Amik Oilfield Equipment & Rentals Inc v Whitecap Resources Inc, 2016 ABQB 192

Court of Queen ’ s Bench of Alberta Citation: Amik Oilfield Equipment & Rentals Inc v Whitecap Resources Inc, 2016 ABQB 192 Date: 20160401 Docket: 1501 08382 Registry: Calgary Between: Amik Oilfield Equipment & Rentals Inc. Plaintiff - and - Beaumont Energy Inc., Beaumont Energy Inc. carrying on business as Whitecap Resources Inc., and Whitecap Resources Inc. Defendants Corrected judgment: A corrigendum was issued on May 4, 2016; the corrections have been made to the text and the corrigendum is appended to this judgment. _______________________________________________________ Memorandum of Decision of J.L.

Mason , Master in Chambers _______________________________________________________ [ 1 ] Amik Oilfield Equipment & Rentals Inc. manufactures, sells and services oilfield equipment. It brings this action against Beaumont Energy Inc. and its successor by amalgamation, Whitecap Resources Inc. Whitecap refused to take delivery of and pay for custom built equipment Amik alleges was ordered by Beaumont prior to the amalgamation. Amik applies for

summary judgment for the purchase price of the equipment, plus interest and costs.

[ 2 ] Whitecap resists the application, on four grounds: 1. The judgment sought is for a contract not pled; 2. The evidence does not establish that Beaumont agreed to take delivery and pay for the equipment; 3. Amik was aware that the Beaumont representative it purported to contract with had no authority to do so; and 4. Amik has not demonstrated its entitlement to the measure of damages sought. [ 3 ] For the reasons that follow,

summary judgment is granted on the issue of Whitecap’s liability for breach of contract. The only real issue is the amount to be awarded, which will be addressed in a subsequent hearing. Test for

summary judgment [ 4 ] Rule 7.3(1) provides that a party may apply to the court for

summary judgment in respect of all or part of a claim on one or more of the followings grounds: (

a) there is no defence to a claim or part of it; (

b) there is no merit to a claim or part of it; (

c) the only real issue is the amount to be awarded. [ 5 ] Alberta has a long history of taking a robust approach to

summary judgment. Our courts strive to craft proportionate means to resolve disputes, and summarily deal with litigation whenever possible. This general approach has now been codified in the foundational rules that made their debut in the 2010 reboot of the Alberta Rules of Court . [ 6 ] The Supreme Court of Canada has recently directed lower courts to be more receptive to

summary judgment applications, in its reasons in Hryniak v Mauldin , 2014 SCC 7 . [ 7 ]

Summary judgment is no longer denied solely on the basis that the evidence discloses a triable issue. The court now asks whether there is any issue of merit that genuinely requires a trial or, conversely, whether the claim or defence is so compelling that the likelihood it will succeed is very high such that it should be determined summarily.

The court will also consider whether examination of the existing record can lead to an adjudication and disposition that is fair and just to both parties: Whitecourt Power Limited Partnership v Elliott Turbomachinery Canada Inc. , 2015 ABCA 252 at paragraph 9 , citing Hryniak v Mauldin and other authorities from the Court of Appeal. [ 8 ] The standard for fairness is not whether the process is as exhaustive as a trial, but whether it gives the judge confidence that she can find the necessary facts and apply the relevant legal principles: Hryniak v Mauldin at paragraph 50 . [ 9 ] The court is to presume that the best evidence from both sides is before it: 1214777 Alberta Ltd v 480955 Alberta Ltd , 2014 ABQB 301 at paragraph 17 . [ 10 ] A party faced with an application for

summary judgment must put its best foot forward, and present evidence to show sufficient “merit” to establish a genuine issue requiring a trial with respect to the outstanding issues: Windsor v Canadian Pacific Railway Ltd , 2014 ABCA 108 at paragraph 21 , citing Canada v Lameman , 2008 SCC 14 at paragraph 19 . The mere assertion of a position by the non-moving party in a pleading or otherwise, or the mere hope of the non-moving party that something will turn up at a trial, does not suffice.

The key is whether the circumstances require viva voce evidence in order to properly resolve the case: 776826 Alberta Ltd. v Ostrowercha , 2015 ABCA 49 at paragraph 11 . [ 11 ] The onus remains on the applicant to present uncontroverted facts and law which entitle it to judgment: see for example, Access Mortgage Corporation

(2004) Limited v Arres Capital Inc. , 2014 ABCA 280 at paragraph 45 . The arrangements between Amik and Beaumont [ 12 ] This litigation turns on the parties’ arrangements concerning the purchase of the disputed equipment. Amik’s position is that at the time Beaumont ordered the equipment, Beaumont agreed to pay for it following delivery. Whitecap’s position is that it was only if and when Beaumont chose to request delivery that any obligation to pay arose, and further that Amik knew that the Beaumont representative it was dealing with had no authority to place orders of this magnitude.

