Vale Canada Limited v Urbanmine Inc, 2022 MBCA 18

Citation: Vale Canada Limited v Urbanmine Inc, 2022 MBCA 18 Date: 20220209 Docket: AI21-30-09599 IN THE COURT OF APPEAL OF MANITOBA Coram: Chief Justice Richard J. Chartier Madam Justice Holly C. Beard Madam Justice Karen I. Simonsen BETWEEN : vale canada limited ) ) (Plaintiff) Respondent ) ) - and - ) ) D. G. Hill and Urbanmine inc. ) R. Nerbas ) for the Appellant (Defendant) Appellant ) ) - and - ) ) R. A. McFadyen and MICHAEL JAMES SCHWARTZ, HARRY ) S. M. Hamm JOHN SCHWARTZ also known as JOHN ) for the Respondent SCHWARTZ, SCHWARTZ BROS. ) CONSTRUCTION LIMITED also known as ) SCHWARTZ BROS.

CONSTRUCTION LTD., ) ALEX McCARTHY, CALVIN KINSMEN, ) Appeal heard: ROGER JACOBS, MARK KOCH, MARK ) November 29, 2021 CHISICK, ADAM CHISICK and DAVE ) THOMPSON ) ) (Defendants) ) Judgment delivered: ) February 9, 2022 - and - ) ) ELG METALS, INC. ) ) (Third Party) ) On appeal from Vale v Schwartz et al , 2020 MBQB 127 chartier cjm Background and Issues [ 1 ] This appeal highlights the importance of not conflating the law of contributory negligence with the law of mitigation when considering a claim for damages arising from conversion. [ 2 ] The facts are straightforward.

The plaintiff owns and operates a nickel mining, smelting and refining operation. The Schwartz defendants, as same was described in para 1 of 2020 MBQB 127 , stole approximately 484,000 pounds of nickel from the plaintiff’s property and sold it to the defendant (Urbanmine) for a little under $2.5 million, which then resold it to the third party for a little over $3.4 million. Urbanmine’s first purchase of the stolen nickel occurred in July 2012. Its last purchase was about 10 months

later when the plaintiff, after conducting an inventory check, discovered that the nickel was missing. The plaintiff immediatelycontacted the police and the thefts stopped. [3] The plaintiff brought a claim against Urbanmine and the other defendants on many grounds, including the tort ofconversion. It then brought a motion for

summary judgment against Urbanmine for conversion. [4] At the hearing on the

summary judgment motion, Urbanmine conceded that the purchase and resale of the nickelconstituted conversion as alleged in the statement of claim and that conversion is a strict liability tort. It argued, however, that

summaryjudgment was not appropriate as more fulsome evidence was required on the subject of the plaintiff’s failure to mitigate its losses. Itsubmitted that a trial was required to determine the efforts that the plaintiff had made to secure its premises; to safeguard the nickel; andto prevent and discover the thefts in a timely manner.

Its defence to the claim for damages was that, had the plaintiff undertaken thesemeasures prior to and after the initial theft, subsequent thefts would have been prevented and the accumulation of losses reduced (thedefence). [5] For its part, the plaintiff submitted that Urbanmine’s defence went to the issue of whether it was contributorilynegligent, not to mitigation. It made the point that, because conversion is a strict liability tort, a defence of contributory negligence isinapplicable. It pointed out that the difference between the two concepts is one of timing.

It said that the duty to mitigate losses involvessteps taken or not taken, either at the time of or after the theft was discovered, whereas contributory negligence involves steps taken ornot taken before the thefts arose. The plaintiff submitted that it fulfilled its duty to mitigate its losses by immediately taking action afterdiscovering the thefts, which action resulted in the thieves being caught. [6] The motion judge agreed with the plaintiff. She concluded that a trial or further evidence was not necessary.

