COURT FILE NO.: 1285/15
DATE: 2019 10 30
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Aluma Systems Inc.
Plaintiff
– and –
Resolute FP Canada Inc.
Defendant
Catherine Willson, for the Plaintiff
Roderick W. Johansen, for the Defendant
HEARD: October 15, 16, 17, 18, 21, 22 and 23, 2019
Conlan J.
REASONS FOR JUDGMENT
I. Introduction
The Background
[1] The Plaintiff, Aluma Systems Inc. (“Aluma”), is in the business of mobilizing (supplying), erecting (building or constructing), dismantling (taking down), and demobilizing (removing from the work site) scaffold (a temporary structure, often standing quite high from the ground level, used to support work crews and materials).
[2] The Defendant, Resolute FP Canada Inc. (“Resolute”), is a company operating in the forest products manufacturing industry. It has a pulp and paper mill facility located in Thunder Bay, Ontario (the “Project”).
[3] For over 17 years, Aluma provided Resolute and its predecessors with the rental of industrial scaffold, specialized access services, and general carpentry services and related labour to the Project.
[4] In May 2014, Resolute informed Aluma that it was terminating Aluma’s services at the Project. Resolute hired a new supplier for those services, Skyway Canada Limited (“Skyway”).
[5] A dispute arose between Aluma and Resolute. That dispute ended up in Court, and a trial was held in Milton, Ontario over several days in October 2019.
The Claim and the Defence
[6] Though there is more than one cause of action pleaded by Aluma, the predominant underpinning of its claim against Resolute rests in the law of contract.
[7] According to Aluma, in May 2014, the parties agreed to an exit plan for Aluma to get out of the Project and, further, Resolute has failed or refused to pay for the costs (invoices rendered by Aluma) associated with that exit plan.
[8] For its part, Resolute alleges simply that it never agreed to pay for the costs in question, nor is it legally required to do so.
[9] The claim by Aluma is for $471,436.41, inclusive of HST. It is comprised of the following:
(i) $98,911.54 (for demobilization, invoiced by Aluma to Resolute but not paid);
(ii) $27,758.45 (for freight specifically, as part of demobilization, invoiced by Aluma to Resolute but not paid);
(iii) $436.63 (for an outstanding rental equipment invoice issued by Aluma to Resolute);
(iv) $27,201.36 (for the rental of blow tank scaffold from March 2015, when it was taken down by Skyway at the instruction of Resolute, to October 2015, when it was retrieved by Aluma);
(v) $21,579.85 (for blow tank scaffold demobilization, invoiced by Aluma to Resolute but not paid);
(vi) $294,524.35 (for contaminated blow tank scaffold that was ultimately disposed of by Aluma); and
(vii) $1024.23 (for contamination testing of the blow tank scaffold paid for by Aluma).
[10] Regarding items (iv) through (vii) above, some explanation is required. A blow tank is a large structure that is a part of the equipment necessary to the operations of a pulp and paper mill. There was a blow tank at the Project. It required scaffold. Aluma provided the scaffold. After the dispute arose between the parties, the blow tank scaffold that Aluma had provided remained at the Project for a long time, until October 2015. It was eventually removed from the Project to Aluma’s Thunder Bay office premises and later, in September 2016, when Aluma was about to close its Thunder Bay operations, Aluma disposed of the blow tank scaffold and related equipment. It wants to recover, among other things, the total list price of the blow tank scaffold inventory that it had supplied to Resolute (the 294.5 thousand dollars, approximately, referred to above). Alternatively, Aluma seeks a reduced figure for that head of damages.
[11] Aluma states that it disposed of the said scaffold and related equipment, all of it, because it was contaminated and unsafe. Resolute states that Aluma failed to mitigate its damages by rejecting Resolute’s offer to purchase the said scaffold and equipment for $25,000.00 and do whatever it chose to do with it.
II. Analysis
A Very Brief Summary of the Evidence at Trial
[12] Although I have considered the totality of the evidence adduced at trial, both viva voce and by way of exhibits, what is focussed on below are only those portions of the evidence that are most relevant to the key facts as submitted by counsel, both very experienced, in their extensive closing submissions delivered at Court on October 23rd.
Mark Kivinen
[13] Mark Kivinen (“Kivinen”) testified for Aluma. He is currently, and has been since the end of 2007, Aluma’s manager for northern Ontario, which responsibilities included the Project.
[14] Kivinen, though not stationed at the Project, would visit the site a minimum of two times per year and maintained frequent contact with Aluma’s site supervisor.
[15] Kivinen identified Aluma’s Standard Terms and Conditions (Exhibit 2, Volume 1, tab 59, page 168) and outlined, in particular, the following clauses, all set out below: 1, 6, 7, 11, 23, 24, and 26.
Scope and Price of Contract. Customer agrees to pay for any and all of the following goods and/or services under the terms and conditions set forth herein: Rental and Purchase of Equipment, Labor, Management, and Field Technical Support. The Contract includes these Terms and Conditions and the attached proposal and documents incorporated into the attached proposal. Aluma will provide the specific materials, equipment and/or services to Customer at the price set out in the attached proposal and these Terms and Conditions.
Price. The price for materials, equipment or services shall be exclusive of all taxes and any costs of freight or transportation to the jobsite. The price for any materials, equipment or services shall be increased as a result of:
a. any increase in any wage rates including, but not limited to, any collective bargaining agreement to which Aluma is a party as well as any government assessment affecting wages or increases in insurance costs and rental rates;
b. any equipment damaged or lost pursuant to Paragraph 7 of these Terms and Conditions;
c. any additional materials, equipment or services provided pursuant to Paragraph 8 of these Terms and Conditions;
d. any other charges for which Customer may be responsible under these Terms and Conditions.
Loss or Damage to Materials or Equipment. The Customer is responsible for all loss or damage to all materials and equipment in its possession or control. The materials and equipment shall be deemed to be in the possession of the Customer for all purposes of the Agreement from the time it is received by the Customer until the time that the materials or equipment has been returned to Aluma’s yard. All shortages and damages to materials or equipment in customer’s possession will be charged to and paid by the Customer at Aluma’s then current list price or such other rate agreed between Aluma and Customer in writing, at the time such loss or damage is discovered by Aluma.
Entire Agreement. This Contract contains the full and entire agreement between the parties. There are no agreements, conditions, representations, warranties, or otherwise, except as are contained herein. No course of prior dealings between the parties and no usage of trade shall be relevant or admissible to supplement, explain, or vary any provisions hereof. Moreover, no general contract, specifications, drawing or other item shall be incorporated into or made a part of the Contract or binding on Aluma unless it is agreed to in writing by Aluma. Commencement of performances shall be deemed the acceptance by Customer of this Contract.
Rental Period. Rental shall commence on and include the date of shipping of the materials and equipment from Aluma and shall end on the date of actual receipt of the materials and equipment in Aluma’s yard. Rental prices are charged on a 28 calendar day cycle.
Shipping. Aluma shall load the materials and equipment for shipping to the Customer and unload it upon its return by the Customer. The Customer shall be responsible for all other loading, unloading, installing, dismantling, transportation and any other actions, and shall pay all transportation charges from and to Aluma’s yard. The Carrier to which the materials and equipment are delivered is hereby declared to be the agent of the Customer.