Affidavit of Lyle Duhaime [ 13 ] Amik relies on the affidavit of Sales Manager Lyle Duhaime in support of its application. Mr. Duhaime dealt with Beaumont representative Mark Volk in regard to the disputed equipment. [ 14 ] Mr. Duhaime deposes that in 2013 and 2014, Amik entered into a series of agreements with Beaumont whereby Beaumont would order and Amik would custom build well site production equipment for Beaumont. Mr.

Duhaime deposes that the parties conducted their business together as follows: Beaumont would place an order for equipment following receipt of a quote from Amik; Amik would order the parts and then manufacture the equipment; When the drilling of the well was complete, Amik would deliver and install the equipment on site; Amik would service the equipment delivered; and Amik would invoice Beaumont for the order and services provided, and Beaumont would pay the invoices. [ 15 ] Over time, Beaumont’s orders came to be comprised of four pieces of equipment: a building/housing package, a cable jack

pumping unit, a dual cylinder pumping unit, and a high efficiency hydraulic cooler assembly, with customized specifications required by Beaumont. [ 16 ] Mr. Duhaime states that on September 16, 2014, as part of the ongoing relationship between the parties and in order to simplify billing, Mr. Duhaime provided Mr. Volk with a quote that listed the pricing of these four items of customized equipment normally ordered by Beaumont (the “September Quote”). [ 17 ] He confirmed under cross-examination that every building package Amik manufactures is custom to the particular customer.

In Beaumont’s case, it had specifications to include: a dual tank scrubber, electrical fixtures, plugs and wiring, automatic louver system, one set of 60 foot hoses, one set of 40 foot hoses, a 600 litre tank and an EMP heat trace pump. Mr. Duhaime further testified that Beaumont’s custom requirements for the pumping units consisted of a series of hydraulic fittings built to Beaumont’s specifications, which deviated from Amik’s standard pumping units. He confirmed that all of these custom requirements were reflected in the pricing of the September Quote. [ 18 ] On September 19, 2014, Mr. Volk emailed Mr.

Duhaime and asked him to “please place an order for 10 motor shacks and 20 dual cylinder hydraulic jacks” (the “Units”). This order was based on the September Quote. [ 19 ] By email dated September 19, 2014, Mr. Duhaime confirmed Mr. Volk’s order (the “September 2014 Order”), as follows: Hi Mark, thanks for the order of 10 [Units]. We will start to order the parts as we need them, looks like you have equipment for about 5 weeks’ worth of drilling so we will look to have the first packages hit the ground for then and we will build 2/week as per your needs.

As you call for the set up of each well, we will take from your built inventory and correspond the proper serial #’s with the proper location. As I stated before, I have included all of the latest additions into the package price so this should simplify your invoices from us... [ 20 ] These 10 Units were built and then delivered to Beaumont between November and December 2014. Beaumont paid for them between January and February, 2015. [ 21 ] Mr. Duhaime deposes that on November 7, 2014, Mr. Volk called Mr.

Duhaime and placed an order for another 10 Units, again based on the September Quote (the “November 2014 Order”). Again, those 10 Units were built and delivered to Beaumont between December 2014 and January 2015, and Beaumont paid for them between February and March, 2015. [ 22 ] Mr. Duhaime goes on to say that on December 10, 2014, Mr. Volk called Mr.

Duhaime to order a third set of 10 Units, again based on the September Quote (the “December 2014 Order”). [ 23 ] Amik built the Units in January and February, 2015 and delivered the first 4 to the well locations requested by Beaumont in late February/early March, 2015. Beaumont paid for those 4 Units. [ 24 ] Mr. Duhaime states that around March 15, 2015, Mr. Volk told him that Beaumont was being sold to Whitecap. Mr. Duhaime asked when Beaumont would be taking possession of the remaining 6 Units. Mr.

Volk indicated that he “did not know, because Whitecap was not telling them anything”. [ 25 ] On April 7, 2015, Mr. Duhaime exchanged a number of emails with Mr. Volk’s superior, Beaumont production engineer Jeff Johnston. He started the email chain, as follows: ... I have been working on getting an answer for these 6 [Units] that were ordered from Beaumont for your drilling program. It seems that Whitecap is not interested in taking the equipment so here we are left holding it. There is no way we can get hung up with this as it was custom designed for Beaumont.

We may be able to work out a restocking fee, this would be the cost of goods and labour. Otherwise we are invoicing them through and I will wait for your direction on where to deliver the product... [ 26 ] Mr. Johnston replied: ... While this issue (using your packages going forward) is in the hands of Whitecap, only the pump skid packaging (building, auto- louvres) were modified from your basic design for Beaumont. The hydraulic pump jacks themselves, as I understand it, are standard units.

