Dow Chemical Canada ULC v NOVA Chemicals Corporation, 2021 ABQB 974

Court of Queen’s Bench of Alberta Citation: Dow Chemical Canada ULC v NOVA Chemicals Corporation, 2021 ABQB 974 Date: 20211208 Docket: 0601 07921 Registry: Calgary Between: Dow Chemical Canada ULC and Dow Europe GmbH Respondents/Plaintiffs - and - NOVA Chemicals Corporation Applicant/Defendant _______________________________________________________ Reasons for Decision of the Honourable Madam Justice B.E. Romaine _______________________________________________________ I. Introduction [ 1 ] Dow brings this application for enforcement of prior rulings for the purpose of the damages and top-up hearing that was to commence on November 9, 2021. Specifically, Dow seeks:

a) an order enforcing the specific exclusion of the inadmissible portions of the January 2020 expert reports of Kevin Waguespack and Alan Reynolds, and confirming the exclusion of recently delivered supplementary reports of Mr. Waguespack and of Ramaswami

Subramanian, all according to previous rulings of this Court and the Court of Appeal; and

b) an order enforcing the limited scope of the productive capability issues for the damages hearing, clarifying or correcting any portion of this Court's October 26, 2021 decision that may be contended to permit otherwise, and including a general exclusion of all operational and "constraints" lay witness testimony and documentary evidence, all according to previous rulings of this Court and the Court of Appeal. [ 2 ] NOVA promptly cross-applied for:

a) an order that the issues raised in Dow's application be determined in the course of the damages hearing, including that, without prejudice to any objections by the opposing party, all expert reports be admitted into evidence and all experts be permitted to testify so as to facilitate a proper determination of those issues in accordance with the laws of evidence, the requirements of fairness, and the Alberta Rules of Court;

b) in the alternative, an order striking all or portions of the expert reports of Messrs. Holloway, Kapur, Shehadeh and Mikulka (the "Dow Expert Reports") on the grounds set out in the Rule 5.36 notices served by NOVA on Dow on September 13, 2021 and to be further set out in NOVA's brief filed on November 22, 2021. [ 3 ] Reasons for Judgment in this litigation were released on October 11, 2018.

The process that was to lead to a top-up of damages hearing for the period from December 31, 2012, the date evidence of operations was curtailed for the purpose of the experts' calculation of damages by agreement of the parties, until the date of judgment began in September 2019. Since then, the parties have appeared before this Court approximately 24 times. I have made rulings and directions at about 16 of those 24 appearances. I have issued nine written decisions. The parties have appealed several of these decisions, and the appeal has been dismissed. Three or four formal orders have been entered into.

Four outstanding draft orders have been in circulation, but not settled. Two appeals have been filed but have been deferred until I reach a decision in the top-up and damages hearing. [ 4 ] It is past time for this top-up and damages hearing to be heard, but the parties have not been able to agree on the scope of the hearing, despite several decisions that sought to provide clarity. [ 5 ] This decision is replete with references to past decisions of this Court and the Court of Appeal and past orders. This should not be necessary, but from the application, cross-application and briefs, it appears to be so.

I have no jurisdiction to vary otherwise final decisions. This decision however, attempts to clarify issues about the scope of the hearing that should already be clear, to disabuse selective parsing and misinterpretations of portions of past decisions and to ensure that this long-postponed hearing will finally be able to proceed. II. Analysis [ 6 ] The issues in contention can be addressed under three headings: A. Expert Witnesses 1. First Reports of Mr. Waguespack and Mr. Reynolds [ 7 ] Dow seeks the exclusion of all or a part of the January 2020 reports of NOVA witnesses Kevin Waguespack and Alan Reynolds.

In 2020 ABQB 441 , I found that Mr. Waguespack's method of calculation of productive capability did not correspond this Court's accepted productive capability methodologies, which were not challenged on appeal of the trial judgment and are therefore res judicata : 2021 ABCA 153 at para 102 . [ 8 ] I found that it was clear that Mr. Waguespack's calculations were not in accordance with my directions as to the quantification of top-up damages and that therefore an accompanying calculation of top-up damages by NOVA expert John Williams based on Mr. Waguespack's approach was likewise flawed.

