Sable Mary Seismic Inc. v. Geophysical Services Inc., 2012 NSCA 33

NOVA SCOTIA COURT OF APPEAL Citation: Sable Mary Seismic Inc. v. Geophysical Services Inc. , 2012 NSCA 33 Date: 20120329 Docket: CA 325703 Registry: Halifax Between: Sable Mary Seismic Incorporated and Matthew Kimball Appellant v. Geophysical Services Incorporated Respondent Judge: The Honourable Justice Duncan R. Beveridge Appeal Heard: October 3, 2011 Subject: Breach of Contract; Duty to give reasons; Reasonable apprehension of bias and bias; Damages for fraud

Summary: The appellants entered into a series of contracts with the respondent. Letters documenting the contracts set out the compensation for the corporate appellant as cost plus 5% for its supply of seismic crews. When the respondent took over its own crewing function it discovered a significant drop in crew expenses that could not be accounted for. The appellants claimed that it was contractually entitled to charge a set monthly amount for crew costs, but charged actual wages plus 30 % plus 6% plus 5% for significant periods of time.

The appellants claimed they had no documents or ability to demonstrate how the invoices for crew costs had actually been calculated. The trial judge found that the contract was actual cost plus 5%. Expert evidence was accepted demonstrating an overpayment of approximately $1.7million. The trial judge also found the appellants liable in fraud for some, but not all of the amounts billed, in excess of the terms of the contracts. The counter-claim by the appellants alleging breach of contract by the respondent for a failure to profit share was dismissed.

The appellants claimed a host of errors by the trial judge including: reasonable apprehension of bias or bias, failure to give adequate reasons, palpable and overriding errors in fact, and miscalculation of damages for fraud. Issue: Was the process tainted by reasonable apprehension of bias or bias; were the reasons by the trial judge adequate; did the trial judge err in his findings of fact or mixed law and fact; and commit reversible error in his calculation of damages for fraud. Result: The claim of reasonable apprehension of bias and bias was without merit.

The reasons of the trial judge were far from generic. He stated with considerable clarity the positions and evidence of each party and accepted the evidence adduced by the

respondent. He found the evidence adduced by the appellants not to be credible and gave reasons why. The findings by the trial judge were, for the most part, reasonable and supported by the evidence. There were no palpable and overriding errors. The complaints by the appellants were little more than an attempt to re-argue their case in the hope that this Court would accept arguments that did not hold sway with the trial judge. With respect to the calculation of damages, if it was erroneous, the award was lower than might otherwise be warranted. The appeal was dismissed with costs.

This information sheet does not form part of the court ’s judgment. Quotes must be from the judgment, not this cover sheet. The full court judgment consists of 53 pages. NOVA SCOTIA COURT OF APPEAL Citation: Sable Mary Seismic Inc. v. Geophysical Services Inc. , 2012 NSCA 33 Date: 20120329 Docket: CA 325703 Registry: Halifax Between: Sable Mary Seismic Incorporated and Matthew Kimball Appellants v. Geophysical Services Incorporated Respondent

Judges: MacDonald, C.J.N.S., Fichaud and Beveridge, JJ.A. Appeal Heard: October 3, 2011, in Halifax, Nova Scotia Held: Appeal dismissed with costs payable by the appellants to the respondent in the amount of $32,500, inclusive of disbursements, per reasons for judgment of Beveridge, J.A.; MacDonald, C.J.N.S. and Fichaud, J.A. concurring Counsel: Derrick J. Kimball and Sharon Cochrane, for the appellant Sable Mary Seismic Incorporated Nash T. Brogan, for the appellant Matthew Kimball Colin D. Piercey and Karen N.

Bennett-Clayton, for the respondent Reasons for judgment : INTRODUCTION [ 1 ] The appellants are Matthew Kimball and Sable Mary Seismic Incorporated (SMS). Mr. Kimball is the President and sole shareholder of SMS. They were sued by Geophysical Services Incorporated (GSI) for breach of contract and fraud. Both claims were based on allegations that invoices routinely submitted by SMS to GSI were inflated beyond the contractual terms. [ 2 ] The trial judge was faced with volumes of documents from both parties, and days of contradictory evidence.

He was required to weigh the evidence, make findings of credibility, consider the competing probabilities and inferences available, and arrive at an objective

interpretation of the contractual arrangements between the parties. The trial judge was also required to address the issue of fraud. To do so, he needed to move away from the objective to the subjective. What did Matthew Kimball and GSI know and believe, and when? [ 3 ] The trial judge found that the invoices in question were not in accord with the terms of the contract and awarded damages against SMS of $1,764,251.70.

The judge also found that Matthew Kimball knew that some of the amounts claimed in the invoices were not in accord with the contract, and that GSI relied on the representations made in the invoices. The judge calculated the damages for fraud of $451,885.41. [ 4 ] The appellants articulate 23 grounds of appeal. In essence, they claim the trial judge was biased, mischaracterized or misapprehended the evidence and made findings of fact or mixed law and fact tainted by palpable and overriding error.

Although some of the findings made and the language used by the trial judge are open to question, I am far from convinced that the essential findings made by the trial judge can or should be overturned. For the reasons that follow, I would dismiss the appeal. FACTUAL BACKGROUND [ 5 ] To understand the issues that faced the trial judge and the appellant ’ s complaints, a somewhat lengthy foray into the facts is necessary. Matthew Kimball worked for what the parties referred to as the ‘ old ’ GSI (Geophysical Services Incorporated) from 1972 to when he was laid off in 1992.

At that time he was the Marine Supervisor for all of Canada, overseeing the operation of marine seismic surveys in the Arctic, the West and East coasts. Seismic surveying involves mapping the subsurface structures on land or at sea for rock formations that may contain hydrocarbon deposits. There may be other useful roles for seismic surveying, but this is the one at the heart of this litigation.

[ 6 ] The data generated by the survey may be generated at the request of a particular client or group, or simply done on the hope or expectation that the data generated will be purchased by interested parties. The difference is aptly described by the trial judge as follows: [27] Proprietary data is produced by seismic activity carried out for a client at the client’s expense and direction. The data is owned solely by the client.

GSI acts as an independent contractor and is paid by the client regardless of the usefulness of the data. [28] Speculative data results from seismic activity carried out by GSI without a firm client. GSI defines the areas of interest and explores, maps, records, and sometimes interprets the data, on its own nickel. GSI owns the data, which it markets to purchasers. GSI retains the rights to and ownership of the data; a purchaser simply acquires a nonexclusive license to use it. [ 7 ] Davey Einarsson was in charge of ‘ old ’ GSI ’ s Canadian operations. He also was laid off in 1992.

After consulting for some period of time, Mr. Einarsson put together a consortium of buyers to acquire the speculative seismic database of ‘ old ’ GSI then owned by Haliburton Inc. Einarsson incorporated a ‘ new ’ GSI (Geophysical Services Incorporated) in 1992 as a Canadian company with its head office in Calgary. The evidence at trial was that there was also a corporation in Houston, usually referred to as the ‘ Houston ’ GSI. [ 8 ] After leaving ‘ old ’ GSI in 1992, Matthew Kimball did construction and contracting in Nova Scotia through a corporate vehicle, Abbott Contracting Ltd.

Kimball was enticed back into the marine seismic world in 1996. His experience convinced him of the viability of an East Coast marine seismic venture. He incorporated Sable Mary Seismic Incorporated in 1997 and wrote various letters about his concept. One of those letters was to GSI in Calgary. Mr. Kimball developed a business plan to buy a suitable vessel and operate it to carry out seismic surveying on the East Coast.

The business plan was revisited by Kimball from time to time, but never came to life due to his inability to secure the necessary capital. [ 9 ] In the meantime, Davey Einarsson through GSI Calgary carried out a fully- funded seismic survey on the East coast in the summer of 1997. Encouraged by the interest shown by the consortium of companies funding that survey, he approached Rieber Shipping about using one of their vessels. After several conversations, Rieber ’ s Sven Rong agreed to meet Einarsson in the fall of 1997 at a convention in Dallas. This resulted in a proposed joint venture.

Rieber would supply a suitable vessel, crew and heavy equipment. GSI Calgary would supply the seismic gear and technical equipment, operations personnel, then process and market the data. Matthew Kimball was already identified as a person Einarsson would be meeting with to discuss regulations and operations on the East coast. [ 10 ] An ‘ old ’ GSI alumni, Gary Bartlett had already written to Matthew Kimball on September 5, 1997 disclosing GSI ’ s tentative plans to do seismic survey work on the east coast in the 1998 season.