Maintenance of Equipment. Customer shall at its own expense maintain and return to Aluma the materials and equipment in the same repair, operative and marketable condition as when it was shipped. The materials and equipment are to be installed, maintained, and operated in conformity with safe industry practice in accordance with the requirements of all applicable laws, ordinances and regulations as well as any specifications or product data provided by or available from Aluma. Aluma shall have the right at any time to enter the site where the Equipment is situation and shall be given free access for the purpose of inspection of the Equipment.
[16] Kivinen testified that those terms, although never signed by anyone on behalf of Resolute, governed the relationship between Aluma and Resolute and were always on the back of every invoice sent by Aluma to Resolute.
[17] Kivinen denied that Resolute’s General Terms and Conditions ever applied, including for the blow tank (although the form is a part of the purchase order for the same, see page 188 of tab 61, Volume 1 of Exhibit 2). Regarding packing and cartage expenses, the following clauses of Resolute’s terms were put to Kivinen in cross-examination, all reproduced below: clauses 6, 20, and 21.
Buyer will not pay any charges for packing or cartage unless agreed to in writing.
There is no agreement or understanding other than stated herein.
Unless otherwise provided herein any written acknowledgement of this order or the delivery of any supplies or the furnishing of any services in accordance with purchase order shall constitute acceptance by the seller of this purchase order subject to all its terms and conditions.
[18] With regard to Aluma’s term 24, dealing with shipping, Kivinen identified examples of Resolute having paid for shipping/freight costs, including the documents at Exhibit 2, Volume 1, tab 69 (page 233) and Exhibit 2, Volume 1, tab 70 (page 248).
[19] Kivinen testified that all Aluma labour was paid for by Resolute at the prevailing hourly rates in effect at the time, whether to unload a truck at the Project, or to erect a scaffold, or to transport equipment from a location to the work “face” (the erection site), or to dismantle a scaffold, or to demobilize equipment from the dismantling site to another location, or to perform maintenance work on scaffold, or to perform work during annual shut-downs of the Project’s operations (even where that work was originally quoted by Aluma as a lump sum), and so on.
[20] Simply put, everything that Aluma did at the Project was billed and paid for on the bases of time and materials.
[21] With regard to Aluma standard term 7, dealing with lost or damaged materials, Kivinen identified examples of Resolute having paid for those types of costs, including the documents at Exhibit 2, Volume 1, tab 68 (page 228) and Exhibit 2, Volume 1, tab 71 (page 253).
[22] Kivinen described the cycle of Aluma’s work at the Project as comprising these four distinct steps, in sequential order: mobilization, erection, dismantling, and demobilization.
[23] Kivinen described what happened after Resolute decided to end the relationship between the parties. The scaffolding work was put out for tender. Aluma bid. Skyway bid. Skyway was successful. Aluma created an “exit plan”, authored by Aluma’s Project supervisor. There was an in-person meeting held in Thunder Bay, which meeting Kivinen attended in mid-May 2014.
[24] Kivinen’s evidence about what Resolute agreed to at the said meeting was unclear. In direct examination, he initially said that Resolute representatives specifically said at the meeting that Resolute would not pay for any demobilization costs (including those outlined in Aluma’s “exit plan”). A few minutes later, still in direct examination, Kivinen stated that Resolute representatives at the meeting did, eventually, agree to pay demobilization costs. In cross-examination, he stated that, at the end of the meeting, one of the Resolute representatives promised that Resolute would issue one purchase order to cover all of the costs, and he assumed/understood that “all of the costs” included the demobilization expenses.
[25] In any event, Kivinen acknowledged that, certainly by June 11, 2014 (the date of an email from a representative of Resolute), it was clear that Resolute was not agreeing to pay for any “cartage/yard and demobilization” costs (Exhibit 2, Volume 1, tab 9, page 19). Further, Kivinen stated in cross-examination that he had nothing in writing from Resolute stating that it would pay for demobilization costs and, in addition, he never heard anyone from Resolute say that.
[26] After the mid-May 2014 meeting in Thunder Bay, Aluma’s Project supervisor sent a letter to Resolute dated May 26, 2014 (Exhibit 2, Volume 1, tab 7, page 15). That letter outlines substantial demobilization costs to be paid for by Resolute.
[27] According to Kivinen, there was nothing unusual about the demobilization costs being sought by Aluma back in May 2014. It was standard practice for Resolute to pay for those costs.
[28] In cross-examination, Kivinen admitted that, by mid-March 2015, he knew that Aluma’s blow tank scaffold had been dismantled at the Project. He also acknowledged that, despite a written request to do so by Peter Herrmann of Aluma on March 13, 2015, Resolute never agreed to stack, band, and ship the dismantled blow tank scaffold.
[29] When asked why, in cross-examination, Aluma waited until October 2015 to retrieve the blow tank equipment, Kivinen replied that Aluma was not allowed on site before that.
[30] Near the end of his direct examination, Kivinen identified the only written document that he is aware of that could be described as a general contract of sorts between Aluma and Resolute (under the latter’s predecessor’s name, Bowater). That document is at Exhibit 2, Volume 1, tab 53, pages 133-135. It is three pages long. Unsigned. It is actually a purchase order issued by Bowater. It is for “labour to erect and dismantle all scaffolding requirements for the Bowater Thunder Bay facility”, at “blended rates”, “contract duration will be for 5 years commencing May 1, 2005 through till April 30, 2010”. Time sheets were to be utilized by Aluma, and then approved by Bowater, and then invoicing done as per the approved time sheets. The said document also provided that “this agreement will be reviewed on an annual basis by both parties”, and either party could terminate the agreement on a minimum of 90 days’ written notice. As for shut-downs and large capital projects, as per the said document, those were to be issued separate purchase orders.
[31] Kivinen stated that the said document was consistent with Aluma’s Standard Terms and Conditions.
[32] Hereinafter, I shall refer to the said document as the “2005-2010 Agreement”.
William Goodhand
[33] William Goodhand (“Goodhand”) testified for Aluma. Although he currently works for Skyway, for 17 years prior to that, right up until Aluma was completely out of the Project, he worked for Aluma at the Project site.
[34] Goodhand was the “man on the ground” for Aluma, plain and simple.
[35] Goodhand testified that all of Aluma’s work at the Project was always billed on the bases of time and materials. Further, Resolute paid for everything regarding that work, including to have stuff shipped to/shipped from the Project site or transported within Resolute property, and including loading/unloading.
[36] Goodhand stated that when Aluma scaffold was taken down, regardless of whether it went to an internal laydown area within the mill, or to an outside area but still on Resolute property, or to somewhere completely off Resolute property, Resolute always paid those demobilization costs.
[37] Goodhand testified that Aluma’s Standard Terms and Conditions applied to the relationship between Aluma and Resolute, while Resolute’s General Terms and Conditions did not.
[38] Goodhand acknowledged that, as early as May 6, 2014, the major representative of Resolute (Mr. Lauzon) told him that Resolute would not pay for any packaging, loading, and removal costs associated with Aluma’s exit from the Project site.