I found that the question of whether expert reports respond to the Court's direction with respect to the nature and limitations of the top-up hearing process is an appropriate issue for resolution in a pre-hearing decision. I noted that Mr. Waguespack's methodology for calculating damages, to the extent it did not correspond with the principles I accepted for the assessment of damages in the Reasons for Judgment, was not relevant and not appropriate evidence for the top-up and damages hearing.

The Court of Appeal confirmed that this Court was entitled "to disregard portions of expert reports about E3's productive capability that did not use the methodology" accepted at trial, and dismissed an appeal with respect to these rulings: 2021 ABCA 153 at para 102 and 104 . [ 9 ] NOVA submits that the ruling I made with respect to Mr. Waguespack's first report need not be observed because no order was taken out after my decision was released. That does not entitle NOVA to ignore the decision. NOVA also suggests that interlocutory procedural directions or orders do not result in res judicata .

Be that as it may, there is no reason to change this decision. Nothing has happened in the months since the decision that changes the nature of the challenged parts of Mr. Waguespack's report and those of Mr. Williams and Mr. Reynolds that rely on Mr. Waguespack's new and rejected definition of productive capability, that would make such opinion now material or relevant. [ 10 ] In an oral decision on August 20, 2020, I noted that Mr. Reynolds' report, to the extent that it is responsive to Mr. Holloways' report and in compliance with accepted assessment principles is admissible.

Obviously, to the extent that it does not, and that it relies on

Mr. Waguespack's rejected opinion, it is not admissible. [ 11 ] Therefore, portions of the first report of Mr. Waguespack and Mr. Reynolds continue to be inadmissible as evidence at the hearing in accordance with my decision at 2020 ABQB 441 (paras 34 to 42 ) and this Court's August 20, 2020 oral decision to the extent that these reports refer to Mr. Waguespack's new definition of productive capability. 2. Mr. Waguespack's Second Report [ 12 ] Dow is correct that in oral reasons delivered on August 20, 2020, I denied NOVA leave to file a supplementary report by Mr. Waguespack.

This decision was made in contemplation of a damages hearing to be heard in January 2021. I noted that the decision of July 31, 2020 did not open the door to any new issue that the parties did not know or ought to have known would be an issue for the top- up hearing, and that NOVA had the opportunity to address relevant issues in the existing reports. I also noted that allowing NOVA to file a new report months after the deadline for exchange of expert reports had passed would be prejudicial to Dow and an unjustifiable protraction of the process leading to further delay and unwarranted complications.

Unfortunately, avoidance of a protracted process was a vain hope. [ 13 ] NOVA appealed the August 20, 2020 ruling, and its appeal was dismissed in full, with the Court of Appeal noting that the Court's rulings "seem to be, on their face, entirely reasonable": 2021 ABCA 153 at para 104 . [ 14 ] NOVA submits that this Court's scheduling order in anticipation of a November 2021 hearing somehow opened the door to a new productive capability report from Mr. Waguespack. This misinterprets the order: it is clear from its

preamble, its timing and its place in the chronology of decisions and appeals that the expert reports referred to in the order relate to an economist and a damages expert, and not to another productive capability report. [ 15 ] However, the hearing scheduled for January 2021 did not occur, and has been delayed by almost 11 months. Dow has good reason to argue that Mr. Waguespack's second opinion should not be admitted into evidence, given previous decisions.

However, by reason of its own strategic choice to present a clearly non-compliant productive capability expert report, this would leave NOVA without any expert report relating to this important issue. Dow has been aware of Mr. Waguespack's second report for a number of months, and I cannot say that Dow would be prejudiced to the same extent as it would have been in August, 2020. Despite Dow's cogent submissions, trial fairness compels me to allow NOVA an opportunity to attempt to adduce into evidence the second Waguespack report. [ 16 ] That is not to say that Mr.

Waguespack's second opinion is automatically admissible. To the extent that it does not comply with the quantification principles for damages that I accepted in the Reasons for Judgment, or is not in accordance with my directions as to the quantification of damages, it may be found to be inadmissible in whole or in part. [ 17 ] Therefore, the admissibility of the second report of Mr. Waguespack and the reports of Mr. Williams and Mr.

