Citation: AMCI Export Corporation v. Nova Scotia Power Inc.,
2008 NSCA 2
Date: 20080111
Docket: CA 282847
Registry: Halifax
Between:
AMCI Export Corporation
Appellant/Cross Respondent
v.
Nova Scotia Power Incorporated
Respondent/Cross Appellant
Judge(s): Cromwell, Saunders and Hamilton, JJ.A.
Appeal Heard: December 6, 2007, in Halifax, Nova Scotia
Held: Leave to appeal granted and appeal allowed; leave to cross appeal granted and cross appeal allowed, per reasons for judgment of Hamilton, J.A.; Cromwell & Saunders, JJ.A. concurring
Counsel: Craig M. Garson, Q.C., for the appellant/respondent
by cross appeal
David G.Coles, Q.C. and Nicole Godbout, for the
respondent/appellant by cross appeal
Reasons for judgment:
[1] The appellant and cross respondent, AMCI Export Corporation (“AMCI”), applied for leave to appeal and, if granted, appealed that part of the June 20, 2007 order of Justice Glen G. McDougall granting summary judgment to the respondent and cross appellant, Nova Scotia Power Incorporated (“NSPI”), on the issue of liability for AMCI’s breach of contract between April 1 and June 30, 2004. NSPI applied for leave to appeal and, if granted, appealed that portion of the same order in which the judge refused to grant summary judgment to it on the issue of liability for AMCI’s breach of the same contract between July 1 and September 30, 2004 and between October 1 and December 31, 2004.
[2] This appeal deals only with the evidence and pleadings that were properly before the judge. It makes no comment on the effect of the Second Amended Defence filed by AMCI or the purported transmission report dated February 11, 2004 that were not in evidence before the judge. No application was made before us for the admission of fresh evidence.
Facts
[3] In his decision published at 2007 NSSC 139, [2007] N.S.J. No. 202, 254 N.S.R. (2d) 242, the judge summarized the dispute before him:
[2] In its AMENDED STATEMENT OF CLAIM filed on February 8, 2005, NSPI alleges that [AMCI] failed to supply coal under a Coal Supply Agreement dated August 3, 2001 (the "Agreement").
[3] According to the pleadings, NSPI alleges that pursuant to the Agreement it issued a confirmation letter dated March 14, 2003 (the "Confirmation Letter") which was accepted by AMCI.
[4] NSPI further alleges that pursuant to the Confirmation Letter, it purchased four separate call options for the purchase and delivery in 2004 of South American Low Sulphur A Coal in quarterly instalments of up to 100,000 Tonnes per quarter (the "Quarterly Options"). On March 21, 2003 NSPI paid a total of US $453,000.00 to AMCI for the purchase of the Quarterly Options. The deadline for exercising each of these Quarterly Options was as follows:
· Quarter 1 Option ("Q1 Option") by November 17, 2003
· Quarter 2 Option ("Q2 Option") by February 16, 2004
· Quarter 3 Option ("Q3 Option") by May 17, 2004
· Quarter 4 Option ("Q4 Option") by August 17, 2004
[5] In addition to the money paid for the right to exercise these Quarterly Options, NSPI also agreed to pay for any coal acquired under the Quarterly Options at a rate that was tied to its thermal generating capacity.
[6] For purposes of this application, NSPI is seeking summary judgment for AMCI's alleged failure to supply the requisite Tonnage under the Agreement for Quarters 2, 3 and 4. . . .
[7] NSPI in its pleadings states that it exercised the Q2 Option on or about February 11, 2004. It also alleges that it exercised both the Q3 Option and the Q4 Option on or about March 8, 2004. In each case NSPI alleges that it exercised the option to purchase the entire 100,000 Tonnes per quarter provided for in the Confirmation Letter.
