Dow Chemical Canada ULC v NOVA Chemicals Corporation, 2023 ABKB 156

Court of King’s Bench of Alberta Citation: Dow Chemical Canada ULC v NOVA Chemicals Corporation, 2023 ABKB 156 Date: 20230315 Docket: 0601 07921 Registry: Calgary Between: Dow Chemical Canada ULC and Dow Europe GmbH Plaintiffs - and - NOVA Chemicals Corporation Defendant Corrected judgment: A corrigendum was issued on August 29, 2023; the corrections have been made to the text and the corrigendum is appended to this judgment. _______________________________________________________ Reasons for Decision of the Honourable Madam Justice B.E. Romaine _______________________________________________________ I.

Introduction [ 1 ] The history of this protracted litigation is set out in a series of decisions issued since the Court of Appeal decision at 2020 ABCA 320 : see 2020 ABQB 441 ; 2021 ABQB 167 ; 2021 ABQB 595 ; 2021 ABQB 784 ; 2021 ABQB 845 ; 2021 ABQB 974 ; 2021 ABQB

621 ; 2022 ABQB 292, 2022 ABQB 417 , 2202 ABQB 422; 2022 ABQB 237 ; see also 2021 ABCA 153 . From time to time during the damages hearing, issues have arisen, the resolution of which may give rise to the necessity of further evidence, or which would help to guide the progression of the hearing. [ 2 ] Three of those issues are dealt with in this decision. The first issue relates to plant equipment changes made to E3 after the 2014 plant turnaround. The second issue relates to the necessity and admissibility of lay witness testimony.

The third issue relates to whether regulatory limits with respect to the emission of NOx affect E3’s ability to operate to its Productive Capability. [ 3 ] My decisions on the issues are as follows: A. Plant Equipment Changes-

Part 1 of Issue D 1. NOVA bears onus of proof on this issue; 2. Much of Mr. Waguespack’s testimony on this issue is inadmissible as new opinion; 3. Mr. Kapur’s cross-examination on this issue does not justify a new report by Mr. Waguespack; 4. On the basis of Mr. Kapur’s evidence and Mr. Waguespack’s admissible evidence, NOVA has not proven that plant changes made to E3 after the 2014 plant turnaround improved its Productive Capability; and 5. No lay witness testimony on this issue is relevant or admissible. Thus, there will be no need to proceed to

Part 2 of the issue. B. Lay Witness Testimony 1. This Court is functus on the issue of Dow’s ability to store the ethylene it would have obtained had E3 been operated to its Productive Capability. 2. NOVA may call John Dennehy and Joanna Landon on the narrow issue of whether damages for February, 2014, September, 2014 and December, 2016 should be excluded on the basis that Dow turned back production from E3 or refused to accept NOVA’s ethylene turnback. Dow may question these witnesses before they are called. 3.

Other than as directed with respect to NOx testing, no other NOVA lay witness testimony is relevant or admissible. C. The NOx Issue [ 4 ] I agree that the Court must consider the impact of regulatory NOx emission limits on the quantum of Dow’s damages. [ 5 ] NOVA may call Mr. Subramanian as an expert witness, subject to Dow’s right to challenge his qualification and the admissibility of his report. Dow has the right to call a rebuttal expert, whose report will be produced prior to the evidence of Mr. Subramanian. [ 6 ] NOVA may question Ms. Deutscher on the extent of Dow’s participation in the NOx testing at E3.

II. Analysis A. Issue D-

Part 1 [ 7 ] This issue arises from the list of issues for the damages hearing identified in 2020 ABQB 422 , is referred to as Issue D: Did the plant equipment changes made to E3 after the 2014 plant turnaround improve its production capacity, and if so, should they have been implemented as part of the 2014 turnaround, were they necessary, were they foreseeable and avoidable and could they have been implemented without affecting plant production? [ 8 ] The term “production capacity” has the same meaning as “Productive Capability”, which is the term used in this decision: 2022 ABQB 422 at para 20 . [ 9 ] On its face, and since it was proposed by NOVA and described in this Court’s July 31, 2020 decision, Issue D is and always has been a two-part determination: 2020 ABQB 441 .

Part 1 is the question of whether one or more plant equipment changes made to E3 after the 2014 plant turnaround improved E3’s Productive Capability. If the answer to

Part 1 is yes,

Part 2 becomes relevant: should these changes have been implemented as part of the 2014 turnaround, were they necessary, were they foreseeable and avoidable, and could they have been implemented without affecting plant production. [ 10 ] Evidence has been heard on

Part 1 of Issue D, but not on

Part 2. Dow submitted that the Court should make a decision on

Part 1 before hearing evidence on

Part 2. NOVA objected to this procedure. I agreed with Dow’s submission: 2022 ABQB 292 , para 1 . [ 11 ] In doing so, I noted that the evidence of Productive Capability that I found to be relevant and persuasive at trial was expert evidence and that NOVA intended to call such expert evidence on

Part 1. I also noted that if the answer to

Part 1 of Issue D was yes, further evidence on the remainder of the issue,

Part 2, would be necessary.

[ 12 ] NOVA submits that this further evidence would include the evidence of lay witnesses. Dow submits that, if lay witness evidence is necessary and relevant to

Part 2, Dow would need to question the proposed lay witnesses before they testify. It is clear that, given the highly contentious history of this litigation, this questioning would lead to further delay in the damages hearing. If the answer to

Part 1 of Issue D is “no”, this questioning and the subsequent testimony of both lay and expert witnesses on the

Part 2 issue would be unnecessary. [ 13 ] NOVA called its Productive Capability expert witness Kevin Waguespack on January 12, 2022. After an extensive voir dire , I found that Mr. Waguespack’s opinion evidence with respect to Productive Capability was generally inadmissible on the grounds of relevance, as it did not comply with the methodology of calculating such capability approved by this Court at trial and undisturbed on appeal. [ 14 ] However, I found that Mr.

Waguespack could give opinion evidence with respect to hearing Issue D, whether one or more plant equipment changes made after the 2014 turnaround but before the 2018 date trial improved E3’s Productive Capability. Subsequently, Mr. Waguespack testified on Issue D

Part 1. [ 15 ] NOVA also sought to call another expert witness, Alan W. Reynolds on Issue D,

Part 1. However, I excluded Mr. Reynold’s evidence on that issue on June 20, 2022: 2022 ABQB 422 , noting as follows: In conclusion, I find that NOVA is attempting by selective parsing of Mr. Reynolds’ written report to turn it into something it is not. Even if it could be implied from the excerpts of Mr. Reynolds’ written report that Mr.

Reynolds is able to give the opinion that plant equipment before it was changed or upgraded did not have the design capacity that would allow E3 to operate at the rates achieved in the 2018 rate trial, the excerpts do not provide the necessary connectivity to address the issue of how this would affect E3’s productive capability as a whole. Therefore, this opinion, as well as being new, would not be helpful or necessary with respect to the

Part 1 issue. Dow has not mischaracterized Mr. Reynolds’ intended evidence, as alleged by NOVA. Calling Mr. Reynolds as a second expert on the issue that Mr. Waguespack has already addressed would be duplicative, and thus prejudicial to Dow. That prejudice is not a prejudice that could be addressed by an award of costs: it would require a remedy such as allowing Dow to re-open its case and call an additional expert to respond to such a second opinion. NOVA is not without evidence on the

Part 1 issue. Mr. Waguespack has given expert evidence on the issue, and therefore NOVA has not been deprived of putting its best case forward. Both on the basis of the factors set out in Smith , and the threshold tests set out in Mohan , I find Mr. Reynolds’ evidence inadmissible on the

Part 1 issue. [ 16 ] Therefore, the first issue in this decision is whether the plant equipment changes made to the E3 after the 2014 plant turnaround improved its Productive Capability. A number of sub-issues were raised by the parties, including whether lay witness testimony is necessary or appropriate to complete the evidentiary record with respect to this issue; which party bears the burden of proof on the issue; whether Mr. Waguespack’s evidence on the issue is new opinion; and whether cross examination of Mr. Kapur entitles Mr. Waguespack to give new expert opinion. B.

Additional Relevant Facts [ 17 ] Issue D arose in late 2019 and early 2020 at NOVA’s initiative, as the parties and the Court identified the damages quantification issues left to be determined arising from the trial decision at 2018 ABQB 482 , prior to the Court of Appeal decision in September, 2020: 2020 ABCA 360 . [ 18 ] In accordance with the agreement of the parties at trial, this Court awarded damages to Dow calculated through to the end of 2012, reserving the quantification of further damages “to the date hereof in accordance with the principles accepted for the calculation of damages in the Reasons for Judgment”.