Montgomery may be addressed at the hearing, in conjunction with the issue of whether they comply with the assessment principles and the threshold principle for consideration of alleged constraints. [ 18 ] If Mr. Waguespack's second report is found to be admissible, Dow will have an opportunity of rebuttal. [ 19 ] Court of Appeal at para 102: We further disagree with NOVA's contention that the trial judge would be wrong to disregard portions of expert reports about E3's productive capability that did not use the methodology she accepted at trial.

The productive methodologies that the trial judge accepted, unchallenged and undisturbed on appeal, continue to apply. Indeed, NOVA's experts concede their productive capability methodologies do not adhere to the principles the trial judge directed must apply, a direction undisturbed by this Court on appeal. By necessary implication, this Court affirmed the trial judge's finding that NOVA is under an obligation to operate E3 at full capacity.

This Court did not alter, nor was it asked to alter, the trial judge's definition of productive capability, or the way in which the trial judge decided productive capability was to be calculated. Accordingly, we conclude the experts need not address these issues again. 3. Report of Mr. Subramanian on NOx Emissions [ 20 ] At the time of the issuance of the October 26, 2021 decision, I had not seen either the second report of Mr. Waguespack nor the report of Mr. Subramanian.

I have now reviewed copies of these reports. [ 21 ] In the August 20, 2020 oral decision, I allowed NOVA to make submissions on the implication of the NOx issue from the testing that was to be done in the fall of 2020, to be "corroborated by an independent third-party report." At the time, it appeared that the issue would likely be resolved through an exchange of briefs. [ 22 ] On December 15, 2020, counsel for NOVA advised the Court by letter that NOx testing had been conducted at E3 by a third party, Bureau Veritas, between September 8-11 and 14-18, 2020.

Dow representatives were present on site during the NOx testing and received the raw data on October 28, 2020. NOVA prepared a report that is a

summary of the results and analysis of the testing conducted by Bureau Veritas and shared it with Dow and the Court on December 14, 2020. [ 23 ] Dow submits that this ought to have ended the matter, and that neither this Court or the Court of Appeal have ever purported to countermand the August 20, 2020 ruling denying further expert reports or permitted a for-litigation NOx report that purports to address E3's top-up productive capability on the basis of further 2021 testing.

Dow submits that previous expert reports raised no genuine issue of any impact of NOx limits on E3's productive capacity. [ 24 ] As indicated in the October 26, 2021 decision, I had not reviewed Mr. Subramanian's report and was not aware of his opinion. I therefore noted that Dow was entitled to object to the admission of this report on any basis, including factors such as Mr. Subramanian's qualifications or the lateness of the report.

[ 25 ] Having now received the report, I direct that the legal issue described in "K" of Appendix A of the October 26, 2021 decision, being to what extent, if any, should damages based on productive capacity be adjusted to account for subsequently discovered regulatory constraints on NOx emissions, must be determined before the issue of the admissibility of Mr. Subramanian's report is decided. If Mr.

Subramanian's report is found to be admissible, a process to address any prejudice caused to Dow by the unexpected report and its late arrival will be addressed, including the opportunity to file an expert report in response. 4. Reports of Messrs Kapur, Holloway, Mikulka and Shehadeh [ 26 ] Nova cross-applies to exclude in whole or in part the expert reports of Dow's expert witnesses on the basis that they do not accord with the principles accepted in the Reasons for Judgment, as modified by the Court of Appeal, and that they seek to advance claims not pleaded by Dow.

This is inconsistent with the prior opinions of NOVA's own experts, which confirmed that the Dow expert reports were compliant with the accepted methodology. [ 27 ] The difference between the first report of Mr. Waguespack and the reports that built on his new definition of productive capacity and the Dow expert reports is that Mr. Waguespack's report was clear on its face that it did not comply with accepted assessment principles. The Dow experts all state that their reports comply with the Reasons for Judgment.