[39] Goodhand was at the meeting between the two sides that was held in Thunder Bay on May 14, 2014. He testified that, at the meeting, Mr. Lauzon said that “one P.O. (purchase order) will be issued to cover all the closing out costs”, and Goodhand took that to mean that Resolute would pay for all dismantling, demobilization and shipping/freight expenses.
[40] Goodhand acknowledged that Resolute never did issue a purchase order for any demobilization or cartage costs. In cross-examination, he confirmed that no document was ever received from Resolute, and he never heard anyone from Resolute say, that Resolute would pay anything for Aluma’s demobilization from the Project site.
[41] When it was suggested to Goodhand, in cross-examination, that about 15-20 per cent of the blow tank equipment was contaminated in or around February 2015, Goodhand disagreed.
[42] By mid-March 2015, Goodhand knew that Aluma’s blow tank scaffold was down.
[43] According to Goodhand, he was banned from the Project site for many months prior to October 2015, when Resolute finally invited Aluma back to retrieve its remaining equipment. When Aluma did so, Goodhand was there and saw that the equipment was contaminated, all mixed together, a mess, and not even washed. The black liquor contaminant had taken a significant toll on the equipment, both inside and outside the aluminum tubing, to the point of having removed some galvanized coating and having caused some rust in places. He took many, many photographs of the contaminated and damaged materials.
[44] In cross-examination, Goodhand agreed that, at the time of retrieval in October 2015, blow tank equipment was piled together, in the same place, with other Aluma equipment that was from the Recaust area of the mill and not from the blow tank at all.
[45] Goodhand stated that he was never told or invited to retrieve the blow tank scaffold until he received an email from Resolute on September 21, 2015 (Exhibit 2, Volume 1, tab 39, page 108).
[46] Goodhand, in cross-examination, was asked what steps he took to retrieve the blow tank equipment before the end of September 2015. He answered that Aluma did not want to get it before it was washed, and that Aluma did not have the facilities to wash it, and that Mr. Lauzon of Resolute had agreed to have it washed.
[47] With regard to the 2005-2010 Agreement, Goodhand was always of the view that it simply continued to be in effect after April 30, 2010, and it was always subject to Aluma’s Standard Terms and Conditions.
John Rosenthal
[48] John Rosenthal (“Rosenthal”) testified for Aluma. Not on consent, he was permitted to give expert opinion evidence in the field of the safe erection and use of access scaffolding including the maintenance and inspection of the same.
[49] At the time that this Court ruled on the admissibility of Rosenthal’s evidence, I promised to counsel that the reasons for the ruling would follow. Thus, those reasons are contained herein.
[50] There was no dispute between counsel about the test for admissibility of expert opinion evidence, (i) relevance (both logical and legal), (ii) necessity, (iii) the absence of any exclusionary rule, and (iv) a properly qualified expert, and there was also no dispute between counsel on the burden of proof (on Aluma) and the standard of proof (on a balance of probabilities).
[51] In addition, it was conceded by Resolute that criteria (iii) and (iv) above were satisfied. The application was contested by Resolute on the narrow bases of relevance and necessity.
[52] In brief oral submissions at Court, counsel for Resolute argued that Rosenthal’s opinions were derived solely or principally from the photographs that he reviewed, and those opinions are not worth much because we do not know for sure what those photographs show.
[53] Rosenthal, a long-time former employee of Aluma (1972-1992), was retained by Aluma in January 2019 in order to review many, many photographs taken of the equipment that was retrieved by Aluma from the Project site in October 2015, and to review other documents as well, and to opine on the extent to which the materials and equipment were contaminated and whether they had to simply be disposed of by Aluma.
[54] Rosenthal was clear and unambiguous in stating that all of the stuff that he saw in all of the photographs that he reviewed had to be disposed of (scrapped). It was heavily contaminated. It was unsafe. “If in doubt, throw it out”, he said, referring to a well-known mantra in the scaffolding industry.
[55] In cross-examination, Rosenthal conceded many limitations to his evidence: he never visited the Project site, and his opinions were based “fundamentally” on photographs as he never saw any of the materials or equipment in person, and he has no knowledge of the state or condition of any of the stuff shown in the photographs in or around February or March 2015, and he does not know but is only assuming that the photographs show blow tank scaffold equipment, or that they show at least some of the blow tank equipment.
[56] Despite those limitations, all of which go to weight in my view, I ruled Rosenthal’s evidence to be admissible. It was certainly relevant as there is a live factual dispute between the parties as to the extent to which the blow tank equipment was contaminated. It was surely necessary as, although I am capable of reviewing the photographs myself (which I have done), I have an untrained eye, and signs of contamination can be subtle, and I know absolutely nothing about the industry standards with regard to scaffold materials that are/may be contaminated.
Michael Mikulasik
[57] Michael Mikulasik (“Mikulasik”) testified for Resolute. Having retired in July 2017, for 42 years before that Mikulasik worked at the Project. In 2014, he was the maintenance manager for the entire site.
[58] Mikulasik testified that Resolute never would and never did agree to pay for Aluma’s demobilization costs, and that Resolute representatives, including himself, “absolutely” made that clear to Aluma at the May 14, 2014 meeting in Thunder Bay.
[59] In cross-examination, Mikulasik stated that Aluma was paid by quotations, as he approved the requisitions, and not on the bases of time and materials.
Brandon Leroux
[60] Brandon Leroux (“Leroux”) testified for Resolute. He works for Skyway, having started in 2001. Since 2014, he has been the scaffold superintendent at the Project.
[61] In February/March 2015, Leroux inspected the Aluma blow tank scaffold before any work was done on it by Skyway, and he took several photographs of the said scaffold, both before and after Skyway recertified it.
[62] According to Leroux, pre-Skyway’s work on the blow tank scaffold, about 10 to 20 per cent of it was contaminated with black liquor. There was no corrosion, though in cross-examination he acknowledged seeing some rust on a large horizontal steel beam shown in the last page of photographs as part of Exhibit 14.
[63] In cross-examination, Leroux stated that he recommended to Resolute that Aluma’s blow tank scaffold equipment be washed after it was dismantled by Skyway in March 2015.
Geoffrey Sissons
[64] Geoffrey Sissons (“Sissons”) testified for Resolute. Without objection by the other side, he was permitted to give expert opinion evidence in the field of structural engineering, specifically with regard to scaffold.
[65] After being engaged by Skyway, Sissons, on February 26, 2015, visited the Project site to inspect the blow tank scaffold. It had already been modified by Skyway. He took several photographs.
[66] Sissons described the blow tank scaffold as being overall “clean”, with “minor” black liquor observed in some places, absent any corrosion, and absent any concern on his part about its structural integrity. It was safe and acceptable for use.
[67] In cross-examination, Sissons disagreed with the suggestion that corrosion would result from the blow tank scaffold being allowed to accumulate black liquor (without any washing) for some eight months between mid-2014 and when he attended in February 2015. He answered that suggestion with the words “not necessarily”. Then he repeated his evidence that his observations of black liquor on February 26, 2015 were “minor”.
Kent Maarup
[68] Kent Maarup (“Maarup”) testified for Resolute. He works for Skyway, and he has been that company’s branch manager for northwestern Ontario (which catchment area includes the Project in Thunder Bay) for 17 years.