Dow expert witness Sanjeev Kapur’s methodology was accepted by this Court as the appropriate methodology to determine E3’s Productive Capability. [ 19 ] In the trial appeal decision, the Court of Appeal referred back to this Court the calculation of Dow’s direct damages resulting from the ethylene shortages, but did not disturb either the findings of liability or the methodology accepted by this Court for determining Productive Capability. [ 20 ] As noted at trial, Dow’s damages up to the end of 2012 had been determined using the results of plant rate trials conducted following each turnaround or equivalent of turnaround.

The first plant turnaround after the cut-off date of the end of 2012 was in May 2014. E3’s Productive Capability prior to then is not in dispute. To complete the quantification of Dow’s damages up to the date of judgment in June 2018, it is necessary to determine E3’s Productive Capability after the 2014 turnaround. [ 21 ] The Court and the parties anticipated that there may need to be adjustments to the Court-approved methodology to enable it to be used post-trial.

It was also clear that the contemplated top-up damages quantification process would require updated expert opinions. [ 22 ] Dow submits that the first plant rate trials after the 2014 turnaround were conducted between October 2018 and April 2019. In an October 15, 2019 expert report, Mr. Kapur used data from those 2018/2019 plant rate trials to determine E3’s post- 2014 turnaround Productive Capability. Dow also produced other expert reports, including the evidence of John Holloway with respect to

Part 2 of Issue D. [ 23 ] NOVA characterizes Mr. Kapur’s report as a “new theory of Productive Capability”, but in fact, other than the question of whether it is appropriate to use post judgement data to calculate Productive Capability within the damages period. Mr. Kapur’s

methodology is not a new theory. The issues of whether it is truly consistent with the Court- approved methodology and, as NOVA submits, there was a rate trial prior to 2018/2019 remain issues for final determination. [ 24 ] After receiving Mr. Kapur’s opinion in late 2019, NOVA, submitted that the gap between the 2014 turnaround and the next plant rate trials in 2018/2019 raised a potential issue about the effect of intervening equipment changes. NOVA argued that Mr.

Kapur’s updated, expert opinion on Productive Capability “was not what it was in the trial period and a mini turnaround following that.” According to NOVA, the 2014 turnaround had occurred “three to four years before the upgrades that actually produced [the] higher capacity [demonstrated in the later rate trials]”.

NOVA submitted that at issue was whether some adjustment should be made to the methodology with respect to equipment changes made after the 2014 turnaround but before the next following plant rate trial. [ 25 ] There is no evidence before me about why the 2018-2019 rate trials had not been conducted sooner after the 2014 turnaround. [ 26 ] NOVA delivered its new expert opinion reports in response to Mr. Kapur’s expert report in January, 2020, including a report from Mr. Waguespack. In a decision at 2020 ABQB 441 at paras 35-44 , I found 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 Judgement, was not relevant and not appropriate evidence for the damages hearing. However, I did not preclude NOVA from calling Mr. Waguespack to give evidence on issues relevant to the hearing, such as whether Mr.

Kapur followed this methodology as accepted at trial in his top-up damages report and whether any changes were necessary in order to apply his methodology to the top-up period or to adapt the methodology in order to comply with the Court’s findings. [ 27 ] In that decision, I agreed that NOVA’s new plant equipment change submission would be a subject for the damages hearing, as follows: Therefore, the issue of what productive capability could have been achieved in the top-up period must be resolved with reference to Mr. Kapur’s trial methodology, [appropriately] adjusted to any trial findings.

I do not forestall submissions from NOVA on whether improvements in productive capability were attributable to plant equipment changes implemented after the 2014 plant turnaround, subject to Dow’s countervailing submission through Mr.

Holloway’s expert report that these changes could have been implemented during the 2014 turnaround or were known earlier and should have been corrected previously or that operational alternatives were available.: 2020 ABQB 441 at paras 52-53 . [ 28 ] Therefore “the Court- Approved methodology of calculating E3’s Productive Capability... did not preclude NOVA from submitting as part of Issue D that it is incorrect to measure E3’s productive capability from rate trial or its equivalent to rate trial, when the rate trial in the period at issue did not follow closely after a turnaround and equipment changes were made in the interim:” 2022 ABQB 422 at para 19 . [ 29 ] In August 2020, NOVA sought leave to adduce a supplementary report from Mr.

Waguespack to “address whether improvements in productive capability were attributable to plant equipment changes implemented after [the] 2014 turnaround “and, if so, “what the consequence is”. NOVA submitted that, without a supplementary report, only Dow’s evidence as to E3’s Productive Capability would be before the Court, and that it would be “procedurally unfair” for the Court to require NOVA to proceed with the damages hearing without an opportunity to provide supplementary Productive Capability reports, both from Mr.

Waguespack “and from one or more experts regarding the NOx issue.” I denied such leave: (oral decision, August 20, 2020), in part given that the damages hearing was at that time planned to commence shortly. [ 30 ] NOVA appealed the July and August 2020 decisions. In May 2021, its appeal was dismissed: 2021 ABCA 153 . The Court of Appeal confirmed that it “did not alter, nor was it asked to alter, the trial judge’s definition of productivity 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” para 102. [ 31 ] A new date in November, 2021was reserved for the damages hearing. [ 32 ] On October 26, 2021, noting “the fact that NOVA appears intent on raising issues at the November hearing that this Court has found, and the Court of Appeal has affirmed, that it cannot reopen as it is functus officio ”, this Court issued a decision reiterating the issues to be determined at the damages hearing, including

Part 1 of Issue D: 2021 ABQB 845 . [ 33 ] Despite the contrary rulings of this Court and the Court of Appeal, NOVA tendered a supplementary July 30, 2021 report from Mr. Waguespack. NOVA has indicated that it is “not relying on [Mr. Waguespack’s] first report” anymore, and that Mr. Waguespack’s “second report totally supercedes it”. On December 8, 2021 ( 2021 ABQB 974 ), over Dow’s objection, I allowed NOVA to attempt to introduce the second report at the hearing: ... 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. 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 Judgement 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. (paras 15 and 16) [ 34 ] A lengthy voir dire on the admissibility of Mr. Waguespack’s opinion commenced on January 19, 2022. As noted on March 29, 2022, I found that, again, Mr. Waguespack’s opinion evidence about E3’s Productive Capability did not comply with the Court- accepted methodology, and therefore was irrelevant and inadmissible.

However, I allowed Mr. Waguespack to testify about

Part 1 of

Issue D: 2022 ABQB 237 , paras 112-119 . I noted that this issue did not require compliance with the Reasons of Judgment, as it was a new issue for the top-up period. By this, I meant that it need not comply with the turnaround rate trial to turnaround rate trial methodology. I found that Mr. Waguespack’s opinion on the issue was prima facie admissible, while the issue of the weight of that opinion remained a live issue for the damages hearing. C. Burden of Proof [ 35 ] NOVA submits that Dow bears the burden of proof on

Part 1 of Issue D. [ 36 ] Specifically, NOVA submits that Dow must prove that Mr.

Kapur’s methodology “accounts for the fact that the plant equipment changes that NOVA undertook starting in 2017 allowed E3 to operate at 2018/2019 rates”. [ 37 ] NOVA also suggests that Dow must establish that it is more likely than not that E3 could achieve the 2018/2019 rates for the period after the 2014 turnaround without the plant equipment changes that took place in 2017 and 2018, or that, in light of the major equipment changes made to E3, the 2018/2019 rate trials are accurate measures of E3’s hourly capacity rates beginning in 2014, such that Mr.

Kapur may ignore those equipment changes in using the 2018/2019 rate trials to calculate E3’s Productive Capability using the Court accepted methodology. [ 38 ] These are mischaracterizations of the issue, and of the law of evidentiary burdens.

The term “burden of proof” is ambiguous, and it is sometimes difficult to determine the burden a party has to satisfy: The Law of Evidence in Canada: Sopinka, Lederman & Bryant, 6 th ed., Lederman, Fuerst and Stewart, LexisNexis Canada Inc. 2022 at 3:03. [ 39 ] As noted previously, NOVA raised what became Issue D in late 2019 as something it wished to argue at the top-up damages hearing, as the damages hearing was then envisaged. [ 40 ] It raised this as a possible issue after Mr.