An offer was made to assist SMS by marketing any data it acquired or by other arrangements. [ 11 ] Mr. Kimball took on a two-month consulting project in China at $15,000 per month. On his return he flew to Calgary to meet with Davey Einarsson. Kimball wanted a three-way partnership with Rieber, GSI and SMS. Einarsson wanted to hire Kimball to run the operational side of the joint venture with Rieber. Their discussions resulted in a written agreement, commonly referred to as the “ Letter Agreement ” of December 5, 1997 (although apparently signed by both parties on December 4, 1997). It was drafted by Mr.

Einarsson. [ 12 ] In essence, GSI agreed to pay SMS a monthly fee of $6,000 US for the services of Matthew Kimball, to mobilize and acquire a seismic crew to conduct surveys in Atlantic Canada commencing May/June 1998. SMS would be responsible to acquire all permits and registrations, and set up an office. As SMS needed to add more personnel, the fee would change with notification and approval from GSI. Kimball was named as the Vice President - Marine Division of GSI, and therefore eligible to participate in the company ’ s incentive stock plan.

GSI agreed to provide at a later date a success sharing plan for SMS based on profits generated. The agreement would be from January 1, 1998 to October 31, 1998, and then continue month-to-month until either party gave notice to the other. [ 13 ] Matthew Kimball joined GSI staff and Mr. Einarsson in January 1998 to work on negotiations with Rieber for the terms of the contemplated joint venture.

Because of the stress laid by the appellants at trial and on appeal as to what happened during these negotiations, it is necessary to include details of those meetings. [ 14 ] Spreadsheets were prepared that set out estimated expenses to be incurred by both Rieber and GSI in the conduct of the joint venture. The evidence was that Gary Bartlett and Matthew Kimball worked on these spreadsheets. Some expenses would be shared by Rieber and GSI before splitting the anticipated revenue from the venture. Other expenses would be the sole responsibility of Rieber or

GSI. One such category of expenses was the cost to run the operation. This category of expenses would be paid directly by GSI. It was known that GSI would be using SMS to hire the seismic crew and run the operation. [ 15 ] From the appellants point of view, a key issue was the number crunching exercise carried out with respect to the cost to run the operation. This included the costs for the seismic crew that SMS would be hiring. To arrive at the estimated cost, Kimball foresaw having eight “ keepers ” or “ key ” people and 16 “ others ” plus office. Salaries were estimated plus the cost of benefits.

This latter cost was arrived at by adding 30% to salary. There was little disagreement that this method of estimating the cost of benefits was used in the ‘ old ’ GSI. When fully operational for the months of June to November, the cost was estimated to be $143,900 (US) per month. [ 16 ] Rieber proposed a revenue split with GSI of 54-46. Davey Einarsson challenged the basis of Rieber ’ s request, suggesting Rieber ’ s suggested expense burden was inflated by using too high a figure for depreciation of its vessel.

In the course of reviewing the expense figures, Einarsson also thought the figure of $143,900 (US) per month was too high and reduced it by 5% to $136,700 (US). [ 17 ] Whatever motivated the negotiators, it is known that Rieber and GSI agreed to a joint venture agreement with a 50-50 share of revenue after payment of certain shared expenses. Mr. Einarsson testified that one of the clauses he suggested to Mr.

Srong of Rieber was a proposal for Rieber and GSI to compare operation costs they actually experienced in November 1998, and if experience varied from the “ general assumptions ” set out in the Appendix B to the Rieber/GSI joint venture agreement, then the revenue split could be renegotiated. Apparently, Appendix B showed “ People and office ” to be $136,700 (US) per month. [ 18 ] Matthew Kimball also proposed supplying the necessary navigation equipment and specialized personnel to GSI, through his company Abbott Contracting Ltd.

GSI agreed to pay Abbott $70,000 per month for one senior and one junior navigator plus specified navigation equipment. This contract was reduced to writing on March 18, 1998. [ 19 ] The joint venture went ahead as scheduled in June 1998 and ran until August 1999. No one disputes that Matthew Kimball, through SMS, ran the operation side of the joint venture for GSI efficiently and without a hitch. It is the amount that he billed GSI for the cost of the seismic crew that became an issue. That issue did not surface until March 2002 when GSI took over the hiring and payment of the crew used to man its vessels.

Before discussing what caused the issue to surface, I return to the events of 1998. [ 20 ] Davey Einarsson and Matthew Kimball agreed verbally that GSI would pay to SMS $500 a month to assist with the expense of setting up and running an office in Windsor, Nova Scotia. GSI would also pay SMS $1,080 a month to cover the leasing costs for a vehicle for Mr. Kimball. The monthly fee for Kimball ’ s services remained at $6,000 (US) per month. Expenses incurred by Mr.

Kimball or SMS were paid and then reimbursed by GSI. [ 21 ] As will be detailed later, Matthew Kimball ’ s evidence varied on the key issue of what SMS was entitled to bill, with respect to crew invoices. Matthew Kimball testified that SMS was entitled to bill GSI a fixed monthly fee of $136,700 (US) per month to cover the total payroll cost of the seismic crew. SMS never billed that amount. Kimball said that, in his view, SMS was a subcontractor to GSI. It had agreed to provide the crew at a total cost of $143,900 (US) per month, but that Davey Einarsson had reduced this amount by 5%. [ 22 ] Mr.

Kimball further asserted that in June 1998, when Davey Einarsson visited his office in his home in Windsor, Einarsson told Kimball that he had cash flow problems and could not afford to pay SMS $136,700 per month. Kimball said that instead, Einarsson proposed that SMS simply bill GSI the amount SMS was paying in salaries and add 30% plus 5%. Kimball said he agreed to this proposal but pointed out to Mr. Einarsson that he had been able to avoid hiring experienced crew and had saved substantial money by hiring recent graduates from radio college.

Kimball says it was agreed to change the formula to salary plus 30% plus 6% plus 5%. This is what Matthew Kimball said was invoiced to GSI throughout the joint ventures between GSI and Rieber Shipping. [ 23 ] Matthew Kimball acknowledged that included in the listed payroll was his salary, and that of his spouse, and the navigators. Davey Einarsson said there was no such agreement to pay a flat fee at any time. It was strictly on the actual cost of providing the crew plus 5%. He never suggested nor agreed to cost plus 30% plus 6% plus 5%. He was also emphatic that he was not aware that he was being billed for Mr.

Kimball ’ s services twice, or those of his spouse or the navigators, for whom he was already being billed $70,000 per month through Abbott Contracting. [ 24 ] The operation of the first joint venture between Rieber Shipping and GSI ran from June 1998 to August 1999. Leaving aside invoices and payments for office, car, Matthew Kimball ’ s monthly fee, the navigation invoices from Abbott Contracting, SMS billed and

was paid the following: Invoice date Description Number of Crewmembers Invoice amount excluding HST 26-Mar-98 Crew cost for March no list 4,050.00 07-Apr-98 Crew cost for April 15 no list 4,050.00 19-Apr-98 Crew cost for April 16-30 6 20,331.00 07-May-98 Crew cost for May 1-15 15 49,063.33 20-May-98 Crew cost for May 16-31 17 52,996.67 09-Jun-98 Crew cost for June 1-15 20 68,367.70 18-Jun-98 Crew cost for June 15-30 21 74,442.70 04-Jul-98 Crew cost for July 1-15 23 80,443.13 20-Jul-98 Crew cost for July 16-31 23 80,443.13 28-Jul-98 Crew cost for August 1-15 25 95,445.00 20-Aug-98 Crew cost for August 16-31 25 95,445.00 08-Sep-98 Crew cost for September 1-15 25 95,445.00 21-Sep-98 Crew Cost for September 15-30 25 95,445.00 06-Oct-98 Crew cost for October 1-15 24 92,745.00 20-Oct-98 Crew cost for October 15-31 24 92,745.00 05-Nov-98 Crew cost for November 1-15 23 88,195.00 22-Nov-98 Crew cost for November 16-30 23 88,195.00 09-Dec-98 Crew cost for December 1-15 25 89,200.00 21-Dec-98 Crew cost for December 16-31 25 89,200.00 08-Jan-99 Crew cost for January 1-15 26 93,250.00 20-Jan-99 Crew Cost for January 16-31 26 93,250.00 05-Feb-99 Crew cost for February 1-15 26 93,250.00

23-Feb-99 Crew cost for February 16-28 26 93,250.00 05-Mar-99 Crew cost for March 1-15 26 93,250.00 22-Mar-99 Crew cost for March 15-31 26 93,250.00 08-Apr-99 Crew cost for April 1-15 26 93,250.00 21-Apr-99 Crew cost for April 16-30 26 93,250.00 07-May-99 Crew cost for May 1-15 26 93,250.00 20-May-99 Crew cost for May 16-31 26 93,250.00 07-Jun-99 Crew cost for June 1-15 26 93,250.00 20-Jun-99 Crew cost for June 16-30 23 85,757.00 07-Jul-99 Crew cost for July 1-15 19 80,443.13 20-Jul-99 Crew cost for July 16-30 21 80,352.00 09-Aug-99 Crew cost for August 1-15 21 80,352.00 12-Aug-99 Crew cost for ATO Payout, 2 weeks notice and severance 21 97,879.50 Total Invoices $ 2,806,781.29 [ 25 ] The contractual arrangements between GSI, Matthew Kimball and SMS were documented in a second “ Letter Agreement ” dated October 16, 1998.