[69] In direct examination, Maarup stated three major things: (i) Skyway dismantled and put in the same yard at the Project site both Aluma blow tank equipment and Aluma Lime Kiln equipment, (ii) Aluma’s calculation of the value of its blow tank equipment is too high, as evidenced by Skyway’s decision not to buy it back in 2015 and as shown by Maarup’s own calculations, including but not limited to Exhibit 33 – his estimate of the wholesale price of new blow tank equipment to match what Aluma had at the Project site, $51,708.41 plus tax, and (iii) Skyway’s count of the components taken off Aluma’s blow tank scaffold in March 2015 (Exhibit 2, Volume 1, tab 38) did not match, at all, Aluma’s blow tank inventory list (Exhibit 2, Volume 2, tab 98).
[70] In cross-examination, Maarup acknowledged that he does not have a count of Aluma’s blow tank equipment before Skyway modified it. Further, his calculation of the total list price of Aluma’s blow tank equipment would be different if he used Aluma’s price per component unit (rather than Skyway’s) – the number in that scenario would be $159,056.00 plus tax, even on the basis of Skyway’s post-modifications count.
[71] Also, in cross-examination, Maarup stated that Skyway’s Terms and Conditions are similar to Aluma’s, in many respects. And Skyway does charge Resolute for missing or damaged equipment, at a preferred price.
[72] In re-examination, however, Maarup clarified that Skyway’s Terms and Conditions do not apply to its relationship with Resolute. Rather, Resolute’s terms apply.
Earle Lyndon Lauzon
[73] Lyndon Lauzon (“Lauzon”) testified for Resolute. He testified remotely, via Skype, from New Zealand, where he currently lives and works.
[74] Lauzon worked for 28 years in the chemical industry, then joined Resolute in 2013 at the Project, and then left that employment to start work in New Zealand after all of the material events had occurred (that is, after October 2015).
[75] At the Project, Lauzon was the procurement and logistics manager.
[76] Several excerpts from Lauzon’s out-of-court examination for discovery were read-in to the record at trial and relied upon by Aluma as part of its case. Those read-ins may be summarized as follows: (i) that Resolute was refusing to pay Aluma’s demobilization costs, including freight expenses, because of the absence of any contract that says that Resolute will pay for those costs, (ii) that demobilization costs were not considered by Resolute in its decision to switch scaffold suppliers from Aluma to Skyway, (iii) that Resolute did pay for transporting materials from Aluma’s Thunder Bay yard to Resolute property, (iv) that Resolute was required to pay for lost or damaged Aluma property, (v) that there was a condition attached to the blow tank equipment that required Resolute to either return the equipment to Aluma contamination-free after dismantling it or to pay current list rates for the equipment, and (vi) that he did not disagree with anything contained under the heading “blow tank exterior perimeter scaffolding” in Goodhand’s May 26, 2014 letter (Exhibit 2, Volume 1, tab 7, page 15), which commentary deals primarily with blow tank rental charges at $3009.00 monthly and Resolute being liable for damage to the blow tank materials.
[77] In direct examination at trial, Lauzon stated that the parties never entered into a formal general contract after the 2005-2010 Agreement expired. They “just kept carrying on”.
[78] In cross-examination, Lauzon testified that every transaction between the parties, when he was at the Project site, was handled by a purchase order. Generally, those purchase orders were for erect and dismantle of scaffold. They were not generally for mobilization/demobilization, which are entirely separate concepts from supply or erect and dismantle.
[79] On occasion, on a transaction by transaction basis, as authorized by a purchase order issued by Resolute, Resolute did agree to pay and did pay for mobilization and/or demobilization costs. But to suggest that there was some overall contract or set of standard terms and conditions that required Resolute to do so regardless of any purchase order is incorrect, Lauzon stated in his testimony.
[80] Put another way, Lauzon testified that there was never any general agreement by Resolute to pay Aluma to ship to or remove from the Project site material and equipment belonging to Aluma.
[81] Concerning the May 14, 2014 meeting in Thunder Bay, Lauzon said that nobody from Resolute ever agreed to pay for any costs associated with Aluma’s exit from the Project site. The meeting was designed to discuss, preliminarily, a transition plan, and Resolute told Aluma at the meeting to put its demands and the details on paper.
[82] When Aluma did so, with reference to Goodhand’s May 26, 2014 letter (Exhibit 2, Volume 1, tab 7, page 14), Lauzon was “taken aback”. He repeated in his testimony that Resolute never agreed to pay any of those demobilization/exit costs. Like he said during his out-of-court questioning, however, he has no objection to what is contained in that Goodhand letter under the heading “blow tank exterior perimeter scaffolding”, which commentary deals primarily with blow tank rental charges at $3009.00 monthly and Resolute being liable for damage to the blow tank materials.
[83] The relationship between the parties was as follows, Lauzon explained. There were never two invoices from Aluma, one for the erection of scaffold and one for the dismantling of the same scaffold. Dismantling was paid for in advance. There was no general contract. Individual transactions were done by purchase orders. Those purchase orders were issued by Resolute upon acceptance of estimates or quotations from Aluma. If Aluma’s actual time spent on a job exceeded its estimate, then a Change Order would be issued to permit payment to be authorized to Aluma.
[84] If anything, Resolute’s General Terms and Conditions governed the relationship between the parties, and not Aluma’s, according to Lauzon.
[85] Several times in his evidence, Lauzon drew this Court’s attention to a certain paragraph in Goodhand’s May 26, 2014 letter (page 15 of Exhibit 2, Volume 1, tab 7), the first full paragraph under the heading “approved dismantle of long term and standing scaffolds”, set out below.
b) Approved dismantle of Long Term and Standing Scaffolds
Many of the long term scaffolds have been standing for years, in some cases over 10 years. Over these years the individual dismantle budgets have been diluted by annual wage increases and further work to assets that the scaffolds have conflicted with. Dismantle budgets were submitted with the original Task Estimates and were not intended to cover the costs of dismantle years later. At the time of the estimates, unless specified, we do not know if the scaffolds have become a Long Term situation.
[86] Lauzon points to that as proof that Aluma quoted for and was paid for the dismantling of scaffolds in advance.
[87] In cross-examination, Lauzon acknowledged that he communicated nothing to Aluma about the dismantled blow tank equipment between mid-March 2015 (when he told Aluma that it was coming down) and late September 2015 (when he told Goodhand to retrieve it).
[88] After Aluma had retrieved its blow tank equipment from the Project site, there were discussions between the parties about Resolute possibly purchasing it. Lauzon offered to buy it for $25,000.00 and absorb the disposal costs. Aluma declined.
[89] With regard to the allegation that Goodhand was ever banned from the Project site in 2015 or at any time, Lauzon objected to that. All that Goodhand had to do was go through security like most everyone else.
The Law
[90] For our purposes, although there is no dispute between the parties as to the basic principles of contract law, it is worth remembering the following important points.
[91] First, most contracts, whether written or oral, are premised on (i) a bargain and (ii) value exchanged, sometimes referred to as consideration. Professor S.M. Waddams, The Law of Contracts, seventh edition (Thomson Reuters, 2017), at paragraph 118 on page 78.
