Bio-Chem Consulting Services, 2016 ABQB 399

Court of Queen’s Bench of Alberta Citation: Bio-Chem Consulting Services

(1980) Ltd v Syncrude Canada Ltd, 2016 ABQB 399 Date: 20160713 Docket: 1201 14367 Registry: Calgary Between: Bio-Chem Consulting Services

(1980) Ltd. Plaintiff - and - Syncrude Canada Ltd. Defendant _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice J.T. McCarthy _______________________________________________________ Introduction [ 1 ] This case involves a dispute between the parties over an unpaid invoice. Bio-Chem Consulting Services

(1980) Ltd. invoiced Syncrude Canada Ltd. for $891,990.75 on November 29, 2010. Bio-Chem’s invoice covered laboratory and technical services it performed in its lab from December 2008 to December 2009. The laboratory testing considered how to optimize a chemical which is added to Syncrude’s Intersite Pipeline to limit corrosion of the pipe. Syncrude denies that it commissioned the technical work and has refused to pay the invoice. [ 2 ] There are two issues for me to decide: • Did the parties enter into an enforceable contract making Syncrude responsible for the invoice?

• Alternatively, if there was no contract should Bio-Chem’s invoice be paid on a quantum meruit basis? Background [ 3 ] Over the course of a three-and-a-half-day trial, I heard evidence from the parties about their course of dealings from 2006 leading up to the present dispute. [ 4 ] Although the parties offer divergent views on whether a contract was concluded or not, the events leading up to December 2008 were generally agreed upon. [ 5 ] The Plaintiff, Bio-Chem Consulting Services, was founded in 1980.

Bio-Chem’s President, Joe Schulz, was a founder of the company and is currently its President, as well at its Operating Manager and Principal Corrosion Advisor. Mr. Schulz is a professional chemist and has worked for many years doing corrosion testing for industry, including the oil and gas industry. His work is often aimed at providing advice on how to mitigate corrosion. Bio-Chem has an office and independent testing facility in Calgary. [ 6 ] The Defendant Syncrude is one of Canada’s largest operators in the oil sands industry. Syncrude uses hot water mixed with ore to recover the oil from the oil sands.

When hot water and ore are applied to the oil sands they cause the oil to float while the sands sink, and oil can then be extracted. After this process is complete, the water is sent to a tailings pond where more of the dirt settles out. The water is then reused in the extraction process by being re-heated and applied to further oil sands. [ 7 ] Syncrude’s Intersite Pipeline transports recycled water used in this oil extraction process between two mining sites in northern Alberta. The pipeline is approximately 36 km long. It is constructed out of carbon-steel and corrosion is expected over time.

Corrosion can be mitigated through various strategies, including the addition of zinc-phospate, a corrosion inhibitor, into the water. [ 8 ] Pipelines are regulated in Alberta and operators are required to prevent leaks from occurring. Operators must monitor for leaks and report any leaks to the Energy Resources Conservation Board (the “ERCB”). If a pipeline leak occurs, the pipeline operator is required to cut out a piece of the pipe for analysis. The analysis attempts to determine the reason for the corrosion, which the operator must report to the ERCB.

The pipeline is shut down in order to remove and replace the pipe when this occurs. [ 9 ] The Intersite Pipeline experienced difficulties with leaking in the period of 2006 to 2008, as three leaks occurred during that timeframe. This concerned the ERCB, who required Syncrude to address the issue by coming up with mitigation strategies in a report. [ 10 ] Bio-Chem became involved in assessing the pipeline leaks in 2006 through a contract with Co-Syn Technology to analyze a pipe cut-out. Co-Syn Technology provides engineering services to Syncrude.

At the time, Co-Syn Technology was a partnership between Colt Engineering, an engineering firm owned by Worley Parsons Canada, and Syncrude. Colt Engineering saw itself as an arm of Co- Syn Technology, with Colt Engineering working directly for Co-Syn Technology, and Co-Syn Technology working directly for Syncrude. [ 11 ] The relationship between Bio-Chem and Co-Syn Technology began when Dave Webster from Colt Engineering/WorleyParsons (“Worley Parsons”) was looking for a lab that could do testing on the Intersite pipeline cut-outs in 2006.

Dave Webster was the Manager of Pipeline and Asset Integrity for WorleyParsons at the time. Mr. Webster became aware of Bio-Chem and its services and asked for a proposal to analyze the pipe cut-out. Bio-Chem provided a proposal and cost estimate for the work to Mr. Webster, who forwarded the documents to Co-Syn Technology. Co-Syn Technology was then responsible for getting approval for the funding from Syncrude. The proposal was accepted and Bio-Chem entered into a contract with Co-Syn Technology to provide its services. [ 12 ] The evidence was that over time, Mr.

Webster asked Bio-Chem for further assistance with testing related to corrosion of the Intersite Pipeline. Each time, Mr. Webster would put in a request to Co-Syn Technology for an extension to the contract to cover the additional work, and approval would be given from Syncrude. [ 13 ] Once work was completed, Bio-Chem sent its invoices to Co-Syn Technology and Mr.

Webster would review the invoice and confirm to Co-Syn Technology that the work was performed and priced as expected, and payment to Bio-Chem would follow. [ 14 ] Over the period of August 2006 to January 2008, at least 10 projects were provided to Bio-Chem in this fashion. The projects included analysis of pipe cut-outs after leaks on the Intersite Pipeline and testing and recommendations relating to mitigating corrosion of the pipeline. The budgets for the projects ranged between approximately $10,000 and $100,000, with one project in the $300,000 range. [ 15 ] During this period of time, Mr.