Kapur had issued his updated top-up hearing expert report, in which it was clear that his opinion with respect to E3’s post-2014 turnaround Productive Capability was based on the results of the plant rate trials following a turnaround. NOVA submitted that it should be able to make an argument that an adjustment should be made on the basis of plant equipment changes that occurred between the 2014 turnaround and the 2018-2019 rate trials. [ 41 ] In para 44 of 2020 ABQB 441 , I said that this Court would hear expert evidence about “whether any differences were properly necessary in order to apply [Mr.

Kapur’s] methodology to the top-up period or to adapt the methodology in order to comply with the Court’s findings”.

I specifically agreed to consider “submissions from NOVA on whether improvements in productive capability were attributable to plant equipment changes implemented after the 2014 plant turnaround”: para 53. [ 42 ] In June, 2022 I confirmed that NOVA would have an opportunity to address the question of “whether one or more plant equipment changes made after the 2014 turnaround but before the 2018 rate trial improve[d] E3’s Productive Capability”: para 119. [ 43 ] Issue D did not, as NOVA argues, “arise from Dow’s introduction of a new theory”. The theory was introduced by NOVA.

NOVA concedes in its brief that: [...] first the legal burden is generally imposed on the party who asserts a proposition . Secondly, the legal burden with respect to an issue is placed on the party who is in the best position to prove the issue. Since the plaintiff is presumed to know her case and the defendant does not, the burden rests with the plaintiff to prove the elements of the cause of action. The legal burden may be reversed, however if the rationale for its allocation is absent (emphasis added) [ 44 ] As noted in David M.

Paciocco and Lee Stuesser, The Law of Evidence (7 th ed.)(Irwin Law Inc:2015) at 581. To say that ... the plaintiff has the burden of proof in a civil case, is something of a simplification. In fact, the burden of proof can shift from party to party during the course of a trial, depending on the specific matter in issue at the time. [ 45 ] While Dow has the ultimate burden of proving damages, NOVA “asserted the proposition” that led to Issue D, and therefore bears the onus of proof. In addition, NOVA, as Operator of E3, is best placed to prove the issue.

Thus, NOVA must present its evidence on the issue first, and the proposition would fail if NOVA does not discharge its burden: Paciocco at 581; 2018 ABQB 482 at para 190 ; Pan Canadian Energy Services v Alberta (Ministry of Municipal Affairs) , 2008 ABQB 393 at para 48 . [ 46 ] NOVA submits that if this Court determines that the burden is on NOVA to establish Issue D, “there [is] a one-sided approach to the introduction of evidence”, and that this Court has an incomplete evidentiary record on the issue, because NOVA has been prevented from calling lay witness evidence on the issue or from leading the evidence of Mr.

Reynolds. [ 47 ] Again, this submission must be analyzed in view of the factual context. As noted, Issue D became an issue for the hearing when it was raised by NOVA in December 2019 and after Mr. Kapur’s October 2019 report was issued. It was included as an issue in this Court’s July 2020, decision. [ 48 ] Despite decisions to the contrary, I allowed NOVA the opportunity to adduce Mr. Waguespack’s report into evidence, subject to submissions on admissibility. At this point, NOVA had been aware that Issue D was an issue for the damages hearing for at least a year. D.

Is lay witness testimony relevant and necessary? [ 49 ] After Mr. Waguespack’s testimony on the issue, NOVA sought to call Mr. Reynolds the issue, and I permitted NOVA to try to qualify Mr. Reynolds on the basis of NOVA’s submission that excerpts from his report were relevant to

Part 1 of Issue D. For the

reasons set out on 2022 ABQB 422 , this attempt failed. Prior to this, Mr. Reynolds was always characterized as an expert on

Part 2 of Issue D. [ 50 ] NOVA submits that two lay witnesses have relevant evidence on

Part 1 of Issue D. However, as I noted at paragraph 11 of 2022 ABQB 292 , there was nothing at that date in these witnesses’ described scope of testimony that related to

Part 1 of Issue D. [ 51 ] In its brief with respect to this issue, NOVA submits that the testimony of the two lay witnesses. Mr. Dennehy and Ms. Sadaba-Omana may be relevant as follows:

a) had NOVA lay witness testimony been allowed, the evidence “would have confirmed the erratic meter issue that Mr. Waguespack pointed out in cross-examination”. This was a new issue raised by Mr. Waguespack. Expansion and confirmation of this new evidence by an employee of NOVA is not appropriate;

b) NOVA was not permitted to introduce evidence from its ethylene plant design expert, Mr. Reynolds, or from its lay witnesses on the impact of the E-650 upgrade. As NOVA concedes, Mr. Waguespack gave evidence on this issue, which is discussed later in this decision;

c) NOVA was prohibited from calling lay witness testimony to support the 2018 Rate Trial Report. The Report speaks for itself, and there is no need to call lay witness testimony on its meaning. Dow and Mr. Kapur do not suggest that it does not say what it says. If documentary evidence was required to support the Report, it could have been included in Mr. Waguespack’s second opinion. The same is true of any documents that may have shown that Dow approved of the equipment changes, to the extent that may be relevant to the issue;

d) NOVA was prohibited from introducing lay evidence regarding the new pipelines of ethane feed that arrived during the top-up period, the new types of debris those feedstocks contained and how they contributed to E-650’s plugging. Again, nothing prohibited Mr. Waguespack from including these factors in his second opinion. NOVA refers to Mr. Reynold’s rebuttal report with respect to this issue, the admissibility of which with respect to

Part 1 of Issue D has already been addressed by this Court;

e) as NOVA notes, Mr. Waguespack was of the opinion that the available data indicated that a re-tray of the depropanizer “was necessary to reach the 121.2 percent rates noted in the high rate trial”. NOVA submits that it should be allowed to present lay evidence to “further explain its depropanizer analysis or the Tracerco analysis”, but this would be an attempt to bolster or add to Mr. Waguespack’s expert opinion on this issue by witnesses who have not been qualified to give expert evidence;

f) while NOVA may be concerned about Mr. Waguespack’s second opinion on

Part 1 of Issue D, it had a full opportunity of having Mr. Waguespack, with NOVA’s long standing knowledge of the issue, address the issue in his written report;

g) NOVA submits that, to the extent that Dow disputes what is meant by the “Project Objective,” NOVA should be allowed to call as a witness its employee who drafted the document in order to resolve any controversy. Again, the document is in evidence and speaks for itself. At any rate, evidence that indicates an equipment change is hoped or anticipated to result in an increase in Productive Capability is not the same as evidence that indicates that such increase did in fact occur as a result of the change;

h) NOVA submits that, had it been able to introduce lay evidence from Ms. Sadaba-Omona, she could have explained how she calculated that the turboexpander upgrade provided an additional 3.6 million pounds per year of ethylene recovery. This calculation is in the NOVA business records and was provided to the experts and relied upon for the purpose of their expert reports. There is therefore no need for Ms. Sadaba-Omona to give testimony on this issue. [ 52 ] Therefore, there is no indication that NOVA was prevented from addressing all these issues in Mr. Waguespack’s second report. While Mr.

Waguespack’s opinions were subject to a number of objections, which will be discussed later in this decision, NOVA had a full opportunity to present expert evidence on

Part 1Issue D. It should not now be allowed to bolster or expand its expert opinion through lay witness testimony. [ 53 ] From this Court’s decision in 2021 ABQB 153 , confirmed by the Court of Appeal at 2021 ABCA 153 , it has been clear that Productive Capability is an issue for the expert witnesses, and evidence of such Productive Capability exists in the business documents that have been exchanged by the parties and provided to the experts as supporting material for their reports.

As noted, “these materials relating to E3’s Productive Capability... can be entered as evidence at the top-up hearing without the need of lay witness.” [ 54 ] As I have noted previously, NOVA is a sophisticated party and has been well represented both at the trial and during this protracted period leading to and as part of the damages hearing. It has been well aware of the issues and has made its strategic decisions during this period with knowledge of the issues. Any suggestion that it has been caught off-guard defies credibility. E. Is Mr.

Waguespack’s April testimony admissible? [ 55 ] In his testimony in April 2022, Mr. Waguespack gave oral evidence supported by 58 pages of slides. These slides formed the basis of virtually all of the questions he was asked in his direct testimony. [ 56 ] Dow immediately objected to this presentation, a copy of which it only received shortly before Mr. Waguespack’s testimony, and submits that Mr. Waguespack was giving new opinion delivered for the first time from the witness stand. I reserved on these objections and allowed Mr.