Sheheld that there was no genuine issue requiring a trial because Urbanmine’s submission was an attempt to raise a defence of contributorynegligence, which is not a defence available to a defendant in a claim for conversion. The motion judge granted

summary judgment. Urbanmine has appealed. [7] The primary issue on this appeal is whether the motion judge incorrectly applied the legal principles relating to theconcept of mitigation by mischaracterizing Urbanmine’s defence as being one of contributory negligence rather than mitigation. Standard of Review [8] A motion judge’s decision to grant

summary judgment is an exercise in discretion. Appellate intervention is onlyjustified if there is an error in law; a palpable and overriding error on the facts; or the decision is so clearly wrong as to be unjust (seeDakota Ojibway Child and Family Services et al v MBH, 2019 MBCA 91 at paras 36-37). [9] The question of whether the motion judge failed to apply the correct legal principles relating to the concept ofmitigation is a question of law and will be reviewed on the standard of correctness.

Analysis [10] In her reasons, the motion judge correctly stated the legal principles to be applied when a plaintiff brings a motion forsummary judgment. She understood the factual issues arising from the evidence. She also understood Urbanmine’s position: that theplaintiff failed to mitigate its losses by failing to address operational and security shortcomings at its facility after the first of a series ofthefts.

She reviewed the evidence concerning these shortcomings to determine whether they related to the defences of contributorynegligence or mitigation. [11] The motion judge noted the difference between the concepts of contributory negligence and mitigation; in essence,adopting the statement of law in Abitibi-Price Inc v Voith Hydro Inc, 1992 CarswellNfld 183 (SC (TD)), that “[i]n contributorynegligence the actions giving rise to the loss occur prior to or at the time of the loss” (at para 89) and that the “duty to mitigate arisesafter the breach or wrongful act and after the plaintiff becomes aware that the defendant[’s] wrongful acts have caused a loss” (at para91). [12] Key to the motion judge’s decision was her finding that Urbanmine’s defence was in relation to the plaintiff’s allegedfailures occurring prior to it becoming aware of the thefts, which was not until after all of the nickel was stolen.

She held that thisdefence was “a request for a finding that the plaintiff has been contributorily negligent, not a finding of failure to mitigate after the loss”(at para 49). She understood that, while Urbanmine’s defence would be available in an action for negligence, it was doomed to fail in anaction for conversion.

Citing the decision of the Supreme Court of Canada in Boma Manufacturing Ltd v Canadian Imperial Bank ofCommerce, (SCC), [1996] 3 SCR 727, she held that, since contributory negligence relates to liability issues, it is notavailable as a defence in this case because conversion is a strict liability tort. As a result, she concluded that there was no genuine issuerequiring a trial and granted

summary judgment in favour of the plaintiff. [13] I have not been persuaded that the motion judge incorrectly applied the legal principles relating to the concept ofmitigation by mischaracterizing Urbanmine’s defence as being one of contributory negligence rather than mitigation. [14] The motion judge was correct in stating that contributory negligence is not an available defence in an action forconversion. In Boma, Iacobucci J, for the majority, clearly indicated that the tort of conversion is one of strict liability and thatcontributory negligence plays no role in the analysis.

He observed (at para 32): The fact that liability for the tort of conversion is strict suggests that the respondent’s submission that the appellants were contributorilynegligent must fail. The matter was raised before the Court of Appeal, and was dismissed without reasons. While this argument wouldbe available in an action for negligence, the notion of strict liability involved in an action for conversion is prima facie antithetical to theconcept of contributory negligence.

[15] Since Boma, the Supreme Court, in Teva Canada Ltd v TD Canada Trust, 2017 SCC 51 at para 3, has reaffirmed thebasic principle that contributory negligence does not apply to a claim for damages arising from conversion.

See Nesbitt Burns Inc vCanada Trustco Mortgage, 2000 CarswellOnt 834 at para 37 (CA); Khosla v Korea Exchange Bank of Canada, 2009 ONCA 467 at para6; and Teva Canada Limited v Bank of Montreal, 2012 ONCA 486 at para 10, leave to appeal to SCC refused, 35000 (24 January 2013); see also the recent decision of Pang v Zhang, 2021 BCSC 591. [16] The motion judge was also correct when she concluded that Urbanmine’s defence to the claim for damages arising fromconversion was unavailable because it related to contributory negligence, not mitigation.