Schulz of Bio-Chem was also in direct contact with Mr. Doug Flint, an engineer who worked directly for Syncrude. It appears that in once instance, while Mr. Webster was away, Mr. Flint provided direct approval of payment for Bio-Chem work. [ 16 ] As mentioned, by 2008 a third pipeline leak had occurred, and the ERCB requested a more thorough response from Syncrude relating to the problem.

As a part of its package to the ERCB on its mitigation strategies, Syncrude included a report prepared by Bio- Chem which had analyzed pipe cut-outs and made recommendations to prevent corrosion of the pipeline (the “Leak Report”). The Leak Report was originally prepared in late 2007, and was further edited by Bio-Chem in 2008 for submission to the ERCB. [ 17 ] In September 2008, Mr. Webster of WorleyParsons wrote to Mr. Schulz of Bio-Chem asking for an update on pending work that had been requested.

He advised that the work would either be approved or rejected based “on available funding and revised actual need”. Mr. Schulz responded promptly with an update on the various projects, most of which were nearing completion. At the end of his response, Mr. Schulz added a

section entitled “New Business”. In this section, Mr. Schulz identified that through his work to date and

review of an internal Syncrude report on corrosion, a possible further issue for testing and analysis was the effectiveness of the zinc- orthophosphate inhibitor, as 25% of corrosion was not being inhibited. He proposed to conduct in-house corrosion tests to establish the optimal dosage and application of zinc-orthophosphate into the pipeline. Mr. Schulz mentioned he had discussed this idea with Mr. Flint of Syncrude, and would prepare a cost proposal for Syncrude’s consideration. After this point in time, Mr.

Schulz began work on his proposal for a testing protocol relating to the optimization of zinc-orthophosphate (the Protocol). It is this Protocol, and its costs, that eventually led to the dispute between the parties. Development of the Protocol and Diverging Positions [ 18 ] In late September 2008, as Mr. Schulz began working on the Protocol he came into more frequent contact with Chris Austin of Syncrude. Mr. Austin is the Technical Advisor for Utilities at Syncrude and has a degree in chemistry. He had worked in water treatment for many years and oversaw the Intersite Pipeline for Syncrude. Mr.

Austin explained that Mr. Flint was more involved in the mechanical aspects of the Intersite Pipeline and he was more involved in the technical aspects. In developing the Protocol, the technical aspects were more critical. Mr. Austin and Mr. Schulz discussed various chemicals to test in the Protocol that would potentially help to inhibit corrosion. [ 19 ] During their discussions, Mr. Austin suggested Mr. Schulz should obtain chemicals from a company called GE Betz. Mr.

Shultz followed up on this suggestion and contacted GE Betz in late September. [ 20 ] Up until this point in time, the parties were fairly consistent in presenting the history of the relationship between Syncrude and Bio-Chem. However as the development of the Protocol continued over the fall months, the parties presented different

interpretations of events and disagreed on certain critical events. Evidence of Mr. Schulz [ 21 ] Bio-Chem’s only witness in these proceedings was Mr. Schulz. Mr. Schulz’s evidence was that there was great urgency developing the Protocol because the Intersite Pipeline had been shut down by the ERCB. Mr. Schulz believed there was a huge financial incentive to get the pipeline going again. To this end, in the fall of 2008 he was working on the Protocol and making edits to the Leak Report. The Leak Report was to be submitted as a part of the package to the ERCB to alleviate their concerns. Mr.

Schulz believed that he had a mandate to help solve the corrosion issues on the Intersite Pipeline and was committed to doing so. [ 22 ] Mr. Schulz saw development of the Protocol as a team effort and invited input from Syncrude. As Mr. Schulz worked on the Protocol, he liaised with Mr. Flint and Mr. Austin. In early October, he provided Mr. Flint with an advance peak of the Protocol for his review. By this time, he had also commenced work on getting chemicals for testing and was in contact with GE Betz about signing a confidentiality agreement to obtain chemicals. [ 23 ] On October 8, 2008, Mr. Flint asked Mr.

Schulz for a budget estimate for the Protocol, which Mr. Schulz pegged at $300,000. [ 24 ] In early November, Mr. Schulz received back an edited version of the Protocol with comments and suggestions from Mr. Austin. Mr. Schulz incorporated the comments and suggestions, which included a suggestion for an additional area of testing. [ 25 ] In early November, Mr. Schulz and Mr. Austin were also working together on the Leak Report which was being edited for the ERCB. Mr. Austin sent a large number of edits to Mr.

Schulz, asking for items to be removed, reworded or revised due to his concern that the Report was too negative. Mr. Schulz responded promptly to incorporate the changes and re-wrote the front end of the report from a more positive perspective. They continued to work on the Leak Report until it was finalized in mid-November. [ 26 ] In mid-November 2008, work on the Protocol was also continuing. Mr. Schulz received a revised confidentiality agreement from GE Betz for the chemicals. GE Betz informed Mr. Schulz, Mr. Austin and Mr.