While NOVA disagrees with this for a variety of reasons, the issue of whether or not they comply is properly an issue for the damages hearing. [ 28 ] Therefore, NOVA's alternative cross-application to strike the expert reports of Messrs Holloway, Kapur, Shehadeh and Mikulka is dismissed as premature. The admissibility of these expert reports may be addressed at the damages hearing, in conjunction with the issue of whether they comply with the assessment principles approved in the Reasons for Judgment, except as they have been modified by the Court of Appeal's 2020 Memorandum of Judgment. 5.

Process [ 29 ] Evidence of documentation relied upon by any expert will not need to be introduced by a lay witness. Such documentation may be introduced as evidence through the agreement of counsel or through its introduction to evidence by the expert during his testimony, to the extent that the expert's opinion on the subject is admissible and relevant. B. Lay Witnesses and Evidence of Constraints 1. NOVA Lay Witnesses [ 30 ] It is obvious that there may have been constraints in the top-up period that were different than those encountered and described during the trial period.

With respect to what NOVA submitted were constraints that allegedly affected liability during the pre- 2013 trial period, I found that they were overstated or, while perhaps a plant issue that needed to be addressed in a timely manner, did not constrain production. I accepted the opinions of Dow's experts that NOVA had failed to address these issues expeditiously. I accepted the evidence of Mr. Holloway that there were no uncommon mechanical constraints that ought to have restricted E3 from reaching its full capacity other than some of the fouling.

However, with respect to the fouling and the burner replacement issues, I found that NOVA's approach to repairing the issues was slow, given that it did not itself need the extra ethylene that could have been provided. [ 31 ] Therefore with respect to alleged constraints in the top-up period, evidence of constraints is only material and admissible if it meets the threshold requirement of relevant constraints as described in the Reasons for Judgment.

As noted in the October 26, 2021 decision, that requirement threshold principle is whether the alleged constraints were uncommon or whether they were unforeseen and unavoidable and whether they would limit E3's productive capacity. [ 32 ] As I had previously noted on July 31, 2020 in 2020 ABQB 441 at para 55 , even if NOVA could identify a new constraint not resolvable earlier through reasonable diligence, it would first need to show that the constraint impacted top-up damages.

Dow submits that none of NOVA's experts has calculated a negative damages impact of any identified constraints. [ 33 ] I agree that only evidence of a constraint that meets the threshold definition of relevant constraints and that is shown to have resulted in reduced productive capability is admissible and relevant to the quantification of damages. A non-quantified or quantifiable impact is of no assistance in quantifying damages.

Evidence of constraints that is led for the purpose of a defence to liability is not admissible, as this Court and the Court of Appeal are functus officio on liability. [ 34 ] If admissible evidence of constraints is adduced at the hearing, this Court must then decide whether the accepted approach to the calculation of damages adjusts for such constraints, as I found was the case for the pre-2013 period in the Reasons for Judgment: para 760. [ 35 ] Dow submits that recent events have led to the necessity of clarifying and enforcing these principles.

In September, 2021, less than two months before the scheduled hearing, NOVA counsel advised Dow counsel that NOVA intended to call seven lay witnesses. The description of the subject matter of the lay witness testimony included references to:

a) changes in the manner in which E3 was operated, including constraints that arose during the top-up period;

b) witness reports to the JVMC and several witnesses’ "interaction with Dow regarding the operation of E3";

c) maintenance matters and reliability issues at E3 arising during the top-up period and their impact on production;

d) relevant accounting matters;

e) NOx testing and reporting; and

f) pricing of NOVA's ethylene supply contracts. [ 36 ] At about the same time, NOVA began to send to Dow over 1.3 million pages of records of "operational issues and constraints". [ 37 ] At a hearing in October, 2021 with respect to Dow's concerns about this huge delivery of documents and the proposed subject matter of the testimony of NOVA's lay witnesses, NOVA stated that there were 31 "constraints issues" that it should be entitled to present at the hearing through numerous lay witnesses and voluminous operations records. [ 38 ] It should not be necessary to repeat the paragraphs of the October 26, 2021 decision that make it plain that excerpts from the Court of Appeal's July decision did not expand the definition of relevant constraints: 2021 ABQB 845 at paras 33-38 . [ 39 ] Any evidence adduced to indicate that NOVA's operations of E3 changed in the top-up period is only relevant to the extent it relates to quantification of damages in accordance with the accepted principles.

