Dow Chemical Canada ULC v NOVA Chemicals Corporation, 2021 ABQB 621

Court of Queen’s Bench of Alberta Citation: Dow Chemical Canada ULC v NOVA Chemicals Corporation, 2021 ABQB 621 Date: 20210806 Docket: 0601 07921 Registry: Calgary Between: Dow Chemical Canada ULC and Dow Europe GmbH Plaintiffs - and - NOVA Chemicals Corporation Defendant _______________________________________________________ Reasons for Decision of the Honourable Madam Justice B.E. Romaine _______________________________________________________ I. Introduction [ 1 ] This application involves the

interpretation of the reasons for judgment in this matter ( 2018 ABQB 482 ) and the judgment roll dated June 20, 2018, specifically the issue of the commencement date of damages for certain accounting adjustment claims. I confirm that damages were awarded for these adjustment claims from January 21, 2012 to December 31, 2012.

II. Relevant Facts [ 2 ] I issued reasons for decision in this matter on June 20, 2018. On September 12, 2019, the parties appeared before me to make submissions on the wording of the judgment roll. They had agreed on a form of order, other than on a few words. Paragraph 3 of Dow's proposed draft read as follows: The life-to-date accounting reconciliation and ethane fixed costs adjustment claims asserted by the Plaintiffs are dismissed for the period that ends in 2012 by reason of limitation of action , but are allowed thereafter .

The Plaintiffs are granted leave for 90 days to amend their Fifth Amended Statement of Claim to plead these claims. (emphasis added) [ 3 ] NOVA objected to the inclusion of the words "but are allowed thereafter". [ 4 ] The wording of paragraph 6(

b) of the judgment roll is also relevant to the issues in this application: 6. Judgment remains reserved in respect of the following matters: .... (

b) The quantification of the Plaintiffs' remaining damages to the date hereof in accordance with the principles accepted for the calculation of damages in the Reasons for Judgment; [ 5 ] The parties referred me to a number of references in the reasons for judgment relevant to the issue. Defined terms used in this decision have the meaning given to them in the reasons. A. Life-to-date Accounting Reconciliation Adjustment [ 6 ] My reasons with respect to the life-to-date accounting reconciliation adjustment (LTD adjustment) commence at paragraph 826 of the reasons.

I describe the basis for this claim by reference to the report of Dow's expert Charles Mikulka dated January 20, 2014. In paragraph 745 of the reasons referring to Mr. Mikulka's evidence generally, I note that "[a]rising from Mr. Mikulka's testimony, the damages claims by Dow through to December 21, 2012, other than for co-products, ethane purity and other adjustments , are as follows: (emphasis added). [ 7 ] Mr.

Mikulka's opinion with respect to the LTD adjustment claim was that "effectively E3 was overpaying for ethane it was receiving over the damages period," and that Dow's portion of this overpayment was $15,507,355. [ 8 ] I noted that Dow's corporate officer had confirmed that Dow was aware of the accounting method that gives rise to this claim by September 24, 2002 as a result of a 2001/2002 audit, and that Dow did not object to NOVA's use of this accounting method at any time prior to March 23, 2012. [ 9 ] At paragraph 830, I found that Dow knew or could have reasonably discovered that NOVA was using the impugned accounting method as early as 2002.

I then noted that, since the claim was first raised in Mr. Mikulka's 2014 report, damages prior to January 2012 were barred pursuant to the Limitations Act , RSA 2000, c L-12 , referring to my analysis under the heading "Limitations of Actions". This was a reference to the ultimate ten-year limitation period. [ 10 ] I then referred to NOVA's submission that Dow could not make this claim as it had not raised it in Dow's Fifth Amended Statement of Claim, but noted that NOVA had been aware that Dow disagreed with the claim since 2012.

I therefore allowed Dow to amend its claim "with respect to future breaches", noting that I had similarly allowed NOVA to amend its pleadings on the last day of trial. [ 11 ] Finally, in paragraph 832, I found that Dow had failed to establish that it was entitled to damages for the LTD adjustment claim "prior to 2012". B. Ethane Fixed cost Adjustment (EFC adjustment) [ 12 ] This claim relates to the

interpretation of "Feedstock Fraction", a defined term in the OSA. In paragraphs 833 to 840 of the reasons, I refer to the relevant portions of the OSA, and the submissions made by the parties with respect to how they should be interpreted. In paragraph 838 to 840, I set out my disagreement with NOVA's submissions with respect to the claim, which Mr.