Flint that pending receipt of the confidentiality agreement, it would be procuring the product samples and information sheets for the products. [ 27 ] Mr. Schulz explained that once he received the chemicals, he could start on the project. In his experience, chemicals are only provided when the project is ready to go ahead. He explained that he did not need the actual chemicals to prepare the Protocol. [ 28 ] Mr. Schulz also reached out to Dave Webster of WorleyParsons to discuss the Protocol around this time. Mr. Webster suggested another area for testing which Mr.

Schulz incorporated into the Protocol. [ 29 ] On December 9, 2008, Mr. Schulz sent Mr. Austin a revision of the Protocol which included input from GE Betz’ water quality experts and the input from Mr. Webster. In his covering email, Mr. Schulz stated the following: ... I believe we have now achieved and [sic] all around consensus on the optimum laboratory testing protocol. I have spoken to Doug Flint about the revisions and he has asked me to forward a

summary budget document only, which I shall do next, so as to allow the creation of a formal P.O. Doug did not need the detailed protocol we are forwarding to you, per attached. We have since also received all test chemicals from GE Betz and have commenced some parts of the testing, per my previous comment to you. Chris, if there are any further edits, please let me. [sic] Doug told me he would touch base with you to move the accounting process forward. ... [ 30 ] On the same date, Mr. Schulz sent a revised budget document to Mr. Flint (the “Budget Document”).

He noted that since the initial budget projection, the project had tripled in size due to additional input from Mr. Webster, Mr. Austin and the GE Betz water

quality experts, as well as Bio-Chem. The estimate now came to $834,165 for the preparation of the protocol and the testing required, plus another estimated $87,000 for project coordination, report writing, and other tasks. Mr. Schulz noted in his covering letter that he had not forwarded the Budget Document to Mr. Webster, as Doug had said Syncrude needed to initiate the accounting process. Mr. Schulz testified that he assumed Mr. Flint would forward the accounting paperwork to Mr.

Webster once it came in. [ 31 ] The Budget Document also contained the following information regarding reporting and confidentiality: Please note, Bio-Chem Consulting Services has signed a non-disclosure agreement with GE Betz wherein it is agreed by GE Betz that any and all test findings and information reported to Syncrude Canada can only be released to GE Betz through the offices of Syncrude Canada. For clarity, Bio-Chem Consulting Services will not report any of our analytical test findings to GE Betz, its affiliates, or any stakeholder other than Syncrude Canada c/o Messers.

Doug Flint and Chris Austin. [ 32 ] Mr. Schulz did not hear anything further from Mr. Flint after forwarding this document. [ 33 ] Mr. Schulz explained that by December 9, 2008, he had started some of the preparatory work of setting up testing equipment with the computer and cutting specimens from pipe, as well as doing base-line runs to get data on corrosion rates without the chemicals. [ 34 ] Mr. Schulz’s position was that by December 9, 2008, the parties had come to an agreement on the Protocol. He characterized the Protocol as a team effort between himself, Mr. Webster and Mr. Austin. Mr.

Schulz received no further edits or communications from Syncrude and believed he had approval for the Protocol based on all of the parties’ dealings to date. He also relied on the fact he had received the chemicals for testing as a sign that the project had approval. In his experience it was not unusual to proceed with a project and have the accounting documentation come later. For that reason, he was not concerned when he did not hear anything further from Syncrude.

They had developed a relationship over the previous two years and he was not concerned about the accounting process which was out of his hands. [ 35 ] Mr. Schulz carried out the testing in the Protocol over the next year, from approximately December 2008 to November 2009. He did not have any contact with Mr. Flint or Mr. Austin during that period. He was in contact with Victoria Stranzinger of Worley Parsons in February of 2009, when he sent her a copy of the Protocol. Ms. Stranzinger was a colleague of Mr. Webster, and was described by Mr. Schulz as his principal contact during that year. Ms.

Stranzinger appeared to be interested in the work and its potential application. [ 36 ] Mr. Schulz characterized Worley Parsons as an agent of Syncrude, as they were contracted to Syncrude for engineering services. He testified that over the year of testing, he provided three interim updates to Worley Parsons. He believed the interim reports or meetings were in February, May and December of 2009. Worley Parsons was his point of contact to disseminate information on the testing. He was used to reporting to them because of his prior work, and they were located in Calgary which made it easy to meet, unlike Mr.

Flint and Mr. Austin who were located in Fort McMurray. [ 37 ] On December 8, 2009, at the third update, Mr. Schulz provided a Power Point presentation to Ms. Stranzinger and Mr. Webster on the Protocol testing and findings to date. By this point in time, most of the testing had been completed and Mr. Schulz was able to provide a comprehensive 40-page report, which was labeled as Interim Report #3. The presentation took approximately two hours and was requested by WorleyParsons. Ms. Stranzinger was interested in the report and corresponded with Mr.

Schulz regarding further testing suggestions and questions after the meeting. Mr. Schulz believed she was passing on the information to Syncrude and that it would be implemented by them. [ 38 ] By this point in time, Mr. Schulz had still not received the accounting paperwork from Syncrude and was concerned. He had not done any invoicing on the project to date. He mentioned the accounting issue to Mr. Webster at the meeting, who promised to follow up with Syncrude. Mr. Webster wrote to Mr. Austin later that day, indicating that Mr. Schulz had met with him and provided interim testing results. Mr.

