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ASSESSMENT OF DAMAGES - Time for assessment - Measure of damages - Difficulty in assessment

Friday, January 26, 2018 @ 10:08 AM  

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Appeal by the plaintiff, Western Troy Capital Resources Inc., from the damages award of $1.25 million granted in its favour for negligence and negligent misrepresentation. In 2008, the appellant retained the respondent engineering consulting firm, Genivar Inc., to conduct a feasibility study to evaluate the amount of mineral resources and economic viability of developing a property in Northern Quebec. Due to the economic downturn, the study was suspended in 2009. In 2010, the appellant instructed the respondent to resume the study. Due to respondent’s failure to properly document the work done earlier and significant staff turnover, this took some time. The parties entered into a Revised Services Contract in 2011. At that time, the resources estimate was still not complete. In April 2012, third-party resource estimates revealed that the resource grade had declined by 19 per cent. The project was deemed economically unviable and the appellant decided to abandon the project. The trial judge found that but for the respondent’s negligence, the appellant would have terminated the project sooner and that the appellant was therefore entitled to compensation for unnecessary expenses incurred. The appellant provided copies of invoices itemizing actual expenditures between resumption in 2010 and the completion of the resource estimate in April 2012, in the total amount of $3,088,333. The respondent’s expert testified that $1,416,028 of the damages claimed were either unrelated to the feasibility study or would have been incurred in any event. He also identified that the appellant’s losses were offset by the $454,995 it had received for mine tax credits. The trial judge noted that there were several speculative matters bearing upon the damages assessment. The trial judge was not persuaded that between 2010 and 2012, the appellant would have terminated the project immediately had the resources estimate been prepared on a timely basis. The trial judge found that the earliest possible start date for the damages was April 2011, that not all expenses incurred after the report was delivered would have been avoided, and that it was not certain when the appellant would have abandoned the project upon the earlier receipt of a report.

HELD: Appeal dismissed. The trial judge’s rejection of the mechanical approach advocated by the appellant of fixing damages on the basis of adding up all the expenses incurred after a specified date was justified on the record. Not all the expenses claimed would have been avoided if a timely resources estimate had been provided. The trial judge’s finding that the earliest date from which damages could be calculated was April 2011, was supported by the record and fatal to the appellant’s contention that damages should be awarded for all expenses incurred after April 2010. It would be wrong to take a strictly linear and sequential approach and assume that all the expenses incurred after April 2011 would have been avoided had the study been ready by that date. In light of these findings, the appellant’s submission that the calculation of damages could only have been accomplished on an invoice by invoice basis was rejected. There was a significant element of judgment required to assess the damages in this case. The trial judge was entitled to consider not only the hard facts and the comments, but also the propensities of the individuals involved.

Western Troy Capital Resources Inc. v. Genivar Inc., [2017] O.J. No. 6655, Ontario Court of Appeal, R.J. Sharpe, G.J. Epstein and K.M. van Rensburg JJ.A., December 11, 2017. Digest No. TLD-January222018011