Mikulka quantified at $42,214,429. [ 13 ] In paragraph 841, I referred to Dow's admission that it was aware that NOVA was calculating Feedstock Fractions in the manner complained of since 2001, and that the claim was only raised in the Mikulka report dated January 20, 2014. I therefore found that the claims for damages under this heading were barred under the Limitations Act "during the damages period". [ 14 ] In paragraph 842, I found that, with respect to future damages, Mr. Mikulka's

interpretation of the relevant portions of the OSA was correct, and "this is a continuing breach". I allowed Dow to amend its pleadings "if it wishes to pursue this claim". C. Limitations of Actions [ 15 ] Under this heading in the reasons at paragraph 1140, I noted NOVA's submission that the LTD adjustment and the EFC adjustment claims were barred in their entirety under the ultimate ten-year limitation period.

[ 16 ] I referred to the relevant sections of the Limitations Act , noting that

a) the ten-year rule operates irrespective of a claimant's knowledge or diligence, and

b) a defence to the claims at issue arose in accordance with section 3(3) of the Act . [ 17 ] In paragraph 1151, I found that the ten-year period for the LTD adjustment claim began to run in 2000, and for the EFC adjustment, began to run in 2001. By implication, this would mean that damages claimed for the period between 2000 and 2010 for the LTD adjustment claim and between 2001 and 2011 for the EFC adjustment were barred. [ 18 ] In paragraph 1152, I then noted that both of the claims were statute-barred with respect to the damages period "that ends in 2012".

Given what I had already said about the ten-year limitation period, this sentence refers to the two-year limitation period, which, as I had noted previously, began with Mr. Mikulka's report dated January 20, 2014. D. Submissions [ 19 ] At the hearing to settle the terms of the judgment roll on September 12, 2019, Dow submitted that these references mean that I had ruled that the claims were barred for the years 2000 to 2010 in the case of the LTD adjustment, and 2001 to 2011 in the case of the EFC adjustment. However, as they had not been expressly pleaded, using Mr.

Mikulka's January 2014 report as effective notice to NOVA, I allowed Dow to amend its statement of claim to plead the more recent claims. These amendments were made in late 2018. [ 20 ] NOVA submitted that the reasons mean that I applied the ten-year limitation period and denied the claims to the end of 2012, while allowing an amendment that would be dealt with subsequently when more recent damages in the top-up years of the action are dealt with.

NOVA submits that the "damages period" referred to in paragraph 841 is the end of 2012. [ 21 ] NOVA submitted that because the ten-year limitation had started, there was no cause of action at all and indeed, while I allowed an amendment to pleadings that would have to be dealt with in the future, I did not allow the claims for the future. [ 22 ] NOVA further submitted that, while I allowed Dow to amend its pleadings, the same ten-year ultimate limitation date defence was open to NOVA for the period subsequent to 2012. [ 23 ] Dow disagreed with this analysis of the law, and instead characterized the ten-year limitation rule as a "moving blackout period" that does not exclude future breaches.

Dow submitted that for future breaches, reference to the two year discoverability test was appropriate. Since NOVA had fair notice of the claims on January 21, 2014, damages for breaches that occurred after January 20, 2012 were not barred by reason of a limitations defence. [ 24 ] I accepted Dow's version of paragraph 3 of the draft judgment roll, and allowed the inclusion of the words "but are allowed thereafter" in the final order. The judgment roll was filed on September 24, 2019.

I understand that paragraph 3 of the judgment roll was not appealed, and is thus final. [ 25 ] These issues resurfaced in the fall of 2020, and by order dated November 25, 2020, I directed that the following issues be determined at a hearing before the Court commencing January 4, 2021, as they were unaffected by the Court of Appeal decision: A. Is the commencement date for the EFC adjustment January 21, 2012 or January 1, 2013? B.

Is the commencement date for the LTD adjustment January 21, 2012 or January 1, 2013? [ 26 ] The parties proposed that these issues could be determined by written briefs without oral argument, and I agreed. The parties exchanged written briefs in early January, 2021, and then a dispute arose about the scope of the issues. Dow submitted that NOVA's brief reframed the issues and raised additional ones.

After a hearing on February 17, 2021, Dow was allowed to file a reply brief to address whether the adjustment damages are barred prior to January 21, 2012, or prior to January 1, 2013, and the other issues raised in NOVA's brief were adjourned to the combined damages hearing. III. Analysis A. Start Date for Non-barred Adjustment Damages [ 27 ] I readily concede that the reasons for judgment with respect to these issues are not a model of clarity. However, notwithstanding NOVA's submissions, not all damage categories have the same start date for remaining damages.

For example, while Dow's future optimization and related co-product damages have a start date of January 1, 2013, the infrastructure revenue damages have a start date of January 1, 2014. I referred to this disparity by reference to Mr. Mikulka's report in paragraph 745 of the reasons.