The complete text of the letter can be found reproduced in the trial judge ’ s decision (para. 54). The essential terms of it were that SMS had the responsibility for all people, related benefits and insurance and GSI would pay the monthly fee.

SMS would continue to supply Matt Kimball to manage the operation of the vessel and the office, with SMS agreeing to hire additional personnel to run the operation in an “ efficient and cost efficient manner ” . [ 26 ] GSI would also continue to pay two things: a monthly fee of $6,000 US for the services of Matt Kimball, and “ for the personnel supplied by SMS at cost plus 5% ” . In addition GSI would continue to supplement the cost of the office at $500 and a vehicle at $1,080 per month. GSI confirmed its intent to provide a success-sharing plan for SMS. The duration of the agreement was somewhat unclear.

It said it would continue until October 16, 1999, but their “ intent is to run continuously for the next 24 months. ” They also said they agreed to continue with the agreement until three month ’ s notice is given one to the other. [ 27 ] GSI and Rieber decided to end the joint venture in August 1999. Matthew Kimball testified that because he had not billed his agreed upon ‘ cost ’ of providing the seismic crew of $136,700 or $143,900, SMS was owed over a million dollars. Nonetheless, Kimball said he agreed to waive the three-month notice period to cancel the October 16, 1998 Letter Agreement.

No invoice or claim was ever advanced by SMS for any such claimed liability. [ 28 ] A second similar joint venture was launched by Rieber Shipping and GSI in 2000. It ran from May 2000 to December 2000. A “ Novation Agreement ” between Rieber and GSI adopted the terms of their previous agreement with some significant changes. The revenue split after shared expenses was changed to 60-40 in favour of GSI.

There would be no right to examine each parties ’ expenditures with a view to any renegotiation of the revenue split, but Rieber acquired the right to audit the accounts of GSI and documentation related to the data library, sales and expenses. In the meantime, GSI continued to pay SMS $6,000 US per month for the

consulting fee for Matthew Kimball. [ 29 ] It was the evidence of Matthew Kimball that during the 2000 joint venture the invoices from SMS to GSI for the crew were the same; the gross amount of payroll plus 30% plus 6% plus 5%. Throughout 2000, Mr. Kimball said he was looking for a suitable vessel for SMS to buy, in partnership with GSI and others, to operate as a seismic survey ship. A ship was eventually found, but it was purchased by GSI alone in 2001for $6.6 million. It became the GSI Admiral. [ 30 ] Before turning to the events in 2001, Messrs.

Kimball and Einarsson re-executed the October 16, 1998 Letter Agreement on October 12, 2000 with the following handwritten endorsement: “ GSI wishes to renew this agreement with SMS for six months commencing May15th 2000. After six months this agreement will be automatically renewed month to month until notice is given one to another with one month notice to cancel this agreement. ” [ 31 ] Starting in January 2001 draft agreements were exchanged between Matthew Kimball and GSI. A draft ‘ Letter Agreement ’ of January 26, 2001 followed a similar format as the two previous letter agreements, with similar language.

GSI would still pay for personnel supplied by SMS at cost plus 5%. There were some key differences. It was anticipated that GSI would be using more than one vessel to carry out seismic surveys; the monthly fee for Matt Kimball would be $12,000 US but there would no longer be any payment to supplement the cost of running an office or leasing a vehicle. [ 32 ] A much more formal set of agreements dated April 5, 2001 were prepared by a solicitor on the instructions of Paul Einarsson, Davey Einarsson ’ s son.

There is no need to refer to the detailed compensation and other provisions set out in these documents, except to note the proposed agreement for GSI to reimburse SMS for all direct personnel cost plus 5% for all personnel costs reasonably incurred. Why this is in any way significant is to contrast it with the response by Matthew Kimball on April 26, 2001. [ 33 ] Mr. Kimball proposed more generous compensation provisions. The key provision was about crew invoices.

Again, GSI was to reimburse SMS for all direct personnel costs plus 5% but direct personnel costs were defined to be payroll, payroll costs and benefits, billed as gross salary plus 30%. [ 34 ] No new agreement was reached. Matthew Kimball testified that he was paid a consulting fee, through SMS, of $12,000 US per month, and SMS crew invoices were billed at salary plus 30% plus 5%. The records and other evidence confirms the payment to SMS of the $12,000 US per month for Kimball.

The crew invoices continued as before, without detail beyond a one-page invoice, identifying names of personnel, the period of time and the amount. [ 35 ] By the fall of 2001, GSI was experiencing a significant cash flow problem. Wayne Lam, Financial Manager for GSI prepared a report on the problem. Significant capital expenditures such as the purchase of the GSI Admiral had put a significant strain on the company. The GSI Admiral had been idled to save money. Davey Einarsson testified that GSI wanted to take over the management of the crew to better control costs.

This led to an exchange of proposals between Einarsson and Kimball in January and February 2002. [ 36 ] Mr. Kimball wrote to Mr. Einarsson on January 25, 2002 setting out his plan for the future. He wrote about what the existing arrangement was in plain type, and in bold was his plan for the future.

Kimball described the existing arrangement as: SMS and Matt Kimball are separate deals; SMS is a crewing company providing GSI ’ s people at cost plus 5%; the people are paid by SMS on invoicing GSI twice a month; they are GSI employees and GSI is at risk for their actions; Kimball is a consultant and operations ’ person with the title of V.P., at a fee of $12,000 US a month. [ 37 ] For the future, Mr.

Kimball proposed that GSI would handle all payrolls, and SMS ’ s role as a crewing company would disappear, but would still invoice GSI a monthly fee of $15,000 US a month for a year, in lieu of the 5% of salaries it had been receiving. Kimball would go on salary with GSI at $6,000 US a month. Davey Einarsson had Mr. Lam calculate how the total compensation would look for Matthew Kimball in comparison to what SMS and Kimball had received in previous years. Lam did so, using 5% on payroll from previous years. The 2002 proposal would see a significant increase in compensation for Mr.

Kimball from previous years. [ 38 ] Einarsson sent the comparison to Mr. Kimball on February 11, 2002. Kimball said this led to a heated indignant exchange that day. Nonetheless, Kimball then sent a further proposal to Mr. Einarsson on February 12, 2002 that had the identical language to his first proposal, but reducing the fee to SMS to $12,500 US a month and to $5,000 US a month for his salary. This was not accepted. Kimball

then wrote on February 14, 2002 “ terminating their agreement. ” [ 39 ] SMS sent the payroll information to GSI. Wayne Lam noticed almost immediately that crew costs were lower than just the 5% that they thought had been charged by SMS. He looked at a number of possible explanations. He could not account for the difference. He said he needed to get information from SMS. Einarsson told him to contact Matthew Kimball. [ 40 ] In late September 2002, Lam said he called Matthew Kimball and asked him to take a look at his records to see if he can come up with why there were differences.

Lam testified that Kimball told him he would locate the information and get back to him. A week went by. Lam said he called again on a Friday. He left messages for Kimball, requesting the information. On Monday, September 30, 2002, Lam got an email from Kimball. It said this: Wayne, after our conversation, I had a quick look at my notes and find that all worksheets for people invoices are gone. Worksheets were precisely that, derived for the period, and adjustment done as to prior billings. GSI from the beginning did not require anything other than names and the amount.

So... there is nothing remaining other than the invoices. SMS was a crewing company. It was not part of GSI in any way, shape or form. Individual salaries were not GSI’s business. In fact, GSI would never know in the first person if anyone during that period had Workers Comp coverages or life insurances, or benefits or anything. They did, of course, but SMS was never required to prove any of this to GSI. Today, I am not prepared to dig into this stuff, and try to reproduce any of the past, for any invoices. What does Davey say about this? Matt [ 41 ] Lam then submitted his report on October 1, 2002.