Waguespack to give evidence subject to admissibility to be determined at the end of his testimony. [ 57 ] Mr. Waguespack was asked in cross-examination whether he was asked to draft a new opinion on the

Part 1 issue. He said that he didn’t consider he had developed a new opinion and that he wasn’t asked to. However, he said he “felt the need to perform additional analysis and prepare additional charts” after hearing Mr. Kapur testify. He agreed that he had “prepared more demonstrations and more visuals”, that he had “probably made some more analysis”, but he considered this “doing a more thorough job of explaining”

how he formed his opinions. He conceded that he had prepared the slides after reviewing this Court’s March 29, 2022 decision, and after receiving further instructions from counsel about whether the projects “met the so-called threshold” of whether they were necessary to increase capacity. [ 58 ] Counsel for NOVA acknowledged that, in response to Mr. Kapur’s testimony, “Mr. Waguespack had to go away and do some more work” and look at “more documents”.

It is conceded that some of these documents were produced by NOVA in its late production of documents in September 2021, weeks before the hearing commenced and after Mr. Waguespack had delivered his 2021 report. [ 59 ] Dow’s main objections were, and are, that: 1) Mr. Waguespack’s April 2022 analyses and opinions do not appear anywhere in the parts of his July 2021 report devoted to plant equipment changes. They are new, and they are thus inadmissible; 2) in testifying about his new analyses and opinions, Mr.

Waguespack openly cited documents that he had not “specifically relied on” or even “considered” for purposes of his July 2021 report. Some were from the NOVA late production of 1.3 million pages of records about “operational issues and constraints” delivered in September, 2021; 3) NOVA sought to justify Mr. Waguespack’s new analyses and opinions as supposedly responding to evidence extracted from Mr. Kapur in cross-examination. As noted later in this decision, the law does not countenance this tactic to make such response evidence admissible; and 4) Mr.

Waguespack’s new opinions, some of which were asserted at trial by NOVA and its trial experts, and rejected in trial reasons by this Court, were inconsistent with the Court-approved, res judicata , Productive Capability methodology. [ 60 ] I accept these objections as valid with respect to most of Mr. Waguespack’s presentation. [ 61 ] With respect to whether Mr. Waguespack’s slides included new opinions, I note the following: 1. In his July, 2021 report, Mr.

Waguespack identified seven “debottleneck projects” performed in 2017 and 2018 that he suggested had contributed to an increase in E3’s production levels, which he called its Productive Capability. In his April presentation, he refers to only four projects: the E-650 replacement in kind and larger spare installation, the T-611 debutanizer re-tray, the T-601 depropanizer upgrade and the TE-551 turboexpander upgrade. Mr.

Waguespack conceded that, when he referred to Productive Capability in his July, 2021 report, he was referring to his Production Capability methodology, which included reliance on NOVA’s demonstrated rates. It is this methodology that this Court has found to be non-compliant with the approved trial methodology. In his April, 2022 presentation on the four projects, he then provided the opinion that each of these projects increased individual equipment capacity or the design capacity of the piece of equipment so as to enable higher operating rates, which resulted in increased E3 Production Capability.

He referred to “two key questions” that are not found as such in his July, 2021 report: 1. Did an equipment change materially increase its stand-alone capacity? 2. Did increased capacity of equipment lead to higher E3 ethylene production capacity? As noted by Dow, Mr. Waguespack used the word “design” 20 times in his April 2022 slides and frequently in his testimony. The word is only used once in the July, 2021 report, and that use is incorrect. 2. Mr. Waguespack introduced a new concept in his April 2022 presentation, with respect to the E-650, which he called “unrecoverable degradation”.

He conceded that he had not used this term or concept in previous reports. Mr. Waguespack acknowledged that the Court-accepted Productive Capability methodology, and its 0.2% per year fouling factor, was “meant to capture all types of fouling”. However, he suggested that the methodology did not address “permanent capacity degradation over time”, and that, while in earlier years, cleaning had almost completely restored the E650, in the top-up period it became worse. However, Mr.

Waguespack acknowledged that E650 was replaced in-kind because it had more than adequate design capacity for the plant to run at its current Productive Capability. Not only was this “unrecoverable degradation” theory new: Mr. Waguespack had not addressed the design capacity of the E-650 or how it related to the 2018/2019 rate trial levels on which Mr. Kapur relied in his July 2021 report. His report merely addressed E3’s actual, achieved production. 3. In the case of the T-611 debutanizer re-tray, Mr.

Waguespack’s previous reports opined that fouling had caused a “capacity constraint”, so it was cleaned and retrayed in April, 2017. In his April, 2022 presentation, he now calls this “capacity degradation”, and opined that the re-traying had increased E3’s production rates. Mr. Waguespack’s July 2021 report had been silent about the debutanizer’s design capacity and whether that design capacity could have achieved Mr. Kapur’s post 2014 turnaround Productive Capability levels. 4. With respect to the T-601 depropanizer, Mr.

Waguespack’s July 2021 report noted that, at the rates at which E3 was operated, the depropanizer “may not have been actively constraining production before June 2018” but an upgrade was made in October 2018 to address “what is expected to become the next plant constraint”. Nothing in the 2021 report was said about the depropanizer’s design capacity, or whether it could achieve Mr. Kapur’s post 2014 turnaround Productive Capability levels. However, during the April 2022 presentation, Mr.

Waguespack opined that the upgrade “materially increased individual equipment capacity and also resulted in increased E3 Production Capacity. However, he conceded that “the relative proportions of the precise contributions made by the three to four projects we’re talking about is a little harder to workout”, but that “in the aggregate”, they were necessary to achieve the 121.2 percent ethylene rates.”

Mr. Waguespack conceded that the change to the depropanizer “addressed what was expected to be the next plant constraint”. He then clarified his testimony as follows: Well, unlike the debutanizer, which I described as kind of running on the ragged edge right near flooding, flooding sometimes, this tower had a little bit of extra capacity, but the analysis suggested that it did not have enough extra capacity to meet the demands of the upgraded debutanizer and heat exchanger.

And also it was expected to be the next limit once you remove the other two limits, and so this was a – in my opinion, a prudent, pre-emptive expansion of a – of the next limit to capacity. 5. Finally, with respect to the TE-551 turboexpander upgrade, also referred to as the “guide vanes”, Mr. Waguespack again said in his 2021 report that the guide vanes “may not have been actively constraining production before June 2018”, but an upgrade was made in October 2018 to address “what was expected to become the next plant constraint”.

In April 2022, he opined that, acknowledging that the turboexpander upgrade did not lead to the production of more ethylene, but instead to the recovery of “ethylene that would otherwise be burned as fuel,” the upgrade “increases the capacity of E3 to the extent that you recover that additional ethylene”. As indicated later this is minimal increased recovery. 6. Cross-examination established that Mr. Waguespack relied on new documents that he had not relied upon for his earlier opinions. It is also clear that he performed a variety of new analyses in order to give his April opinions. 7. In January, 2022, Mr.

Waguespack testified that he had not quantified the supposed effects of plant equipment changes. In April, 2022, he asserted that he had done his “own analysis” of “the magnitude of the capacity increase of the projects” and that they “ultimately result in [a] 2 or 3 percent nameplate capacity increase” “ at the equipment level ”, “for seven furnace mode”, a phrase he used to mean a supposed collective increase due to projects that occurred at different times, by comparison with E3’s previously demonstrated rates according to NOVA’s “% of nameplate” actual production data.

He conceded that this number was not found in his 2021 report, but that “it’s easily derived”, despite his January evidence. 8. Mr. Waguespack conceded in examination-in-chief that his 58 slide presentation required additional analysis arising from Mr. Kapur’s testimony in December 2021, relating to the four equipment changes that he was going to talk about. In answer to NOVA counsel’s questions about why, to the extent that it was accurate, some of the analysis he spoke about in his testimony was not “expressly” included in his written report, Mr.

Waguespack said: The context of my report – at the time, I was reviewing Mr. Kapur’s report, and I didn’t think the impact of these upgrade projects was an issue. I thought it was mainly the timing of the implementation of those projects. So in conducting my analysis for my report, I did an analysis. I did due diligence through those projects, and, as I mentioned, discussed several times with the process engineer and really understood everything about those projects that I could, but I didn’t realize there was a – until I heard Mr.