Proof that any operational change affected the quantification of damages will be in the business records that were provided to the experts months ago. There is no need for evidence of why the data is what it is.

As noted by Dow, if in fact actual production in a month in the top-up period was equivalent to productive capability, there would be no damages in that month. [ 40 ] It follows that evidence of NOVA's "operational strategies" is not material or relevant nor is extensive lay witness testimony and records about how NOVA operated E3 during the top-up period, unless such testimony relates to a constraint that meets the threshold requirement in the Reasons for Judgment. [ 41 ] As noted by Dow, the Reasons for Judgment and the Judgment Roll determined three important things: 1) NOVA's obligation to optimize production to E3's productive capability, 2) NOVA's liability for failing to meet such obligation, and 3) this Court's rejection of Mr.

Ferrigno's productive capability methodology and suggested constraints adjustments in favour of the methodologies offered by Dow's experts, which already took into account any common and uncommon constraints in calculating a productive capability/effective capability/available capacity/production shortfall/Dow production gap.

The determination of those matters makes the top-up damages quantification a much simpler and narrower exercise than the trial had been. [ 42 ] Since NOVA's obligation to optimize production to E3’s productive capability has been finally determined, it would be irrelevant for NOVA to attempt, as it attempted at trial, to prove that it "ran E3 to constraint" unless the constraint meets the threshold level and affected productive capability.

Since liability has been finally determined, it would be irrelevant for NOVA to attempt, as it attempted at trial, to prove that it managed "constraints" well and was not guilty of wilful misconduct or gross negligence. This Court is functus officio on that issue.

Since the Court-accepted productive capability methodologies have been finally determined, it would be irrelevant for NOVA to attempt, as it attempted at trial and attempted again in its January 2020 expert reports, to adduce in evidence that in its operation of E3 it encountered "common constraints." I repeat that, even if it is able to establish that there were constraints in the top-up period that met the threshold level, there is still the issue of whether they are taken into account in the Court-accepted methodologies.

NOVA's operational strategies and conduct, including many so-called "constraints" encountered and NOVA's efforts to manage them, are matters affecting E3's actual production - the levels of which are not in dispute - rather than its productive capability. They are irrelevant if they do not meet the threshold level of relevant constraints and evidence of them would be inadmissible. [ 43 ] Given what was said about constraints in the October 26, 2021 decision, I expected that the scope of relevant documents would be narrowed: para 67.

I directed NOVA to identify to Dow the documents on which it no longer intends to rely: para 67. NOVA has not complied with this direction; instead it submits that its position is unchanged and that it will not comply with this direction until after it questions Dow’s lay witness. [ 44 ] Dow submits that, since there is no admissible expert evidence that quantifies the alleged impact of any of the alleged constraints according to Court-accepted productive capability methodologies, issue "E" in the Appendix attached to the October 26, 2021 decision should be struck.

NOVA submits that there are such constraints. [ 45 ] Dow submits that issue "E" should in any event not have been included as an issue for the hearing, given that in the July 31, 2020 decision, this Court found on the basis of the first Waguespack and Williams reports that there was no genuine issue with respect to constraints other than the plant equipment damages item that is now issue "D". As noted, an appeal of that decision was dismissed. [ 46 ] I make no finding with respect to Dow's characterization of the NOVA expert reports at this point in time.

Dow's submissions on this subject, and on the subject of issue "D" of Appendix A to the October 26, 2021 decision will be considered with respect to the admissibility of any evidence of alleged constraints.

The inclusion of issues "D" and "E" in the Appendix of the October 26, 2021 decision as issues for hearing will continue pending the admissibility of evidence of alleged constraints. [ 47 ] These directions with respect to the relevance and admissibility of evidence of constraints remain unchanged, will be enforced and will guide the admission of evidence at the damages hearing, including with respect to NOVA's proposed lay witnesses. [ 48 ] This decision does not preclude NOVA from calling lay witnesses to give relevant and admissible evidence.