[92] A bargain requires mutual assent between the parties. “In the ordinary case…there is a manifestation of willingness to be bound by one party followed by a manifestation of an assent by the other by words or conduct, generally and usefully called offer and acceptance”. The Law of Contracts, supra, at paragraph 25 on pages 19-20.
[93] Second, where a breach of contract has been found, and where the innocent party claims the usual remedy of monetary damages, subject to other principles involving remoteness and mitigation, the most common method of measuring those damages is referred to as the “reliance measure”.
[94] The proper assessment of damages, I say respectfully, is something that litigants and lawyers generally do not pay enough attention to.
[95] “Theoretically, the plaintiff is entitled to be put in as good a position as would have been occupied had the plaintiff received the performance promised”. The Law of Contracts, supra, at paragraph 739 on page 516.
[96] Where the contract was profitable for the plaintiff, as in our case, the award of damages is based on the value of the performance promised by the defendant. Normally, however, we deduct from the value of the promised performance any costs saved by the breach. In addition, to avoid double compensation for the plaintiff, there should be no reimbursement for expenses incurred by the plaintiff as those would normally have been incurred in any event in order to earn the promised performance. The Law of Contracts, supra, at paragraph 717 on page 503.
[97] Let us consider a very simple example, for illustrative purposes only. Jacob and Adiva contract for Jacob to pave Adiva’s driveway in exchange for $5000.00. The agreement includes a term that Adiva pay the money in two instalments, $2500.00 initially and the balance at the end of the job. The work is done satisfactorily. Although the first instalment was paid, for no legitimate reason, Adiva refuses to pay the outstanding $2500.00 at the end of the project. Adiva is found to have breached the contract. Jacob claims $2500.00 in principal damages. He acknowledges, though, his failure to get a survey for the job in advance, which was a requirement of the bargain, and which survey would have cost $500.00 and would have been paid for by Jacob alone. That $500.00 must be deducted from the $2500.00 claimed. Also, to do the job, Jacob incurred expenses of $1000.00 in materials. Those expenses were never to be added to the $5000.00 price but were considered part of that price. Jacob is not entitled to recover anything towards that $1000.00. The net result in this example is damages of $2000.00 in Jacob’s favour.
[98] Of course, the facts are usually more complicated than the above, hence the need to be careful when assessing the quantum of damages for a breach of contract.
[99] Finally, Aluma’s counsel has nicely summarized some of the relevant legal principles pertaining to contract law at paragraphs 4 and 6-10 of the “Legal Argument of the Plaintiff”, which summary is reproduced below (citations/footnotes omitted). I agree with and adopt the following for purposes of these Reasons.
The court takes a holistic analysis of the documents passed between the parties and the conduct of the parties, and gleams that to which the parties agreed.
In practice, Butler advocates for courts to assess the documents and conduct of the parties to determine whether an agreement was reached on certain material points, and then decide which of the three possible outcomes to apply.
The court must determine what the parties reasonably intended based on their words, written documents, and/or conduct.
The court employs a flexible analysis guided by certain key factors, namely:
a. Notice of the term or term(s) at issue as well as the reasonableness of the terms(s);
b. Course of previous dealings; and
c. Unconscionability of the inclusion or enforcement of a particular term.
Previous dealings are relevant if they establish actual knowledge and consent to the terms which are to be imposed. A well-established course of dealings is more likely to lead to a contractual term being given effect.
Ultimately, the court’s analysis is elastic and is driven by the facts of each case without resort to rigid structure. In other words, precedent is of limited assistance to the interpretive exercise. Professor Waddams concisely summarized the approach as follows:
Our rules of contract formation do not require the use of special formulas. The question in each case is whether the conduct of the party sought to be bound, taken as a whole, including what has been said and done as well as what has been written, would lead a reasonable person in the position of the other party to believe that the former had manifested his assent to a particular set of terms. Unless one were to recommend the requirement of strict formalities (and the experience of formalities in our law of contracts has not been a happy one) one cannot expect certainty in the law of contract formation.
[100] Similarly, I agree that all of the following jurisprudential references brought to my attention by counsel for Resolute, in closing argument, are pertinent to this case, dealing with (i) the contractual duty of good faith and honesty, (ii) mitigation of damages, and (iii) the minimum performance principle.
[101] On item (i), the contractual duty of good faith and honesty, it is helpful to refer to paragraphs 92 and 93 of the decision of the Supreme Court of Canada in Bhasin v. Hrynew, 2014 SCC 71, 2014 CarswellAlta 2046, set out below.
[92] I conclude that at this point in the development of Canadian common law, adding a general duty of honest contractual performance is an appropriate incremental step, recognizing that the implications of the broader, organizing principle of good faith must be allowed to evolve according to the same incremental judicial approach.
[93] A summary of the principles is in order:
(1) There is a general organizing principle of good faith that underlies many facets of contract law.
(2) In general, the particular implications of the broad principle for particular cases are determined by resorting to the body of doctrine that has developed which gives effect to aspects of that principle in particular types of situations and relationships.
(3) It is appropriate to recognize a new common law duty that applies to all contracts as a manifestation of the general organizing principle of good faith: a duty of honest performance, which requires the parties to be honest with each other in relation to the performance of their contractual obligations.
[102] On item (ii), mitigation of damages, important are paragraphs 23-25 of the decision of the Supreme Court of Canada in Southcott Estates Inc. v. Toronto Catholic District School Board, 2012 SCC 51, 2012 CarswellOnt 12505, set out below.
[23] This Court in Asamera Oil Corp. v. Seal Oil & General Corp., 1978 CanLII 16 (SCC), [1979] 1 S.C.R. 633, cited (at pp. 660-61) with approval the statement of Viscount Haldane L.C. in British Westinghouse Electric and Manufacturing Co. v. Underground Electric Railways Company of London, Ltd., [1912] A.C. 673, at p. 689:
The fundamental basis is thus compensation for pecuniary loss naturally flowing from the breach; but this first principle is qualified by a second, which imposes on a plaintiff the duty of taking all reasonable steps to mitigate the loss consequent on the breach, and debars him from claiming any part of the damage which is due to his neglect to take such steps.
[24] In British Columbia v. Canadian Forest Products Ltd., 2004 SCC 38, [2004] 2 S.C.R. 74, at para. 176, this Court explained that “[l]osses that could reasonably have been avoided are, in effect, caused by the plaintiff’s inaction, rather than the defendant’s wrong.” As a general rule, a plaintiff will not be able to recover for those losses which he could have avoided by taking reasonable steps. Where it is alleged that the plaintiff has failed to mitigate, the burden of proof is on the defendant, who needs to prove both that the plaintiff has failed to make reasonable efforts to mitigate and that mitigation was possible (Red Deer College v. Michaels, 1975 CanLII 15 (SCC), [1976] 2 S.C.R. 324; Asamera; Evans v. Teamsters Local Union No. 31, 2008 SCC 20, [2008] 1 S.C.R. 661, at para. 30).