Webster noted substantial charges had been incurred and Bio-Chem could not be paid without the proper paperwork in place. He asked for Mr. Austin and Mr. Flint’s assistance. [ 39 ] In the weeks and months following this meeting, Mr. Schulz attempted to contact Mr. Flint and Mr. Austin regarding the accounting, without success. He hoped the paperwork would be generated so he could bill for the project. After waiting for many months, he eventually created an invoice for Syncrude totalling $891,990.75 on November 29, 2010. Mr. Schulz sent the invoice to Mr. Flint, Mr.

Austin, and a senior operating officer at Syncrude. [ 40 ] There was correspondence between the parties after this date regarding the invoice, and it became apparent that Syncrude’s position was that it had not agreed to proceed with the Protocol. Syncrude refused to pay the invoice and Bio-Chem commenced the within Statement of Claim on November 14, 2012. Evidence of Syncrude [ 41 ] Syncrude called three witnesses at trial, Mr. Austin, Mr. Webster, and Ms. Stranzinger. They presented a different

interpretation of the events in the fall of 2008 while the Protocol was being developed. Their evidence diverges significantly regarding the events from December 2008 through to December 2009. [ 42 ] Mr. Austin agreed that he and Mr. Schulz worked together developing the Protocol in the fall of 2008. However he differed in his perspective of the importance of the Protocol and its urgency. He understood that Mr. Schulz had offered to help with corrosion mitigation and Mr. Austin was open to hearing his proposal and the costs for the proposal. Mr. Austin’s evidence was that there was no urgency to the Protocol.

He stated that the Intersite Pipeline was frequently shut down and that shut downs were not costly and did not affect oil production. He explained that both mining sites have abundant water supplies and were not dependant on the recycled water from the Intersite Pipeline to function. The Protocol was related to the longevity of the pipeline, and not to the start-up of the pipeline.

[ 43 ] Mr. Austin recalled that in the fall of 2008, he was more concerned about providing a response to the ERCB after the third leak on the pipeline. He provided edits to Mr. Schulz for the Leak Report. In Mr. Austin’s opinion, the Leak Report contained unsubstantiated recommendations which would have been difficult for Syncrude to implement, such as reducing organics in the water, so he asked for those to be taken out,. The Leak Report was one item in the package of reporting going to the ERCB to satisfy the ERCB’s concerns about leaks.

Another part of the package was Syncrude’s plan to reduce oxygen in the water going into the pipe, as oxygen contributes to corrosion. [ 44 ] In terms of the confidentiality agreement with GE Betz and the supply of chemicals, Mr. Austin was aware as a former GE Betz employee that they were concerned with their intellectual property. He believed the confidentiality agreement was necessary for GE Betz to provide Mr. Schulz with information necessary to develop the Protocol and estimate its costs. [ 45 ] As they worked on the Protocol, Mr. Austin asked Mr.

Schulz to work on the tone of the Protocol to make it more positive. Mr. Austin knew he would need to get approval for the Protocol from upper management, and wanted it to focus less on what Syncrude was doing wrong and more on what positive results would come from the testing. As the Protocol neared completion, he was still waiting on the final cost estimate in mid-November. Costs were of concern to both he and Mr. Flint. [ 46 ] Mr. Austin denied that Mr. Schulz was given a mandate to solve corrosion issues on the Intersite Pipeline, stating that was, in fact, Mr. Austin’s mandate. [ 47 ] Mr.

Austin received the revised Protocol and covering letter from Mr. Schulz on December 9, 2008. He also received the budget around this time from Mr. Flint. When questioned about the comments in the covering letter that Mr. Schulz had received the chemicals and had started testing, Mr. Austin stated it did not resonate with him that this meant anything other than Mr. Schulz was ready to carry out the work. He denied that he should have told Mr. Schulz to stop testing if the Protocol was not yet approved, noting “I never told him to start testing”. [ 48 ] Mr.

Austin agreed that he did not provide more input on the Protocol after December 9, 2008. He took the proposal to his superior, Joe Matula, and asked for direction. Mr. Matula said no to the proposal as the proposed budget was too large for them to accept. Mr. Matula suggested Mr. Austin work with the technical department at Exxon-Mobile instead, which is Syncrude’s parent company. [ 49 ] Mr. Austin testified that he phoned Mr. Schulz in early January 2009 to tell him the news. He had a vivid recollection of telling Mr. Schulz that he was sorry, but that Syncrude was not proceeding with the Protocol work. Mr.

Schulz was upset and stated that he had already started working on the project. Mr. Austin replied that he should not have done so as there was no Contract Work Authorization (CWA) in place. [ 50 ] Mr. Austin did not hear about the Protocol again, nor did he hear from Mr. Schulz, until December 2009 when he received the email from Mr. Webster that testing had proceeded and there was an issue with accounting. Mr. Austin was shocked to hear that testing had gone ahead. [ 51 ] As noted, Mr. Webster of WorleyParsons also gave evidence at trial. Mr.

Webster was asked at trial about his involvement in developing the Protocol. He did not recall having any input into the Protocol or receiving the draft document, though he did recall hearing from Mr. Schulz that he was doing zinc phosphate testing for Syncrude around December 2008 or January 2009. Mr. Webster was somewhat surprised by this, as he did not know that Bio-Chem was on Syncrude’s approved vendor list. He noted that not even WorleyParsons was on the Syncrude approved vendors list, only Co-Syn Technology was. However, whatever interactions were going on with Syncrude were not within his knowledge. Mr.