It is important not to conflate the law ofcontributory negligence with the law of mitigation. There is a difference between conduct that contributes to the loss (contributorynegligence) and conduct that fails to mitigate the loss (duty to mitigate). The former speaks to an apportionment of liability, the latter toan apportionment of damages. [17] The foundational distinction between contributory negligence and mitigation is timing. The former relates to conductoccurring prior to or at the time of the loss; the latter relates to conduct occurring after the aggrieved party becomes aware of the loss.

The distinction was carefully described by Harvin D Pitch & Ronald M Snyder, Damages for Breach of Contract, 2nd ed (Toronto: Carswell, 2013) vol 1 (loose-leaf updated 2014, release 1), ch 9 at

section 2). While admittedly focussed on contract law, the authorsexplained the distinction in the context of tort (at pp 9-2, 9-4): . . . Contributory negligence is an issue of causation and should be distinguished from the plaintiff’s duty to mitigate damages. . . . The issueof contributory negligence arises in tort law when a loss occurs as a result of two or more causes, one of them

an act of the plaintiff. Incontributory negligence, the actions of the plaintiff and the defendant occur prior to or at the time of the loss complained of. The basicconcept of contributory negligence is that a plaintiff who has contributed to the cause of a loss must bear responsibility on the liabilityissue in direct proportion to the responsibility in causation, or fault. As the name implies, the concept is most often applied in tort law. .. . . . . Mitigation, on the other hand, is a concept applicable to both contract and tort law.

The issue of mitigation arises independent of theissue of the plaintiff’s contribution to causation after the defendant has caused a loss to the plaintiff. Once the plaintiff becomes awarethat the defendant has caused a loss, the plaintiff is obliged to take steps to avoid incurring greater losses. This obligation is referred toas the duty to mitigate damages.

In distinguishing contributory fault and mitigation it may be helpful to recall that the plaintiff’s duty tomitigate arises after breach and after the plaintiff becomes aware that the defendant’s wrongful acts have caused a loss; the plaintiff’scontributory fault occurs prior to or at the time of the loss. The essential distinguishing fact is timing. . . . [emphasis added] [18] Few courts have clarified the difference between the principles of contributory negligence and those related tomitigation of damages.

The parties provided this Court with the Abitibi-Price Inc case from the Newfoundland Supreme Court TrialDivision. Another is TNT Canada Inc v Parmalat Dairy & Bakery Inc, 2004 CarswellOnt 84 (Sup Ct J), where Ferguson J cited andapplied, at paras 134-35, the above excerpts from Pitch. As succinctly stated in the excerpt, “[t]he essential distinguishing fact [betweenthe two concepts] is timing” (at p 9-4). [19] There is one final issue to address in regard to Urbanmine’s appeal. While raised in first instance, it was not addressedby the motion judge.

Urbanmine submits that the plaintiff’s duty to mitigate arose when the plaintiff knew or “ought to have known” ofthe wrongful act. It argues that, once the first of a series of thefts occurred, there comes a time when it can legitimately say that theplaintiff “ought to have known” of the ongoing thefts and, accordingly, was required to mitigate losses from that point forward. [20] The plaintiff points out that Urbanmine’s authority for this proposition was a non-conversion case that pre-dates Boma(see RF Fry & Associates (Pacific) Ltd v Reimer, (BC CA), 1993 CarswellBC 243 (CA)).

The plaintiff describes thecomments in that case to be obiter and says that, in any event, it was overridden by Boma. [21] There are, however, other conversion cases that refer not only to the issue of whether the duty to mitigate arose whenone subjectively “knew” of the wrongful act, but also whether it arose when one objectively “ought to have known” of the wrongfulact. [22] Those cases can be traced to Sachs v Miklos, [1948] 1 All ER 67 (CA (Eng)). In that case, the plaintiff left with one of

the defendants, as a gratuitous bailee, a quantity of furniture. Sometime later, the defendants wrote two letters to the plaintiff notifyinghim that he must remove his furniture or it would be sold. Not having received a reply, the defendants gave the furniture to anauctioneer for sale. Several years later, when the furniture would have increased in price, the plaintiff demanded his furniture and,unable to obtain same, sued for conversion and damages. Goddard LCJ commented on mitigation and the date on which the plaintiff“knew or ought to have known” of the conversion (at p 69).