Davey Einarsson said he was on his way to Halifax and would meet with Matthew Kimball. I pause to observe that despite the communications in February 2002 about termination of their agreement, it is apparent that Matthew Kimball continued as a consultant with GSI until the end of October 2002. How that termination happened, and its aftermath, assumed some significance in some of the things the trial judge found, and was not prepared to find. [ 42 ] Mr. Einarsson flew to Halifax on October 7, 2002. Mr. Kimball picked him up at the airport and drove to the Prince George Hotel.

They socialized, and agreed to meet the next morning to get ready for planned events. Kimball went to Einarsson ’ s room. The accounts of that meeting differ somewhat. [ 43 ] It is common ground that Wayne Lam ’ s Report of October 1, 2002 was shown to Kimball. Kimball reacted violently. He blamed Einarsson, and complained that Lam did not take into account SMS had paid for safety boots, taxis, schools, and motels. Kimball did not utter one word that the difference in crew costs was accounted for by the fact that GSI had agreed to pay SMS an amount consisting of salary plus 30% plus 5% or any variation thereof.

In fairness, Kimball testified that he initially said he was sure he mentioned the 30%, but when confronted by earlier sworn testimony about that meeting where he had said there had been no need to refer to such markup, he then acknowledged he “ may not ” have referred to the markups. [ 44 ] Kimball wrote a letter of resignation that day and delivered it to Einarsson ’ s hotel room. In a subsequent email, Kimball asked Einarsson if he had relayed to Wayne Lam the items missing in his analysis. Einarsson assured Kimball he had done so.

Lam testified at trial that the list of items relayed to him were all matters that were expenses that SMS typically had claimed reimbursement from GSI separately, and in any event, could not make up the difference in the amount of the crewing invoices. He was unchallenged at trial on this assertion. [ 45 ] GSI launched an action against SMS and Matthew Kimball on November 27, 2002 and sought an Anton Piller Order to gain access to premises owned or controlled by the appellants. The order was granted on an ex parte application, but subsequently set aside ( 2003 NSSC 73 ).

Some of the evidence adduced at that hearing became the subject of cross-examination at trial.

[ 46 ] Another factual issue that should be mentioned is in relation to the pre-trial application brought by the respondent to strike the appellant ’ s jury notice. The application was heard by Justice Warner on January 3, 2008. The respondent argued before Warner J. that the factual complexity of the issues and volumes of detailed evidence would overwhelm a jury and the significant trial issues involved questions of law, equitable claims, and questions of mixed law and fact, all of which were not appropriate for resolution by a jury.

Justice Warner acknowledged that a number of the key factual issues that would have to be decided at a trial could well be decided by a jury, but that the main issues involved equitable remedies and complex issues of fact and law. The application was granted ( 2008 NSSC 79 ). Justice Warner ’ s decision was upheld on appeal ( 2008 NSCA 83 ). [ 47 ] The trial was held over the course of thirteen days in March 2009. By all appearances, procedurally it was a fairly routine civil proceeding. Pre-trial briefs were filed, expert reports were filed, lists of witnesses exchanged.

The respondent called four witnesses, Davey Einarsson, Paul Einarsson, Merle Carr, and Wayne Lam. Forensic Accountant Mary Jane Andrews was scheduled to testify for the respondent, but the appellants consented to the admission of her expert report without the necessity of attendance for examination. [ 48 ] The appellants also called four witnesses, Matthew Kimball, SMS Accountant Gary MacKenzie, Paul Wilson, and Accountant, Karen Klusak.

Following three days of oral submissions concluding on March 19, 2009, Justice Warner reserved his decision. [ 49 ] Reasons for judgment are dated December 31, 2009 ( 2009 NSSC 404 ). Justice Warner set out the issues. He summarized the oral and documentary evidence. In his analysis he set out the relevant principles for

interpretation of contracts. For a variety of reasons, parol evidence was permitted to be adduced by both parties during the direct and cross-examination of Mr. Einarsson and Mr. Kimball. As will be examined later, the subjective intent or

interpretation of Messrs. Einarsson and Kimball played no role in the

interpretation exercise, but was relevant to the claim of fraud. In any event, no complaint is advanced by either party about the trial judge ’ s rulings and use of parol evidence. [ 50 ] Because of the chronology of the contractual arrangements, and the fact that the arrangements were at times oral, resolution of the credibility contest, mainly between Davey Einarsson and Matthew Kimball, was a key issue for the trial judge to resolve. Both parties spent considerable effort trying to call into question the credibility and reliability of these two key witnesses.

On all of the key differences between the evidence of Einarsson and Kimball, the trial judge believed the former and not the latter. [ 51 ] The trial judge did not accept the analysis prepared by Gary MacKenzie, an accountant that had worked for SMS for 27 years. The analysis was tendered to support the argument that the

interpretation of the contractual arrangements between SMS and GSI could not reasonably have been just actual cost plus 5% since it would be clearly contrary to the commercial interests of the parties. [ 52 ] The trial judge concluded that the only reasonable

interpretation of the contracts was that GSI was obliged to pay for personnel supplied by SMS in an amount equal to the actual cost to SMS of supplying those personnel plus 5%. He accepted the expert evidence tendered by the respondent demonstrating that, based on documents and records obtained from the appellants, SMS over-billed, and GSI overpaid, at least $1,764,251.70. [ 53 ] The trial judge mused that the most difficult issue to analyse and determine was the claim of fraud.

He plainly put the onus on the respondent to establish that SMS, and Matthew Kimball, knew that the crewing invoices were not in accord with the contract and knowingly misrepresented the truth to GSI.

He articulated the issue as follows: [145] Resolution of this issue depends on: (1) whether the representation made by SMS in the invoices to GSI were false in fact, that is, not in accordance with the agreement, and (2) that SMS, when it made the representation, knew that it was false, or made it recklessly without knowing whether it was true or false, and (3) that GSI was thereby induced to unwittingly pay the invoices. [ 54 ] For reasons that will be examined later, the trial judge made two key findings. First, he found that cost plus 30% plus 5% was what Mr.

Kimball understood the crewing contract was between SMS and GSI. Second, he found that at some point during the currency of the arrangement between SMS and GSI, Davey Einarsson (and hence, GSI) knew that the invoices from SMS were being done on the basis of the cost of the crew listed on the invoices plus 30%. This meant to the trial judge that GSI did not rely on the representations by SMS in the invoices to the extent the invoices claimed cost plus 30%.

The trial judge found that, out of the total over billing of $1,764,251.70, $451,885.41 was attributable to undisclosed amounts for relatives, navigation crew and the additional markup.

[ 55 ] The appellants counterclaimed alleging breach of contract by the respondent in not providing any share of the profits. The trial judge dismissed the counterclaim (for $1.39 million) on two bases. First, the words in the letter agreements about success or profit sharing were simply words of general intention, and were not intended to be a legally enforceable agreement. Secondly, he was not convinced that GSI was actually in a profit position at the time that SMS terminated its agreement with GSI. [ 56 ] With this background, it is time to set out the grounds of appeal advanced by the appellants. ISSUES [ 57 ] The appellant advanced 23 grounds of appeal. They are:

(1) The decision of the trial judge was unreasonable, perverse, exorbitant, and not in keeping with the jurisprudence, and not a finding that could be made upon consideration of the evidence adduced at trial;

(2) The trial judge made a fundamental error in rendering a decision after an inordinate and inexcusable delay as a result of which he was unable to accurately recall relevant evidence presented at trial;

(3) The trial judge erred in failing to recuse himself as the trial judge on the basis of bias or perceived bias after assuring the Appellants that he was not scheduled to be the trial judge;

(4) The trial judge erred in law by rejecting the expert report and evidence of Gary MacKenzie;

(5) The trial judge failed to understand the expert evidence of Gary MacKenzie;

(6) The trial judge erred in law by failing to give the evidence of Merle Carr proper weight after acknowledging and accepting her evidence which contradicted the evidence of T. David Einarrson and undermined the theory of the Respondent’s case;

(7) The trial judge misapprehended the law regarding the duty of a trial judge in assessing credibility and giving reasons therefore;

(8) The trial judge erred in law by failing to adequately address his reasons for accepting the evidence of T. David Einarrson;

(9) The trial judge either ignored, misapplied, misapprehended or forgot credible evidence that challenged the credibility of T. David Einarrson and seriously undermined the theory of the Respondent’s case;

(10) The trial judge erred in law by rejecting the evidence of Matthew Kimball by ignoring, misapplying, misapprehending or forgetting critical evidence that supported the theory of the Appellants’ case and challenged the evidence and the credibility of T. David Einarrson;

