



COURT OF APPEAL FOR ONTARIO

CITATION: Western Troy Capital Resources Inc. v. Genivar
    Inc.,  2017 ONCA 971

DATE: 20171211

DOCKET: C63024

Sharpe, Epstein and van Rensburg JJ.A.

BETWEEN

Western Troy Capital Resources Inc.

Plaintiff (Appellant)

and

Genivar Inc. and Patrick Giard

Defendants (Respondents)

Sara J. Erskine and Kristjan Surko, for the appellant

Howard B. Borlack and Stephen Barbier, for the
    respondent, Genivar Inc.

Heard: November 22, 2017

On appeal from the judgment of Justice Graeme Mew of the Superior
    Court of Justice, dated November 1, 2016, with reasons reported at 2016 ONSC
    6829.

REASONS FOR DECISION

FACTS

[1]

The appellant, Western Troy Capital Resources
    Inc., (Western Troy) retained the services of the respondent, Genivar Inc.
    (Genivar), an engineering consulting firm, to conduct a feasibility study to
    evaluate the amount of mineral resources and the economic viability of
    developing a property at MacLeod Lake in Northern Quebec. The trial judge found
    that in carrying out its work, Genivar had breached its duty of care toward
    Western Troy and had made negligent misrepresentations. This sole issue on this
    appeal is whether the trial judge erred in his assessment of damages.

[2]

The trial judge made detailed findings of fact
    that we need not repeat here. The following outline highlights the facts
    essential to this appeal.

[3]

In 2008, Western Troy obtained a positive
    preliminary economic assessment of the MacLeod Lake property from another
    consultant. In June 2008, it retained Genivar to conduct a feasibility study,
    which includes the development of a mineral resources estimate (also referred
    to as a resource block model), to determine whether the resource was
    economically viable. In early 2009, Genivar told Western Troy that preliminary
    results for the resource model were better than expected. A few weeks later,
    due to the economic downturn following the sub-prime financial crisis, the
    study was suspended.

[4]

In early 2010, Western Troy instructed Genivar
    to resume the study, but due its failure to properly document the work done
    earlier and significant staff turnover, this took some time. In August 2010,
    Genivar reported that a proper feasibility study could not be undertaken until
    capital costs for road access and power supply were completed. Western Troy
    rejected that advice and asked Genivar to proceed with the study.

[5]

The parties entered into a Revised Services
    Contract on July 20, 2011. At that time, the resources estimate was still not
    complete. Mr. Giard, the personally named defendant, took charge of the project
    for Genivar. He had serious concerns about the viability of the project because
    of capital costs, but he did not express these concerns to Western Troy at that
    time. He retained a third party to audit the reliability of the source data
    that would be used for the resources estimate. In April 2012, these third-party
    resource estimates revealed that the resource grade had declined by 19%. The
    project was deemed economically unviable and Western Troy decided to abandon
    the project.

TRIAL JUDGMENT

[6]

The trial judge gave detailed reasons finding
    that Genivar had breached its duty of care and made material misrepresentations
    to Western Troy. The trial judge found that but for Genivars negligence,
    Western Troy would have terminated the project sooner and that Western Troy was
    therefore entitled to compensation for unnecessary expenses incurred. He found
    that the resources estimate should have been finalized at least one year and
    maybe as much as two years earlier than the actual completion date of April
    2012.

[7]

Western Troy submitted that it should be
    compensated for all expenses it had incurred from the date the study was
    resumed in 2010. It asserted that if the resource estimate indicating a
    substantial decline in grade had been received by then, it would have
    immediately halted the project. At trial, Western Troy 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 $3,088,333.81.

[8]

Genivar adduced expert evidence in support of
    its contention that the damages were $590,439. The expert testified that $1,416,028
    of the damages claimed by Western Troy were either unrelated to the feasibility
    study or would have been incurred in any event. He also identified that Western
    Troys losses were offset by the $454,995 it had received for mine tax credits.