In the result, and in an effort to determine exactly what the plaintiff knew orought to have known, Goddard LCJ remitted the matter to the lower court to determine when and whether the defendant’s letters, whichwould have notified him of the pending sale, were received by the plaintiff. [23] Sachs and the wording of “ought to have known” have been referred to in a number of subsequent Canadian conversioncases. However, in all of those cases, the issue boiled down to whether the plaintiffs ought to have known because they were actuallynotified.

See, for example, this Court’s decision in Steiman v Steiman (1982), (MB CA), 143 DLR (3d) 396 at 409(Man CA), citing Spence J in his dissent, but not on this point, in R v Arnold, (SCC), [1971] SCR 209 (at pp 231-32): . . . I have pointed out that in the present case the respondent knew of the sale of his shares in early January 1960.

Applying Lord Goddard’stests therefore, I have come to the conclusion that the respondent’s damages should be calculated with reference to the price of the shares when he was notified of the conversion. . . . . . . [emphasis added] [24] The grounding principle of notification in regard to the duty to mitigate is also noted in many authorities.

See ErikaChamberlain & Stephen GA Pitel, eds, Fridman’s The Law of Torts in Canada, 4th ed (Toronto: Thomson Reuters, 2020), which citesthe reasons of this Court in Dominion Securities Ltd v Glazerman, 1984 CarswellMan 104 (CA), noting that (at p 166): . . . . . . [T]he application of the duty to mitigate damages produces the same result as the application of the doctrine that the damagesrecoverable by the plaintiff consist in the replacement cost of the converted goods at the time of the conversion, or the time when theplaintiff is notified of the conversion. . . . . . . [emphasis added] [25] See also Philip H Osborne, The Law of Torts, 6th ed (Toronto: Irwin Law, 2020), ch 4, which referenced mitigation interms of a plaintiff’s awareness: “Consequently, when the act of conversion occurs, the plaintiff must mitigate his loss by promptlyreplacing it.

Damages are assessed, therefore, at the time of the conversion or, at the latest, when the plaintiff is aware of theconversion” (at p 330) (emphasis added). [26] Returning to the case at hand, there is a clear distinction to be drawn between the facts of this case and a plaintiff whoknew or ought to have known of a conversion because of some form of obvious notification or awareness. Here, there was nothing onthe evidentiary record to suggest that the plaintiff was ever notified in any way of any of the thefts.

Moreover, the motion judge found,as a fact, that the plaintiff reported the thefts to the police as soon as it became aware of them. The uncontroverted facts establish that,after conducting an inventory check, the plaintiff discovered that the nickel was missing and immediately contacted the police. As statedby the motion judge, “By then, the nickel was gone and there was nothing further the plaintiff could have done to mitigate [its] loss” (atpara 50). [27] The evidentiary record establishes that the plaintiff was never notified nor became aware of the thefts until its workersdiscovered them.

Given these important factual findings, the plaintiff could not be expected to mitigate the losses occurring from the

thefts when it did not know they were occurring. In the circumstances, the motion judge’s finding that the plaintiff fulfilled its duty to mitigate its losses is unassailable. [ 28 ] In the result, I am of the view that Urbanmine has not demonstrated any error in principle by the motion judge, nor any palpable and overriding error with respect to the facts and the evidence referred to in her analysis. Moreover, I have not been convinced that her decision is wrong, let alone so clearly wrong as to amount to an injustice. To the contrary, I am of the view that she interpreted and applied the law correctly and that her decision to grant the

summary judgment motion was a proper exercise of judicial discretion. [ 29 ] For these reasons, the appeal is dismissed with costs. CJM I agree: JA I agree: JA