(11) The trial judge misapprehended the law in relation to “cost plus contracts” and misapplied the law in relation to the findings of fact made in the case;

(12) The trial judge misapprehended the law in relation to fraud;

(13) The trial judge erred in finding that the elements of fraud had been established by the evidence adduced at trial;

(14) The trial judge erred in finding fraud on the same evidence that was heard in the Anton Piller application where fraud was not established;

(15) The trial judge erred in dismissing the Appellants’ counterclaim for profit sharing by ignoring, misapplying, misapprehending or forgetting the contents of the expert report of Karen Kluska;

(16) The trial judge erred in reserving his decision more than nine months from the day of reserving judgment in contravention of the s. 34(

d) of the Judicature Act ;

(17) Due to the passage of time the trial judge forgot or misunderstood key evidence going to the assessment of the evidence;

(18) The trial judge made findings of fact that were not consistent with the evidence adduced at trial and patently wrong;

(19) The trial judge made contradictory findings of fact several of which are fatal to the conclusions reached in the decision;

(20) The trial judge gave undue weight to certain evidence and little or no weight to other evidence;

(21) The trial judge ignored, misapplied, misapprehended or forgot critical evidence and came to patently wrong conclusions, including mathematically wrong conclusions;

(22) The trial judge miscalculated the damages based on the uncontroverted evidence and the factual findings he made;

(23) The trial judge erred in failing to allow the evidence of the Appellants respecting industry standard. [ 58 ] In my view, these can best be organized and dealt with under the following general categories: Bias/Reasonable apprehension of bias Delay Error in his findings of credibility Inadequate Reasons Palpably Wrong Findings of Fact Legal Errors

Other Errors [59] Before beginning an examination of the appellants’ complaints, it is useful to keep in mind some general and well settledconstraints on appellate review. The appellants and respondent rely on different authorities, but they all stand for the identical generalpropositions. On questions of law, the trial judge must be correct; on questions of fact or mixed law and fact, an appeal court can onlyintervene if convinced the trial judge has committed a palpable and overriding error. Saunders J.A. in McPhee v.

Gwynne-Timothy, 2005NSCA 80, for the Court, wrote: [31] A trial judge’s findings of fact are not to be disturbed unless it can be shown that they are the result of some palpable andoverriding error. The standard of review applicable to inferences drawn from fact is no less and no different than the standard applied tothe trial judge’s findings of fact. Again, such inferences are immutable unless shown to be the result of palpable and overriding error.

Ifthere is no such error in establishing the facts upon which the trial judge relies in drawing the inference, then it is only when palpable andoverriding error can be shown in the inference drawing process itself that an appellate court is entitled to intervene. Thus, we are to applythe same standard of review in assessing Justice Richard’s findings of fact, and the inferences he drew from those facts. H.L. v. Canada(Attorney General) 2005 SCC 25 , [2005] S.C.J. No. 24; Housen v. Nikolaisen, 2002 SCC 33 , [2002] 2 S.C.R. 235;Campbell MacIsaac v.

Deveaux & Lombard, 2004 NSCA 87. [32] An error is said to be palpable if it is clear or obvious. An error is overriding if, in the context of the whole case, it is so seriousas to be determinative when assessing the balance of probabilities with respect to that particular factual issue. Thus, invoking the“palpable and overriding error” standard recognizes that a high degree of deference is paid on appeal to findings of fact at trial. See, forexample, Housen, supra, at ¶ 1-5 and Delgamuukw v.

British Columbia, (SCC), [1997] 3 S.C.R. 1010 at ¶ 78 and 80.Not every misapprehension of the evidence or every error of fact by the trial judge will justify appellate intervention. The error must notonly be plainly seen, but “overriding and determinative.” [33] On questions of law the trial judge must be right. The standard of review is one of correctness. There may be questions of mixedfact and law. Matters of mixed fact and law are said to fall along a “spectrum of particularity.” Such matters typically involve applying alegal standard to a set of facts.

Mixed questions of fact and law should be reviewed according to the palpable and overriding errorstandard unless the alleged error can be traced to an error of law which may be isolated from the mixed question of law and fact. Wherethat result obtains, the extricated legal principle will attract a correctness standard. Where, on the other hand, the legal principle in issueis not readily extricable, then the issue of mixed law and fact is reviewable on the standard of palpable and overriding error. See Housen,supra, generally at ¶ 19-28; Campbell MacIsaac, supra, at ¶ 40; Davison v.

Nova Scotia Government Employees Union, 2005 NSCA51. [60] Cromwell J.A. (as he then was) earlier expressed the same general approach in MacNeil v. Chisholm, 2000 NSCA 31: [8] Finding facts and drawing evidentiary conclusions from them are roles of the trial judge, not the Court of Appeal: seeToneguzzo-Norvell v. Burnaby Hospital, (SCC), [1994] 1 S.C.R. 114 at 121. An appellant cannot challenge a trialjudge's findings of fact simply because the appellant does not agree with them: Delgamuukw v. British Columbia, (SCC), [1997] 3 S.C.R. 1010 at paragraphs 88 and 90.

Findings of credibility are “... eminently a matter for the trier of fact.”: see A.W.Mewett, Witnesses (1991) at page 11 - 3. [9] The judge, as the trier of fact, must sort through the whole of the evidence and decide which to accept and which to reject so as topiece together the more plausible view of the facts. Many considerations properly influence this decision, including the nature of anyunreliability found in a witness’s testimony, its relationship to the significant parts of the evidence, the likely explanation for the apparentunreliability and so forth.

The trial judge may find that some apparent errors of a witness have little or no adverse impact on thatwitness’s credibility. Equally, the judge may conclude that other apparent errors so completely erode the judge’s confidence in thewitness’s evidence that it is given no weight. [10] Making these judgments is the job of the trial judge and the Court of Appeal generally should not substitute its own judgment onthese matters. An appellant alleging an error of fact must show that the trial judge’s finding is clearly wrong. Not every error in findingsof fact permits appellate intervention.

As Lamer, C.J.C. said in Delgamuukw, supra at para 88:

...it is important to understand that even when a trial judge has erred in making a finding of fact, appellate intervention does not proceedautomatically. The error must be sufficiently serious that it was ‘overriding and determinative in the assessment of the balance ofprobabilities with respect to that factual issue’. (emphasis added) Where credibility is in issue, only errors that fundamentally shake the appeal court’s confidence in the trial judge’s findings of fact justifyappellate intervention.

BIAS/REASONABLE APPREHENSION OF BIAS [61] Actual bias and reasonable apprehension of bias are related, but distinct concepts. Both seek to ensure for the parties, and forsociety, that judges conducting trials or other proceedings do so impartially and fairly; and also have every appearance of having doneso. If a judge acts with bias against one party it is fatal to the validity of the outcome.

If a judge says or acts in a manner that to aninformed and reasonable observer demonstrates he or she is not impartial, there is an apprehension of bias; the outcome is also vitiated. [62] Detailed submissions were not made by the parties on what standard of review should be applied, if any, to these issues. Theappellants assert that Justice Warner pre-judged certain aspects of the issues that would have to be determined at trial when he gavereasons allowing the application to strike the notice of trial by jury. Justice Warner’s reasons are reported: 2008 NSSC 79, affirmed2008 NSCA 83.

The appellants contend that when Justice Warner gave his reasons he provided an assurance to them he was not goingto be the trial judge. [63] The respondent has two answers. The first is that the appellants should not be allowed to complain in light of the proceduralhistory concerning Justice Warner becoming the trial judge. Justice Warner gave his decision striking the jury notice on March 19,2008. The trial was then scheduled for November 2008 in Kentville. The Honourable Justice Arthur LeBlanc was to sit in Kentville thatmonth.

Scheduling difficulties lead to Justice Warner replacing Justice LeBlanc on the rota for November 2008. The appellants broughta motion requesting Justice Warner to recuse himself. Warner J. heard the motion on September 3, 2008. The motion was dismissed. An order confirming the dismissal was taken out on September 29, 2008 and the trial was adjourned by consent to March 2, 2009. [64] This leads the respondent to say that the appellants having failed to appeal the decision of Justice Warner of September 3, 2008,they cannot do so now. There is much force to the position of the respondent.

The decision by Justice Warner declining to recusehimself was an interlocutory decision, and could have been appealed. It was not. No reason has been offered by the appellants for nothaving done so. The availability of that remedy could hardly have escaped their attention, since one of the authorities relied upon by theappellants before Warner J. in September 2008 in support of its recusal motion, was Mitsui & Co. (Point Aconi) Ltd. v. Jones Power Co.,2001 NSCA 112.