[9]

The trial judge found that the damages
    calculation in this case was inherently difficult and, to some extent,
    speculative. He noted that the question of when Genivar would have completed
    the study, had it met the standard of care, required conjecture. He accepted
    Genivars contention that at least some of Western Troys expenditures would likely
    still have been incurred, even if the resource estimate had been provided
    promptly after the project resumed. He was not persuaded that in the period
    between 2010 and 2012, Western Troy would have terminated the project
    immediately had the resources estimate been prepared on a timely basis.

[10]

The trial judge concluded that, appreciating
    these difficulties and making the best of the evidence, $1.25 million was a
    fair figure. He dismissed Genivars counterclaim for $322,432.71 for unpaid
    fees.

ISSUE

[11]

The sole issue on appeal is whether the trial
    judge erred in his damages assessment.

ANALYSIS

[12]

Western Troy asks this court to increase the
    award to $2,967,144.55, the total of its expenses on the project after April
    2010 less certain expenses that it concedes would have been incurred in any
    event or, alternatively, the total of its expenses from April 2011
    ($2,151,365.08).

[13]

Genivar does not cross-appeal the quantum of
    damages and asks this court to uphold the trial judges award.

[14]

Western Troy argues that the trial judge erred
    by failing to anchor his assessment of damages in the evidence and that he
    failed to adequately explain what expenses he rejected and what evidence he
    relied on in coming up with the figure of $1.25 million. Western Troy further
    submits that the trial judges assessment cannot be reconciled with the balance
    of his reasons. As he found that the resources estimate should have been
    finalized at least one year and maybe as much as two years before April 2012,
    the damages should include all expenditures incurred before either April 2010
    or 2011. The damages incurred after either date far exceed $1.25 million.
    Western Troy also argues that the damages award is inconsistent with the trial
    judges determination that prejudgment interest should run from the date of the
    Revised Services Contract on July 20, 2011.

[15]

The standard of review applicable to this case cited by
    both parties is set out in
TMS Lighting Ltd. v. KJS Transport Inc
.,
    2014 ONCA 1, at para. 60 (citations omitted):

[A] trial judges assessment of damages
    attracts considerable deference from a reviewing court.  Appellate
    interference with a damages award at trial, particularly an award made by a
    trial judge sitting alone, is justified only where the trial judge made an
    error in principle, misapprehended the evidence, failed to consider relevant
    factors, considered irrelevant factors, made an award without any evidentiary
    foundation, or otherwise made a wholly erroneous assessment of damages

[16]

The court added, at para. 61: 
Mathematical exactitude in the calculation of damages is neither
    necessary nor realistic in many cases.

[17]

In our view, when the reasons are read as a
    whole, the trial judge provided an adequate explanation, firmly grounded in the
    evidence, for why he rejected the approach advocated by Western Troy and
    accepted Genivars position that not all the expenses claimed by Western Troy
    would have been avoided if a timely resources estimate had been provided. In
    our view, his damages assessment is not vulnerable to review in this court on
    the applicable standard of review.

[18]

The trial judge noted, at para. 148, that there
    were several matters bearing upon the damages assessment that were
    speculative when the evidence was considered as a whole.

[19]

First, there was an element of speculation as to
    when, if Genivar had met the standard of care, the resources estimate would
    have been completed. He found, at para. 130, that the work could have been
    done at least one year and maybe as much as two years before when it was
    actually done. The use of the word maybe indicates that the trial judge was not
    satisfied on a balance of probabilities that the work should have been
    completed by April 2010, two years before the completion of the April 2012
    resource estimate. This meant that the earliest date from which damages could
    be calculated would be April 2011. That finding is, in our view, supported by
    the record and fatal to Western Troys contention that damages should be
    awarded for all expenses incurred after April 2010.

[20]

The second speculative question was what
    expenses Western Troy would have incurred in any event if the resources
    estimate had been completed in a timely manner. On this point, the trial judge
    accepted the evidence of Genivars expert witness that feasibility studies
    typically proceed with all work happening concurrently rather than
    sequentially. He accepted the experts evidence that some of the expenses
    Western Troy claimed would have been incurred to move the project forward while
    the feasibility study was being prepared. The trial judge did not accept the
    extent of the reductions proposed by Genivars expert but he did accept, at
    para. 144, that there must be some reduction.

