r v. Valero, 2019 NLCA 9

Wm. Tapper Ltd. and William Tapper (appellants) v. Valero Energy Inc. and CST Canada Co. (respondents) (17/53) Indexed As: Wm. Tapper Ltd. and William Tapper v. Valero Energy Inc. and CST Canada Co. 2019 NLCA 9 4 C.A.N.L.R. 137 Court of Appeal of Newfoundland and Labrador Welsh, White and Harrington JJ.A. February 15, 2019

Summary: By agreement between the parties, the appellant, Tapper, was appointed as an agent of the respondent, Ultramar, for the purpose of selling and delivering petroleum products, particularly home and commercial heating fuel, to the customers of Ultramar in a defined market area in and near St. John’s. In 2010, Ultramar notified Tapper, that it was replacing its existing fuel delivery system with a new computer-based dispatching and fuel delivery system. When the system was installed on Tapper’s delivery vehicles, Tapper alleged that it was slower than the former paper-based system.

Tapper claimed that he entered into an agreement with Ultramar to receive compensation for losses caused by the new system and sued for damages. The claim was dismissed. The trial judge found that Tapper failed to prove the existence of any contractual obligation to pay compensation, and further failed to prove any damages arising from the introduction of the new system. Tapper appealed. Held: Appeal dismissed.

Harrington J.A. ( Welsh and White JJ.A. concurring): Tapper alleged that the trial judge would have been assisted in the analysis of whether there was a contract for compensation if he had drawn an adverse inference from the respondent’s failure to produce certain internal documents. The decision of a trial judge to draw or not draw an adverse inference is a matter of discretion and is entitled to significant deference on appeal.

There is no basis on which to conclude that the judge erred with respect to the exercise of his discretion not to draw an adverse inference as a result of Ultramar’s failure to locate and submit the documents Tapper requested. The only written contract between the parties is an “Agency Agreement” dated May 1, 2002, which was updated on January 2, 2012. Tapper argues that the parties reached an agreement at a September 14, 2011 meeting in St. John’s. However, no records of the meeting were created by either party.

While an oral agreement may be enforceable, it must be established that the parties did, in fact, agree, and what the terms of that agreement are. The trial judge did not err in finding that there was no legally enforceable agreement between Tapper and Ultramar with respect to payment of his losses. The trial judge considered all the evidence adduced at trial in relation to the September 2011 meeting and alleged agreement, including the conduct of the parties subsequent to that meeting and the relevant documentary evidence. The trial judge found that Tapper had failed to establish the existence of an agreement.

The parties did not act in a manner consistent with an agreement having been reached, and the material terms of any agreement clearly remained to be negotiated. The trial judge found there was no evidence of bad faith by Ultramar and no evidence of actual loss to the appellant. There is no basis on which to disturb these factual findings by the trial judge. Tapper has failed to identify any error in the trial judge’s analysis. The appeal must be dismissed. Cased cited: Stassis v. Amicus Bank , 2014 NLCA 38 , 356 Nfld. & P.E.I.R. 80

Counsel: Barry Learmonth Q.C., for the appellants; Leanne O’Leary and Megan Taylor, for the respondents. This appeal was heard on January 11, 2018 before Welsh, White and Harrington JJ.A.

The following judgment was filed on January 15, 2019 by Harrington J.A. for the Court. ______________________________________________________________ Harrington J.A.: INTRODUCTION [ 1 ] This is an appeal regarding a contractual dispute between the parties arising from the trial judge’s dismissal of the appellant’s claim for compensation related to the respondent’s introduction of a new dispatching and fuel delivery system. [ 2 ] The appellant, Wm. Tapper Ltd., is a body corporate organized and existing under the laws of Newfoundland and Labrador.

The co-appellant, William Tapper, is the sole director and shareholder of Wm. Tapper Ltd. (the corporation and the individual are hereinafter collectively referred to as “Tapper”). [ 3 ] The majority of the appellant’s dealings were with Ultramar Ltd. On or about June 1, 2013, Ultramar changed its name to Valero Energy Inc., the respondent.

The co-respondent, CST Canada Co., is a spin-off corporation to which Valero assigned certain contracts. [ 4 ] By agreement between Tapper and Ultramar, Tapper was appointed as an agent of Ultramar for the purpose of selling and delivering petroleum products, particularly home and commercial heating fuel, to the customers of Ultramar in a defined market area in and near St. John’s.