Kapur’s testimony that he was questioning whether those projects were needed or not, not the timing of the projects. So, in my presentation today, I’m being, you know, more deliberate in explain – you know, trying to show a lot more detail in connecting the dots, so to speak, that – some of which is not included in my report, not – not displayed in my report. My presentation today is trying to, again, make more deliberate showing of my investigation into things I’ve looked at. Q If you had known when you read Mr.

Kapur’s report that he disagreed that these projects did increase productive capability, what would you have done differently? A I would’ve certainly expanded the

section in my report that discusses the impact of these projects and shown some more analysis and shown more of what we’ve seen here today. Again, its’s a judgment call on how much to show in an expert report, and there’s a lot of documents, as I mentioned, for each of those projects; how many to show and walk though – you know, tediously through each – all of that stuff. So I would have expanded that and really focused more on did they impact E3 capacity, I think is the answer there. [ 62 ] On cross examination, Mr.

Waguespack testified that “[a]t this time of [his report], [he] wouldn’t have even known what issue D was, I think. I’m not sure that would have resonated with me... I think there’s passage in my 2021 report that states what I believe about these projects and that they increase capacity, which is directly the threshold question. I didn’t label it as an issue D,

Part 1. I didn’t have appreciation back then.” [ 63 ] Mr. Waguespack was candid: some of his April presentation was not included in his written report. [ 64 ] For example, Mr. Waguespack conceded under cross-examination with respect to his slide 22, in which he discusses the performance of the debutanizer during the 2002 rate trial, that he had looked for the first time at the information contained in the slide after he heard Mr. Kapur’s testimony. NOVA counsel conceded that the information in slide 22 with respect to Mr. Kapur’s opinion about debutanizer high loading is in response to Mr. Kapur’s testimony. Mr.

Waguespack testified that, after having Mr. Kapur’s testimony, he went back and “dug a little further into some of the details” of the 2019 rate trial reports in which NOVA suggested that the debutanizer project increased E3’s production levels, although he was of the general opinion in his written report that “several key equipment de-bottleneck-projects” executed after the 2014 turnaround increased E3’s capacity with seven furnaces. [ 65 ] After hearing Mr. Kapur’s testimony, he prepared charts on the supposed effects of the debutanizer re-tray. After hearing Mr.

Kapur’s testimony, he did “some plots” related to the re-tray, but testified that he did not have all the data to test NOVA’s own analysis directly. [ 66 ] NOVA conceded that the information in slides 40-44 with respect to the depropanizer was not in Mr. Waguespack’s report, but was prepared in response to Mr. Kapur’s testimony.

All of this falls within the Court in Cheesman’s example of the dangers of the failure of disclosing the substance of an expert’s opinion evidence, of “allowing a defendant to deliver a skeletal expert’s report, “but then allowing that expert to testify about the substance of the plaintiff expert’s report”. Dow could not be expected to have known the reasons for Mr. Waguespack’s opinion on

Part 1 Issue D, even though he may have made glancing reference to it in his report.

[ 67 ] I agree, therefore, that much of Mr. Waguespack’s April presentation is new opinion evidence not previously disclosed and therefore not admissible. [ 68 ] NOVA submits that Mr. Waguespack’s opinion that Mr. Kapur’s reliance on the 2018/2019 rate trials is inappropriate because Mr. Kapur fails to account for the impact of certain debottlenecking work completed by NOVA after the 2014 turnaround, is not new. In support, NOVA and references certain parts of the 2021 Waguespack Report. The identified parts that may be relevant to the issue are as follows:

a) Paragraph 29: “Mr. Kapur uses a basis for 6-furnace operation that was only demonstrated after the Top-up Period. I do not believe that Mr. Kapur’s basis is correct and it certainly does not conform to a “conservative basis” upon which to evaluate the Production Gap...”;

b) Para 30: “Mr. Kapur and I also disagree on the proper basis for maximum capacity during 7-furnace operation, As is the case for six furnaces, Mr. Kapur uses a basis for capacity that was only demonstrated following equipment upgrades that were made after the Top-up Period ended in mid-June 2013 ... Finally, Mr. Kapur does not address the likelihood that the rate observed in early 2019 was enabled by other debottlenecking work done after the Top-up Period (i.e. other than E-650 and the debutanizer)”;

c) Para 45 “...because the outage in 2017 allowed for a mechanical change that eliminated the debutanizer as a bottleneck and allowed higher rates during 7-furnace operation...”

d) Para 50: “Mr. Kapur acknowledges that the production rates demonstrated in January 2019 might not have been achievable without plant equipment changes that were made in the years following the 2014 turnaround ...” Mr. Waguespack supports this statement by reference to a footnote in Mr. Kapur’s report, the

interpretation of which is contested;

e) Para 51: “I do not agree that production rates demonstrated after the Top-up Period are a valid basis for determining E3’s 7-furnace capacity. Several key equipment debottleneck projects were executed after the 2014 turnaround, some prior to June 2018 and some after the 2018 turnaround, all of which served to increase capacity with seven furnaces.

The projects implemented during the Top-up period (and captured in my analysis) include those completed during the April 2017 outage: • Debutanizer (T-611) retray – removed debutanizer constraint; and • Furnace feed vaporizer (E-650) cleaning – allowed increase in plant throughput during both 6- and 7-furnace operation: allowed reassessment of E-650 upgrade project.”

f) Para 52: “The following projects were completed during and after the 2018 turnaround and contributed to an increase in Productive Capability after the Top-up Period.

From my review of the records these constraints do not appear to have been known by NOVA prior to the 2014 turnaround, with the exception of the known, recurring fouling issues with E-650. • May-June 2018 Turnaround: • Retube of C3 refrigeration surface condenser (E-676) – restored condensing capacity and enhanced power and operating flexibility; • Turbo-expander (TE-551) guide vanes upgrade – enabled optimum operation for the chilling train and minimizing ethylene losses in off-gas; operation of bypass valve eliminated; and • Furnace feed vaporizer (E-650) replaced in kind and valve tie-ins installed for later installation of spare E-650S. (emphasis added) • October 2018 Outage: • New in-line spare for furnace feed vaporizer (with higher capacity than original) was installed (E650S), allowing E3 to perform on-line exchanger cleaning, enabling higher furnace feed rates and removing the C3 refrigeration load constraint; and • Depropanizer (T-601) upgrades, including new downcomers, trays, and feed distributor.

This change addressed what was expected to be the next plant constraint.” ( emphasis added)

g) Para 53: “Mr. Kapur has not evaluated whether the production gains recorded in early January 2019 might be attributable to debottlenecking projects on equipment that may not have been actively constraining production before June 2018, but appeared to do so afterwards” (e.g. T-601 depropanizer: TE-551 turbo-expander)”.

h) Para 59: “Following the 2014 turnaround, Mr. Kapur sets the maximum capacity with 6 furnaces at 180.2 Mg/hr., a rate that reflects an ethane feed rate of 59 Mg/hr, and conversion of 68%. Similar to his approach for seven furnaces. Mr. Kapur bases his assumption on a high conversion rate trial conducted after the Top-up Period ended, and which was achieved over four days from December 12-15, 2018. However, this rate was achievable only after the specific capital projects noted above were implemented during and after the 2018 turnaround.”

i) Para 61: “As with the case of seven furnaces noted above, Mr. Kapur acknowledges that the 6- furnace production rates demonstrated in December 2018 might not have been achievable without plant equipment changes that were made after the Top-up period [Dow disagrees with this statement]. He agrees with the opinion of Dow expert, Mr. Holloway, that the changes could have been made earlier and uses the December 2018 rates as the basis for determining Productive Capability.

Similar to the 7- furnace basis for assumptions, I do not agree that production rates demonstrated after the Top-up Period are a valid basis for calculating the Production Gap during the Top-up Period.” [ 69 ] Dow agrees that parts of paragraphs 50 to 54 (later clarified to be paragraphs 50 to 53) of Mr. Waguespack’s report address the subject of

Part 1 Issue D, and that these form the boundaries of admissibility of Mr. Waguespack’s evidence. Given a generous

interpretation, I find that a portion of paragraph 45, paragraph 59 and a portion of paragraph 61 could also be said to address

Part 1 Issue D. [ 70 ] I directed NOVA to identify for the Court and for Dow the portions of the slide presentation that it believes are admissible, and NOVA did so. [ 71 ] In

summary, however, NOVA submitted that all of the slides except four are tied to Mr. Waguespack’s report, and that these four were Mr. Waguespack’s response to Mr. Kapur's testimony on cross-examination. NOVA had previously conceded that slides 40-44 were not in Mr. Waguespack’s report. Dow submits that 11 of the slides refer only to the evidence of Mr. Kapur. [ 72 ] Many of the slides are said by NOVA to be connected to paragraphs 50-53 of Mr. Waguespack’s report.