Can you please work out a restocking fee and then Whitecap can make a decision as to which option they would like to pursue – restocking or taking delivery... [ 27 ] Mr. Duhaime emailed back that: ...there is a tad more into these than just the louver system (your wiring, panels, hydraulics, and fuel system) which would all have to come out leave holes in the walls of brand new shacks. Yes the pumping units are stock but I didn’t bring in 24 extra rams and numerous parts just to sit here. Ordered by Mark Volk through you. This is the business you had in the works while you were selling to Whitecap.

NO communication my way until it was too late. This is Beaumont’s responsibility to clean up. I am working on some numbers right now. It’s a tricky situation because we can’t bring any of the parts back to our supplier and just pay a simple restock fee. [ 28 ] Mr. Johnston replied that: ...Once you have a handle on them, and I understand it’s not easy, if you could let us know what the restocking charges would be that would be helpful. We will pass this information on to Whitecap and will let you know how they would like to proceed asap...

[ 29 ] Amik sent the invoices for the 6 Units to Beaumont on April 16, 2015. Amik sought payment of $613, 584.36, representing the pricing for the Units contained in the September Quote. [ 30 ] On April 21, 2015, Mr. Duhaime emailed again, this time to Bradley Jennings of Whitecap, stating that: ... Just touching back with you on restocking the Beaumont order. There are quite a few costs we would have to eat in order to restock this equipment. We would be [willing] to restock at 40%. First, we wouldn’t have ordered all the parts for this equipment if we didn’t have an immediate sale for them.

The cost of carrying these parts is going to be huge through this downturn. These building packages are custom built to Beaumont specs so to strip them down and rebuild into a standard hydraulic package comes with extra labor costs along with all the wasted labor we already have into building them. The electrical, fuel system, hydraulic package, and louver system will have to be modified. Now we sit with a building that has numerous holes in and will have to be devalued when we are able to sell. 40% of each package is roughly $38,000 and there are 6 set ups sitting here.

I know you guys aren’t interested in hydraulics and I believe you have had a bad experience in the past. If it happened to be with National Oilwell then I can see where you had trouble. Likely came down to their service. In the past 2 years we never left Beaumont hanging one single time, we had men working every single weekend for a year doing setups. Our business was built and based on being the best service providers in Lloydminster. When Beaumont had issues or required changes, we made it happen.

Please let me know your thoughts on this and I hope we can solve this issue here and now... [ 31 ] On April 28, 2015, Mr. Jennings responded as follows: ... As far as hydraulic jacks go...they are typically more expensive than a 80-114-64 pumpjack setup and the maintenance costs to keep hydraulic jacks running becomes very cumbersome over time. Service has not been the issue. As far as the restocking fee goes we are not prepared to move on our stance with regards to this. We will not be paying any restocking fee on those units.

We will not throw away $0.25MM on equipment that we have not ordered and are not committed to take possession of. I understand you are not happy with this and that you may lose money as a result. I do wish you luck and hope that you are able to recoup some of your costs on these units over time. This is final and I will not be entertaining further discussions on this... Affidavit of Joel Armstrong [ 32 ] In addition to cross-examining Mr. Duhaime, Whitecap submitted the affidavit of its VP Production & Operations, Joel Armstrong. Whitecap took over Beaumont after the dealings between Mr. Duhaime and Mr.

Volk in regard to the equipment in issue. Mr. Armstrong had no involvement in and accordingly has no personal knowledge of those dealings. [ 33 ] Mr. Armstrong exhibits a letter dated January 12, 2016 from Mr. Volk to Whitecap’s counsel. [ 34 ] Mr. Volk’s letter starts out by stating that “The reason for this letter is to give you my take on the relationship between Beaumont... and Amik...” and goes on as follows: Beaumont ... was using Amik ... as its supplier for power unit and hydraulic driven pumping units, for their new well[s] in Beaumont’s drilling program.

We would normally get the drilling list with approximately 10 new wells per group, then we would order equipment from Amik accordingly. The drilling list would come from Jeff Johnston to me and we would get things ordered up from Amik to make sure they could supply units on time when the wells were completed and turned over to us to set up the single well batteries. [Once the] order was sent to Lyle for quote and availability on e-mail and when the quote was accepted we carried forward with the order for the next 10 new wells.

When these wells were almost completed the drilling order for the next 10 well[s] were sent to us again to get ready for the next run. At this point I would call Lyle and have him go ahead in preparing for the next 10 wells by getting the inventory to build 10 more power units and 20 hydraulic pumping units, this equipment is not build overnight it takes time to put it all together and get inventory from his suppliers. When wells were turned over construction to build the single well batteries we would call [Mr.