Tapper’s agency relationship with Ultramar commenced in 1983, with the current dispute involving an agency agreement signed in 2002. [ 5 ] In March of 2010, Ultramar notified its agents, including Tapper, that it was replacing its existing fuel delivery system. A new computer-based dispatching and fuel delivery system called the “Touchstar System” was intended to replace the previous procedure for the dispatch of delivery trucks. [ 6 ] When the Touchstar System was installed on Tapper’s delivery vehicles in June 2010, complications arose.

Tapper alleged that the new system was slower than the former paper-based system. Ultramar conceded that the system caused “transitional difficulties,” but maintained that the system offered more efficiencies than deficiencies. [ 7 ] Tapper claimed that he entered into an agreement with Ultramar to receive compensation for losses caused by the new system.

Ultramar denied the existence of any such agreement, and took the position that Tapper was adequately compensated for any inefficiencies during implementation of the new system. [ 8 ] Tapper sued Ultramar for monetary damages for the costs and inefficiencies he associated with the introduction of the Touchstar System.

He also sought a declaration that a restrictive covenant in the agency agreement with Ultramar was unreasonable and invalid; the trial judge’s finding that the covenant was unenforceable is not under appeal. [ 9 ] With respect to the primary issue, the trial judge found that Tapper failed to prove the existence of any contractual obligation to pay compensation, and further failed to prove any damages arising from the introduction of the Touchstar System. FACTS [ 10 ] Tapper initially expressed displeasure about the prospect of the Touchstar System being installed on his vehicles.

He notified Ultramar that he was unwilling to absorb any research and development costs associated with the introduction of the new system. [ 11 ] On October 13, 2010, Tapper submitted a claim to Ultramar for reimbursement of $11,590.60. He claimed that this represented additional costs he had incurred because of the Touchstar System between June and September 2010.

In this correspondence, Tapper claimed that a one-time payment would be fair as part of the implementation process. [ 12 ] On October 20, 2010, Ultramar responded to Tapper, stating that no payment would be made for downtime losses, and that any long-term negative effects would be discussed during annual business reviews. [ 13 ] Despite the initial denial of the claim by Ultramar, further discussions between the parties resulted in Ultramar making a payment of $11,590.60 in December 2010. [ 14 ] On April 11, 2011, Tapper changed his position that a one-time payment was the appropriate compensation.

He submitted a further claim to Ultramar alleging that he had incurred a further $29,315 in losses because of the Touchstar System. Tapper did not provide any supporting documents or explanation as to how he calculated this amount. [ 15 ] In response on April 15, 2011, an Ultramar representative indicated that Ultramar was only willing to compensate a limited

amount for downtime in certain situations, but that more substantiated information would be necessary to justify a compensation claim for “downtime” outside of limited situations left to be addressed in upcoming business reviews. [ 16 ] On May 4, 2011, Tapper wrote to Ultramar indicating that he had incurred an additional $4,940 in losses, which he added to his previous claim for a total of $34,255. [ 17 ] In July of 2011, Ultramar advised that the invoices submitted by Tapper would not be processed due to insufficient supporting data.

Ultramar re-iterated that increased operational expenses would not be compensated by way of invoices. [ 18 ] In August of 2011, Ultramar advised Tapper that the payment made in December of 2010 was not a “business as usual payment,” but rather a one-time payment which Ultramar offered to cover costs during the deployment of Touchstar affecting Tapper and other Ultramar agents in the changeover to the new system. [ 19 ] A meeting between Tapper and representatives from Ultramar was held in St. John’s on September 14, 2011. The primary issue on this appeal is related to the events and outcome of that meeting.

At trial, Tapper testified that he had reached an agreement that Ultramar would accept his invoices, and all that remained to be determined was the proper format for his invoices.

In contrast, representatives of Ultramar testified that they were clear in the meeting with Tapper that compensation would not be paid on an ongoing basis, and they would only agree to a one-time payment. [ 20 ] At the meeting, Ultramar offered Tapper a lump sum of $18,000 to resolve his “past complaints.” This amount was rejected by Tapper. [ 21 ] On January 4, 2012, Tapper signed an updated agreement with Ultramar regarding his commission rates. Tapper accepted a payment from Ultramar for $25,000 with respect to the controversy over Touchstar.

Ultramar claimed at trial that the $25,000 payment was made in exchange for Tapper agreeing to stop submitting invoices. Tapper acknowledges the payment was made, but denies that he agreed to refrain from submitting invoices. [ 22 ] During the early months of 2012, representatives from Ultramar continued working with Tapper in responding to his claims.