[21]

As the trial judge put it at para. 131 of his
    reasons, it seems to me unlikely that everything that was spent from the
    resumption of work in early 2010 would not have been spent had the resource
    estimate been completed at or shortly after the resumption. This finding meant
    that 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 be ready by that date.

[22]

A third area of uncertainty identified at para.
    148 was exactly what the reaction of Western Troy would have been upon receipt
    of a timely feasibility study. The trial judge found that Rex Loesby, the president
    of Western Troy, took a very aggressive approach in promoting the MacLeod Lake
    project to his board and to investors and that he was a difficult and demanding
    client who often resisted Genivars advice. For example, in August 2010, when
    Genivar suggested that the feasibility study should not be undertaken before certain
    infrastructure issues were resolved, Loesby instructed Genivar to proceed with
    the feasibility study. He asked Genivar to destroy a September 2010 letter
    cautioning that inappropriate assumptions were being made regarding road access
    and power transmission because of his fear that Quebec tax refunds secured by
    Western Troy would be reversed.

[23]

There was also evidence that the decision
    whether or not to proceed with the project was contingent on commodity prices. Had
    the resources estimate been available earlier, when commodity prices were
    surging in 2010 and early 2011, the project may have appeared sufficiently
    viable to continue the feasibility study.

[24]

The trial judge found, at para. 151, that
    Western Troy had a strong desire for this project to succeed and that it is
    unrealistic to say that [Loesby] would simply have drawn a line and terminated
    the project if the resources estimate had been completed earlier. Loesby did
    terminate the project when the report was completed in 2012, but the trial
    judge found that that was only because so much money had already been spent that
    Loesby had no wiggle room left. Had he received the report at an earlier
    point, the trial judge found that he would have looked for other ways to
    improve the project economics and that, accordingly, the project would not
    necessarily have died at that point.

[25]

In our view, these findings were open to the
    trial judge on the evidence. In light of these findings, we do not agree with
    Western Troys submission that the calculation could only have been
    accomplished on an invoice by invoice basis.  There was a significant element
    of judgment required to assess the damages in this case. Western Troys expert
    offered no alternative to simply awarding almost every dollar that Western Troy
    claimed. We agree with Genivars submission and the trial judges conclusion
    that there was an array of factors at play that made the assessment of damages
    speculative to a considerable degree.

[26]

The trial judge candidly stated, at para. 152,
    that there was an element of guesswork in assessing the damages but that his
    assessment had not taken place in a vacuum. The trial judge was entitled, as he
    put it, to consider not only the hard facts and the comments, but also the
    propensities of the individuals involved.

[27]

The trial judges decision to award prejudgment
    interest from the date of the Revised Services Contract, July 20, 2011, was
    made on the basis of determining a reasonable point of time from which to
    calculate interest on the damages he awarded. That is plainly distinguishable
    from a finding that all expenses incurred after that date were compensable as
    damages.

[28]

In our view, the trial judges rejection of the
    mechanical approach advocated by Western Troy of fixing damages on the basis of
    adding up all the expenses incurred after a specified date was justified on the
    record.

[29]

Western Troy has not persuaded us that the trial
    judge ignored relevant evidence, or that he made any palpable and overriding
    error of fact or error of law that would justify this court in interfering with
    his decision. His findings 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 Western
    Troy would have abandoned the project upon the earlier receipt of a report are
    firmly grounded in the evidence and his assessment of $1,250,000 in damages and
    his approach to prejudgment interest were reasonable.

DISPOSITION

[30]

For these reasons, the appeal is dismissed with
    costs to Genivar fixed in the amount agreed to by the parties, namely, $25,000
    inclusive of disbursements and taxes.

Robert
    J. Sharpe J.A.

Gloria
    Epstein J.A.

K.
    van Rensburg J.A.