Duhaime] or John and tell them when we were ready for the next set up they would bring the equipment from Lloydminster to our field and set up the power units and pumping units run and test equipment then return to base. At this point Amik would invoice the units to the LSD where delivered and then send the invoice into cortex and would come to me for approval and then to Jeff Johnston for final approval then to accounts payable to pay Amik for equipment and labour.

This was the same process that was to happen with the last 10 wells sent to us on the latest drilling order, the 10 well[s] were drilled and only four wells would be completed pre breakup and the other 6 well pads to be completed post breakup This process changes when Beaumont... entered into a merger with Whitecap...when the wells were due to be set up into single well batteries Whitecap said they have their own equipment and decided not to use the equipment from Amik ...These decisions were made by Whitecap ... and not by myself as I never had the authority to make any decisions for or on behalf of Whitecap... [ 35 ] The description in this letter establishes that Mr.

Volk, the Beaumont representative who dealt with Amik’s Mr. Duhaime in regard to Beaumont procuring its custom equipment from Amik, has a view consistent with Mr. Duhaime’s as to the manner in which the equipment was ordered, delivered and paid for. [ 36 ] Mr. Armstrong also exhibits a series of texts exchanged between counsel for Whitecap and Mr. Volk, in which counsel appears to be questioning Mr. Volk about items not addressed in his letter. [ 37 ] The gist of this text exchange is that counsel for Whitecap is asking Mr. Volk about why his January 12, 2016 letter does not

say anything about a direction that invoicing could not be made before delivery, nor about a request that a packing slip be signed, presumably for the Units. Mr. Volk maintains in his responses that 10 Units would not be billed at once, but rather they would be invoiced when they were delivered. He also states that he never said that he had to sign a packing slip, and that he never signed anything on delivery. [ 38 ] The 6 Units remain in Amik’s yard. A photograph of the 6 customized housing packages and the 12 modified hydraulic pumping units that go with each housing package is exhibited to Mr.

Duhaime’s affidavit. Does the application seek judgment for a transaction different than the transaction pled in the statement of claim? [ 39 ] Whitecap firstly submits that Amik is seeking

summary judgment on a different transaction than is pled in its statement of claim, and suggests that this is fatal to the application. [ 40 ] Judgment can only be granted on a basis that is pled: Motkoski Holdings Ltd v Yellowhead, 2010 ABCA 72 ; Paniccia Estate v Toal , 2012 ABCA 397 . [ 41 ] In Motkoski , the trial judge gave judgment against the County of Yellowhead for selling land that turned out to be the former site of a landfill, based on fraudulent concealment, latent defect and other grounds. On appeal, the Court held that the findings at trial extended “well beyond” the pleadings.

A new trial was ordered. [ 42 ] In Paniccia , the Court addressed the trial judge’s refusal to consider two further legal arguments raised by the defendant doctor after the close of evidence. These points of law were not pled by the doctor in his defence. The Court held at paragraph 32 that: ... pleadings do matter, and a judgment based on an issue not pleaded is improper. So the trial judge would have been wrong to find for the appellant on either of the new issues without such an amendment.

That in turn doubtless would have been granted only if it was proper to reopen the trial for more evidence.... [ 43 ] Paragraph 9 of Amik’s statement of claim states that in “ September 2014”, Beaumont ordered 10 Units from Amik, and goes on to allege non-payment in respect of that order. In this application, judgment is sought for the price of the remaining 6 Units ordered in December of 2014.

Whitecap submits that since the statement of claim talks about a “ September 2014” order, the court is precluded from granting judgment based on the alleged agreement made in December of that year. [ 44 ] Counsel for Amik advised the court that this reference to the month of September in paragraph 9 of its statement of claim is a typographical error. [ 45 ] After referring to “September 2014”, paragraph 9 goes on to set out the terms of the September Quote described above, the reference tool that the parties made use of in the placement of the December 2014 Order.

It is easy to see how this error was made. [ 46 ] The statement of claim goes on to make clear that that Amik is seeking recovery for the invoices associated with the December 2014 Order. Paragraph 11 alleges that Amik delivered the first 4 Units and received payment for these, and that the remaining 6 Units were to be delivered after spring break up. Paragraph 12 alleges that Amik sent invoices totalling $613, 548.36 plus GST for the remaining Units to Beaumont on March 31, 2015 and April 6, 2015, but that the defendants rejected the invoices and refused delivery.

