(Joel Krahn/Yukon News file)

Appeal court orders new trial in Yukon Energy Corp., contractor lawsuits

The B.C.-Yukon Court of Appeal found the trial judge erred in invoking an irrelevant legal principle

The Yukon Energy Corporation (YEC) and a contractor hired to refurbish the Aishihik hydro plant will be back in court after the B.C.-Yukon Court of Appeal found the judge presiding over the parties’ lawsuits against each other erred.

In a decision dated May 15, the appeal court found that Yukon Supreme Court Justice Gerard Hawco made legal mistakes in his reasonings for awarding compensation to both Ontario-based North America Construction (NAC) and YEC in 2016.

The legal spat between the two began shortly after YEC contracted NAC to upgrade the Aishihik generating station in 2010. NAC completed the project in late 2011 and then sued YEC, claiming the corporation owed it almost $4 million for additional work that wasn’t outlined in the original contract. YEC counter-sued for the costs of fixing what it said were deficiencies with NAC’s job.

Hawco awarded NAC approximately $2 million and YEC about $400,000.

YEC appealed part of Hawco’s decision, saying the judge, among other things, erroneously applied a legal rule — Browne v. Dunn, which basically states that contradictory evidence must be put to a witness during cross-examination — on two of NAC’s additional work claims and on YEC’s counterclaim of deficiencies when it wasn’t actually relevant.

NAC cross-appealed, claiming Hawco erred by awarding YEC $100,000 for a claimed deficiency that wasn’t supported by evidence and by finding YEC didn’t fail to mitigate damages.

B.C.-Yukon Court of Appeal Justice Anne MacKenzie, along with Justices David Frankel and Barbara Fisher, granted YEC’s appeal and the first half of NAC’s cross appeal, ordering a new trial for the matter.

In her reasonings, MacKenzie wrote that the Hawco erred by choosing to side with NAC’s witnesses based on the Browne v. Dunn rule on the two contested work claims and when determining the cost of deficiencies.

“As YEC points out, the judge’s repeated application of the rule was not only unjustified in all the circumstances of the extensive pre-trial disclosure in this complex construction lawsuit, but it was initiated solely by him and applied solely against YEC, not NAC,” she wrote. “Neither party invoked the rule at trial, and as stated, neither relied on it or referred to it in closing argument.”

She rejected NAC’s claim that, while though the rule shouldn’t have been invoked, Hawco’s repeated mention of it was “regrettable but harmless.”

“Instead, I find references to the rule in Browne v. Dunn permeated the judge’s reasons. It is not possible to regard the references as mere surplusage. In my view, the errors were material and justify appellate intervention,” MacKenzie wrote.

MacKenzie also found that the trial judge had failed to take YEC’s argument into account on one of the work claims, in which YEC challenged the legitimacy of the value claimed.

On NAC’s cross appeal, MacKenzie wrote that Hawco had wrongly awarded YEC $100,000 for deficiencies related to electrical cabinets that had welded instead of removable backs as specified in the contract. Hawco had based the figure on an expert’s estimate, but MacKenzie found the expert had not been prepared for the question and that the figure was “merely speculation” that was “unsupported by evidence and amounts to reversible error.”

The appeal court dismissed NAC’s claim that YEC failed to mitigate the cost of deficiencies by not allowing NAC back on site to remedy them.

Contact Jackie Hong at jackie.hong@yukon-news.com

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