On February 29, 2012, a representative from Ultramar rejected Tapper’s claim that he was entitled to claim for downtime losses, and indicated that these losses should have been reflected in his commission rate agreement signed on January 4, 2012. [ 23 ] Despite this rejection, a further payment of $9,454.50 was made to Tapper based on Touchstar losses alleged to have been incurred for January, February, and March 2012. Tapper continued submitting invoices to Ultramar, and claimed that the payment for January to March did not cover the full extent of his losses.

No further payment was made by Ultramar to Tapper with respect to Touchstar losses. [ 24 ] A new representative of Ultramar became responsible for the management of the Touchstar System and dealings with Tapper. Ultramar attempted to arrange a further meeting with Tapper, but Tapper chose not to attend. [ 25 ] Tapper commenced an action seeking payment of his downtime losses in accordance with a purported September 14, 2011 “agreement”. He later sought payment of compensation for downtime losses over the 48-month period from April 2012 to the end of April 2016. [ 26 ] The trial judge dismissed the claim.

He concluded that while Tapper may have felt that he reached an agreement in September 2011 regarding compensation, there was no evidence of a meeting of the minds that would have created an obligation on the part of Ultramar to pay compensation to Tapper.

The trial judge further concluded that Tapper had failed to demonstrate that the Touchstar System had caused inefficiencies in Tapper’s fuel delivery operations leading to financial losses. [ 27 ] The trial judge held that Ultramar did not engage in bad faith dealings with Tapper and that he was not entitled to claim aggravated damages as pleaded by Tapper against Ultramar. ISSUES [ 28 ] The appellant identified the following grounds of appeal: 1.

That the trial judge erred in failing to draw an adverse inference from the fact that the respondents had relevant documents in their possession or control which they failed to produce; 2. That the trial judge erred in concluding that there was no evidence that the appellants sustained losses as a result of the implementation of the Touchstar System; 3. That the trial judge erred in concluding that there was no agreement between the appellants and respondents to compensate the appellants for the losses claimed by the appellants as a result of the implementation of the Touchstar System; 4.

That the trial judge erred in his assessment of the benefits and advantages which the appellants were alleged to have received as a result of the implementation of the Touchstar System;

5. That the trial judge erred in concluding that the respondents had not breached their duty to act honestly and in good faith in discharging their obligations towards the appellants. [ 29 ] The primary ground of appeal is ground 3, the finding that there was no enforceable contract. Subsidiary to this ground of appeal is ground 1, as the drawing of an adverse inference could have assisted the trial judge in finding that there was an agreement. Grounds 2 and 4 relate to damages, and are only relevant if this Court disturbs the finding that there was no agreement.

Breach of Contract [ 30 ] The trial judge rejected the argument of Tapper that an enforceable agreement for compensation had been made at the September 14, 2011 meeting. Failure to Draw an Adverse Inference [ 31 ] Tapper alleged that the trial judge would have been assisted in the analysis if he had drawn an adverse inference from the respondent’s failure to produce certain internal documents. [ 32 ] It is unclear from the trial judge’s reasons whether he did draw an adverse inference.

The trial judge found: [13] While I am prepared to accept that in circumstances such as this an adverse inference may be drawn, it does not relieve the plaintiff in any action from the burden of proving its case. Where the Court finds that on the evidence it is difficult to find that the case has been proven on the balance of probabilities, such an inference could assist the Court in reaching a conclusion.

I will keep this in mind as I examine the evidence. [ 33 ] At no further point in his reasons does the trial judge refer to the adverse inference. [ 34 ] Drawing an adverse inference was considered by this Court in Stassis v. Amicus Bank , 2014 NLCA 38 , 356 Nfld. & P.E.I.R. 80 . In Stassis , the Court described the underlying rationale as follows: 36 Adverse inferences are founded on the common-sense logic that if a party has evidence and chooses not to bring it forward it must not have been favorable. The Supreme Court of Canada has referred to the proposition stated by Lord Mansfield in Blatch v.

Archer (1774), 1 Cowp. 63 , 98 E.R. 969 (Eng. K.B.) , at page 970 : It is certainly a maxim that all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other side to have contradicted. ( Clements (Litigation Guardian of) v. Clements , 2012 SCC 32 , [2012] 2 S.C.R. 181 (S.C.C.) , at paragraph 11 ; R. c.

Jolivet , 2000 SCC 29 , [2000] 1 S.C.R. 751 (S.C.C.) , at paragraph 25 .) [ 35 ] As noted by this Court in Stassis , the decision of a trial judge to draw or not draw an adverse inference is a matter of discretion and is entitled to significant deference on appeal, and should only be disturbed if the decision constituted a palpable and overriding error: 59 But the question before this Court is not whether the trial judge was entitled to draw an adverse inference.