Webster was not at all involved in the work in December 2008 or January 2009. [ 52 ] Mr. Webster did not receive interim reports #1 or #2, or have meetings with Mr. Schulz in the first half of 2009. Mr. Webster did recall receiving a presentation from Mr. Schulz in late 2009 where he presented the results of his testing. However, Mr. Webster’s recollection was based on documentation from that time, and was not an independent recollection. He confirmed that at the meeting, Mr. Schulz informed him that he could not get Mr. Austin or Mr. Flint to return his calls and sought assistance with accounting. [ 53 ] Mr.

Webster’s email to Mr. Austin of December 8, 2009, the date of the meeting, reflects his understanding of events at the time, and shows that he did not feel that he was in the loop on the project: Chris, I had a meeting with Joe Schulz this morning where he presented the interim results of the testing entitled Optimization of Corrosion Inhibition Practices . The test protocol that he followed was apparently developed with your assistance and in collaboration with GE Betz.

This presentation was Update #3 and was provided to WorleyParsons as a courtesy, since we work closely with Doug in trying to keep the product in the pipeline... After seeing the amount of testing completed, I asked Joe if he had a Syncrude CWA for the testing work (knowing that it was not part of the CoSyn CWA for the ongoing pipeline integrity work) and the answer was no but he was waiting for it. .... The bottom line is that there have been substantial charges incurred by Bio-Chem and there is no way that they can be paid without the appropriate Syncrude paperwork being in place.

As I was never in the loop on this project, I have no idea if the test program was approved so can’t be of much assistance. The point of this email is to request that you, with Doug Flint’s assistance, address the accrued Bio-Chem charges and determine the path forward. ... [ 54 ] Mr. Webster characterized Bio-Chem as a contractor and disagreed Mr. Schulz was given a mandate to do corrosion mitigation on the Intersite Pipeline. WorleyParsons was the corrosion consultant to Syncrude. Mr. Webster stated that Mr.

Schulz was a contractor to WorleyParsons and Syncrude through Co-Syn Technology, he was contracted to do specific elements of work relating to the pipeline, and did that work well. There was no further mandate. [ 55 ] Victoria Stranzinger also gave evidence at trial. At the time of these events, Ms. Stranzinger had been newly hired by WorleyParsons as their Pipeline Corrosion Specialist, and started work in July 2008. Ms. Stranzinger first met Joe Schulz in the fall of 2008 when she went to his offices to inspect and take photos of the pipe. Her next contact with Mr. Schulz was in February 2009 when

she received a copy of the Protocol. She was interested in the Protocol and read it. She did not recall having a presentation about theProtocol or receiving Interim Report #1 with an update on the Protocol around that time. [56] Ms. Stranzinger was curious about the services Mr. Schulz provided, as she had previously run a lab, and arranged for a tourat Bio-Chem’s site in April 2009. She recalled that during the tour they went to the Bio-Chem boardroom and she was shown somedocuments, including graphs with preliminary results from the Protocol testing. Ms.

Stranzinger recalled asking for a copy of thedocuments but was told by Mr. Schulz that he could not share them as they were proprietary, and had not yet been shared with Syncrude.Mr. Schulz told Ms. Stranzinger the Syncrude work had been authorized by Mr. Austin. [57] The next time Ms. Stranzinger had contact with Mr. Schulz was at the December 8, 2009 meeting with Mr. Webster. She didnot recall meetings or conversations between the April tour and the December meeting, and did not receive Interim Report # 2 in thattimeframe. The December meeting was in the morning at WorleyParsons’ office. Mr.

Schulz provided a PowerPoint presentation andInterim Report # 3, and gave them a chance to ask questions. [58] Later that afternoon, Ms. Stranzinger emailed Mr. Schulz with questions and suggestions for testing, and also asked for a softcopy of Interim Report #3, which he provided. However, two days later she called Mr. Schulz asking him to postpone the further testinguntil the project was approved, and advised Mr. Webster she had done so by email. She did not appear to have any further contact withMr. Schulz. [59] Mr. Austin and Ms.

Stranzinger both gave evidence at trial that they did not use the information from Bio-Chem’s InterimReport #3 to Syncrude’s benefit. Mr. Austin said any implementation of the recommendations would have been done at his direction,and that did not occur. Syncrude used Brenntag, not GE Betz, as its zinc-orthophosphate supplier prior to the Protocol and continues touse Brenntag to this day. Ms. Stranzinger testified that by the time she received Interim Report #3 she had finished her work on recycledwater and had already reported to Syncrude, therefore none of the information was passed on to Syncrude. [60] Mr.

Webster’s evidence was that he did not know if Syncrude had switched chemical suppliers or changed the flow rate onthe Intersite Pipeline. He could not answer a question on whether Syncrude had changed the water temperature in the pipeline, noting heis not part of Syncrude operations. Findings [61] I must determine whether Bio-Chem and Syncrude entered into an enforceable contract for a testing protocol on zincphosphate optimization. [62] In order to find a legally enforceable contract, Bio-Chem must show that the parties reached an agreement.

For a concludedcontract to exist, the court must find that the parties: (1) had a mutual intention to create a legally binding contract; and (2) reachedagreement on all of the essential terms of the settlement: see: Bawitko Investments Ltd. v Kernels Popcorn Ltd. (1991), (ON CA), 53 O.A.C. 314, 79 D.L.R. (4th) 97 (Ont.

