] I do not accept Del’s position. The discrepancy between the summary sheet and the actual invoice arises from the fact that the total on the invoice includes GST and the amounts on the summary sheet individually exclude GST which is then added to the summary’s subtotal. With respect to the underlying documents in support of the invoice, I have no information that such was demanded and that Alcos refused to produce it. I disagree that reassembly of the stacker was Alcos' responsibility under the contract.

[265] Alcos is entitled to this item.

[266] ITEM 6: BROCK SOLUTIONS' INVOICE FOR EXTRA STARTUP CHARGES - invoice 6076 - $19,210.

[267] Art Jobin requested that the TLL be run in production mode during the commissioning process. This extended the time required for commissioning by two months, thereby requiring Brock Solutions to be present for significantly longer than the normal commissioning process.

[268] ITEM 7: ALCOS' INVOICE FOR EXTRA STARTUP CHARGES - invoice 6077 - $99,513.45. Because of Art Joban’s request that the TLL be run in production mode during commissioning, Alcos incurred extra time for commissioning by two months, thereby requiring Alcos to be present for significantly longer than the normal commissioning process.

[269] I will address items six and seven, together.

[270] Del takes the position, both with respect to Brock’s claim for extra time during the startup and Alcos' claim for the same, that these are not proper extras. The contract was a fixed price contract both between Alcos and Del, and Alcos and Brock. That Brock exceeded its budgeted time on this project is not Del’s responsibility. Moreover, Brock did not complete the commissioning work. If excess time was required, it was required because of multiple issues with the equipment, the responsibility for which rests entirely with Alcos. Del also objects because Brock’s invoice is dated August 27, 2012 but not produced to Del until February 2013 when Alcos provided its invoice for the extra.

[271] Del does not dispute that at its request, during the commissioning process, 80 to 100 coils were run on the TLL, for production purposes. The commissioning process under the contract, however, was a much more brief process then was followed here because of the agreement to run the extra coils. The commissioning process contemplates testing the TLL under a no-load and load situations to determine whether all the components work appropriately.

[272] It is reasonable, therefore, to assume that running these extra coils would extend the commissioning process. I also accept that there were significant commissioning issues that continued throughout the extended commissioning period of August and September. Indeed, these issues continued through to the Final Acceptance Testing, Alcos acknowledge this.

[273] While Alcos incurred extra costs because of this extended period, Del received the benefit of running these extra coils. On a quantum merit basis, Alcos is entitled to compensation for the additional work that was required to accommodate Del’s request to run the extra coils. Alcos is not entitled, however, for compensation for issues that arose in the commissioning process that were its fault, regardless of how long it took.

[274] Further, there were delays in this time period caused by Del or others for whom Del was responsible, which caused Alcos to spend more time.

[275] Absent an analysis on a line-by-line basis of the commissioning issues and the hours recorded, I am left to do the best that I can with the evidence that I have. Accordingly, on the evidence as a whole, concerning the issues that arose during commissioning, and the commissioning issues that continued after the Final Acceptance Testing begun (as Alcos has admitted), I award each of these items at 50% of the claim for a total of the two of $59,361.72.

[276] ITEM 8: A CLEANING FLATTEN OR AUTO GREASE LUBRICATION SYSTEM – invoice 6078 – $2,152.65. On September 21, 2012 Action Register, it was noted that the automatic greasing system for the flattener was not working properly. Upon inspection, the dirt was introduced by Del’s employees. Further, it was maintenance work, which is beyond the scope of the contract.

[277] Del’s position is that this item was never proved to be a Del issue. Further, no supporting documents was provided.

[278] I accept Burak Albulak’s evidence that the dirt was introduced by the fault of Del’s workers. Because the machine had not been commissioned or finally accepted, it cannot be classified as maintenance.

[279] Alcos is entitled to be paid for this item.

[280] ITEM 9: ALIGNMENT OF STACKER – invoice 6079 – $5,779.95. Alcos had to attend and properly align the stacker, which Del’s installer had not done properly. It was out of parallel to the line. The problem arose because it was not installed properly on the foundation work. Rather than removing the stacker and redoing the foundation work and then reinstalling stacker, Alcos' personnel were able to correct the installation by realigning certain parts of the stacker, thereby saving Del significant money.

[281] Del takes the position that Alcos has not established that the realignment was necessary because of an issue that arose during installation process.

[282] I accept Burak Albulak’s evidence in this respect. Alcos is entitled to payment of this extra.

[283] Based on the foregoing, the total allowed extras are $97,882.42.

6. If Alcos breached the contract, what damages must it pay?

[284] In light of my findings, above, Del is not entitled to damages.