In Jones, the appellant by way of an interlocutory appeal, was successful in overturning the decision by a trial judgewho refused to recuse himself on the basis of reasonable apprehension of bias (see also Mary and David Goodine Dairy Farm v. NewBrunswick (Milk Marketing Board), 2002 NBCA 38). [65] In any event, I need not decide the issue on this basis, since I am far from convinced that the appellants have demonstrated areasonable apprehension of bias or bias.

The main thrust of the appellant’s submission was that they were not able to obtain a fairhearing as a result of the decision by the trial judge to strike the jury notice. One of the leading cases in Canada on the issue of bias is R.v. S.(R.D.), (SCC), [1997] 3 S.C.R. 484. In that case, Cory J. explored a number of key concepts about impartiality,bias and reasonable apprehension of bias.

With respect to the polar opposites of impartiality and bias, he noted the authorities thatestablish that the word impartial connotes absence of bias, actual or perceived; and that impartiality is a state of mind in which theadjudicator is disinterested in the outcome, and is open to persuasion by the evidence and submissions (para. 104).

Bias is a state ofmind that is in some way predisposed to a particular result or that is closed with regard to particular issues (para. 105). [66] In setting out what the test is for finding reasonable apprehension of bias, and how to apply it, Justice Cory wrote: 109 When it is alleged that a decision-maker is not impartial, the test that must be applied is whether the particular conduct gives riseto a reasonable apprehension of bias. Idziak, supra, at p. 660. It has long been held that actual bias need not be established.

This is sobecause it is usually impossible to determine whether the decision-maker approached the matter with a truly biased state of mind. SeeNewfoundland Telephone, supra, at p. 636.

110 It was in this context that Lord Hewart C.J. articulated the famous maxim: “[it] is of fundamental importance that justice shouldnot only be done, but should manifestly and undoubtedly be seen to be done”: The King v. Sussex Justices, Ex parte McCarthy, [1924] 1K.B. 256, at p. 259. The Crown suggested that this maxim provided a separate ground for review of Judge Sparks’ decision, and impliedthat the threshold for appellate intervention is lower when reviewing a decision for “appearance of justice” than for “appearance of bias”.This submission cannot be sustained.

The Sussex Justices case involved an allegation of bias. The requirement that justice should be seento be done simply means that the person alleging bias does not have to prove actual bias. The Crown can only succeed if Judge Sparks’reasons give rise to a reasonable apprehension of bias. 111 The manner in which the test for bias should be applied was set out with great clarity by de Grandpré J. in his dissenting reasonsin Committee for Justice and Liberty v.

National Energy Board, (SCC), [1978] 1 S.C.R. 369, at p. 394: [T]he apprehension of bias must be a reasonable one, held by reasonable and right-minded persons, applying themselves to the questionand obtaining thereon the required information. . . . [The] test is “what would an informed person, viewing the matter realistically andpractically -- and having thought the matter through -- conclude. . . .” This test has been adopted and applied for the past two decades.

It contains a two-fold objective element: the person considering thealleged bias must be reasonable, and the apprehension of bias itself must also be reasonable in the circumstances of the case. SeeBertram, supra, at pp. 54-55; Gushman, supra, at para. 31. Further the reasonable person must be an informed person, with knowledgeof all the relevant circumstances, including “the traditions of integrity and impartiality that form a part of the background and apprisedalso of the fact that impartiality is one of the duties the judges swear to uphold”: R. v. Elrick, [1983] O.J. No. 515 (H.C.), at para. 14.

Seealso Stark, supra, at para. 74; R. v. Lin, [1995] B.C.J. No. 982 (S.C.), at para. 34. To that I would add that the reasonable person shouldalso be taken to be aware of the social reality that forms the background to a particular case, such as societal awareness andacknowledgement of the prevalence of racism or gender bias in a particular community. [67] What then was it that Justice Warner said or decided that the appellants claim deprived them of a fair hearing? The appellantssay that Justice Warner engaged in a partial review of the evidence and drew conclusions from that review.

They say his commentsshow a predetermination of issues to be decided at trial. The sole focus of their complaint is reproduced in their factum as follows: Whether these conversations, taken together with the “letter agreements”, constitute a legal agreement (B.2), in the absence of anyagreement as to the terms for profit sharing, is primarily an issue at law, or at best, a complex issue of mixed law and fact. It is difficultto project any role for a jury in respect of this issue.

I do not see how or what questions could properly be put to the jury that would notalso involve the assessment of the law. [para. 110] …Based on the affidavits before the Court, assuming an legal agreement to share profits was reached, there is no evidence upon which ajudge or jury could determine that a consensus was reached as to the terms of such profit sharing, such as when and on what basis profitsharing would occur… [para. 113] …the only basis, on the uncontradicted facts in the affidavits, upon which a Court could grant a remedy to the defendants is on theequitable principle most commonly identified as unjust enrichment… [para. 113] [68] I fail to see anything the learned judge said in para. 110 that in any way indicates a prejudgement of any issue yet to bedetermined at trial.

The complained of comments in para. 113 must be put in context. What the trial judge actually said was (2008NSSC 79): [113] With respect to B.3, the defendants say that, in the absence of any agreement as to the terms for profit sharing, the Court mayaward damages based on quantum meruit and not on any equitable principles. Based on the affidavits before the Court, assuming an legalagreement to share profits was reached, there is no evidence upon which a judge or jury could determine that a consensus was reached asto the terms of such profit sharing, such as when and on what basis profit sharing would occur.

Whatever the wording in Paragraph 13(f)of the Amended Defence and Counterclaim, the only basis, on the uncontradicted facts in the affidavits, upon which a Court could granta remedy to the defendants is on the equitable principle most commonly identified as unjust enrichment.

By whatever description, in theabsence of an agreement on the terms of any profit sharing, the relief is a discretionary or equitable remedy obtained under what JusticeGonthier, and other text writers call, the "third logic of private law". [69] “B.3” is a reference to Justice Warner’s labelling of the issues that a jury would be called on to determine at trial. “B.2” was

whether conversations between the parties and documents created a legally binding contract. B.3 was: “ If so, what profit sharing arrangement, as a matter of discretion, should be imposed on the Plaintiff ” (para. 103). The judge was called upon to decide, based on what the parties adduced before him by way of affidavit evidence, if it was appropriate for a jury to decide the issues as defined by the parties by their pleadings and submissions. He clearly prefaced his remarks as being based on the affidavit evidence before him, and were in response to the position being advanced by the appellants.

In my view, no fully informed person viewing the matter realistically would conclude any lack of impartiality by Justice Warner. [ 70 ] With respect to actual bias, the appellants claim that the trial judge appeared to move the onus from the respondent to the appellants and argued the case from the perspective of the respondent. I have carefully reviewed the transcript of the trial proceedings and the reasons for judgment rendered by the trial judge. There is no evidence to support such a claim. I see absolutely no merit in the appellants ’ complaint and I would dismiss this ground of appeal.

DELAY [ 71 ] The appellants point out that the decision rendered by a trial judge was outside the direction in s. 34(

d) of the Judicature Act , which permits a judge to reserve judgment but for no longer than six months. They complain that the delay resulted in the trial judge forgetting or not accurately recalling or misunderstanding key evidence. The appellants refer to some of the leading authorities on the issue of s. 34(d), which clearly establish the time limit is not mandatory but strongly directory. As observed by Roscoe J.A. in Langille v. Midway Motors Ltd , 2002 NSCA 39 : [8] Dealing with the last issue first, the appellant seeks a declaration that there was a loss of jurisdiction and an order for a new trial.

The last day of trial was May 21, 1999. The cover page of the written decision contains two dates: “Decision: November 20, 1999” and “Decision Released: November 22, 1999”. We have no explanation for the different dates. Assuming without deciding that the decision in this case was reserved for longer than the six months permitted by s. 34 of the Judicature Act , we do not agree that there was a loss of jurisdiction in the circumstances. The time limit should not be considered to be mandatory but rather strongly directory.

The appropriate remedy for failure to deliver a judgement after trial within six months, should be an order for mandamus , not an order for a new trial. Since the decision has now been delivered, no order is required. See also Toronto Dominion Bank v. Lienaux, 2005 NSCA 97 . [ 72 ] The appellants say the delay impacted on the integrity of the fact finding process by the trial judge. They claim he made 90 factual errors or omissions caused, they say, by forgetting, misunderstanding, misapprehending, mischaracterizing evidence, making findings not based on evidence and otherwise making contradictory findings.