[25] On the other hand, a plaintiff who does take reasonable steps to mitigate loss may recover, as damages, the costs and expenses incurred in taking those reasonable steps, provided that the costs and expenses are reasonable and were truly incurred in mitigation of damages (see P. Bates, “Mitigation of Damages: A Matter of Commercial Common Sense” (1992), 13 Advocates’ Q. 273). The valuation of damages is therefore a balancing process: as the Federal Court of Appeal stated in Redpath Industries Ltd. v. Cisco (The), 1993 CanLII 3025 (FCA), [1994] 2 F.C. 279, at p. 302: “The Court must make sure that the victim is compensated for his loss; but it must at the same time make sure that the wrongdoer is not abused.” Mitigation is a doctrine based on fairness and common sense, which seeks to do justice between the parties in the particular circumstances of the case.
[103] And, on item (iii), the minimum performance principle, reference should be had to paragraphs 30-32 of the decision of the Court of Appeal for Ontario in Atos IT Solutions v. Sapient Canada Inc., 2018 ONCA 374, 2018 CarswellOnt 5977, reproduced below.
[30] Compensatory damages are the usual measure of damages for breach of contract. The expectancy principle governs the calculation of compensatory damages. It requires the breaching party to pay as damages an amount that will provide the non-breaching party with the financial equivalent of performance: John D. McCamus, The Law of Contracts, 2d ed. (Toronto: Irwin Law, 2012), at p. 871; and Angela Swan & Jakub Adamski, Canadian Contract Law, 3d ed. (Markham, ON: LexisNexis Canada, 2012), at pp. 381-383.
[31] The common law places several limits on the expectancy principle: see McCamus, at pp. 877-882; and Swan & Adamski at p. 471. One limit is the minimum performance principle. The principle has been expressed in several different ways. In Open Window Bakery, at paras. 11 and 20, the Supreme Court of Canada expressed the principle this way: in cases where the defaulting party had alternative modes of performing the contract, damages are calculated on the basis of the mode of performance least burdensome to the defaulting party and least profitable to the non-breaching party.
[32] The jurisprudence and legal literature contain other formulations of the minimum performance principle:
(i) [D]amages for breach of a contract with alternative performances are assessed by reference to the promisor’s minimum or least extensive performance”: Michael G. Pratt, “Damages for Breach of Contracts with Alternative Performances” in Jeff Berryman & Rick Bigwood, eds., The Law of Remedies: New Directions in the Common Law (Toronto: Irwin Law, 2010), p. 105 at p. 107;
(ii) [W]here the option of fulfilling one of two alternative promises rests with the promisor who is in default, the measure of damages is the loss caused by reason of the promisor failing to perform the promise with the lesser value”: Stewart v. Cran-Vela Rental Co., Inc., 510 F.2d 982 (U.S. C.A. 5th Cir. 1975), at p. 986; and
(iii) Damages are assessed “on the basis that the defendant will perform the contract in the way most beneficial to himself and not in the way that is most beneficial to the plaintiff”: Withers v. General Theatre Corp., [1933] 2 K.B. 536 (C.A.), at p. 549.
Findings
[104] For convenience, I adopt the framework outlined in the document provided to this Court by Ms. Willson during her closing argument, that titled “Aluma systems – damages summary”.
Demobilization and Collection of Equipment
[105] Aluma’s equipment rental invoice number 950639367, dated February 5, 2015 (Exhibit 2, Volume 2, tab 82), in the amount of $436.63, is not disputed by Resolute. Aluma is entitled to that sum.
[106] The $27,201.36, being rental charges for the blow tank scaffold between March and October 2015, eight months, at $3400.17 per month inclusive of tax (Exhibit 2, Volume 2, tab 80), has been proven. Aluma is entitled to that sum as well.
[107] With regard to the $27,201.36, Mr. Johansen made three submissions in closing. I do not accept any of them.
[108] First, that the said claim is not valid because Goodhand testified that Resolute was only to pay for standing scaffolds. That is correct, under normal circumstances, as testified to by Goodhand. Here, however, it was reasonable in my view for Aluma to insist that the materials and equipment be washed, and the evidence is clear that Resolute failed or refused to do so even in the face of Leroux’s recommendation. In those circumstances, it would be unjust to deprive Aluma of both the equipment and the rental charges therefor on the ground that, technically, the scaffold was not standing during that time period.
[109] Second, that Aluma knew that the scaffold was down in mid-March 2015, was never banned from the site, but failed without good reason to retrieve the equipment and terminate the rental period (thus mitigating its damages) earlier. The first two parts of that sentence I agree with, but the suggestion that Aluma ought to have retrieved the equipment earlier than it did I reject. I accept Leroux’s evidence that it needed to be washed and that he specifically recommended to Resolute that it be washed. It was not washed. I accept Goodhand’s evidence that Aluma did not want to retrieve the equipment until it was washed, and that Lauzon said that he would have it washed. There was, therefore, good reason for the delay in Aluma retrieving the blow tank equipment.
[110] Third, that Resolute should be credited with $15,045.00 because it paid rent on the dismantled blow tank scaffold for five months between April and August 2015. I agree with Ms. Willson that the documents relied upon by Resolute to support that claim do not prove that any monies were actually paid for that time period (Exhibit 2, Volume 1, tab 42). Although Lauzon testified that some rent was paid after the dismantling of the scaffold, he provided no specifics. I think that he was simply mistaken in that regard. I accept the evidence of Kivinen that no rent was paid to Aluma on the blow tank scaffold for that time period.
[111] For all other demobilization costs claimed by Aluma, including associated freight and labour costs ($98,911.54, plus $27,758.45, plus $21,579.85), they are denied.
[112] Those three amounts, combined, I shall refer to hereinafter as “demobilization costs”.
[113] I disagree with Ms. Willson’s submission that, considering all of the evidence including the 2005-2010 Agreement, the parties’ respective terms and conditions (especially Aluma’s), and the pattern of conduct of the parties over the years, it has been proven on balance that Resolute is liable to pay for those demobilization costs. I find to the contrary.
[114] As the reasons for a decision on any given contested issue are written mainly for the benefit of the unsuccessful side of the litigation, I will deal with the arguments advanced by Ms. Willson on behalf of Aluma.
[115] First, it is submitted on behalf of Aluma that there is only one “written contract” that can be identified. I agree – the 2005-2010 Agreement.
[116] Second, it is submitted on behalf of Aluma that the 2005-2010 Agreement is relevant to the relationship between the parties, even after it expired, on its face, on April 30, 2010. I agree. The evidence at trial, including that of the two witnesses with managerial authority on both sides, Kivinen and Lauzon, suggests, and I so find, that the parties simply carried on after April 30, 2010 as if the 2005-2010 Agreement persisted.
[117] That in no way assists Aluma, however. In fact, it hurts Aluma’s position. Notice that the 2005-2010 Agreement says not a word about mobilization or demobilization. It says not a word about freight, cartage or shipping.
[118] Third, it is submitted on behalf of Aluma that there are documents available to us that suggest that Resolute paid for Aluma’s transportation costs, for example the document at tab 55, Volume 1 of Exhibit 2, specifically page 144. I agree.
[119] Again, that in no way assists Aluma, however. Staying with the said document for illustrative purposes, it is a request for quotation issued by Bowater to Aluma. It says not a word about a commitment by Bowater to pay for mobilization or demobilization.