Whether evidence that is proposed to be adduced by a lay witness is relevant and admissible will be determined at the hearing after the testimony of the expert witnesses. [ 49 ] To be clear, however, nothing compels a court to allow witnesses to give evidence at a hearing that has been found to be inadmissible or irrelevant, as this not only would prolong the hearing and waste court and judicial resources, but would prejudice the opposing party, which may out of a degree of caution feel it necessary to respond to irrelevant matters.

As noted by the Court in Robertson v Edmonton (City Police Service) , 2004 ABQB 243 , the person calling the witness should be able to show from evidence on the record some indication that it is possible that relevant evidence will be forthcoming. While the ultimate onus of proving that the witness should not be called rests on the party opposing the calling of the witness, the party that does wish to call the witness should be able to meet the threshold test of showing the court what relevant evidence will possibly be forthcoming from the witness and why: paras 10-12, 26.

2. Dow Lay Witnesses [ 50 ] Dow does not presently appear to be calling any lay witnesses. However, as I indicated in the October 26, 2021 decision, Ms. Deutscher and Ms. Dieser may be questioned by NOVA on relevant and admissible evidence, with questioning on the issue of constraints limited to constraints that meet the threshold requirement of relevance as set out in the Reasons for Judgment, and subject to the limitations set out in 2021 ABQB 845 .

If the delayed questioning of these Dow witnesses requires additional questions to be put to the expert witnesses, these experts may be called back by Webex if that is reasonable, to answer the follow-up questions. [ 51 ] While I previously indicated that the questioning of Dow employees could proceed, that was before it became apparent that the October 26, 2021 decision did not succeed in narrowing the relevant issues, and NOVA has not, as directed, identified the documents on which it no longer intends to rely: para 67. [ 52 ] To ensure that the questioning is limited to relevant issues, it will not occur until the experts, including Mr.

Waguespack, have been heard. While this is an unusual approach, it is made necessary by the fact of NOVA's late production of over 1.3 million pages of operational documents. It is only when the issue of whether any constraints alleged by NOVA meet the threshold requirements that the proper scope of this questioning can be determined. This is not a full trial of liability and damages, but a hearing on damages, and the circumstances do not warrant the postponement of the hearing to conduct lengthy questioning of these Dow witnesses on documentation that may not prove to be relevant. C.

Liability [ 53 ] In the October 26, 2021 decision, I made it clear that this Court is functus officio with respect to the determination of NOVA's liability for the top-up period: 2021 ABQB 845 at para 22 . I also made it clear that the Reasons for Judgment give meaning to what would constitute wilful misconduct and gross negligence and that I was functus officio on that issue: para 24. I noted at para 27 and 28: It bears repeating: this Court and the Court of Appeal are functus officio on liability. At any rate, NOVA's liability will not be merely assumed at the November hearing.

Dow must adduce evidence that establishes that, either the ethane allocation scheme or a failure to optimize production continued in the top-up period. If it does so, the finding in the Reasons that this would constitute wilful misconduct and/or gross negligence would continue to apply, and Dow would not be obliged to go further . Evidence of NOVA's operational strategies or of compliance with the Operator's standard of care, which were not an issue at trial, does not relieve the Operator of its contractual obligation to optimize production in accordance with the Reasons, and this evidence is thus irrelevant. ...

If Dow adduces evidence that NOVA failed to optimize production in the top-up period in accordance with the principles accepted in the Reasons, NOVA's operational strategies are irrelevant . (emphasis added) [ 54 ] These comments were in direct response to NOVA's submission that Dow was asking the Court "to deny NOVA's legitimate defence to liability ": para 26.

The reference to adducing evidence in these paragraphs refers to evidence of a delta between actual production and production capability, and not to any obligation on Dow to re-establish liability. [ 55 ] There is no room in this statement, or in the Court of Appeal decision that dismissed NOVA's appeal of this ruling to suggest that the issues of wilful misconduct and gross negligence must still be determined in the top-up period. [ 56 ] I also made it clear that NOVA's reliance on an excerpt from this Court’s July 2020 decision to justify its submissions that liability is still an issue were incorrect.