As noted previously, these paragraphs are general in nature, and do not contain the detailed analysis set out in the slides alleged to be related to them. [ 73 ] Many of the other slides are said to be related to Appendix B of Mr. Waguespack’s report. Appendix B is described in Mr. Waguespack’s report as follows: Please refer to appendix B for a detailed list of documents considered.

Documents specifically relied upon are cited in report footnotes. [ 74 ] In other words, unless a document is cited in the report footnotes, it may have been considered but not relied upon. [ 75 ] Dow notes that none of the foot-noted documents are referred to in the slides, further supporting its contention that the slides are essentially a new report. Many of the documents set out in the slides are part of the 1.3 million pages of documents disclosed by NOVA shortly before the damages hearing commenced.

As noted previously, NOVA has never complied with this Court's direction to identify for the Court and Dow the documents on which it no longer intends to rely at the hearing. This late disclosure of documents was considered in 2021 ABQB 974 and in 2022 ABQB 292 . [ 76 ] None of these late disclosure documents are referenced in Mr. Waguespack’s July 2021 report, and Dow would have no reason to suspect that they would form part of Mr. Waguespack’s testimony. Approximately 18 of the documents that Mr.

Waguespack offered in testimony are from this new disclosure. [ 77 ] It is of course correct that an expert report is a

summary and need not be a complete rendition of all the evidence, and that an expert may give evidence that is latent in their reports. [ 78 ] Experts may also use slides to illustrate and explain the context of their opinions. However, most of the slides in this case illustrate a new opinion, neither previously disclosed nor "latent" in Mr. Waguespack’s July 2021 report. [ 79 ] In the end, in order to give NOVA a full opportunity to present Mr. Waguespack’s evidence subject to objections with respect to admissibility, Mr.

Waguespack was allowed to testify using the slides, with Dow Counsel objecting to most of the slides as they were put in evidence. This is the reason for the great number of Dow objections, most of which are quite valid. [ 80 ] As noted previously, this Court noted in July 2020 that evidence required as a foundation for any further award of damages exists in the business documents that have been exchanged between the parties and provided to the experts as supporting material for their reports, such that this evidence can be entered without the need of lay witnesses. NOVA submits that this justifies Mr.

Waguespack referring in his April, 2022, testimony to business documents not referred in his 2021 report. This is not correct: the fact that Mr. Waguespack has enlarged the scope of documents on which he relies in his April presentation is an additional indication that parts of the presentation are a new report. [ 81 ] NOVA submits that Dow's position that Mr. Waguespack may only refer to documents expressly cited in his report is contrary to the position Dow advanced and the Court accepted with respect to Mr. Kapur's testimony. Again, this is not accurate.

One of the documents in issue was an electronic document. While it was not referred to in Mr. Kapur’s written report, it was delivered with the report as back-up. Another was a back-up document that NOVA had requested with respect to a table in the written report. Another was with respect to daily production data that related to data set out in the report. Given Mr. Kapur's explanation with respect to these documents, NOVA did not object to them being entered as evidence. These documents are different from Mr. Waguespack’s evidence, both in nature and in quantity. [ 82 ] In conclusion, much of Mr.

Waguespack’s April presentation consists of new opinions not previously disclosed in his written report. These opinions go far beyond any ordinary expansion of disclosed opinions and are inadmissible as being contrary to the purpose of pretrial disclosure of expert opinions. Some of Mr. Waguespack’s presentation is based on his previously disclosed opinions, and has been taken into account with respect to the resolution of

Part 1 Issue D. [ 83 ] I find that the following slides are admissible: a. slide 3, subject to the fact that in cross- examination, Mr. Waguespack explained that what he meant by the reference to “Productive Capability” was that he considered the capacity, of the six- furnace and seven- furnace capacity, rather than Productive Capability as a whole, and that his opinion is that these are the two main inputs in calculating Productive Capability and an increase in theie capacity would translate to an increase in the “capacity” of the plant when in six- furnace and seven-furnace mode. Mr.

Waguespack conceded that what he wrote his report, about the possible increase in E3’s Productive Capability was based on his inadmissible methodology of Productive Capability. However, he testified that his analysis of the projects was focused on whether they “moved the needle” on six or seven furnace capacity. b. slide 4 c. slide 6

d. slide 28 e. slide 36 f. slide 37 g. portion of slide 45, excluding the reference to “Expected Capacity change...” [ 84 ] Slides 53 to 57 are not responsive to the

Part 1 Issue D question but are a

summary of Mr. Waguespack’s criticism of Mr. Kapur’s report. The admissibility of these slides and Mr. Waguespack’s testimony on them will be the subject of the final decision in the damages hearing. [ 85 ] When considering these slides, I also considered cross-examination testimony. [ 86 ] To the extent that I have discretion to allow Mr. Waguespack’s new opinions and analyses to be admissible on the basis of trial fairness, I take into account the following factors:

a) NOVA raised Issue D as a concern and this Court accepted it as an issue for the damages hearing more than a year and a half prior to Mr. Waguespack delivering his July 30, 2021 opinion. Mr. Waguespack had every opportunity to include his opinion with respect to

Part 1 Issue D in his written report. If Mr. Waguespack intended to opine on this issue, he could have done so in his report. To the extent that he did so, the references in his report to the issue are admissible in evidence;

b) Part 1 Issue D has always on its face been a precondition to

Part 2 of Issue D, and the "bifurcation" that NOVA complains of should not have been a surprise;

c) NOVA has already had the benefit of an order allowing Mr. Waguespack’s second opinion to be part of the evidence at the damages hearing, subject to admissibility concerns. NOVA was aware after much of Mr. Waguespack’s first opinion had been found to be inadmissible on the basis that it did not comply with the Court-accepted methodology of calculating Productive Capability of what it would need to address in Mr. Waguespack’s second report;

d) If this Court allowed Mr. Waguespack’s new opinions and analysis to be admitted at the evidence, it would be necessary to allow Dow an opportunity to respond with a new expert report, prolonging what has already been a very long hearing because of NOVA's strategic choices;

e) NOVA failed to comply with my direction to identify which of the 1.3 million documents disclosed shortly before the hearing it would no longer rely upon. Instead, it used some of those documents in Mr. Waguspack’s new opinion during his April, 2022 testimony, giving Dow access to the slides only a day before Mr. Waguespack testified. [ 87 ] Given these factors, I do not exercise my discretion to allow the new opinions and analyses into evidence.

Trial fairness directs otherwise: it would be unfair and prejudicial to Dow to allow this new evidence in at this stage of the hearing. [ 88 ] I find the other slides in Mr. Waguespack’s April presentation to be inadmissible for one or more of the following reasons:

a) they are in response to Mr. Kapur's cross-examination and not in Mr. Waguespack’s report;

b) they relate to the documents disclosed by NOVA in September, 2021 very shortly before the damages hearing commenced;

c) they contain information and new opinions not included in Mr. Waguespack’s report;

d) they do not reflect his opinion, but merely quote from NOVA documents not referred to in his report;

e) they rely on documents not relied upon by Mr. Waguespack in his report;

f) they relate to what Dow knew about the projects, or whether Dow approved the expenditure on the projects, which is not relevant to the issue;

g) they purport to quantify the impact of the projects on Productive Capability, which Mr. Waguespack previously testified he did not do in his report. In addition, some of these opinions are just a report of NOVA employee opinions. F. Is Mr. Kapur’s cross-examination on his opinion on Issue D

Part 1 justification for a new report by Mr. Waguespack? [ 89 ] As noted previously, much of Mr. Waguespack’s testimony and slide presentation on this issue constituted a new expert report. NOVA submits that evidence on

Part 1 Issue D that it solicited from Mr. Kapur on cross-examination and some redirect questions by Dow on that evidence opened the door for Mr. Waguespack to give new opinions on plant equipment changes. [ 90 ] NOVA submits that Mr. Kapur “volunteered” the evidence. Further, NOVA criticizes Mr. Kapur for his ability to respond to its questions on cross-examination on some unpersuasive basis of unfairness. NOVA’s assertion that Mr. Kapur volunteered the information or that he had given testimony on the

Part 1 issue in direct examination is not correct: 1. The only example that NOVA submits in support of its contention that Mr. Kapur addressed that

Part 1 issue in direct testimony is an exchange between Dow counsel and Mr. Kapur during examination in-chief as follows: Q And so can you just speak briefly to why you use that rate trial data for your calculation of Productive Capability in the top-up

period? A So that’s the time frame the rate trial data was available from. Q And what did you do with respect to satisfying yourself regarding that data? A Yes. I had to make sure that the data is applicable to the time frame after the 2014 turnaround for the assets as they existed after the 2014 turnaround. This is not testimony on

Part 1, but merely support for Mr. Kapur’s use of rate trial data. 2. None of the examples from the transcript that NOVA relies upon to support its submission that Mr. Kapur volunteered opinions on the

Part 1 issue indicate anything but responses to cross-examination questions on the issue, such as Mr. Kapur’s response to the cross- examination question of whether he took Mr. Holloway’s conclusion in his report at face value, or whether he had discussed any of the plant equipment changes in his report. While NOVA may be unhappy with the answers to these cross-examination questions, they were not “volunteered” in any way other than as valid responses to questions. 3. It is correct that, in redirect, Dow counsel asked Mr.