[4] The evidence before the judge included the affidavit of Mark Sidebottom, Director of Energy Fuels and Risk Management for NSPI, sworn January 9, 2006, the affidavit of Ernie Leo Thrasher, President of AMCI, sworn April 7, 2006 and a letter addressed to Mr. Thrasher:
Dear Mr. Thrasher
Re: NSPI Options for 100 K DWT Q2 2004
Please be informed that NSPI wishes to exercise its South American Low Sulphur “A” Coal Options in Q2 2004 for 100K DWT to supply its facilities in Nova Scotia. Price negotiated $US 1.24331 per MMBtu at the designated load port of Puerto Bolivar, Colombia.
Please confirm receipt of this notice via return fax or e-mail.
Please contact me if you have any questions.
Sincerely,
Barrie W. Fiolek
Manager Solid Fuels
[5] The record indicates that this letter was not discovered by NSPI until Mr. Sidebottom did a computer search the morning of the first appearance before the judge on the summary judgment application. During cross examination before the judge, Mr. Sidebottom testified that the computer search indicated that the letter was generated by someone at NSPI on February 11, 2004.
[6] The parties agreed that the Agreement and Confirmation Letter required NSPI to exercise its options for each quarter of 2004 in writing, that there was no evidence properly before the judge confirming that the February letter or any other written notice was sent to AMCI with respect to Q2 and that NSPI gave timely written notice to AMCI of its exercise of its options for Q3 and Q4.
[7] Mr. Thrasher swore in his affidavit:
15. NSPI did not provide written notice to AMCI, prior to February 16, 2004 or at any time, that it was exercising its Quarterly Option 2. . . .
[8] NSPI attempted to buy two loads of coal from AMCI in Q2, April 1 to June 30, 2004. The first load was to be delivered between May 15 and 25, 2004 and the second between June 20 and 30, 2004. NSPI claimed that AMCI did not respond to its nomination of a vessel for the first load until after NSPI was forced to divert the vessel to mitigate damages. AMCI supplied 41,365.01 tonnes of coal to NSPI at the Port of Palmarejo, Venezuela, between June 20 and July 1, 2004. The correspondence between NSPI and AMCI concerning NSPI’s attempts to buy coal in Q2 include the following two e-mails from Mr. Thrasher:
No. 1
May 10, 2004
Subject: RE: Q2 LS Nominations
Colin:
I apologize for the delayed reply. Thanks for your nomination of the M/V Alice Oldendorff for a May 15-25 laycan and a second vessel for a June 20-30 laycan. Since these vessels load approximately 39,000 MT per cargo, please confirm that NSPI will be lifting 78,000 MT of the 100,000 MT declared under the Q204 LS option.
Best regards
Ernie Thrasher
No. 2
May 20, 2004
Subject: Re: Q2 LS Nominations
Colin:
Thanks your message. [After advising of a highway rock slide]
. . .
We currently have approximately 24,000 MT in stock at Palmarejo and are receiving deliveries at a reduced rate due to the highway closure. Depending on the situation with the highway, we expect to have sufficient cargo available for the June 20-30 laycan at Palmarejo. Therefore, please nominate the performing vessel to allow us to nominate the vessel to the port for approval.
. . .
Meanwhile, as noted in my e-mail dated May 10 (copy below), please confirm that NSPI will be lifting 78,000 MT of the 100,000 MT declared under the Q204 LS option.
Ernie Thrasher
(Emphasis added)
Decision
[9] In his decision the judge referred to Civil Procedure Rule 13.01(b) and to case law governing summary judgment applications. Neither party took exception to his statement of the governing law:
[12] It is clear from a review of these, along with a myriad number of other previously decided cases, that an application for summary judgment has two steps. First, the moving party must show that there is no genuine issue of material fact for trial and therefore summary judgment is a proper question for consideration. (See MacNeil v. Bethune, supra, at page 31).
[13] The burden then shifts to the respondent to prove facts which establish, if not the validity of its claim or defence, then at least a genuine issue for determination. (See Somers Estate v. Maxwell (1995), 107 Man. R. (2d) 200; [1996] M.J. No. 46 (Q.L.) (C.A.))