It is whether the record shows that the trial judge made a palpable and overriding error by failing to do so. [ 36 ] Tapper asked the trial judge to draw an adverse inference from certain documents involving Tapper that he believed were in the possession of Ultramar. Tapper suggested that these documents, had they been produced, would have supported his claim that there was an agreement between Tapper and Ultramar regarding compensation. [ 37 ] Ultramar responded that it was never alerted by Tapper prior to trial that full disclosure had not been made.

Further, no witnesses from Ultramar were discovered by Tapper in relation to the proceeding. As a result, Ultramar only became aware of the alleged lack of disclosure when Ultramar contacted two former employees to be witnesses at the trial. This led Ultramar to conduct a further search of its records, and to provide additional pre-trial disclosure. [ 38 ] Despite this further search, certain additional records sought by Tapper were never located. Ultramar argued that the documents could not be located and likely no longer existed.

It is these “missing records” from which Tapper sought to have the trial judge draw an adverse inference. [ 39 ] At trial, Ultramar called the two former employees to testify. It is apparent from the decision that, upon consideration of the whole of the evidence, including the evidence of these witnesses, the judge was satisfied that the alleged missing documents did not warrant the exercise of his discretion to draw an adverse inference. The evidence provided a reasonable explanation for the missing documents.

The judge was not satisfied that Ultramar chose not to bring the evidence forward for the reason that it would not have been favourable to its case. [ 40 ] Rather, it follows from reading the decision as a whole that the judge concluded that the evidence that was adduced at trial was sufficient to permit a proper analysis of Tapper’s claim for compensation. There is no basis on which to conclude that the judge erred with respect to the exercise of his discretion not to draw an adverse inference as a result of Ultramar’s failure to locate and submit the documents Tapper requested.

Evidence of an Agreement [ 41 ] Tapper’s claim for contractual damages can only be established if there was a contract that Ultramar breached.

[ 42 ] The only written contract between the parties is an “Agency Agreement” dated May 1, 2002, which was updated on January 2, 2012. Remuneration is dealt with in clause 11. The first paragraph sets the rates of commission the Company agrees to pay the Agent. Review of the rates is addressed in clause 11.02: The Company shall upon either Agents’ request: (

a) Review the commission rates with the Agents and advise them of the concepts by which the rates are determined; (

b) Review the Agents’ operations and make recommendations designed to enable them to operate efficiently under these rates; (

c) Evaluate the economic factors which have an effect on the Agents’ operating costs and review the commission rates in accordance. [ 43 ] In his factum, Tapper argues that the parties reached an agreement at the September 14, 2011 meeting in St. John’s. However, no records of the meeting were created by either party. While an oral agreement may be enforceable, it must be established that the parties did, in fact, agree, and what the terms of that agreement are. [ 44 ] At the meeting, Tapper suggested an increase to his commission rate to compensate him for the losses, as opposed to sending monthly invoices.

This proposal was strongly rejected by Ultramar representatives at the meeting. [ 45 ] Tapper testified that he left the meeting with an agreement that he would continue submitting monthly invoices for his losses, and that “he and Mr. Clarke, a representative of Ultramar, would work on a format for his invoices that would be acceptable to Ultramar for auditing purposes.” [ 46 ] Tapper was paid $25,000 by Ultramar for downtime losses on January 4, 2012, at the same time his commission rate agreement was signed. This new agreement did not refer to downtime losses.

Discussions with Ultramar regarding compensation for downtime losses continued into February 2012. The matter was brought to a head when in a February 29, 2012 email a representative from Ultramar told Tapper that there was no agreement to pay for downtime, and that if it was an issue it should have been part of the commission agreement he just signed. [ 47 ] Tapper received further compensation for downtime losses for January, February and March 2012. [ 48 ] The parties disagree on what the outcome of the September meeting was.

Tapper argued that, at the September meeting, an agreement was reached on compensation for the downtime losses. [ 49 ] Ultramar replied that, while there was an initial attempt to compensate for actual downtime losses when the Touchstar System was introduced, this was never intended to be a long-term solution, and no agreement was made to that effect. [ 50 ] The trial judge held that there was no “meeting of the minds” at the September 14, 2011 meeting. In other words, there was no agreement with defined terms accepted by both parties.