If he made any such errors they are open to review on the appropriate standard of review. Accordingly, I would dismiss this ground of appeal. INADEQUATE REASONS/FINDINGS OF CREDIBILITY [ 73 ] It is convenient to consider these two headings together as encompassing all of the appellants ’ complaints about the findings made by the learned trial judge. The key to the outcome of the trial was a resolution of the credibility of the two very divergent views as to what was or was not orally agreed to between Matthew Kimball and Davey Einarsson.

As already noted, the trial judge resolved most of those issues by accepting Einarsson ’ s evidence and not that of Kimball. The appellant says the trial judge had a duty to give reasons as to why he found Einarsson to be credible, and Kimball not. They cite R. v. Sheppard , 2002 SCC 26 and Laurel Oak Marketing Ltd. v. Royal Canadian Golf Assn. , 2010 ONCA 62 , in support of their argument. [ 74 ] The landmark decision of the Supreme Court of Canada in R. v. Sheppard recognized a duty to give reasons in order to permit meaningful appellate review.

A failure to do so, is an error of law and may trigger a remedy of an order for a new trial. These principles were reviewed by this Court in McAleer v. Farnell , 2009 NSCA 14 . MacDonald C.J.N.S. set out the principles established in R. v. Sheppard and it progeny. He explained:

[12] I begin with the recent decision of the Supreme Court of Canada in R.E.M., 2008 SCC 51. Although decided in a criminal lawcontext, I nonetheless find that it offers good guidance in this appeal.

There, the Chief Justice explained how a trial judge's reasons fulfillfive basic purposes: 1) to inform the parties why the decision was made; 2) to provide public accountability for the judicial decision; 3)to permit effective appellate review; 4) to help ensure fair and accurate decision making, and 5) to provide guidance to future courts inaccordance with the principle of stare decisis. [13] These basic goals, the Chief Justice explains, are effectively fulfilled if the decision informs the reader as to what was decidedand why: ¶ 17 These purposes are fulfilled if the reasons, read in context, show why the judge decided as he or she did.

The object is not to showhow the judge arrived at his or her conclusion, in a "watch me think" fashion. It is rather to show why the judge made that decision. Thedecision of the Ontario Court of Appeal in Morrissey, predates the decision of this Court establishing a duty to give reasons in Sheppard.But the description in Morrissey of the object of a trial judge's reasons is apt. Doherty J.A. in Morrissey, at p. 525, puts it this way: "Ingiving reasons for judgment, the trial judge is attempting to tell the parties what he or she has decided and why he or she made thatdecision" (emphasis added).

What is required is a logical connection between the "what" - the verdict - and the "why" - the basis for theverdict. The foundations of the judge's decision must be discernable, when looked at in the context of the evidence, the submissions ofcounsel and the history of how the trial unfolded. . . . ¶ 25 The functional approach advocated in Sheppard suggests that what is required are reasons sufficient to perform the functionsreasons serve - to inform the parties of the basis of the verdict, to provide public accountability and to permit meaningful appeal.

Thefunctional approach does not require more than will accomplish these objectives. Rather, reasons will be inadequate only where theirobjectives are not attained; otherwise, an appeal does not lie on the ground of insufficiency of reasons. This principle from Sheppard wasreiterated thus in R. v. Braich, [2002] 1 S.C.R. 903, 2002 SCC 27, at para. 31: ... [Emphasis in original.] [14] Furthermore, the amount of detail required to meet these basic functions very much depends on the context of each case: ¶ 44 The degree of detail required may vary with the circumstances.

Less detailed reasons may be required in cases where the basis ofthe trial judge's decision is apparent from the record, even without being articulated. More detail may be required where the trial judge iscalled upon "to address troublesome principles of unsettled law, or to resolve confused and contradictory evidence on a key issue ...":Sheppard, at para. 55. [15] For this reason, our role on appeal is not to criticize the level of detail or expression.

Instead it is to determine if the functionsnoted above have been fulfilled to the point where a meaningful appeal is available: ¶ 53 However, the Court in Sheppard also stated: "The appellate court is not given the power to intervene simply because it thinks thetrial court did a poor job of expressing itself" (para. 26). To justify appellate intervention, the Court makes clear, there must be afunctional failing in the reasons.

More precisely, the reasons, read in the context of the evidentiary record and the live issues on whichthe trial focussed, must fail to disclose an intelligible basis for the verdict, capable of permitting meaningful appellate review. [75] Here the trial judge was well aware of the law with respect to the assessment of credibility. He referred to Faryna v. Chorny, (BC CA), [1952] 2 D.L.R. 354, [1951] B.C.J.

No. 152, where O’Halloran J.A. said: 11 The credibility of interested witness[es], particularly in cases of conflict of evidence, cannot be gauged solely by the test ofwhether the personal demeanour of the particular witness carried conviction of the truth. The test must reasonably subject his story to anexamination of its consistency with the probabilities that surround the currently existing conditions.

In short, the real test of the truth ofthe story of a witness in such a case must be its harmony with the preponderance of the probabilities which a practical and informedperson would readily recognize as reasonable in that place and in those conditions. ...

[ 76 ] The trial judge gave extensive reasons for every important aspect of the case he had to decide. The reasons are far from generic. In my opinion, he stated with considerable clarity the positions and evidence of each party, and considered the overall factual matrix of the relationship between SMS and GSI, including many objective documents and facts. After doing so, he clearly accepted the evidence of Einarsson. I agree with the submission of the respondent that the trial judge simply did not find Mr. Kimball to be a credible witness on the important issues; and gave a number of reasons why.

There is no need to go through all of them. Two will suffice. They are that the trial judge got the evidence of Matthew Kimball wrong when he referred to an agreement with GSI to bill at $143,900 US per month when fully operational; and the circumstances surrounding the end of the business arrangements, particularly the issue of worksheets being unavailable, to demonstrate how the crewing invoices were calculated. [ 77 ] The appellant asserts that Matthew Kimball ’ s evidence was consistent; there was an agreement to pay SMS for crew at the rate of $136,700 US per month. With respect, this is not at all accurate.

Kimball ’ s evidence on this issue was markedly inconsistent. Despite the fact that all of the written agreements provided for SMS to bill GSI at cost plus 5%, Mr. Kimball said the actual agreement between SMS and GIS was for a fixed amount. Kimball said the following about the monthly fee SMS was entitled to charge GSI: A. Davey came in and had a look at the form. Davey had been continuously updated by me and Gary Bartlett throughout; and there were some further talks. Earlier in the week, the vessel value and amortization periods -- you can see where that’s changed on this form.

Davey took my original costs of 143,900 and reduced it by five per cent. Q. Now, is that the “People in Office” that appears under “Operational Expenses”? A. That’s correct. Q. All right. A. There were some other numbers here. “Mobe costs” were in the - supplied by GSI, I believe. In the final form, that “Mobe Costs” number is out of there altogether. It”s a cost to be borne by each side. And basically, when you change one number, some of the “Total GSI Expense” number changed. The installation, mobilization costs changed, through discussions.

Anyway, at the end, when this document was cleaned up, it was a 50/50 split. Q. And the item for “People in Office” was changed from 143,9 to what? A. One hundred and thirty-six thousand, seven hundred US dollars. . . . A. At that time, when Gary Bartlett had resigned, I wanted to review with Davey what our basis of agreement was; and I did point out to Davey that he had reduced my fee of One hundred forty-three thousand nine hundred dollars ($143,900.00) by five per cent to assist in the marriage with Rieber at a 50/50 proposition. And I told Davey I wanted that five per cent back. Q. What was his response? A.

Davey said, “Okay, that’s fine. It was just a vehicle to end the negotiations. They didn’t seem to be going anywhere,” and it aided him quickly in getting the numbers where, the overall numbers, where he and Sven could sign off on this thing.

Q. And how then was that resolved, that you would get the five per cent back? A. I added that to the, to my “Total crewing ” number, when I submitted the bills. Q. And did you discuss with him what the costing was going to be for the crew? A. Well, we had, we had the spreadsheet, the operating – the full operating months were an easy number. It was the ramp-up numbers. But because Davey and I were close, the advantage in all of this is, Davey and I were getting into this venture together. Whether I was his partner in the first instance wasn’t an issue to me, or to Davey at the time.

We were going to get on with this business. Rieber was a vessel of opportunity and took a lot of risk away from what Davey and I ultimately wanted to do. I knew all Davey’s costs ’cause I was party to the equipment suppliers; and so those were his large costs; and we felt it was only fair that I would show my costs to Davey. . . . A. Davey looked at it and I said to him, “Well, what are we gonna do with my 136,7?” Right? We’re low. This is the month of June. It’s not – we’re not into the basis of – here’s your – here’s the crew list, 30 per cent, five per cent, and here’s your bill.

