A month after a judge awarded over $1 billion in damages to Dow Chemical Canada ULC over a dispute with Nova Chemicals Corporation regarding an Alberta ethylene plant, Nova has filed a notice of appeal as it looks to have the ruling overturned.
In documents filed in Calgary on Thursday, Nova indicated it is seeking an “order setting aside the judgment and dismissing the plaintiffs’ claim,” an “order finding Dow Canada liable on Nova’s counterclaim” or having a different Court of Queen’s Bench judge look into the case.
The two chemical giants co-own E3, an ethylene-production facility near Joffre, Alta. That is considered to be one of the largest facilities of its kind.
Ethylene is a flammable, gaseous, unsaturated hydrocarbon that can be used in the process of manufacturing polyethylene, a type of plastic.
In June, a judge sided with Dow Canada after it alleged breach of contract, claiming Nova “took part of the ethylene and other products produced at E3 that belonged to Dow Canada under the terms of the joint venture for its own use.” It also claimed Nova failed to follow through on other obligations, resulting in a loss of production.
READ MORE: Judge orders company to pay Dow Canada $1B in damages after fight over Alberta ethylene plant
For its part, Nova defended itself against the claim, arguing “an ethane shortage justified its development and use of ethane allocation among the three ethylene production facilities at the Joffre site, and that Dow Canada knew about this allocation as it was occurring and failed to object to it,” the summary reads. Nova also said it operated E3 “to its productive capability, subject to mechanical issues that constrained production.”
Damages were assessed at about USD $1.06 billion against Nova, including interest and the judge threw out Nova’s counterclaim.
“Dow has established these facts and has proved on a balance of probabilities that Nova has breached the joint venture agreements both as operator and as co-owner and has converted some of the ethane that Dow was entitled to from E3,” Justice Barbara Romaine in a 334-page ruling issued on Wednesday.
“I also grant Dow a declaration that the conduct of Nova as operator constitutes wilful misconduct and gross negligence.”
Romaine accepted Dow’s argument that Nova always had sufficient ethane to fill E3 and to get additional ethane and that Nova failed to operate E3 to maximize production.
In its notice of appeal, Nova claims Romaine “misapprehended” the project agreements between it and Union Carbide Corporation (UCC) (a wholly owned subsidiary of Dow).
“She ignored the commercial purpose of these agreements, as well as the factual matrix and context at the time they were entered into,” the documents read. “As a result, she erroneously awarded over USD $1 billion in damages to UCC’s successors in interest, Dow Europe and Dow Canada.”
Nova’s appeal also claims, among other things, that Romaine “erred and reached an unreasonable conclusion in interpreting the meaning of the objective that the plant will ‘optimize product production’ and ‘achieve first decile performance'” under a section of the operating and services agreement.
Nova lists multiple other concerns with Romaine’s ruling, including how the damages were calculated.
“The trial judge erred in law by awarding interest on the damages at a rate much higher than the statutory rate, which had the effect of increasing the total award to Dow by more than USD $300 million.”
The E3 facility began operations in Joffre in 2000. Joffre is located about 145 kilometres south of Edmonton.
You can view Nova’s notice of appeal documents below.
–With files from The Canadian Press
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