Kapur why his report did not specifically address the equipment changes between 2014 and 2016, and whether any of the items that NOVA counsel had asked about in cross-examination had any impact on Mr. Kapur’s evaluation of Productive Capability. This was prudent re-examination given the questions that had been asked. [ 91 ] When Mr. Kapur issued his updated report on Productive Capability in late 2019, there had been no identification of the Part D issues or whether improvements in Productive Capability were attributable to plant equipment changes implemented after the 2014 turnaround. [ 92 ] Mr.

Kapur merely responded to questions of whether he had addressed the issue of when he gave his updated report on Productive Capability. NOVA solicited these responses in cross-examination. [ 93 ] Cross examination cannot be used as a foundation for supposedly “responsive expert evidence” on subjects not covered by the responding expert in his own report. When Mr. Waguespack testified in April, 2022, he confirmed that some of his evidence was “additional analysis related to Mr.

Kapur’s testimony in December related to ... these projects I’m going to talk about”. [ 94 ] This issue was addressed in Cheesman et al v Credit Valley Hospital et al , 2019 ONSC 5783 .

In that case, the Court refused to accept that a defence expert could testify in chief about anything that a plaintiff’s expert testified about, even if the testimony of the plaintiff’s expert was contained in his report, if the defence expert was silent on the issue in his responding report. [ 95 ] The Court noted at paras 74, 230 and 231 that: The defence position would denude of almost all utility those provisions of rule 53 that call for the exchange of reports 90 and 60 days before the pretrial conference and that require experts to list the reasons for their opinions in their reports.

It would allow a defendant to deliver a skeletal expert’s report, but then have the expert testify in chief about all of the substance of the plaintiff’s expert’s testimony on the basis that Quantrill and Marchand allow a defence expert to respond to the testimony of the plaintiff’s expert. That would allow defendants to take plaintiffs entirely by surprise. It would force plaintiffs to trial without knowing the opinions of defence experts and without knowing the reasons for those opinions.

That is trial by ambush. ... ... just because a defendant can cross-examine the plaintiffs’ expert on something that is not contained in any of the experts’ reports does not mean that the defendant can later examine their own experts in chief on that issue. To hold otherwise would allow the defence to eviscerate rule 53.03.

It would allow defence experts to remain silent on a point in their reports, have the defence cross-examine the plaintiff’s expert on the point even though the plaintiff’s expert did not refer to it in his or her reports and then use that as an excuse to have the defence expert introduce evidence in chief which should have been set out in his report.

This would sanction trial by ambush and allow defendants to avoid the requirements of rule 53.03. (emphasis added) [ 96 ] Alberta Rules 5.34 and 5.35 read together require the disclosure of expert reports so that an expert may not testify with respect to an issue, except with leave, unless the substance of his testimony is set out in a report served under the Rules, in accordance with the same underlying purpose– to avoid trial by ambush. [ 97 ] The purpose of disclosure is obvious: “[i]t is designed to avoid one party surprising the other with expert testimony ... to require parties to give notice of their expert evidence (i.e., waive the privilege) in time to allow the other side a reasonable chance to respond ...

It allows the experts to focus on what is truly in dispute”. It prevents “disruption of the trial process which occurs when litigants are taken by surprise” because “parties know ahead of time what expert opinions they will encounter”. Even if the expert has served a report in compliance with the Rules, the trial judge has discretion to ensure that a party is not unfairly taken by surprise by expert evidence on a point that would not have been anticipated from a reading of the report: Drapaka v Patel , 2013 ABQB 247 at para 45 ; Wade v Baxter , 2001 ABQB 812 at para 52 . [ 98 ] Most of Mr.

Waguespack’s April, 2022, presentation cannot have been anticipated from a reasonable reading of his report. [ 99 ] NOVA submits that the facts of Cheesman are distinguishable. In Cheesman , the plaintiff’s medical expert witness testified about issues of swelling and pain and had referred to these issues in his report. The defendant’s expert, when responding to the plaintiff expert’s report, did not refer to these issues in his report. The Court found that the defendant expert should have done so if the defence wanted him to respond to these issues raised by the plaintiff’s expert.

The Court found that the proposition that an expert witness can be asked to comment on the opinion of another expert did not apply in this situation, that the defendants cannot use their own silence in the

face of the plaintiff’s expert’s testimony about an issue beyond the scope of their report as a basis for adducing evidence from their own experts on an issue that goes beyond the defendants’ experts’ reports. [ 100 ] While the Court in Cheesman noted that there were circumstances in which it may be appropriate for defence experts to respond to the evidence of a plaintiff’s expert even though the defence expert had not included that information in their report, the Court’s examples of when that may be appropriate do not include the situation in this case. [ 101 ] In any event, the Court’s comments about “trial by ambush” referred to a different situation, in which plaintiff’s expert witnesses had not referred to a treating physician’s consultation notes in their expert reports, but defence counsel had cross-examined them on the issue.

While the Court found that defence counsel was entitled to do so, because the right to cross-examine goes beyond the contents of an expert’s report, “that does not mean that the defendants can later examine their own experts in chief on that issue. [ 102 ] The same situation is before this Court: Mr. Kapur did not specifically refer to the

Part 1 Issue D in his report. In fact, the

Part 1 issue arose after Mr. Kapur had issued his report in October 2019. [ 103 ] NOVA submits that Dow cannot have been taken by surprise by the contents of Mr. Waguespack’s new evidence. While it is true that Dow was aware of NOVA’s position on the issue and had the opportunity to review Mr. Waguespack’s second opinion to the extent that Mr. Waguespack addressed the issue, it certainly could not have been aware of the new 58 slide report, with its extensive new opinions.

This is the essence of the principle that an expert’s opinion should be included in his report, to avoid trial by ambush. [ 104 ] NOVA need not have cross-examined Mr. Kapur on the issue. As it bears the onus of establishing that equipment changes post 2014 affected Productive Capability, it could have introduced its evidence through Mr. Waguespack, subject to the scope of his report. [ 105 ] In conclusion, NOVA’s cross-examination of Mr. Kapur did not open the door to new evidence from Mr. Waguespack. G.

Has Nova established that plant changes, made to E3 after the 2014 plant turnaround improved its Productive Capability? 1. Evidence of Mr. Waguespack on

Part 1 Issue D [ 106 ] Mr. Waguespack’s opinion on

Part 1 Issue D is that Mr. Kapur is incorrect in using 2018/2019 rate trial data without taking into account the effect of four plant equipment changes. He says that the plant outage in 2017 allowed for a mechanical change that eliminated the debutinizer as a bottleneck and allowed higher rates during seven furnace operation. He does not agree that production rates demonstrated after the top-up period are a valid basis for determining E3's seven-furnace "capacity". He says that several key equipment debottleneck projects served to increase "capacity" in seven furnace mode.

He says that several key equipment debottleneck projects completed during and after the 2018 turnaround contributed to an increase in Productive Capability after the Top-up Period. His opinion is Mr. Kapur's maximum capacity following the 2014 turnaround was only achievable after the specific capital projects he noted in his report (subsequently limited to 4) were implemented during and after the 2018 turnaround. He does not agree that six furnace production rates are a valid for calculating what he calls the "Production Gap" during the Top-up Period. [ 107 ] Mr.