[285] Had I found that Del not breached the contract, I would have ordered further evidence with respect to Del’s damages.

[286] The only potential breach of the contract by Alcos is that the TLL, as designed and as it existed in February 2013, could not process heavy gauge HRPO and stainless coils such that they produced sheets, on a consistent basis, that were memory free.

[287] Del, however, did not produce any evidence with respect whether, and, if so, how the TLL could be modified to process these coils, how long those modifications would take, and the cost of those modifications.

a. Lost Profit, Past and Future

[288] Setting aside my concerns over the lack of evidence with respect to whether, how, over what period, and at what cost the TLL could be modified, I have other concerns with respect to the loss of profit claim.

[289] Del’s loss of profit claim is based on the profit which it could have earned on the range of products it intended to transfer to the TLL from the stretcher line, but was unable to because of the TLL’s inability to produce memory free sheets from heavier gauged HRPO and galvanized coils. By transferring 400 tons from the stretcher leveler to the TLL, Del could increase its profit.

[290] I disagree with Del’s position.

[291] Del’s claim for loss of profit is based on its inability to transfer 400 tons of coils from the stretcher leveler to the TLL, thereby freeing up capacity on the stretcher line. I find that the transfer of 400 tons to the TLL would not increase the capacity of the stretcher line.

[292] The stretcher line was already working at capacity. It operated two eight hour shifts per day. It could not increase to a third shift. The third shift was used to prepare orders and load trucks. Del could not operate the stretcher line and pack and load orders at the same time in that building.

[293] Second, the stretcher leveler had a backlog of orders, notwithstanding that it processed coils for two full shift per day. The extent of his backlog was the subject of some disagreement. Mr. Jobin put the backlog on the stretcher line at 3 to 4 shifts, Mr. Legendre variously at 2 to 3 days and 2 to 3 shifts, and Mr. Hill (Del's CFO) at 2 to 3 days, or at 7 shifts.

[294] I accept Mr. Hill’s estimate. His evidence was the most consistent with respect to the backlog. Further, Mr. Hill, as CFO, is required to maintain this information for the company’s records. Mr. Hill was the only person who testified about whether the transfer of the 400 tons to the TLL would create capacity on the stretcher line. His evidence was that the 10% transferred would have "taken care of" the backlog on the stretcher line. It would not have created capacity on the stretcher line.

[295] Therefore, I find that the stretcher line, at the time that the TLL would have been commissioned and accepted, was working at capacity, with a 2 to 3 day - seven shift backlog, and that there was no ability to increase the number of coils processed on the stretcher line. I find that the transfer of the 400 tons per month to the TLL would merely have reduced or eliminated the backlog on the stretcher leveler.

[296] As a result of these findings, Del has sustained only a one-time loss of profit. Had it been able to transfer the 400 tons from the stretcher line to the TLL, it would have advanced earning the profit from the 2 to 3 day backlog on the stretcher line by eliminating the backlog. Accordingly, had I awarded Del damages, I would have fixed the loss of profit at the profit arising from three day's production on the stretcher line. I cannot calculate this loss on the evidence before me.

[297] Even if I had accepted that the stretcher line had capacity after the transfer of the 400 tons to the TLL, and even if Del was entitled to that loss in the future, I find that Del did not discharge its obligation to prove its future losses.

[298] Messrs. Jobin, Hill, and Legendre all expressed the opinion that over the past 25 years, whenever Del had increased capacity, it was able to fill that capacity without difficulty. This evidence, however, is historical, anecdotal, and incomplete. For instance, neither of these three gentlemen gave any examples of instances where Del’s increased its capacity, what steps and/or cost were incurred to attract more business, and how long it took to fill that capacity.

[299] Historical experience is an important factor, but only one factor in answering the question of whether Del could have replaced the 400 tons of coils transferred to the TLL, at what cost, and over what time. Normally, future loss of profit is determined through expert evidence as to future market trends for Del’s products, as well as the likelihood that Del would have taken either more of existing market share or a portion of any increased market available in order to fill any capacity again by the transfer of the 400 tons.

[300] All of the Del witnesses referred to a business plan that was submitted to Del’s financial institution in order to obtain financing to buy the TLL. One assumes that the business plan presented to a financial institution in order to secure funding for such a significant purchase as the TLL, would have contained some analysis of the availability of future work. I do not accept that Del would have entered into the purchase of the machine that cost almost $6 million, plus the cost of the new premises, based solely on the anecdotal experience of Del’s principles.

