Dow Chemical Canada ULC v NOVA Chemicals Corporation, 2021 ABQB 167

Court of Queen’s Bench of Alberta Citation: Dow Chemical Canada ULC v NOVA Chemicals Corporation, 2021 ABQB 167 Date: 20210303 Docket: 0601 07921 Registry: Calgary Between: Dow Chemical Canada ULC and Dow Europe GmbH Plaintiffs/Defendants by Counterclaim - and - NOVA Chemicals Corporation Defendant/Plaintiff by Counterclaim _______________________________________________________ Endorsement of the Honourable Madam Justice B.E.

Romaine _______________________________________________________ [ 1 ] The parties disagree about whether the next stage in this litigation should occur in the fall of this year or the spring of 2022. [ 2 ] To put this dispute in context, I will summarize where we currently are in the litigation. [ 3 ] In the Court of Appeal's judgment roll of January 19, 2021: (

a) The Court stated that NOVA's appeal with respect to the calculation of damages is allowed in part, and referred back to this Court to determine direct losses arising from NOVA's breaches, excluding indirect or consequential damages, in accordance with the Court of

Appeal's reasons. (

b) The Court issued directions with respect to the conversion of allocation damages to Canadian dollars and the calculation of interest. (

c) NOVA's appeal from the dismissal of its counterclaim is dismissed, except that the remedial effect of the illegality of the performance of the Ethane Pooling covenant is referred back to this Court for determination in accordance with the Court of Appeal's reasons. (

d) This Court is to determine all issues arising from the recalculation of damages with respect to the issue of direct versus indirect damages, including whether NOVA overpaid damages to which Dow is entitled after damages are recalculated, the quantum of such recalculated damages and any overpayment, the timing of repayment and any rights of set-off arising from any overpayment and any claims of interest. (

e) The balance of the appeal was dismissed. [ 4 ] Thus, as Dow submits, the Court of Appeal impliedly affirmed my finding that NOVA is under an obligation to operate E3 at full capacity, and that it was in breach of that obligation. [ 5 ] The Court of Appeal did not change what I found to be the definition of productive capacity or change the way in which I decided that it was to be calculated. I understand that it was not asked to do so.

Therefore, it will not be necessary to have expert witnesses readdress these issues. [ 6 ] I note that, with respect to the damages recalculation, the Court of Appeal's reasons indicate that Dow's damages are prima facie the value of ethylene that it was entitled to under the contract but did not receive.

The Court of Appeal comments that quantification of these foreseeable damages is the value of ethylene minus the cost of producing it, and that, if Dow was forced to acquire higher cost ethylene from another source, that might be another way of calculating its losses. [ 7 ] The Court commented further that, in a contract like this, for the delivery of a product, the loss of the value of the product is the direct damage, and anything above the market value of the undelivered product is prima facie "indirect or consequential". [ 8 ] None of the directions in the judgment roll are a surprise, given the Court of Appeal's reasons.

During a hearing preparation meeting in November, 2020, the parties agreed to a single hearing for both the damages recalculation issue and the top-up of damages to 2018. That hearing was envisaged by all parties to occur in the fall of 2021. [ 9 ] Last week, NOVA produced a new proposed litigation schedule.

Rather than a combined damages recalculation and top-up hearing in the fall of this year, NOVA submits that the matter should not be heard until early 2022 in a five week hearing that would deal with damages as recalculated from 2001 to 2012 and then from 2013 to 2018, and liability for the period 2014 to 2018. This is based on the assumption that NOVA's appeal of my November 24, 2020 order will succeed.

In that order, I indicated that, while I reserved on a number of specifically identified issues in my reasons for judgment, including quantification of Dow's remaining damages to the date of judgment, liability was not among those reserved issues, and that I had no jurisdiction to reopen the reservation made in the judgment so as to permit a redetermination of NOVA's liability. [ 10 ] NOVA concedes that, if it is unsuccessful in its appeal of my order, it would be possible to have a damage recalculation and top-up hearing in the fall of 2021, but says that if it is successful, the hearing cannot occur this year. [ 11 ] It also appears that NOVA's approach would envisage proceeding in 2021 on a portion of the damages recalculation issue before the top-up hearing, following an exchange of expert reports on the damages recalculation issue.

NOVA proposes applying at that stage to have Dow refund at least the portion of the overpayment, if any, that its respective experts agree would be owed. [ 12 ] This appears to be similar to what NOVA asked the Court of Appeal to include in its judgment roll; that it was entitled to be reimbursed the excess damages it has paid under a new damages recalculation.

I am advised that instead, the Court of Appeal referred the question to this Court, including the issues of quantum, timing of repayment and any rights of set-off. [ 13 ] I cannot agree that the scheduling of a combined recalculated damages and top-up hearing should proceed on the speculative basis that NOVA may be successful in its appeal of my November, 2020 order. [ 14 ] As the appeal is proceeding on a fast track basis and will be heard on March 30, 2021, it is quite possible that there will be a decision on the appeal before a combined damages recalculation and top-up hearing as currently envisaged would be heard. [ 15 ] If NOVA is unsuccessful in its appeal, the parties will have prepared for a fall hearing, and there will be no delay. [ 16 ] As Mr.

Leitl points out, if NOVA is successful in its appeal, the top-up hearing will be fundamentally different from a top-up hearing on damages alone. It would involve issues of liability in the top-up period, lay witnesses, questioning and what Mr.

Leitl describes as millions of new documents produced by NOVA. [ 17 ] It would then be necessary to revisit the scheduling of the hearing, but the preparation necessary for the recalculation hearing and for a top-up hearing focused only on damages would not be wasted, as, in any event, the parties would have to address the possibility of damages if NOVA is found to have been partially or wholly liable during the top-up period after submissions are made on liability. [ 18 ] Dow should not be put in the position of preparing for a type of hearing that may not be necessary. [ 19 ] Proceeding as NOVA suggests would mean the loss of an opportunity to have the recalculation hearing and the top-up hearing occur in the fall of 2021, more than four years after this Court's decision and more than two years after the Court of Appeal's decision.

[ 20 ] I make no comment on a possible NOVA application for repayment of excess damages paid prior to the combined hearing.

I would certainly be available to hear such an application if it is made. [ 21 ] Dow suggests that the scheduling for a fall hearing can be quite simple - a deadline for the simultaneous exchange of primary damages reports 60 days before the commencement of the hearing and a deadline of 30 days before commencement for reply reports. [ 22 ] Dow also notes that the parties have engaged in extensive document exchange over the last two years, and that there is no need for a deadline for document exchange, other than any new documents that may arise from the expert reports.

That exchange, Dow suggests, can be worked out by the parties. [ 23 ] NOVA has not responded in a meaningful way to a

schedule that would lead to a fall hearing. Therefore, I direct the parties to attempt to produce such a schedule. Since I gave a

summary of my decision on February 24, 2021, NOVA has questioned what I mean by a "fall hearing". I have not requested a fall time slot for the hearing, as I expect to hear from the parties as to their available dates and the anticipated length of the hearing. [ 24 ] If the parties are unable to agree on the details, we will

schedule another hearing preparation conference to resolve the outstanding issues. Heard on the 24 th day of February, 2021. Dated at Calgary, Alberta this 3 rd day of March, 2021. B.E. Romaine J.C.Q.B.A. Appearances: Blair C. Yorke-Slader, Q.C. Ciara MacKey, Denise Brunsdon, and Dylan Gibbs for the Plaintiffs/Defendants by Counterclaim Steven Leitl, Q.C., Colin Feasby, Q.C., and Tris Mallett for the Defendant/Plaintiff by Counterclaim