Executive Summary: Key Legal and Evidentiary Issues

• The case centers on the recalculation of damages due to NOVA's failure to supply Dow with its contractual share of ethylene from the jointly operated E3 ethane cracker.

• The core dispute concerns whether profits lost from downstream polyethylene production are "direct damages" or "excluded consequential damages" under the Operating and Services Agreement (OSA).

• The Alberta Court of Appeal found Dow’s losses from missed ethylene deliveries to be direct damages, but profits from polyethylene production were characterized as indirect and thus excluded.

• A remand was ordered to the trial court to determine Dow’s “direct damages” based on the value of the shorted ethylene, excluding profits from polyethylene.

• Expert evidence was pivotal in assessing the productive capability of E3 and calculating the value of the lost ethylene, with disputes over methodology and admissibility.

• The court ruled it functus officio on liability, limiting the current proceeding solely to damages quantification per appellate direction.

Facts and outcome

This litigation involves Dow Chemical Canada ULC and Dow Europe GmbH (collectively "Dow") as plaintiffs and NOVA Chemicals Corporation ("NOVA") as the defendant. The conflict arises from the operation of a jointly owned ethane cracker facility known as "E3" in Alberta. Under the Operating and Services Agreement (OSA), NOVA was obligated to operate the E3 plant and supply Dow with a specified share of ethylene. Dow alleged that NOVA failed to do so between 2001 and 2018.

In previous judgments, the courts found NOVA to have committed breaches of contract, including acts of willful misconduct, for shorting Dow’s supply of ethylene. The breach allegedly affected Dow's ability to produce polyethylene at its own facilities.

Initial trial and appellate proceedings

A 2018 trial judgment awarded Dow over $1.4 billion in damages, calculated primarily on profits lost from not being able to convert ethylene into polyethylene. NOVA appealed the damages award, arguing that such downstream profits were "excluded damages" under Article 14 of the OSA, which precludes liability for indirect or consequential damages unless caused by gross negligence or willful misconduct.

The Alberta Court of Appeal partially upheld NOVA’s appeal. It concluded that while the lost ethylene itself represented direct damages, the profits Dow could have earned by converting that ethylene into polyethylene were excluded as indirect or consequential under the agreement. The appellate court remanded the matter back to the trial court to reassess Dow’s damages limited to direct losses.

Issues on remand

The trial court, under Justice B.E. Romaine, was tasked with recalculating damages specifically tied to the market value of the ethylene that Dow did not receive due to NOVA’s breach. A primary question was how to determine the “market value” of ethylene in a jurisdiction where no clear market existed. This led to disputes over methodologies proposed by competing experts.

Dow relied on expert Sanjeev Kapur to assess the productive capability of E3 and quantify ethylene shortfalls. Kapur’s methodology, rooted in plant rate trials and historical operational data, was upheld by the court. NOVA challenged this approach and sought to introduce alternative expert reports, but many of these were excluded due to their inconsistency with court-approved damage principles or for being submitted too late.

NOVA also attempted to reopen issues of liability and raise new arguments about operational constraints and regulatory NOx emissions affecting ethylene production. These attempts were rejected by the court, which reiterated that liability had already been settled and that the court was functus officio on such matters.

Final outcome

Ultimately, the trial court upheld the calculation of direct damages based on the ethylene Dow should have received, minus its cost of production, in accordance with the appellate court’s remand. The court affirmed that downstream profits, such as those from polyethylene production, remained unrecoverable under the contract. Key expert reports that complied with previously accepted methodologies were admitted, while others were excluded.

Although the original trial judgment in 2018 awarded over $1.4 billion in damages, that figure was significantly reduced after the Alberta Court of Appeal ruled in 2022 that profits from polyethylene production were excluded consequential damages. In this 2025 ruling, the court did not assign a specific dollar value to the revised damages. Instead, it approved Dow’s methodology for valuing the shorted ethylene and confirmed that the final amount is to be determined in a subsequent phase, limited to the direct market value of the ethylene Dow did not receive.

This decision secures a narrowed but still significant recovery for Dow, focused solely on the value of the ethylene shortfall, while excluding broader economic losses tied to downstream operations.