C.A.). [63] The basic position of the common law is clear that a contract is made when an offer, in accordance with its terms, is accepted.A contract does not exist until there has been a definite offer and an unqualified and unconditional acceptance of the terms of the offer iscommunicated to the offeror: see: Canadian Dyers Assn. Ltd. v Burton (1920), 47 O.L.R. 259, [1920] O.J. No. 138 (Ont. H.C.J.);Bawitko Investments. [64] Acceptance is defined by Professor G.H.L.

Fridman in his text, The Law of Contract in Canada (2011), 6th edition, at p. 45,as "... the signification by the offeree of his willingness to enter into a contract with the offeror on the terms offered to him ". At p. 46, hegoes on to say "[t]he response of the offeree must be a clear indication that the offer has been accepted. It must be unconditional, clearand absolute." [65] The test for whether there has been acceptance is objective, rather than subjective.

Professor Fridman explains at p. 47: Whether or not there has been an acceptance depends upon whether the offeree has so conducted himself that a reasonable man wouldbelieve that he has accepted, or is accepting, the offer in question, at least as long as the offeror has acted on such belief.

The generallyadopted theory of offer and acceptance is that the parties' behaviour must be viewed objectively, in terms of how the reasonable man, ifhe were a bystander, would describe the effect of what he had seen or heard. [66] In some cases, acceptance can be communicated through conduct, rather than expressed orally or in writing. The SupremeCourt considered the issue of acceptance by conduct, which again must be judged objectively, in St. John Tug Boat Co. Ltd. v IrvingRefining Ltd., (SCC), [1964] S.C.R. 614, 46 D.L.R. (2d) 1, [1964] S.C.J. No. 38.

The question is whether a reasonableperson would interpret the offeree’s conduct as an acceptance of the offer.

The applicable principle was described by Richie J., on behalfof the Court at p 7(QL): The test of whether conduct, unaccompanied by any verbal or written undertaking, can constitute an acceptance of an offer so as to bindthe acceptor to the fulfilment of the contract, is made the subject of comment in Anson on Contracts, 21st ed., p. 23, where it is said: The test of such a contract is an objective and not a subjective one, that is to say, the intention which the law will attribute to a man isalways that which his conduct bears when reasonably construed, and not that which was present in his own mind.

So if A allows B towork for him under such circumstances that no reasonable man would suppose that B meant to do the work for nothing, A will be liableto pay for it. The doing of the work is the offer; the permission to do it, or the acquiescence in its being done, constituted the acceptance. In this connection reference is frequently made to the following statement contained in the judgment of Lord Blackburn in Smith v.Hughes [(1871), L.R. 6 Q.B. 597 at 607.], which I adopt as a proper test under the present circumstances:

If, whatever a man's real intention may be he so conducts himself that a reasonable man would believe that he was consenting to the terms proposed by the other party and that other party upon that belief enters into a contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party's terms. [ 67 ] In this case, Mr.

Schulz submits that it was reasonable for him to believe, based on the conduct of Syncrude’s employees and WorleyParsons as Syncrude’s agent, that Syncrude accepted Bio-Chem’s offer to perform the testing set out in the Protocol and accompanying budget. [ 68 ] My findings in this case turn in large part on credibility. There are small and large discrepancies between the parties regarding the events of 2008 and 2009, most notably in relation to whether Mr. Austin called Mr. Schulz to inform him that Syncrude would not proceed with the Protocol, an event which Mr.

Schulz denies occurred. [ 69 ] In assessing credibility, I have considered the following factors: • Demeanour of the witness: including forthrightness, spontaneity, firmness of memory, accuracy, and evasiveness; • Bias and interest in the outcome of the case; • Consistency: whether there is internal consistency with other parts of the witness’ evidence, both at trial and on prior occasions; • Corroboration: whether there is external consistency with other credible witnesses and documents; • Whether there is an air of reality to the evidence.

See: Prodigy Graphics Group Inc. v Fitz-Andrews , [2000] O.T.C. 237, [2000] O.J. No. 1203 (ONSC) ; and Pacific West Systems Supply Ltd. v Vossenaar , 2012 BCSC 1610 , 2012 CarswellBC 1610. [ 70 ] I find that Mr. Schulz lacked credibility as a witness. Although he appeared forthright and firm in his memory on direct examination, he had difficulties with accuracy on cross-examination and when confronted with previous answers he had given in discovery. His answers on cross-examination were frequently obstructive and evasive. Mr.

Schulz refused to answer most questions directly, and danced around the answers to pointed questions when he knew the answer could be problematic to his case. He was intent on answering questions in a way that substantiated his version of events or characterization of relationships, for example insisting that WorleyParsons was an agent of Syncrude. Overall, I found his evidence to be self-serving.

His evidence was also uncorroborated or contradicted in key areas, such as whether and when Interim Reports #1 and #2 were delivered to WorleyParsons, and whether he interim billed or not. [ 71 ] On the other hand, I found the Syncrude witnesses to be forthright in their evidence in direct and cross examination. There was consistency in their version of events and characterization of the relationship between Syncrude and WorleyParsons. They were not hesitant to admit if they could not remember a detail or event.