The invoices are referenced by their unique invoice numbers. Those invoices are exhibited to Mr. Duhaime’s affidavit in support of Amik’s

summary judgment application and form the basis of the

summary judgment sought, in the amount of $613,548.36 plus GST. [ 47 ] The typographical error in the statement of claim here is not within the realm of pleading deficiencies addressed in Motkoski and Paniccia . [ 48 ] It is clear on all the material before the court that the September 2014 Order has never been in issue between the parties, and that the December 2014 Order has always been in issue. Notwithstanding the single incorrect reference in the statement of claim to “ September ” instead of “ December ”, Amik’s statement of claim does in fact address non-payment for the remaining 6 Units ordered by Beaumont in December 2014, as does Amik’s application for

summary judgment. [ 49 ] Counsel for Amik advised counsel for Whitecap of the typographical error in paragraph 9 of the statement of claim, during his cross-examination of Mr. Duhaime in the fall of 2015, and confirmed that the claim was for the December 2014 Order. Counsel for Whitecap went on to question Mr. Duhaime about the December 2014 Order, Whitecap’s deponent addressed it in his responding affidavit, and Whitecap addressed it in its written and oral submissions. Whitecap received the invoices for the 6 Units, which match those referenced in the statement of claim. It knows full well what the claim is, and the

summary judgment application complies with rule 6.3(2). [ 50 ] Whitecap further asserts that its defence does not respond to any contract made in December 2014. [ 51 ] While Whitecap’s defence begins with the allegation that there are no unpaid invoices for packages ordered in September 2014, or even for Beaumont’s “many further orders...after that”, it goes on to allege at paragraph 3 that “Insofar as can be determined by Whitecap, Amik sought to foist further orders on Beaumont...”.

It states at paragraph 5 that “Beaumont had no agreement to Amik to order or accept delivery or equipment as alleged...” [ 52 ] This defence captures the arguments made by Whitecap in response to Amik’s application, which resist judgment for the unpaid invoices arising from the December 2014 Order. [ 53 ] Whitecap suggests that an amendment application should have been made prior to this

summary judgment application, and that only if the amendment were allowed and Whitecap given time to amend its defence, should the court entertain a

summary judgment application seeking judgment on the December 2014 Order.

[ 54 ] This approach is inconsistent with the obligation of litigants under Rule 1.2(3)(

a) to identify the real issues in dispute, and facilitate the quickest means of resolving the claim at least expense. To the extent necessary, I would be prepared to amend paragraph 9 of the pleadings from “September 2014” to “December 2014”, based on the evidence filed. [ 55 ] Whitecap’s first basis of resistance based on the pleadings fails.

Has Amik failed to establish Beaumont’s agreement to take delivery and pay for the equipment? [ 56 ] Whitecap next argues that Amik has not established that Beaumont agreed it would take delivery of and pay for the 6 Units in dispute. [ 57 ] Whitecap argues that the so-called “order” was not in writing and that Mr. Duhaime and Mr. Volk did not discuss that Beaumont was obliged to take delivery and pay for the Units Amik says Mr.

Volk “ordered” over the phone on December 10, 2014. [ 58 ] Thus, Whitecap argues, Amik must persuade the court that this term ought to be implied. [ 59 ] The court will only imply an unexpressed term in a contract where necessary to implement the parties’ presumed intention and give business efficacy to the contract: G.H.L.

Fridman, The Law of Contract in Canada , 5 th ed. (Toronto: Thomson Carswell, 2006) at 467. [ 60 ] Whitecap suggests that this phone call did not constitute an “order” for equipment obliging Beaumont to take delivery and pay the prices referenced in the September Quote. [ 61 ] Rather, Whitecap characterizes the December 10, 2014 phone call as simply a “heads up”. It suggests that in calling Mr. Duhaime, Mr.

Volk was simply notifying Amik that Beaumont had a need for more custom built Units in the future, and that if Amik wanted the opportunity to receive a firm sales contract, it may want to go ahead and order the necessary inventory from its third party suppliers and then commence the custom manufacturing process based on Beaumont’s specifications.

That way, if and when the time came, Amik would be able to respond to Beaumont’s request for delivery, and only then would Beaumont be obliged to take delivery and pay for the Units. [ 62 ] The evidence before the court does not support this characterization, and it lacks commercial sense. [ 63 ] The evidence clearly demonstrates that these Units were custom built, and that this did not happen overnight. Amik first had to order many items of inventory from third party suppliers and put the component parts together, all to meet Beaumont’s unique specifications.

While it is true that the two pumping units are sold as standard stock, they too were customized with hydraulic bypass equipment and formed only part of each Unit, making up roughly 40% of the price of each. While the housing package portion of the Units could be dismantled, this would take time and leave holes in the housing. The Units could not be simply replaced on the shelf for re-sale if Beaumont did not supply the delivery dates and locations. [ 64 ] The commercial arrangement was simple. Amik had Beaumont’s specifications and a price list in place for the items of equipment making up the packages sold.