[120] As another example, take the document referred to by counsel for Aluma in closing argument – at tab 57, Volume 1 of Exhibit 2. It is correct that there is an Aluma field labour and material sheet at that tab that has the words on it “yard demob”. It is also correct that there is a reference to mobilization and demobilization for scaffolding in the bleach plant at the Project site.
[121] That, likewise, is of no assistance to Aluma’s position. The document at page 154 of Exhibit 2 is a purchase order issued by Bowater to Aluma. The subject matter is a major shut-down scheduled for June 2010. Demobilization costs were paid because they were specifically authorized to be paid by a purchase order issued by the mill for the shut-down.
[122] Although the said document pre-dates his arrival at the Project, it is entirely consistent with the evidence of Lauzon, which evidence I accept on the issue of demobilization costs. Demobilization costs were paid by Resolute, on occasion, where authorized by a purchase order.
[123] The said document is also entirely consistent with the 2005-2010 Agreement which, although it expired on its face just prior to the date of the purchase order in question, required separate purchase orders to deal with large capital projects and shut-downs.
[124] Fourth, it is submitted on behalf of Aluma that its Standard Terms and Conditions governed the relationship between the parties. I find otherwise.
[125] I agree entirely with Mr. Johansen that neither party appears to have paid much attention to its or to the other’s terms and conditions. None of Aluma’s terms is referred to at all in the 2005-2010 Agreement. Neither party ever signed the other’s terms and conditions. I was taken to not a single piece of correspondence over the entire history of the relationship between the parties, 17 years up until May 2014, in which either set of terms and conditions was discussed. No witness on either side spoke of any verbal discussion with anyone about either party’s terms and conditions over 17 years of business relations.
[126] Besides, Aluma’s position itself, in this litigation, does not adhere to its own terms. For example, look at the clause about “price”, term number 6, quoted above in these Reasons. “The price for…services [which presumably includes labour] shall be exclusive of all taxes and any costs of freight or transportation to the jobsite” [emphasis added]. That is relevant to mobilization but has nothing to do with demobilization costs.
[127] As another example, look at Aluma’s clause 26, “maintenance of equipment”. When the dispute was occurring about the blow tank scaffold equipment, between March and October 2015, why did Aluma not bring that term to the attention of anyone at Resolute in order to enter the site? After all, it says that “Aluma shall have the right at any time to enter the site where the Equipment is situated…”
[128] I have already found that Aluma was justified in waiting until October 2015 to retrieve the equipment, but the fact that the said term was not even on the radar is further evidence that Aluma’s Standard Terms and Conditions were not considered authoritative.
[129] I prefer the evidence of Lauzon over that of Aluma’s witnesses on the question of what was most important in defining the rights and responsibilities of the parties – the purchase orders issued by Resolute.
[130] Fifth and finally, it is submitted on behalf of Aluma that the conduct of the parties, common sense, and commercial realities dictate that Resolute is legally responsible to pay the demobilization costs. I disagree.
[131] We have the 2005-2010 Agreement, silent on demobilization or any expenses associated therewith. We have no amendment to that Agreement after April 30, 2010, whether written or verbal. Everyone agrees that it just seemed to continue. We have instances where Resolute paid demobilization costs under authorization by purchase orders, transaction by transaction, exactly as described by Lauzon in his evidence, which evidence I accept. We have the termination of the relationship between the parties in May 2014. Nothing in writing exists that anyone at Resolute ever agreed to pay the demobilization costs being claimed in this litigation. No evidence exists that anyone at Resolute ever expressly agreed, verbally, to pay those costs. We know that there was an almost immediate and unequivocal objection by Resolute to paying those costs when it learned, in 2014, that Aluma was seeking to recover them. It is clear that no purchase order was ever issued by Resolute with regard to those costs. And there is no evidence as to what is common in the industry for the payment of demobilization costs upon the termination of scaffolding services at a project site.
[132] With respect, I fail to see how the conduct of the parties, common sense, and/or basic notions of business and commerce (whatever that means, and to the extent that I am capable of taking judicial notice of something that might fall under that umbrella) suggest(s) that Resolute is liable to pay for the demobilization costs being claimed.
[133] There was no bargain to pay for those costs. No mutual assent. Nor could it be reasonably expected that there would be.
[134] For those reasons, except for the $436.63 and the $27,201.36, Aluma’s claim with regard to the demobilization costs is dismissed.
Contaminated and Missing Equipment
[135] I remind the reader that the issue of damaged Aluma equipment due to contamination is limited strictly to blow tank scaffold equipment, not other materials unrelated to the blow tank. The pleadings, the marshalling of the evidence at trial, and the opening and closing arguments on both sides make that clear. That is important, as will be apparent below.
[136] There is no dispute between the parties that Resolute must pay Aluma for damaged blow tank scaffold equipment due to contamination. In fact, that has always been the case since at least 2005, evidenced by the 2005-2010 Agreement – see the reference to lost or damaged equipment at page 135 of Exhibit 2, Volume 1, tab 53.
[137] The only issues are (i) to what extent the said equipment was contaminated and (ii) the appropriate quantum of damages to be awarded to Aluma.
[138] On the first issue, frankly, some “rough justice” is required. The evidence is not very tight.
[139] Only one person testified, to any degree of specificity, about the condition of the Aluma blow tank scaffold equipment immediately before Skyway modified it – Leroux. He is a qualified scaffold inspector. He is very experienced in the industry. He conducted a thorough inspection of the scaffold. He took several photographs. He had good reason to be cautious as his own son was working at the Project site.
[140] I accept Leroux’s evidence, uncontradicted in a material way by any other evidence adduced at trial by either side, and unwavering in cross-examination despite numerous photographs being shown to him by Ms. Willson and him being pressed to change his evidence on the degree of contamination pre-Skyway work on the scaffold, that the scaffold was contaminated by black liquor by as much as 20 per cent.
[141] Yes, it is true that Goodhand was asked about that suggestion, the 20 per cent, and he stated that he disagreed with it. But he did not give his own assessment of the degree of contamination at that time (in February 2015). And he did not conduct an inspection of the scaffold at that time.
[142] I accept, as well, the evidence of Sissons that the degree of black liquor contamination on the blow tank scaffold post-Skyway modifications was relatively “minor” and non-corrosive.
[143] I also accept the evidence of Goodhand that, in October 2015, the equipment that he retrieved at the Project site was a total mess. It was significantly contaminated.
[144] And I accept the evidence of Rosenthal, who I thought was one of the best overall witnesses at trial on either side, that everything he saw in all of the photographs that he reviewed had to be scrapped due to contamination.
[145] All of the above evidence can readily be accepted by this Court. There is no inconsistency among it. It can be explained in one or both of two ways: (i) either the equipment deteriorated further and substantially between February/March 2015 and October 2015, and/or (ii) what Goodhand retrieved and what Rosenthal reviewed in the photographs was not just blow tank scaffold but also much more heavily contaminated scaffold equipment from the Recaust or from another area of the mill.
[146] If the former, then Aluma is entitled to damages based on 100 per cent of the equipment being scrapped (because I have already found that Aluma was justified in waiting until October 2015 to retrieve the equipment).