Overall, the documents corroborated their version of events in the fall of 2008 and in 2009. [ 72 ] I will provide a few examples of difficulties with Mr. Schulz’s evidence. [ 73 ] Mr. Schulz’s position at trial was that an agreement had been reached by the time he forwarded the finalized Protocol and Budget Document to Syncrude on December 9, 2008. He maintained that approval had been given for the project based on all of the interactions between the parties leading up to that date, and the fact that he had signed a confidentiality agreement with GE Betz and was in receipt of the chemicals. Mr.

Schulz’s position was that all there was left to do after December 9, 2008 was to start on the project, as he had his instructions and approval, and that was what he did. He did not need to hear back from Mr. Austin or Mr. Flint regarding edits or the budget. [ 74 ] After giving this evidence, Mr. Schulz was confronted with his evidence at discovery (in 2013) regarding events in the December 2008 to January 2009 timeframe. He was asked when he next heard from Mr. Austin or Mr. Flint after sending the December documents. He replied that “we attempted to get a hold of Mr.

Austin on several occasions, unsuccessfully”. He stated that this was during December 2008 to January 2009 timeframe, when the work was starting. Mr. Schulz explained the reason he was trying to get a hold of Mr. Austin “was because we wanted to secure his technical input or any opinions that he may have regarding the technical document we prepared, because there was - - it was still in good time to make any changes, if he felt that was appropriate”. [ 75 ] This evidence clearly contradicts Mr. Schulz’ trial evidence that there was agreement on the Protocol by December 9, 2008.

When confronted with this discrepancy, Mr. Schulz explained he had major surgery prior to the discovery, so was tired and his memory was lacking. He stated there were not various attempts to contact Mr. Austin at that time. Mr. Schulz explained that at discovery he confused the period of time in December 2008/January 2009 with December 2009/January 2010 - when he tried to call Mr. Austin numerous times about the invoice. He apologized and stated that his discovery evidence was incorrect. [ 76 ] This is an example of Mr.

Schulz tailoring his evidence at trial, perhaps unconsciously, to suit the narrative he wanted to prove – namely that the Protocol was finalized and approved by December 9, 2008. [ 77 ] Mr. Schulz was also contradicted at trial by his discovery evidence relating to the relationship of WorleyParsons to Syncrude. In his Budget Document, Mr. Schulz wrote that Bio-Chem would not report their test findings to “GE Betz, its affiliates, or any stakeholder other than Syncrude Canada c/o Messrs. Doug Flint and Chris Austin”. However his evidence at trial was that he did report test findings to Ms. Stranzinger and Mr.

Webster of WorleyParsons. Mr. Schulz justified this by stating that WorleyParsons was an agent of Syncrude.

[ 78 ] Mr. Schulz was then presented with discovery evidence where he was asked about the meaning of “stakeholder” in the very same phrase in the Budget Document. He answered that WorleyParsons was a stakeholder because they had an interest in the project. As such, they were not entitled to the confidential results of the testing: Basically, stakeholders would be those people that have an active interest in the progress of the project, the result that come about from doing any amount of work.

And by the nature of the business relationship that we have and the professional status that I have and that my company has, it means that stakeholders would be WorleyParsons’ staff. You know it’s nobody else’s business. It’s a confidential matter, what goes on, what comes out, and what the consequences of findings are. [ 79 ] This is another example of Mr. Schulz characterizing events at trial in a way that he believed would suit his case, despite his own earlier contradictory evidence. [ 80 ] I find that Mr.

Schulz’ discovery evidence that WorleyParsons was a stakeholder, and not entitled to the testing results, was his actual belief at the time of the events in 2008/2009. Ms. Stranzinger testified that when she asked for copies of the testing results in April 2009 Mr. Schulz refused, stating that the information was proprietary. [ 81 ] There were other instances where Mr. Schulz’ evidence was not corroborated. He provided different dates for when he provided Interim Reports #1 and #2 in oral evidence and documentary evidence.

For example, Interim Report #1 was cited as being presented in February on some occasions and in April on other occasions. This suggests his memory and record keeping of these events is poor. As well as confusion over the timing of the reports, there were no copies of Interim Reports #1 or #2 tendered in evidence, and the WorleyParsons witnesses denied ever receiving them. Ms. Stranzinger did recall an update meeting in April 2009, however she also clearly recalled that Mr. Schulz refused to provide copies of the documents. [ 82 ] Another example of uncorroborated evidence was Mr.

Schulz’s testimony on the importance of the confidentiality agreement with GE Betz and that his receipt of the chemicals signified project approval. The documents in evidence show that GE Betz first provided a confidentiality agreement to Mr. Schulz for signing on October 7, 2008, which was before the initial Protocol document or preliminary budget were even provided to Syncrude. A revised confidentiality agreement was sent to Mr. Schulz November 13, 2008, with a notation asking which address the product samples should be sent to. The agreement was executed by Mr. Schulz November 21, 2008.

This was before the Protocol was finalized and before the revised budget, which had tripled, was presented to Syncrude. Thus the documents do not support a finding that the confidentiality agreement signified project approval. Nor did Mr. Schulz provide any corroboration from others in the industry that the receipt of chemicals signifies project approval. [ 83 ] Therefore, in considering credibility in this case, I prefer the evidence of Syncrude to that of Mr. Schulz where there is conflict. [ 84 ] With this in mind, I make the following findings.