There was no agreement on what exactly Tapper was to be compensated for, and how the loss was to be calculated. This indicates that an enforceable agreement was not reached at the September meeting. [ 51 ] From Ultramar’s perspective, all statements made and steps taken on its behalf from March 2010 to August 2013 unambiguously contradict Tapper’s position. If any agreement was reached in September 2011 for Tapper to continue with his monthly invoicing, this would imply that the invoices submitted by Tapper were satisfactory to Ultramar.

This was contradicted by records showing that Ultramar had previously rejected the invoices submitted by Tapper as being vague, inadequately supported and inappropriately citing operating costs, which ought to have been incorporated into commission rates. [ 52 ] Moreover, Tapper’s outstanding monthly invoices to Ultramar were never paid in full after the September 2011 meeting between the parties. Instead, a lump sum payment of $25,000 was offered by Ultramar for all outstanding amounts.

Had Ultramar been satisfied with the invoices and content with paying them on an ongoing basis, there ought to have been nothing preventing payment of the outstanding amounts in full immediately after the September meeting. The eventual payment by Ultramar of $25,000 in January 2012 to settle all outstanding amounts is consistent with Ultramar’s evidence as to the discussions that took place at the September 2011 meeting. [ 53 ] The trial judge properly considered all the factors relevant to the question of whether a contract had been concluded between the parties regarding the Touchstar System.

After reviewing the evidence, the trial judge found that, whatever was discussed at the September 14, 2011 meeting between the parties, he was “satisfied that there was no meeting of the minds in respect of an agreement arising from the meeting, and nothing had transpired afterwards to indicate that one was reached later” (decision of the trial judge, at paragraph 32). [ 54 ] Ultramar acknowledged at trial that it made several payments to Tapper after the September 14, 2011 meeting to settle all outstanding invoices up to that date.

On appeal, Tapper submits that the trial judge placed insufficient weight on the significance of these payments, which he claims were evidence of an agreement for Ultramar to continue paying his ongoing monthly invoices indefinitely. The evidence does not support that contention. Ultramar explained the basis on which the lump sum payments were made. [ 55 ] I am satisfied that the trial judge did not err in finding that there was no legally enforceable agreement between Tapper and Ultramar with respect to payment of his Touchstar System-related losses.

The trial judge considered all the evidence adduced at trial in relation to the September 2011 meeting and alleged agreement, including the conduct of the parties subsequent to that meeting and the relevant documentary evidence. The trial judge found that Tapper had failed to establish the existence of an agreement.

The parties did not act in a manner consistent with an agreement having been reached, and the material terms of any agreement clearly remained to be negotiated. [ 56 ] Further, the trial judge found as a fact that there was “no evidence of dishonest dealings” and that “Ultramar did not engage in bad faith dealings” (decision of the trial judge, at paragraphs 41 and 42). A review of the judge’s decision as a whole leads to the conclusion that he considered the relevant evidence and provided reasons. There is no basis on which to disturb these factual findings.

[ 57 ] Regarding the claim for damages related to introduction of the Touchstar System, the trial judge concluded: [26] In attempting to determine whether there was an actual cost to Tapper, one has to consider both the advantages and disadvantages of the system. Without consideration of the efficiencies which seem obvious in the Touchstar system through elimination of many manual tasks, it is impossible to determine whether the delays reported by Tapper made the system truly more inefficient. Tapper acknowledged that the new system did things automatically that previously had to be done manually.

It is logical to assume there would have to be some efficiencies from this. Tapper has presented only one side of the ledger, and it is impossible to determine, overall, whether his operation suffered. [27] Third, Tapper had the burden of demonstrating there were actual losses. There was no evidence of actual loss. While he said his staff had to work longer, and the trucks were on the road longer, he testified that he had no record of an increase in salary or operational costs.

He did not present financial statements showing that his operation suffered a loss, or even reduced revenue or profits, associated with the introduction of the new system. I am satisfied that he has not made out his claim for damages. [ 58 ] There is no basis on which to disturb these factual findings by the trial judge. CONCLUSION [ 59 ] As set out above, Tapper has failed to identify any error in the trial judge’s analysis.

Accordingly I would dismiss the appeal. [ 60 ] The trial judge declined to order costs because both sides experienced some success, with Tapper failing on his claim for damages but succeeding on his request for a declaration of invalidity on the restrictive covenant. I would not disturb that order. On appeal, Ultramar was entirely successful. I see no reason why it should not be entitled to costs of this appeal for one counsel on Column 3 of the Scale of Costs in the Court of Appeal Rules . Appeal dismissed.