In recognizing this, I did not, as NOVA submits, find that all damages yet to be quantified must be quantified from a start date of January 1, 2013. [ 28 ] With respect to the LTD adjustment, I barred damages under this category prior to January 1, 2012, two years prior to the time NOVA had notice that Dow objected to the use of this accounting method in Mr. Mikulka's January 20, 2014 report, applying the two- year limitation period rules.

Thus, while the reference to "prior to 2012" in paragraph 832 was ambiguous, in context these words refer to the period prior to January 21, 2012. [ 29 ] With respect to the EFC adjustment, I again referred to the Mikulka report dated January 20, 2014. While again the words in paragraph 841 "during the damages period" were ambiguous, the words preceding that imply that I was only barring this claim for the period exceeding two years prior to the date of the Mikulka report, again referring to the two-year limitation rule. There was otherwise no reason to refer to the date of the Mikulka report.

It is noteworthy that I accepted Mr. Mikulka's

interpretation of the relevant portions of the OSA, and therefore found that the EFC adjustment was a continuing breach. NOVA concedes that it can be inferred that the same

conclusion was reached with respect to LTD adjustment damages. [ 30 ] The reference in paragraph 1152 to both claims being statute-barred with respect to the damages period "that ends in 2012" does not change this, as it refers to the two-year limitation period that I previously identified as being prior to January 20, 2014, and not to the ten-year period discussed under "Limitations of Actions", which has nothing to do with knowledge or diligence. [ 31 ] The fact that I accepted the words "but allowed thereafter" in the judgment roll confirms this

interpretation. If the reference to "the period that ends in 2012" in paragraph 3 of the judgment roll referred to December 31, 2012, there would be no need for the words "but allowed thereafter". NOVA's submission that these words refer to leave to amend the pleadings makes no sense grammatically or logically. While the judgment roll did not quantify adjustment damages for the period January 21, 2012 to December 31, 2012, that is because the effect of the application of the limitations defence did not allow a calculation from Mr. Mikulka's report. That does not change the fact that I accepted Mr.

Mikulka's analysis; I found liability for the adjustment damages from January 21, 2012 to December 31, 2012; and I allowed damages for that period. [ 32 ] NOVA notes that it submitted in written argument at the time of the trial that all of Dow's claims arising more than two years before Dow actually sought a remedial order with respect to this issue are statute-barred, and that a remedial order had not yet been sought. [ 33 ] Dow in its trial written argument noted that it first formally objected to the adjustments issues in Mr. Mikulka's report in 2014.

It pointed out that the related facts are largely not in dispute, that NOVA had full opportunities of pre-trial questioning and cross- examination on the issues at trial, and that NOVA led its own evidence on the issues, so there could be no complaint of surprise.

Dow submitted that if the Court took the view that there should be a formal pleading amendment, one was available pursuant to Rule 3.65, pointing out that in its own application for amendment of the pleadings on the last day of trial, NOVA emphasized the breadth of that rule. [ 34 ] NOVA now makes the argument that the start date for the LTD and EFC adjustment claims should be two years before the pleadings were amended, not two years prior to the date on which Dow delivered the Mikulka report.

NOVA cites three cases in support of this argument that are distinguishable on their facts. [ 35 ] Whether or not this submission is correct, it was not made to the Court at the time amendment to pleadings was discussed, whether in respect of NOVA's application to amend pleadings, or Dow's later application. In both cases, the implication was that the amended pleadings would take effect with respect to the issues and arguments made at trial. Had NOVA's current submission been made, Dow would have had the opportunity to counter the submission by reference to Section 6(1) and 6(4) of the Limitations Act .

In any event, the reasons for judgment and the judgment roll do not reflect these submissions, and they are final. I am functus on this issue. B.

Is NOVA entitled to advance limitations defences for the period following January 21, 2012 at the combined damages hearing? [ 36 ] NOVA submits that it did not understand the Court to be awarding LTD and EFC damages for the period following January 1, 2013 and foreclosing any further substantive and limitations defences in the top-up period by the words of paragraph 3 of the judgment roll. [ 37 ] It submits that a fair process in this circumstance requires that NOVA be permitted to advance both substantive and limitations defences for the period following whatever the Court determines to be the start date of the LTD and EFC damages claims. [ 38 ] The parties agreed at the February 17, 2021 case conference that this is an issue that will be argued at the fall hearing.

Dated at the City of Calgary, Alberta this 6 th day of August, 2021. B.E. Romaine J.C.Q.B.A. Appearances Blair C. Yorke-Slader, Q.C. Ciara MacKey, and Denise Brunsdon for the Plaintiffs

Steven Leitl, Q.C., Colin Feasby Q.C., Bryan Walker, Tommy Gelbman, and John McCammon for the Defendant