[301] Finally, Del’s loss of profit claim is in perpetuity. There was no evidence as to how long this loss of profit would have lasted; for example, evidence as to the life expectancy of the TLL.

b. Out Of Pocket Expenses

[302] To the extent that Del claims out-of-pocket expenses with respect to investigation, modification and retrofitting of the TLL, the recoverability of those damages depends, in whole or in part, on whether the TLL can be fixed or retrofitted to process heavy gauge HRPO and stainless coils.

[303] I have found that the TLL, as designed and as it stood in February 2013, could not produce heavy gauged HRPO and stainless coils. There was no admissible evidence put before me with respect to whether the TLL could be repaired, redesigned, or modified, on an economic basis, such that it could process heavy gauged HRPO and stainless coils into sheets that, consistently, were memory free, how long those modifications would have taken, and at what cost.

[304] Looking at Exhibit 2G, tab 237, the updated spreadsheet of out-of-pocket expenses incurred by Del, and based on my findings, above, the following expenses (using their numbers in the right hand column on tab 237) appear to be related to attempts to investigate and/or correct the TLL, which I would have allowed as recoverable: 2, 4, 9 to 26, 31, 33, 36, 43, 45 to 49, 51 to 53, 57 to 60, 63, 64, 72, and 85 to 87.

c. Alcos’ Defence regarding Consequential Losses

[305] The contract contained the following limitation of liability clauses (Exhibit 1, tab 2, p. 78):

Seller’s liability under this warranty shall be limited to replacing or repairing any parts found on inspection to be defective and furnishing any parts necessary to correct engineering defects, without charge to the Buyer, FOB shipping point.

Seller makes no warranties on unmodified vendor items not of Seller’s design or manufacture, but Seller will extend to the Buyer its rights under any warranties which it obtains from the manufacturer thereof. The foregoing constitutes the exclusive express warranty of Seller and the exclusive liability of Seller for breech [sic] of such warranty.

Seller shall not be liable for any consequential damages resulting from defective goods delivered hereunder.

Seller shall not be responsible for unauthorized alterations or damage to the machine or related equipment due to circumstances beyond Seller’s control.

[306] Alcos submits that most of Del’s losses are excluded by the limitation of liability clauses in the contract.

[307] Del argues that contra proferentem applies to the limitation of liability provisions. Del says that where there is an ambiguity in a contract, regardless of equality of bargaining power, it must be interpreted against the person who benefits by the clause. Further, Del says that the limitation of liability clauses are ambiguous. Further, Del says that the limitation of liability provisions are contained within the Warranties portion of the contract, and only apply where a functioning machine is delivered.

[308] Contra proferentem does not apply, as a general rule, between parties of equal bargaining power (see: Cathcart Inspection Services Ltd. v. Purolator Courier Ltd., 1981 CanLII 2896 (ON SC), 4 O.R. (2d) 187 (S.C.), at para. 23, and Tas-Mari Inc. v. Dibattista*Gambin Developments Limited, 2009 CanLII 41355 (ON SC), 97 O.R. (3d) 579 (SCJ) at para. 70).

[309] The main provision Alcos relies upon is “Seller shall not be liable for any consequential damages resulting from defective goods delivered hereunder.”

[310] Where a loss of profits is a direct, anticipated result of the breach of contract, they are direct and not consequential losses (see: Dow Chemical v. Nova Chemicals Corporation 2018 ABQB 482). Certainly, Alcos, like the parties in Dow, must have contemplated that loss of profits would be a natural and direct result in the event that the TLL did not function as specified. Therefore, looking at this clause, in isolation, I conclude that the interpretation that gives business efficacy to this clause is that "consequential damages" does not include loss of profits. It would apply other more remote expenses such as paying others to do the work the TLL could not do.

[311] I would have allowed the loss of profit loss as I have determined it above.

COSTS

[312] If the Parties cannot agree on the question of costs, they may arrange a conference call through my judicial assistant to timetable an appointment and the delivery of materials.

Trimble J.

Date: February 28, 2019

COURT FILE NO.: CV-13-1937-00

DATE: 2019 02 28

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

RE: Alcos Machinery Inc. Plaintiff/Defendant by Counterclaim

AND:

Del Industrial Metals Inc. and Bloorguard Investment Company Limited and Bloorguard Investment Company Limited, Defendants/Plaintiff by Counterclaim

COUNSEL: Sean Flaherty, Counsel, for the Plaintiff/Defendant by Counterclaim

Jeffrey Kriwetz, Counsel, for the Defendants/Plaintiff by Counterclaim

ENDORSEMENT

Trimble J.

Released: February 28, 2019

[^1]: Future Lost Profit of $529,000 p.a. /12, x 8 = $352,666.67