Beaumont’s Mr. Volk would order the Units in groups of 10, to ensure that sufficient equipment was ready to meet Beaumont’s needs in the field. The Units were built to its specifications. Delivery was in twos or as otherwise directed by Beaumont, as wells were ready for installation of the Units. Payment was due after delivery. It was a deferred payment arrangement, as distinct from payment in full up front, which as Mr. Volk’s texts indicate, the parties did not agree to.

Rather, while Beaumont’s obligation to pay arose at the time of the order, the time for payment was delayed until after delivery of each Unit. [ 65 ] Whitecap submits that the absence of any discussion as to delivery dates in the December 10, 2014 phone call is consistent with its “heads up” characterization. It asserts that it was not necessary at that stage, being only a notification that there may be a firm sale in the future, if Beaumont were to call back and request delivery of Units. [ 66 ] Mr. Duhaimes’ evidence is that there was some discussion as to when the Units would need to start arriving. Mr.

Volk told him that Beaumont was drilling two wells per week, and, as a result, would need more equipment by mid-January. [ 67 ] As it turned out, the first 4 Units were delivered between February 27 and March 4, 2015, prior to spring breakup. The last of the Units, the 6 at issue, were manufactured between January 26 and February 5, 2015. After the delivery of the first 4 Units, it was determined that the remaining 6 Units would be delivered after spring breakup when the rural roads were re-opened to heavy loads. Mr.

Volk confirms this in his January 12, 2016 letter: “the 10 well[s] were drilled and only [4] wells would be completed pre breakup and the other 6 well pads to be completed post breakup”. [ 68 ] In the circumstances, Beaumont’s obligation to take delivery and pay for each of the 10 Units did not depend on the provision of the delivery date at the time of the order. Beaumont’s business did not lend itself to that. The delivery date was necessarily a bit of a moving target, by virtue of Beaumont’s intended use of the Units.

Beaumont was not in a position at the time of the order to identify the precise delivery date and location of each well that would need a Unit. The evidence clearly demonstrates that the Units had to be and were manufactured ahead of time, and ready for delivery to the wells identified by Beaumont as they were completed and ready to be set up with the Units.

The invoices for payment would follow set up of the Units at the well sites and Beaumont would pay after delivery. [ 69 ] This was the process followed for the September 2014 Order, the November 2014 Order, and the first 4 Units of the December 2014 Order, the latter two orders having been placed over the phone. Whitecap submits that there is no evidence of these prior deliveries and payments, but those facts are admitted in its defence, in paragraph 2(

b) and (c). Further, Beaumont’s cheque stubs for its payment of the first 4 units are exhibited to Mr. Duhaime’s affidavit. The parties’ clear and consistent course of conduct expresses the terms of delivery, including Beaumont’s obligation to take delivery and pay. [ 70 ] The parties established a manner of doing business whereby the delivery date and specific well location would be subsequently supplied by Beaumont. That does not take away from Beaumont’s obligation to pay for these Units custom built to its

specifications, arising at the time of the placing of the order. [ 71 ] It is my conclusion that this course of conduct implicitly included an agreement at the time of the order, to take and pay for the Units ordered. The custom nature of the equipment, the need to order inventory from third party suppliers, and the time needed to manufacture the Units from these component parts all support this conclusion. [ 72 ] It is true that this course of conduct was never reduced to a written contract, or even the subject of a written purchase order sent to Beaumont upon the order being placed.

But that is the way the parties conducted their relationship. It was informal, and notwithstanding the large figures involved, acceptable to both sides. The absence of a formal contract or written purchase order is only now being used to renege on an obligation of Whitecap’s predecessor, which Whitecap does not want to honour. [ 73 ] Mr.

Volk’s text messages to counsel for Whitecap are tendered in an attempt to demonstrate that Beaumont had no obligation to pay for the Units until it decided that it would take delivery. [ 74 ] I have carefully reviewed those texts and in my view, they do not impugn the conclusion that Beaumont’s obligation to pay arose when the orders were placed, and that payment was deferred, to after the delivery of the Units. Whitecap cannot cancel the agreement by refusing to ask for delivery.

It was implicit in the arrangement that delivery would be requested, and the well site locations provided within a reasonable period of time. [ 75 ] Counsel for Whitecap emphasizes Mr. Volk’s text that “[t]hey could not bill 10 units at once. When they were delivered they could invoice us.” [ 76 ] That statement, viewed in context of all the evidence before me, simply confirms that the parties had agreed that Amik would not bill for the whole order up front. Rather, the Units would be invoiced as they were delivered to the field to the particular well sites. [ 77 ] Mr.

Volk’s letter expressly written to describe the parties’ dealings is consistent with that, as are Mr. Johnston’s emails. There is no discrepancy in the evidence. Mr. Jennings’ emails take issue with this obligation to pay but of course Mr. Jennings had no personal involvement and has no personal knowledge. The obligation arose before Whitecap amalgamated with and took on Beaumont’s liabilities. [ 78 ] Amik and Beaumont contracted for the manufacture, delivery and payment of 10 Units of customized equipment in December 2014. Whitecap refused to take delivery and pay for the remaining 6 Units under that order.