[10] Rather, the parties’ argument on their respective appeals was that the judge erred in applying this law.
[11] With respect to Q2, the judge referred to the fact that each of Mr. Thrasher’s two May e-mails, quoted in paragraph 8 above, specifically referred to 100,000 tonnes of coal having been “declared” by NSPI for Q2. In light of this and the fact AMCI delivered one load of coal to NSPI between June 20 and July 1, 2004, the judge found the Q2 option was exercised so that there was no arguable issue left for trial and that there was no valid defence raised and granted summary judgment to NSPI with respect to Q2.
[12] With respect to Q3 and Q4, the judge referred to AMCI’s defence of force majeure. He refused to grant summary judgment for Q3 and Q4 because he found there was a factual dispute requiring trial, whether the rockslide on the road between the coal mining region of Cucuta, Colombia and the port of Palmarejo, Venezuela and the alleged subsequent shortage of trucks available on that route constituted force majeure as defined in the Agreement.
Standard of Review
[13] The parties agreed on the standard of review applicable to these appeals. With respect to AMCI’s appeal of the judge’s order granting summary judgment which has a final and terminating effect, this court is not to interfere unless there was an error of law resulting in an injustice. For NSPI’s appeal, since the judge’s order does not have a terminating effect, the standard of review is the usual standard that applies to appeals of interlocutory orders. This court will not intervene unless wrong principles of law were applied or a patent injustice would result. See Milbury v. Nova Scotia (Attorney General), [2007] N.S.J. No. 187 (NSCA).
AMCI’s Appeal
[14] The issue before us on AMCI’s appeal is whether the judge erred in finding that there was no genuine issue of material fact to be tried with respect to Q2 and granting summary judgment to NSPI on the issue of liability for AMCI’s breach of its contractual obligation to provide 58,634.99 tonnes of coal to NSPI in Q2, April 1 to June 30, 2004.
[15] AMCI argued that the judge erred in granting summary judgment against it because there was a genuine issue of material fact to be tried, namely: whether NSPI gave AMCI written notice that it was exercising its Q2 option as required by the Agreement and Confirmation Letter.
[16] It argued that it was not estopped by its June delivery of coal from now claiming that NSPI did not properly exercise its Q2 option, relieving AMCI of any obligation to sell further coal to NSPI in Q2, because of clause 19.2 of the Agreement:
The failure of either Party to insist, in any one or more instances, upon strict performance of any of the provisions of this Agreement or to take advantage of any of its rights hereunder shall not be construed as a [waiver] of any such provisions or the relinquishment of any such rights, but the same shall continue and remain in full force and effect for the Term of this Agreement.
[17] NSPI argued that the existence of the February letter and the references in Mr. Thrasher’s May e-mails to the 100,000 tonnes of coal being “declared” by NSPI under the Q2 option supported the judge’s finding that NSPI had properly exercised its Q2 option so there was no genuine issue of material fact to be tried. In the alternative, it argued that AMCI was estopped from now requiring written exercise of its Q2 option by NSPI because of what it characterized as the acknowledgement of NSPI’s exercise of its Q2 option in Mr. Thrasher’s May e-mails and because it supplied coal to NSPI in Q2. It argued that clause 19.2 of the Agreement does not provide AMCI with a sustainable defence because its only purpose is to make clear that if the parties waive strict compliance with the terms of the Agreement and the Confirmation Letter from time to time, this does not preclude them in subsequent contractual dealings from insisting on strict compliance, such as written notice.
[18] I am satisfied the judge made an error of law resulting in an injustice in granting summary judgment to NSPI for Q2. Accepting, as both parties did, that the Agreement and Confirmation Letter required NSPI to exercise its Q2 option in writing, there was no conclusive evidence properly before the judge that it did so. The fact the February 11 letter was generated in one of NSPI’s computers does not prove it was sent to AMCI. There is no other evidence that was properly before the judge that written notice was sent. In fact, Mr. Thrasher swore in his affidavit that no written notice was received by AMCI for Q2. In light of this evidence and in the face of the contractual requirement that notice be in writing, there is a genuine issue of material fact for trial which a reading of clause 19.2 of the Agreement in the context of the record does not resolve because the record does not provide sufficient uncontested facts to allow a final determination of its proper interpretation. I would grant leave and allow AMCI’s appeal.