Waguespack concedes that, at the time of his report, any opinions he included about

Part 1 Issue D used the assessment of Productive Capability that he felt was appropriate at the time. However, he says that his analyses of the projects does not depend on the Productive Capability framework - that it focused on whether the projects "moved the needle" on six or seven furnace capacity. [ 108 ] I did not find, as NOVA suggests, that the Court-approved Productive Capability methodology is not part of

Part 1 Issue D. What was meant was that NOVA’s proposition set out in

Part 1 Issue D would clearly involve an adjustment to the methodology with respect to the rate trial to rate trial part of the methodology. [ 109 ] Mr. Waguspack concedes that he did not address the magnitude of the changes in his written report. 2. Evidence of Mr. Kapur on

Part 1 Issue D [ 110 ] Mr. Kapur issued his October 2019 opinion before NOVA raised Issue D. It is understandable that Mr. Kapur did not make specific reference to the specific equipment changes that NOVA submits support its position that Mr. Kapur's Productive Capability calculation could not have been possible without intervening equipment changes. [ 111 ] However, NOVA made the strategic decision to cross-examine Mr. Kapur on the

Part 1 issue. Mr. Kapur was clear that he made no adjustments to his Productive Capability opinion for the alleged effects of any such changes as, in his opinion, such changes did not improve that Productive Capability. [ 112 ] Mr.

Kapur testified that, after reading the first part of the 2018/2019 rate trial report where it is suggested that E3 production rates might not have been achievable without some plant equipment changes that were made in the years following the 2014 turnaround, he had to review the equipment changes to understand whether they had any impact on Productive Capability, and, in his opinion, they did not. He reviewed all daily status reports for that purpose from 2013 until 2019. He reviewed most of the E3 quarterly reports, probably all of them. He reviewed the joint venture minutes of meetings.

He believed that he had reviewed the presentations to the co- owners that were technical in nature. [ 113 ] Mr. Kapur confirmed that he had reviewed the designs for the plant equipment changes for the top-up period and the loss and waste analyses.

[ 114 ] Mr. Kapur acknowledged that he had not mentioned the specific equipment changes that NOVA was alleging affected Productive Capability in his report, but that he reviewed documents "to see the things which can impact the Productive Capability" and that he had taken them into consideration. Productive Capability in his opinion was achievable as E3 existed after the 2014 turnaround. No equipment changes were necessary to achieve the Productive Capability numbers in his report. [ 115 ] Mr.

Kapur testified that he had scanned the documents pertaining to the 2014 turnaround to understand if there were any in-kind replacements of equipment or if there was any new equipment to that level so that he could understand the impact on Productive Capability. He found that the 2014 turnaround did increase E3's Productive Capability, due to work done to restore E3 to conditions, and probably some creep. [ 116 ] NOVA submits that Mr. Kapur ignored significant equipment and design changes in calculating Productive Capability, but I accept Mr.

Kapur's testimony that he reviewed these changes to determine whether they impacted E3's Productive Capability as it was set in the ground in 2014 and was satisfied that they did not. He specifically noted the E650 as it was originally designed under its restored condition, the debutanizer as it was designed under its condition restored after the turnaround and the depropanizer, all could which he says could achieve the Productive Capability he presented in his report. [ 117 ] NOVA notes that Mr.

Kapur answered questions on cross-examination with detailed reference to information and documents not cited anywhere in his report. These documents were put to him in a cross-examination by NOVA counsel, and he testified that he had reviewed them in the course of preparing his opinion. This criticism is unwarranted. [ 118 ] NOVA also mischaracterizes Mr. Kapur's opinion, alleging that he says that the equipment changes were pointless. This was not his opinion; his opinion is that they did not increase Productive Capability. NOVA mischaracterizes Mr.

Kapur's opinion when it submits that he said that there was no capacity - increasing event in the 2014 turnaround. [ 119 ] NOVA suggests that the fact that Mr. Kapur's October 2019 opinion did not contain an opinion that no equipment changes were required to achieve the rates achieved in the 2018/2019 rate trials means that he implicitly accepts the opposite proposition. This argument does not make sense and is clearly contradicted by his evidence. [ 120 ] Mr. Kapur was unshaken by cross examination on his opinions.

He answered questions with knowledgeable replies, indicating his understanding of the context and details of the equipment changes, and with a clear understanding of E3 as a whole and the inter- relationship of its parts. 3. Specific Expert Evidence on Equipment Changes A. The E-650 heat exchanger [ 121 ] NOVA replaced the E650 with a larger E650S immediately before the 2018/2019 rate trials. An in-kind replacement for the E650 was installed after the trials. [ 122 ] The reason for the installation of the new E650 was that the existing E650 consistently fouled after cleaning.

This was not a new problem: the fouling of the E650 was discussed at length during the trial. [ 123 ] Paragraphs 607 and 608 of the Reasons for Judgement note that NOVA submitted that fouling in the E-650 had periodically affected E3’s productive capability from 2006 to 2008. The Reasons address the fouling issue, and the opinions of expert witnesses on whether it limited E3’s production.

I noted that, although fouling was an unusual problem, I could not find that it affected E3’s Productive Capability in a material way. [ 124 ] At paragraph 629, I found that, while some of the fouling issues may have been out of the ordinary, given the length of time NOVA took to resolve the issue and given that Mr. Mikulka’s opinion fairly backs out actual down-time from his calculations, this approach compensates for any minor more-than-normal constraints on production. [ 125 ] NOVA cross-examined Mr. Kapur during the damages hearing about this equipment change. Mr.

Kapur testified that an in-kind replacement of the E650 was necessary for E3 to reach the six-furnace rates he used because it was necessary to have an E650 in clean condition as designed for a Productive Capability rate trial. He pointed out that, based on plant data, with six- furnace operation with 59 Mg/hr conversion, ethylene production of 176 Mg/hr with seven- furnaces was achieved. He noted that therefore the estimate he used post-2008 up to 2014, 174.8 Mg/hr was very conservative. He noted that in the 2014 turnaround, the E650 was washed and inspected. [ 126 ] Mr.

Kapur acknowledged on cross-examination that the larger E650S was in place at the time of the 2018/2019 rate trials, but, based on his assessment, what was necessary to get the rates he used was to have an in-kind clean E650. [ 127 ] Mr. Waguespack testified that the in-kind E650 could not handle furnace combustion at the rates selected by Mr. Kapur. However, on cross-examination, he conceded that replacing a fouled piece of equipment with a clean one would not increase Productive Capability. Mr.

Waguespack agreed that the Court accepted methodology addressed Productive Capability “from a design point of view” and “includes the principle that the plant will be brought back into clean-condition every five years or so when turnarounds are conducted”. Therefore, if a piece of equipment “fouls and we replace it with a clean one, we’re not increasing Productive Capability”. As Mr. Waguespack noted, [i]n order to be eligible to increase the Productive Capability of the plant, a change of a piece of equipment must increase that piece of equipment’s design capacity. [ 128 ] Mr.

Waguespack agreed that “to even consider” whether “an equipment change” increased productive capability, it must have “materially increased its standalone capacity”, when “compared with original design”, and the plant must have been “limited by that piece of equipment” prior to such design capacity increase.

[ 129 ] Mr. Waguespack eventually agreed that the in-kind E650 replacement and therefore the design capacity of the old E650 were capable of achieving Mr. Kapur's rates, after being shown plant data for the period after the in-kind replacement of the E650S was put into service, although he suggested that a different conversion rate may have made a difference or there may have been other changes. [ 130 ] In Mr.

Waguespack’s new albeit inadmissible opinion, he suggested that the kind of fouling that the old E650 was experiencing changed during the top-up period from what it had been before, on the basis of what he called "plugging", a theory that had been raised and rejected at trial. [ 131 ] NOVA submits that what was happening to the E650 during and even before the top-up period was permanent deterioration, that it was not just "gunk that accumulates on equipment but can be cleaned in a turnaround". NOVA submits that Mr. Kapur agreed with this, but this is inaccurate. Mr.

Kapur testified during cross- examination that the Court-approved methodology he used assumed that in the first year after turnaround, the equipment was "as best as it could be", closer to the design condition. He noted that the methodology used in the trial period allows for all the components that pertain to turnaround including leak-outs and fouling, within the average five year turnaround capacity. [ 132 ] When Mr. Kapur was cross-examined with reference to data with respect to the cleaning of the E650 during the April 2017 outage of the plant, which led to the decision to replace the

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