There is no issue of merit requiring trial in this regard. Is there a genuine issue requiring trial as to Mr. Volk’s limited authority? [ 79 ] Whitecap’s deponent Mr. Armstrong characterizes Amik’s claim for the 6 Units as based on “subsequent oral orders allegedly made with Mr. Volk”. [ 80 ] The evidence concerning the order placed by Mr. Volk in December 2014 is undisputed. Mr. Volk’s January 12, 2016 letter confirms he placed the orders. The issue is whether Amik knew that Mr.

Volk’s authority to order equipment was limited to $2500 purchases, as arguably suggested in the “Internal Controls memo” exhibited to Mr. Armstrong’s affidavit. [ 81 ] Whitecap relies on Mr. Volk’s text message that “he knew I never had the authority to sign anything over $2500 that was company policy” (emphasis added). [ 82 ] It is not at all clear who the “he” is that Mr. Volk is talking about in this text message. Mr. Duhaime’s name is not mentioned anywhere in the text chain. This cryptic text is not sufficient to raise an issue that Amik knew that Mr.

Volk had no authority to place the December 2014 Order. [ 83 ] In any event, the evidence suggests that the order was placed at the direction of, or at the very least, the awareness of Mr. Johnston, identified in the Internal Controls memo as one who did have authority to place such orders. [ 84 ] Mr. Volk states in his January 12, 2016 letter that “[t]he drilling list would come from Jeff Johnston to me and we would get things ordered up from Amik to make sure they could supply units on time when the wells were completed and turned over to us to set up the single well batteries” ...

This was the same process that was to happen with the last 10 wells sent to us on the latest drilling order... [t]his process changed when Beaumont...entered into a merger with Whitecap ...Whitecap said they have their own equipment and decided not to use the equipment from Amik ...These decisions were made by Whitecap...” [ 85 ] As noted above, Mr. Johnston subsequently communicated with Mr. Duhaime regarding the 6 remaining Units from the December Order. In these exchanges, Mr.

Johnston acknowledges the order of these Units, and does not challenge the validity of the transaction on the basis of lack of authority or otherwise, even in the face of Mr. Duhaime’s comment that the Units were “[o]rdered by Mark Volk through you.” [ 86 ] Further, Mr.

Volk’s texts include the statement that “If you or anyone else do not believe what I’m telling you, you need to speak to Jeff [Johnston] he was in charge of Beaumont equipment purchases I was only doing what I was asked.” [ 87 ] Whitecap expresses surprise that Amik is asking the court to enforce an order for over a million dollars of equipment, made over the telephone, without any written follow up. [ 88 ] Even though Mr. Volk used email, copied to Mr.

Johnston, to place the September 2014 Order, he made the November 2014 Order over the telephone and, as I have said, Beaumont paid for all 10 Units manufactured under that order, without complaint. Again, this telephone method was followed for the December 2014 Order, and Beaumont paid for the first 4 Units . Beaumont was apparently content to allow Mr. Volk to place those orders in this fashion, and honoured them. It was only after Whitecap came on the scene, with

its own preferences for well site equipment, that a problem arose. [ 89 ] In the circumstances, Whitecap has not raised an issue of merit requiring trial regarding Mr. Volk’s authority to commit Beaumont to purchase the Units manufactured pursuant to the December 2014 Order. Has Amik demonstrated its entitlement to the measure of damages sought? [ 90 ] Amik pleads sections 48 and 49 of the Sale of Goods Act in its Reply. Those sections provide two remedies for the seller. [ 91 ]

Section 48 sets out the conditions under which the seller may maintain an action against the buyer for the price of goods: Action for price of goods 48(1) When under a contract of sale the property in the goods has passed to the buyer and the buyer wrongfully neglects or refuses to pay for the goods according to the terms of the contract, the seller may maintain an action against the buyer for the price of the goods.

(2) When under a contract of sale the price is payable on a day certain, irrespective of delivery, and the buyer wrongfully neglects or refuses to pay the price, the seller may maintain an action for the price although the property in the goods has not passed and the goods have not been appropriated to the contract.

(3) Nothing in this

section prejudices the right of the seller to recover interest on the price from the date of tender of the goods or from the date on which the price was payable, as the case may be. [ 92 ] If property has passed, without more Amik may be entitled to payment of the purchase price. This issue has not been addressed by the parties. [ 93 ] The parties did address

section 49, which provides that the seller may maintain an action against the buyer for damages for non-acceptance: Damages for non-acceptance 49(1) When the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may maintain an action against the buyer for damages for non-acceptance.