NSPI’s Cross Appeal
[19] NSPI appealed the judge’s decision which refused to grant it summary judgment for liability for a total of 200,000 tonnes of coal with respect to Q3 and Q4, July 1 to September 30, 2004 and October 1 to December 31, 2004.
[20] There is no dispute that NSPI gave written notice to AMCI on March 8, 2004 exercising its option to purchase a total of 200,000 tonnes of coal in Q3 and Q4. The sole issue raised before the judge and before us with respect to Q3 and Q4 was whether there was a genuine issue for trial concerning the defence of force majeure. (This issue was not raised on appeal with respect to Q2.)
[21] AMCI argued that it was relieved of its contractual obligation to supply coal to NSPI in Q3 and Q4 by virtue of the force majeure clause in the Agreement. AMCI’s evidence was to the effect that transporting coal in sufficient quantities had become impossible as a result of a rock slide on the main road between the coal mining region of Cucuta, from which AMCI intended to source the coal for NSPI, and the port of Palmarejo from which it wished to ship it.
[22] NSPI argued that the judge erred by in effect holding that AMCI could sustain a defence of force majeure on the evidence before him in light of the terms of the Agreement and Confirmation Letter that provided that AMCI would provide coal of South American origin to the port of Puerto Bolivar, Colombia or any other port nominated by AMCI. It pointed out that the contractual arrangement between the parties did not restrict AMCI to selling to NSPI coal from the coal mining region of Cucuta or to delivering it to the port of Palmarejo. It argued that the judge erred by failing to recognize that there was no evidence before him indicating that AMCI could not deliver coal from other South American mines to either Palmarejo or another port and by failing to appreciate that the evidence before him indicated AMCI had made no efforts to meet its contractual obligations to deliver coal to NSPI in Q3 and Q4 beyond attempts to deliver coal from one particular mine via one particular road to one particular port.
[23] The only evidence before the judge on the issue of force majeure related to the rock slide on the main road between the coal mining region of Cucuta and the port of Palmarejo. In the transcript of Mr. Thrasher’s discovery evidence that was before the judge he agreed that in order to have a force majeure event under the Agreement the event had to be beyond the control of the parties, that the Agreement provided that AMCI would deliver “South American coal generally,” that there were many sources of such coal available in Q3 and Q4 that AMCI could have acquired, that AMCI had authority under the Agreement to name ports other than Palmarejo for delivery, that he made no inquiries about delivering coal to another port and that he was not aware of any impediments to shipping coal from any other ports.
[24] In light of the provisions of the Agreement and Confirmation Letter which allowed AMCI to provide coal of South American origin to a port of its choice and in light of Mr. Thrasher’s testimony on discovery about the availability of other coal and other ports in Q3 and Q4 and AMCI’s lack of efforts to fulfill its contractual obligations, I am satisfied the judge erred by fundamentally misunderstanding the evidence when he found there was a factual dispute concerning force majeure and refused to grant summary judgment. I would grant leave, allow the appeal and grant summary judgment to NSPI as to liability for 200,000 tonnes of coal for Q3 and Q4.
[25] Given the ongoing court proceedings in which these parties are involved, I would ask the parties to draft the order giving effect to this decision and forward it to the court on or before January 18, 2008. In the event the parties cannot agree on the form of the order, each shall submit to the court the order it recommends to give effect to this decision on or before January 25, 2008 and the court will prepare the order with or without further consultation with the parties as it deems fit.
[26] As success has been divided, I would not order either party to pay costs to the other.
Hamilton, J.A.
Concurred in:
Cromwell, J.A.
Saunders, J.A.