Davey Einarsson, for the month of June, owed me One hundred thirty-six thousand seven hundred dollars ($136,700.00). . . . Q. Now, following the, that audit in November, did you and Davey Einarsson have any further discussions about your arrangements? A. No. Q. Was there any further discussion about the level of your invoices? A. Yes. When Davey – during this period when Davey and I were meeting and did this Agreement, again, Sable Mary’s invoices that Davey was looking at were lower than the anticipated level. We ’d agreed to look at that back in our June meeting and, again, Davey had cash flow problems.

I intended, at this point in time, to split the 136,7 invoicing half each pay period; and again, Davey said he could not afford that. . . . Q. You maintain that your contract with GSI was never a cost plus contract? A. It never was. Q. In fact, you testified yesterday, that the deal you had was that you were entitled to charge US One hundred thirty-six thousand seven hundred dollars ($136,700.00) a month? That ’s what you say the deal was, correct?

A. For the two Joint Ventures, that ’s correct. Q. And you say that the cost Sable Mary incurred to maintain the crew were its business, not Mr. Einarsson’s business or GSI’s business? A. That’s correct. Q. That ’s because you say it was never a cost plus contract? A. That ’s correct. Q. And your explanation for all this is that this is what Mr. Einarsson told you to do? He agreed to all this? A. Oh, he certainly did. . . . A. He - I think the terminology is, is wrong. Right? He didn't have the cash flow to pay the contracted price of 136,7. Okay? Q. Am I correct in understanding that you’re saying that Mr.

Einarsson wanted you to add six per cent; A. That’s correct. Q. Thirty per cent? A. Yes. Q. Amounts that are not reflected in the written contract, A. That’s correct. Q. Yes? Okay. A. Yeah. Q. And this served his interests, you say, because it allows him to keep the costs high, closer to the amount that he had been discussing in the negotiations with Rieber?

A. No, closer to the contract price that I had given him. Q. Which you say is One hundred thirty-six thousand seven hundred dollars ($136,700.00)? A. It was One hundred forty-three thousand nine hundred (143,900) less the five per cent, which is to me... Q. Taking us to... A. The five per cent that we talk about, Q. And that takes us to the One hundred thirty-six thousand seven hundred dollars ($136,700.00) figure... A. That's correct. Q. ...I just referred to? A That’s correct. [ 78 ] Not only did the trial judge find the evidence of Mr.

Kimball inconsistent, he found it to be improbable in light of the overall circumstances, and not in accord with the written agreement and other documentation. For example, the documentary evidence clearly referred to the spreadsheets prepared for the Rieber/GSI joint venture negotiations as being estimates. The trial judge mentioned the email from Matthew Kimball of January 13, 1998 where Kimball referred to the expenses shown as being estimates by both parties, and that actual expenses would be available for each to review at the end of the first operating season (para. 107). [ 79 ] The evidence by Mr.

Kimball that the actual terms of the contract were for some fixed amount, whether it was $143,900 US or $136,700 US made no sense to the trial judge. If it was a fixed amount, why then did the parties not simply say so in their own private contract of October 16, 1998? That document simply said GSI was to continue to pay for the personnel supplied by SMS at cost plus 5%; as did every other document that referred to the contractual arrangement, including many authored by Mr.

Kimball. [ 80 ] If the actual liability of GSI was either of the set amounts per month, according to Kimball, SMS was owed over a million dollars as of August 1999, yet no bill was ever rendered for that amount, let alone an email or any scrap of paper suggestive of that kind of liability. Instead, when GSI and SMS documented the arrangement they had for the second joint venture in 2000, it was a renewal of the same terms set out in the October 16, 1998 letter, cost plus 5%. The trial judge could find no logical answer to these questions.

Neither can I. [ 81 ] Somehow a contract between SMS and GSI for a set amount had SMS sending invoices for amounts that bore no relation to $143,900 US or $136,700 US per month. Kimball ’ s explanation for this is that because of Einarsson ’ s plea of no cash flow, it was agreed to have SMS invoice for the total SMS payroll plus 30% plus 6% plus 5%.

Apparently, the additional 6% being added because otherwise the 30% plus 5% would be too low, and Einarsson was fearful that if actual expenses were too low, Rieber may push for a renegotiation of the revenue split away from 50-50. [ 82 ] The appellant ’ s reliance on Laurel Oak Marketing Ltd. v. Royal Canadian Golf Assn ., supra , is not helpful. In that case, the Court of Appeal for Ontario ordered a new trial in a contract case where the trial judge rejected the evidence of a key witness for the

appellant as “ not credible ” but gave no reasons for that finding. The appellant had no idea why, nor did the Court of Appeal. The reasons were conclusionary and did not provide a path for the reader as to how the trial judge reached his conclusion. That is a far cry from this case where the trial judge explained in detail the problems he had with the evidence of Matthew Kimball. It is clear to the appellant, and to this Court, why he found the evidence of Mr.

Kimball not to be credible. [ 83 ] The appellants lay great stress on certain passages in the trial judge ’ s reasons as being indicative that he forgot important evidence or mischaracterized certain events, both of which caused the trial judge to err in his credibility findings. These passages are in relation to the lack of worksheets to demonstrate how the actual amounts on the crewing invoices were calculated. The judge discussed the circumstances in both the contract and fraud sections of his decision. In the contract

section he wrote (para. 109): ...As will be noted in the next

section of this decision, one of the substantial problems that the court had with the defendants’ evidence as to the contents of the agreement was the fact that the crewing invoices contained only the final figure, without any breakdown of how that figure was calculated by SMS. When GSI pressed for the backup documents or worksheets that were used to create the crewing invoices, Kimball stated that they were “gone”. These were the best - and only - evidence, of the basis of SMS’s crewing invoices.

I find it improbable that no record would have existed in SMS’s files of the worksheet and backup documents; that is, the basis of the crewing invoices. It caused me to doubt Matt Kimball’s evidence as to the terms of the agreement. [ 84 ] In the fraud

section of the decision, the trial judge also discussed the lack of records to demonstrate how the invoice amounts were calculated. He said: [149] ...A quick look at the bi-monthly invoices show that the calculation was obviously not done on the invoice itself. The only reasonable inference is that calculation was made on a worksheet, based on and supported by back up records and information. There is no reason that these backup records and worksheets would not be kept. There are several obvious reasons why they would be kept.

One of them is the obvious obligation to account to GSI for how it arrived at the amount contained in the bi-monthly crewing invoices. [150] Instead, when GSI asked for these invoices in 2002, SMS first delayed, then refused to provide the information, and then, incredibly, stated that all its backup records were “gone”. . . . [152] It is not credible that those worksheets and back up records, when pressed for, went missing and have never surfaced since. [153] The missing records, being the backup record for the crewing invoices, contain the only original contemporaneous information that would show the basis of SMS’s crewing invoices and therefore how it interpreted the contract.

At trial, no document, contemporaneous with the submission of the crewing invoices, was produced that might support (

a) SMS’s

interpretation of the crewing contract, and (

b) that the crewing invoices were in accord with SMS’s

interpretation. The absence of any documents which clearly existed at one time, and which logically would have been retained for some period of time, causes me to conclude that the defendants knew that the invoices were not in accord with the agreement - the agreement either as interpreted by GSI, or as interpreted by the defendants.

The evidence of Wayne Lam and Matthew Kimball dealt with the events leading to Kimball’s September 30, 2002 e-mail that the worksheets were “gone”. [ 85 ] The complaint by the appellant is the trial judge mischaracterized the events concerning the worksheets – that it is not fair to say Mr.

Kimball was “ pressed ” ; and that the judge forgot about Kimball ’ s evidence that he had deliberately thrown out the worksheets showing the invoice calculation, with the approval of Davey Einarsson, in August 2002. [ 86 ] I earlier set out the evidence concerning the exchange between Chief Financial Officer Wayne Lam of GSI and Mr. Kimball in late September 2002 when Lam was looking for information from Kimball to explain why the crew costs had decreased so significantly. The contact in September 2002 by Mr. Lam was the first request for backup for the crew invoices. Mr. Kimball did not deny that Mr.

Lam had called him looking for such information, which obviously included documentation. When Lam had not heard back from Kimball in a week or two, he called and left messages. This led to Kimball ’ s email of September 30 where he wrote that after a quick look at his notes, all worksheets for people invoices were “ gone ” . He referred to these worksheets being just that, derived for the period,

adjusted for prior billings and there is nothing remaining. Kimball added t

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