I noted at paras 31 and 32 of the October 26, 2021 decision that: Therefore, this Court made it plain that NOVA may seek to establish that the operation of E3 may have changed during the top-up period or that E3 was supplied with sufficient ethane to meet its obligation to optimize production in accordance with E3's productive capability through the use of the business documents that had been exchanged between the parties and provided to the experts . Nor would NOVA be precluded from using expert evidence to do so "in accordance with the principles" set out in the Reasons.

The comment did not open the issue of liability in the top-up period to a variety of new defences to liability: it merely notes that Dow must adduce evidence that the facts, or some of the facts, that underpin the finding of liability in the Reasons continued during the top-up period. (emphasis added) [ 57 ] Those "facts ... that underpin the finding of liability," read in context with the decision as a whole, are facts that may be established "through the use of the business documents that had been exchanged between the parties and provided to the experts" and that establish that either the ethane allocation scheme continued or the failure to optimize production in accordance with the principles and methodology accepted in the Reason for Judgment continued.

It would be incongruous and incorrect to read anything more in this phrase after the preceding paragraphs make it clear that evidence that one of these two circumstances exist is all that is necessary in order to establish damages: see also para 38 of the October 26, 2021 decision. [ 58 ] I note that NOVA argues that Dow has conceded that the ethane allocation scheme did not continue in the top-up period.

This is an issue for the hearing. [ 59 ] Where actual production is less than plant capacity, calculated in accordance with the methodology accepted in the Reasons for Judgment, NOVA is necessarily in breach of its obligation to operate E3 with the objective of optimizing production: 2021 ABQB 845 at para 25 . [ 60 ] This Court and the Court of Appeal are functus on liability. While the evidence of damages is required as described in the previous paragraph, liability has been found: 2021 ABQB 153 at paras 61 , 65, 73, 92.

Issues of liability, including issues of wilful misconduct and gross negligence are res judicata : 2021 ABQB 845 at paras 23-29 , 70. This Court did not treat these issues as damage

issues in the Reasons for Judgment, contrary to NOVA's assertion.

The issue of whether NOVA had been found to have been grossly negligent or guilty of wilful misconduct is found in the discussion of the application of the exclusion clause because the clause exempts the Operator from liability for lesser conduct. [ 61 ] A reference to a finding of liability does not become a damages issue because of its position in the Reasons for Judgment. [ 62 ] This Court did not open the issue of liability in the top-up period in para 31 of the October 26, 2021 decision or in para 18 of 2020 ABQB 441 . [ 63 ] NOVA submits it is entitled to argue that, for any period when NOVA supplied E3 with "sufficient Ethane", it is irrelevant whether E3's actual production fell short of Mr.

Kapur's or anyone else's theoretical opinion of production capacity, based again on selective quoting of the October 26, 2021 decision and incorrect

interpretation of the phrase in para 32 of that decision, "facts that underpin the finding of liability." [ 64 ] It is not correct to allege that the optimization obligation was merely to supply "sufficient ethane" to E3 and the provisions of the Reasons for Judgment and the Appeal decision cited by NOVA in its brief to support this theory do not support his

interpretation.

Optimization was not defined in this manner in the Reasons for Judgment nor in any decision of the Court of Appeal: 2018 ABQB 482 at paras 678 and 694 ; 2020 ABCA 320 at paras 30 , 42. [ 65 ] The only relevant questions with respect to the optimization obligation is whether E3 was supplied with sufficient E3 to meet its obligation to optimize production in accordance with E3's productive capability as determined by the methodology accepted in the Reasons for Judgment, which can be established through the use of the business documents that have been exchanged between the parties and provided to the experts: October 26, 2021 decision at para 31. [ 66 ] NOVA submits that Dow's entitlement to damages in the top-up period is dependent on Dow being able to prove that NOVA's failure to optimize production was deliberate or intentional, by reference to Dow's pleadings.

The paragraphs of the Reasons that NOVA cites in its brief to support this theory do not bear that

interpretation. It is the Reasons for Judgment that govern liability. Liability was founded on breach of contract, not on intention: para 678 of the Reasons for Judgment.