(2) The measure of damages shall be the estimated loss directly and naturally resulting in the ordinary course of events from the buyer’s breach of contract.

(3) When there is an available market for the goods in question, the measure of damages is, in the absence of evidence to the contrary, to be ascertained by the difference between the contract price and the market or current price of the goods at the time or times when they ought to have been accepted, or, if no time was fixed for acceptance, then at the time of the refusal to accept. [ 94 ] This

section underlines that the measure of damages for wrongful non-acceptance by the buyer is the loss to the seller. G.H.L. Fridman confirms at page 303 of his text, Sale of Goods in Canada , 6 th ed. (Toronto: Thomson Reuters Canada Ltd., 2013) that: The object ... is to differentiate normal, foreseeable consequences of a breach of contract (for which damages are recoverable), from abnormal, special, particular loss which might occur unforeseen by the buyer, and not foreseeably likely to result from his default, such loss not coming within the scope of recoverable damages.

The underlying test of recoverable damages is foresight of consequences. [ 95 ] If there is an available market for the goods, the seller is entitled to the difference between the contract and market price. If not, as Professor Fridman aptly points out at pages 309-310, the court must assess the loss to the seller as best it can, on the basis of loss of profit. This may involve taking into account the cost of manufacturing or procuring the goods, or the cost of altering them to enable the seller to resell them elsewhere. [ 96 ] Mr.

Duhaime testified under cross examination that Amik’s “loss” due to Whitecap’s refusal to take delivery of the Units is 40%. The underlying basis of that is not adequately canvassed in evidence. [ 97 ] Mr. Duhaime also testified that the hydraulic pumping units can be replaced into inventory and that the customized housing package can be dismantled and its parts re-used or sold. Whether or not it is reasonable to expect Amik to have taken those steps in the circumstances is similarly not adequately canvassed in the evidence or the parties’ submissions.

For example, what would the labour costs be in dismantling the housing package, and what sort of return, such as salvage value, might reasonably be realized on those parts? Are there other costs of re-sale of these parts? What cost is involved in removing the hydraulic bypass to facilitate a sale of the hydraulic pumping units as “standard” inventory?

What efforts were made to re-sell the hydraulic pumping units and other parts? [ 98 ] In addition to informing Amik’s loss, and the availability of a market for the parts, some of these inquiries may go to mitigation of damages as well. [ 99 ] The only remaining issue is what Whitecap should pay Amik as a result of its refusal to take delivery of and pay for the Units. I direct that the parties contact the Masters’ office to set up an appointment to discuss the procedure for a hearing on this topic. More briefing and evidence is needed to properly determine the amount to be awarded.

I anticipate that this may be capable of being addressed through affidavits and cross-examination, such that oral evidence at trial may not be necessary. Conclusion [ 100 ] The court must be able to confidently issue judgment on the record before it. I conclude that I can do so in terms of Whitecap’s liability for breach of contract, and that there is no need for vive voce evidence in that regard. I have the first hand evidence of Mr.

Duhaime, the Amik employee who dealt with Beaumont’s Mr. Volk on the order in question. His evidence was not materially impaired under cross-examination, nor does the affidavit evidence from Whitecap raise an issue of merit requiring trial in the circumstances. Mr. Volk’s letter and texts appended to Mr. Armstrong’s affidavit do not contradict Mr. Duhaime’s evidence in any material respect; rather his description and commentary are consistent with Mr. Duhaime’s evidence of the transactions at issue.

I am able to conclude on this record that Beaumont ordered equipment that was custom built to its specifications and agreed to pay for that equipment after delivery to its well sites. Its successor Whitecap refused to accept delivery and is liable to Amik in that regard. The only issue is the quantum of the award, which shall be addressed in a subsequent hearing. [ 101 ] If the parties cannot agree, they can approach me to settle costs. Heard on the 03 rd day of March, 2016. Dated at the City of Calgary, Alberta this 1 st day of April , 2016. J.L. Mason M.C.C.Q.B.A.

Appearances: Elena Semenova and Johanna Price Peacock Linder Halt & Mack LLP for the Plaintiff Christian J. Popowich Code Hunter LLP for the Defendants _______________________________________________________ Corrigendum of the Memorandum of Decision of J.L. Mason, Master in Chambers _______________________________________________________ The following changes have been made: 1. Para 4: "Rule 7.3(1)(b)" replaced with "Rule 7.3(1)" 2. Para 13: after the words "dealt with" the word "the" deleted, and

comma deleted after the word "representative" 3. Para 49: a period inserted after the word "submissions" 4. Para 54: "1.3" replaced with with "Rule 1.2(3)(a)" 5. Para 59: ",citing" replacedwith ":" 6. Para 91: word "that" deleted