I find that Bio-Chem and Syncrude engaged in the development of the Protocol in the fall of 2008. There was serious interest in the Protocol expressed by Syncrude based on its participation in editing the Protocol and based on the fact that it continued development of the protocol after the first budget estimate of $300,000 on October 8, 2008. However, I find that Syncrude did not provide Bio-Chem and Mr. Schulz with a mandate to address its corrosion issues. That was an incorrect assumption by Mr. Schulz. [ 85 ] Nor did Syncrude operate from a sense of urgency regarding the Protocol. The evidence of Mr.

Austin and from correspondence at the time shows that the urgency related to finalizing edits on the Leak Report to the ERCB. The urgency did not extend to the Protocol. In internal emails between Mr. Flint and Mr. Austin at Syncrude regarding the Protocol development in October, Mr. Flint stated that “[t]ime is something I think we have on this matter”. The emails show that Mr. Austin took almost a month to respond with his comments on the first draft of the testing Protocol. [ 86 ] It appears that while Mr.

Shulz was thorough in his development of the Protocol by consulting with others outside of Syncrude, there were not clear communications on how this would affect the budget, or approval for the project. This was likely an oversight by both parties. Mr. Schulz made an incorrect assumption that the budget was not an issue, despite the fact that it had increased from $300,000 to approximately $900,000, and was far above the monetary range of any work he had performed before. I believe Mr.

Austin’s evidence that cost was a significant issue. [ 87 ] Therefore, I find that as of December 9, 2008, when the revised Protocol and Budget Document were sent to Syncrude, this represented Mr. Schulz’ offer to Syncrude to perform certain services at a specified price. It was on this date that there was a clear offer that outlined the essential terms. Mr. Schulz’ communications to Mr. Flint and Mr. Austin of that date show he believed the project would be approved, and the accounting was a technicality to follow, but that was an assumption on his part.

I do not find it was a reasonable assumption considering the degree to which the budget had expanded. [ 88 ] I accept Mr. Austin’s evidence that it did not resonate with him that Mr. Schulz had started testing by December 9, 2008. Mr. Austin’s comment that he “didn’t tell him to start testing” is indicative of Mr. Austin’s (and Syncrude’

s) position at the time, which is that an agreement had not been concluded and approval was still needed from upper management. [ 89 ] As mentioned, I do not accept Mr. Schulz’s position that the signing of the confidentiality agreement and receipt of chemicals signified acceptance of the project. The timing in the documents did not support his position and furthermore, GE Betz was not in a position to provide approval of the project. Nor was there any substantiation that such a custom exists in the industry. [ 90 ] I find Mr. Schulz’s offer of December 9, 2008 was not accepted by Syncrude. I believe Mr.

Austin’s evidence that he called Mr. Schulz in January 2009 and advised he was sorry but the project was not approved. I also note that Mr. Austin’s evidence to the same effect was read-in by Mr. Schulz’ counsel at trial, and bolsters this finding. Discovery evidence read-in by an opposing party becomes evidence in the action for all purposes: Mallet v Alberta , 2002 ABCA 297 , 15 Alta. L.R. (4 th ) 231. [ 91 ] There was no contract formed in this case, and the invoice is not payable on that basis.

[ 92 ] It is unfortunate that Mr. Schulz made costly assumptions in this case and proceeded without authorization. It is clear that Syncrude and WorleyParsons viewed Mr. Schulz as a valuable contractor to address specific needs, but they did not give him a mandate beyond that. Quantum Meruit [ 93 ] Bio-Chem claimed that in the alternative, I should find that Bio-Chem should be compensated for unjust enrichment on a quantum meruit basis. According to the Supreme Court in Kerr v Baranow , 2011 SCC 10 , 1 S.C.R. 269, quantum meruit can be restitutionary award of compensation for unjust enrichment. Bio-Chem would be required to prove the following elements: (

i) The defendant has benefited or been enriched by the plaintiff’s efforts and contributions; (ii) The plaintiff has suffered a corresponding deprivation; and (iii) There is no juristic reason for the enrichment. [ 94 ] Bio-Chem’s difficulty in this case is that that Syncrude was not enriched by Bio-Chem’s test findings. Mr. Schulz assumed the information was passed on from Worley Parsons to Syncrude for implementation, but this was not born out in the evidence. Ms. Stranzinger testified she had already reported to Syncrude on recycled water by the time she received Bio-Chem’s results. [ 95 ] Mr.

Austin was also clear that none of Bio-Chem’s recommendations were implemented at Syncrude. It would have been Mr. Austin who directed changes to their program, and they are on the same program they were at the time, just with tighter controls, such as controlling the oxygen letdown into the water as per the Syncrude report to the ERCB.

Syncrude used Brenntag, not GE Betz, as its zinc- orthophosphate supplier prior to the Protocol and continues to use Brenntag to this day. [ 96 ] Absent proof of the first element of enrichment, Bio-Chem’s claim must fail. [ 97 ] In the result, the claim of Bio-Chem Consulting against Syncrude Canada is dismissed. Costs [ 98 ] If the parties are unable to agree on costs, they may make an appointment to speak to me. Heard on the 14 th day of March, 2016 to the 17 th day of March, 2016. Dated at the City of Calgary, Alberta this 13 th day of July, 2016. J.T. McCarthy J.C.Q.B.A. Appearances: Johanna C. Price/E.

Jane Butcher, Peacock Linder Halt & Mack for the Plaintiff Jonathan W. McCully, Sharek & Co. for the Defendant