Court of Queen’s Bench of Alberta Citation: Dow Chemical Canada ULC v NOVA Chemicals Corporation, 2018 ABQB 482 Date: 20180620 Docket: 0601 07921 Registry: Calgary Between: Dow Chemical Canada ULC and Dow Europe GmbH Plaintiffs/Defendants by Counterclaim - and - NOVA Chemicals Corporation Defendant/Plaintiff by Counterclaim Restriction on Publication This decision has been redacted so that it may be published. The unredacted decision may not be published to protect confidential proprietary information in accordance with orders made at trial, and shall be sealed in the court file in accordance with paragraph 1461. _______________________________________________________ Reasons for Judgment of the Honourable Madam Justice B.E. Romaine ______________________________________________________ Page 2 DOW CLAIM ................................................................................................................................. 8 I. Overview ............................................................................................................................. 8 II. Introduction ......................................................................................................................... 9 III. Detailed Submissions of the Parties with respect to the Dow Claim ................................ 10 IV. Facts .................................................................................................................................. 12 V. Principles of Contractual Interpretation ............................................................................ 12 VI. Allocation Claim ............................................................................................................... 15 A. Factual Context ................................................................................................................. 15 B. Parties and Agreements – Summary of Key Provisions ................................................... 21 C. Concept ............................................................................................................................. 26 D. Analysis............................................................................................................................. 27 E. Nova Defences to Allocation Claim ................................................................................. 37 1. Ethane Shortage ............................................................................................................ 37 2. Disclosure ..................................................................................................................... 39 3. Misrepresentations ........................................................................................................ 43 F. Analysis of Ethane Allocation as a Breach of Contract .................................................... 44 G. Analysis of Ethane Allocation as Conversion .................................................................. 45 VII. Optimization Claim ........................................................................................................... 46 A. Introduction ....................................................................................................................... 46 B. Evidence of Productive Capacity ...................................................................................... 47 1. Sanjeev Kapur ............................................................................................................... 47 2. Chris Wallsgrove .......................................................................................................... 54 C. Nova Defence of Mechanical Constraints ........................................................................ 55 1. Introduction ................................................................................................................... 55 2. John T. Holloway .......................................................................................................... 56 3. Scott Ferrigno ............................................................................................................... 64 4. Nova Lay Witnesses ..................................................................................................... 72 a) Admissibility of Evidence of Lay Witnesses ............................................................ 72 b) David Gent ................................................................................................................ 74 Page 3 c) Ron Just ..................................................................................................................... 81 d) Jeffrey Kluthe ............................................................................................................ 83 e) Kevin Wilke .............................................................................................................. 84 f) Randy Saunders ........................................................................................................ 89 g) David Craig ............................................................................................................... 91 h) Yost Kieboom ........................................................................................................... 92 i) William Wade ........................................................................................................... 96 j) John Dennehy .......................................................................................................... 102 5. Conclusions on Mechanical Constraints ..................................................................... 104 a) Furnace Burners and Coils ...................................................................................... 104 b) Venturis ................................................................................................................... 106 c) E-502 Exchanger ..................................................................................................... 107 d) C2 Splitter – Hydrate Formation ............................................................................. 107 e) E-568 Exchanger ..................................................................................................... 108 f) E-565 Reboiler ........................................................................................................ 108 g) E-650 ....................................................................................................................... 109 h) TD-405 Steam Rack ................................................................................................ 109 i) Crossover Piping ..................................................................................................... 109 j) Furnace Availability Issues – Miscellaneous .......................................................... 109 k) Cooling Water System Debris................................................................................. 110 l) T-301 Pressure Relief Devices ................................................................................ 110 m) K-570 Pressure Safety Valves ............................................................................... 110 n) K-400 Compressor .................................................................................................. 111 D. Breach of the Joint Venture Agreements ........................................................................ 112 1. Breach of Section 4.3(b) of the OSA .......................................................................... 112 2. Breach of Section 4.4(a) of the OSA .......................................................................... 114 a) Constraints were reported to Dow .......................................................................... 114 b) Budgets as Approval of Operations ........................................................................ 115 3. Breach of Section 7.3 of the OSA ............................................................................... 115 4. Breach of Section 3.2(c) of OSA and Section 3.11 of the COA ................................. 117 E. Conclusion on Optimization Claim ................................................................................ 117 VIII. Damages .......................................................................................................................... 120 Page 4 A. Introduction ..................................................................................................................... 120 B. Dow Lay Witnesses ........................................................................................................ 120 1. David Kyle .................................................................................................................. 120 2. Mariano Gutierrez ....................................................................................................... 123 C. Expert Witnesses ............................................................................................................. 124 1. Charles Mikulka .......................................................................................................... 124 a) Entitlement to damages ........................................................................................... 128 b) Unlimited demand ................................................................................................... 128 c) Reliance on the AUDB ..........................................................................................