[147] If the latter, then Aluma is entitled to damages based on something between 20 and 100 per cent of the equipment being scrapped. Not 20 per cent, as argued by Mr. Johansen, because that would ignore the common sense reality that there must have been some further deterioration of the equipment while it sat in the yard, uncovered and unwashed, for 7-8 months.
[148] Unfortunately for Aluma, I have to elect to employ the latter. I have reviewed carefully the evidence of Goodhand and Rosenthal. Neither testified that the equipment in question was all from the blow tank scaffold. In fact, in cross-examination, Goodhand expressly agreed that, at the time of retrieval in October 2015, blow tank equipment was piled together, in the same place, with other Aluma equipment that was from the Recaust area of the mill and not from the blow tank.
[149] That concession by Goodhand was a fair one, and it makes total sense given the evidence of Maarup who confirmed that materials from different areas of the mill were placed together by Skyway in the yard in March 2015. I accept that evidence from Maarup.
[150] That concession by Goodhand is not only consistent with the evidence of Maarup but is also consistent with the evidence of Sissons. In cross-examination of Sissons, something important came to light when he was confronted with a photograph taken by Goodhand at the time that the Aluma materials were retrieved from the Project site in October 2015 – the photograph at Exhibit 2, Volume 3, tab 118, page 736. Ms. Willson suggested to Sissons that the said photograph shows corrosion on aluminum that was caused by black liquor at the blow tank. Sissons, who has been in the mill many times since the 1990s, and who is very familiar with the different areas of the Resolute property, replied sharply that the degree of corrosion shown in that photograph was very likely caused by lime in the Recaust sector, and not from the blow tank at all. I accept that evidence from Sissons.
[151] As to where in the spectrum the needle should fall between 20 and 100 per cent, given that the burden of proof is on Aluma, and given the relatively poor state of the evidence on this issue, I have to be conservative. On the other hand, 7-8 months is a considerable period of time. The elements can be harsh and would likely exacerbate the deteriorated condition of unwashed and contaminated equipment, according to Rosenthal, whose evidence I accept.
[152] In all of the circumstances, I find that damages ought to be assessed on the basis of 40 per cent of the blow tank scaffold equipment having to be scrapped due to contamination.
[153] On the second issue of how to calculate the damages owing to Aluma on account of the contaminated blow tank scaffold, I reach a compromised solution.
[154] Neither principal position advanced is a reasonable one, in my view. Aluma’s request for $295,000.00, approximately (based on 100 per cent contamination), is premised on the total list price of its inventory and its Standard Terms and Conditions, which terms I decline to apply for the reasons stated above. Resolute’s suggestion of $51,000.00, approximately (based on 100 per cent contamination), is premised on Skyway’s wholesale price and on a spreadsheet (Exhibit 33) prepared more than three years after the equipment was finally retrieved by Aluma, and further it utilizes Skyway’s count of the components, which count I agree with Ms. Willson is unreliable because it occurred post-Skyway modification of the blow tank scaffold.
[155] I think that the best approach is the alternative one recommended by Aluma - $196,072.71 (based on 100 per cent contamination), as per the quotation prepared by Goodhand, the person with intimate knowledge of the equipment and its components, dated February 2015, at least in the same year that the equipment was ultimately retrieved by Aluma.
[156] 40 per cent of that figure is $78,429.08. Aluma is entitled to that quantum of damages under this heading.
[157] I am not concerned that the said recovery runs afoul of mitigation of damages and/or minimum performance principles. In my view, the $25,000.00 offer by Resolute to purchase the equipment and dispose of it was too low and was made too late in the chronology of events. It was rightfully rejected by Aluma.
[158] Added to the $78,429.08 will be $1024.23, the third-party contamination testing invoice paid by Aluma. No issue is taken with that by Resolute.
[159] Before concluding, I must make this observation. It is obiter, but it may be helpful in the event that the case goes beyond this Court level. It relates back to my earlier comments about the proper measurement of damages for breach of contract, as outlined by Professor Waddams, and the overly simplistic driveway paving example that followed.
[160] I repeat, where the contract was profitable for the plaintiff, as in our case, the award of damages is based on the value of the performance promised by the defendant. Normally, however, we deduct from the value of the promised performance any costs saved by the breach. In addition, to avoid double compensation for the plaintiff, there should be no reimbursement for expenses incurred by the plaintiff as those would normally have been incurred in any event in order to earn the promised performance. The Law of Contracts, supra, at paragraph 717 on page 503.
[161] Thus, if I am wrong about the demobilization costs, and if I am also wrong about the contamination in that it is determined that Aluma should have been awarded damages based on 100 per cent contamination, then I would have queried whether it would be appropriate to make reductions to the overall damages awarded to Aluma, in order to avoid potential double compensation.
[162] More specifically, I would have sought submissions on whether Aluma could properly recover the demobilization costs for the blow tank scaffold on top of the total replacement value of the same equipment. If Aluma is correct that, under contract, Resolute had an obligation to pay to replace all of the blow tank equipment, whether at $295,000.00 or $196,000.00, approximately (the two figures in its damages summary sheet), then that payment, arguably, would have saved Aluma all of its demobilization costs with regard to the blow tank scaffold.
[163] In other words, if it is Aluma’s position that Resolute committed a breach of contract in failing to pay the replacement value of the blow tank equipment, then perhaps it is also true that the said breach of contract ought to be held to have saved Aluma its demobilization costs for that same equipment. In a perfect world, the payment would have been made, and Aluma would then have had no reason to retrieve the equipment at all. It is not a perfect world, and we know that Aluma, understandably, retrieved the equipment in October 2015. Perhaps now, however, it cannot claim for both. At the very least, the dilemma would have been there to be confronted, that is, whether recovery of both would put Aluma in a greater position than it would have been in had the contract been performed, in all respects, by Resolute.
III. Conclusion
[164] It is trite to remind the reader that, putting aside the issue of mitigation of damages, Aluma had the onus of proof in this proceeding, on the civil standard of more likely than not (proof on a balance of probabilities).
[165] I am satisfied that it has met that burden only to the extent of total damages in the principal amount of $107,091.30. Judgment shall issue accordingly.
[166] That is the total of the four amounts outlined above:
(i) $436.63 (equipment rental invoice, not disputed); plus
(ii) $27,201.36 (blow tank rental for those months in 2015); plus
(iii) $78,429.08 (on account of contaminated and scrapped blow tank scaffold equipment); plus
(iv) $1024.23 (contamination testing invoice, not disputed).
[167] Otherwise, the balance of Aluma’s Claim, as amended, is dismissed.
Interest and Costs
[168] I will abide by any agreement between counsel as to how to address issues of interest and costs, if not resolved out of court.
[169] We can do so by way of written submissions or by way of a recorded teleconference. If the latter, counsel may simply schedule it with the trial coordinator. If the former, then counsel may agree on their own timeline and advise the Court accordingly, failing which I will impose one along with limitations on length.
[170] Whether by agreement of counsel or by imposition, if written submissions are filed, no reply is permitted except with leave of the Court, and Resolute, being the more successful party after trial, shall deliver its submissions first.
[171] I thank both counsel, Ms. Willson and Mr. Johansen, for their assistance throughout the proceeding. It was a pleasure having them before the Court.
Conlan J.
Released: October 30, 2019