If NOVA means to argue that this Court's finding of liability was incorrect because it went beyond Dow's pleadings, the time to address this was at appeal of the trial judgment. [ 67 ] Even if there was an element of intention in this Court's finding of liability, and there was not, this Court and the Court of Appeal are functus on liability and it cannot be reopened at the damages hearing. [ 68 ] This is not a question of "correcting" the October 26, 2021 decision: all that is necessary is to read all of paragraph 27 and not just the second and third sentence, all of paragraph 31 and not just part of the first sentence, all of paragraph 18 of the July 31, 2020 decision and paragraph 32 of the October decision, which, read in context, make it clear that the issue of ethane being supplied in "sufficient" quantities as a new defence to the finding of liability in the Reasons for Judgment is not admissible, as this Court is functus on liability. [ 69 ] This is an issue of the proper

interpretation of previous decisions, not a collateral attack on the October 26, 2021 decision. [ 70 ] The NOVA brief creates a concept called the Damages Principles. This decision does not constitute acceptance of the comments in the brief set out under that heading, as they are properly submissions that should be made at the damages hearing.

The following, however, must be clarified: the damages hearing does not open the door to the consideration of contractual defences to liability. [ 71 ] As noted by the Court of Appeal: ... there can be no question that the conclusions of fact and of mixed fact and law necessarily imbricated in the reasoning and conclusions of the trial judge as to what was the Agreement -- when reinforced by the Appeal Decision of this Court -- are covered by the foundational justice value of finality and issue estopped, as well as by the doctrine of functus officio and collateral attack.

Finality is crucial to the administration of justice: see Penner v Niagara (Regional Police Services Board), 2013 SCC 19 at para 101 , [2013] 2 SCR 125. ... D. Other Matters 1. Scheduling of Consideration of the Impact of the Illegality of the Ethane Pooling Covenants [ 72 ] NOVA submits that this Court should

schedule this issue immediately, noting that the Court of Appeal remanded the issue to this Court "over a year ago." This is not quite accurate: while the Court of Appeal referred the issue of the effect of the illegality of the covenants back to this Court for consideration, it also commented that "[s]ince the parties will want to work together in the future to their mutual advantage, a consensual resolution of the outstanding issues respecting ethane supply would be preferable to one imposed by the Court": 2020 ABCA 320 at para 167 . [ 73 ] The parties have provided this Court with sometimes contradictory information about their attempts to achieve a solution.

NOVA's recent position is that negotiations are over. [ 74 ] The calculation of damages was also referred back to this Court by the Court of Appeal on June 10, 2020, and, despite the Court offering multiple opportunities for scheduling a damages and top-up hearing, such hearing has been complicated by numerous pre- hearing applications and appeals.

The latest hearing date, which was to commence on November 8, 2021, has been delayed for over a month, and is apparently now at risk for further delay as a result of the possibility that NOVA may apply to the Court of Appeal for a stay of the hearing pending the appeal of the October 26, 2021 decision.

[ 75 ] It would be an abuse of Court resources to attempt to

schedule this subsequent hearing until the top-up and damages hearing has occurred. [ 76 ] As noted by the Court of Appeal at para 84 of 2021 ABCA 153 : Court time is a scarce and valuable resource. Litigants and the court must determine a dispute-resolution trial process that both accords parties due process and absorbs no more court time than is necessary. This is what good lawyers and judges do. This is what happened here. 2. Outstanding Orders [ 77 ] If the parties continue to be unable to agree on outstanding orders, they may make submissions to the Court. To date, they have not done so.

Heard on the 29th day of November, 2021. Dated at the City of Calgary, Alberta this 8th day of December, 2021. B.E. Romaine J.C.Q.B.A. Appearances: Blair C. Yorke-Slader, Q.C, E. Bruce Mellett, Denise Brunsdon, Ciara J. Mackey, Alyssa Marshall for the Plaintiffs//Respondents Steven Leitl, Q.C., Tommy Gelbman, Bryan H. Walker, Fergus I. Schappert, Gunnar Benediktsson, Olivia C. Dixon, Emily McKinnon for the Defendant/Applicant