Company suing Vale for $8.7M suffers setback in court

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A company hired – and then fired -- by Vale in Sudbury to work on demolishing a building at its Copper Cliff operations has suffered a partial loss in its $8.7 million lawsuit against the company.

After Vale hired Priestly Demolition in March 2018, it began work on demolishing one of the buildings at the Copper Cliff site. But in May 2020, Vale fired the company, citing repeated safety violations. Vale began its own lawsuit in July, claiming breach of contract.

"Priestly denies that Vale had grounds to terminate the contract," said the transcript from the Superior Court of Ontario hearing. "In fact, Priestly claims that Vale terminated the contract in bad faith. Priestly delivered its statement of defence and counterclaim on Aug. 14."

In its counterclaim, Priestly seeks $2.413 million for work performed under the contract for which it has not been paid, as well as more than $6 million in damages "for lost profits in relation to six demolition projects that Vale is expected to tender in future."

Worth more than $212M

The company estimate those contracts to be worth more than $212 million. Vale is currently making some historic changes at its Copper Cliff facility. Two new, 450-foot stacks are now fully installed and ready to replace the famous Superstack that has been in Sudbury for decades.

Priestly was hired to take down the No. 1 Cottrell Building, and it its lawsuit, it claims Vale held them to a much higher safety standard than other contractors.

"Priestly claims that the contract was wrongly terminated by Vale," the transcript said. "In the alternative, Priestly claims that Vale breached its duty of good faith in performing the contract by holding Priestly to unreasonably high safety standard that were not imposed on other contractors."

And because the contract was terminated, Priestly claimed it had lost the opportunity to bid on future contracts, including the Superstack takedown.

"Priestly pleads that there are six projects that Vale is expected to put to tender in the future which have an estimated value of $212,400,000," the transcript said. "Priestly pleads that it could have bid on those six contracts if it was not barred by Vale from doing so."

To justify its claim of $6.29 million in losses for future work, Priestly argued that it has won an average of 14.64 per cent of the Vale projects it bids on, and earned an average of 20 per cent profit on each job.

"Priestly, therefore, pleads that it is entitled to damages in the amount of $6,219,072 in lost future profits, which represents 20 per cent of 14.64 per cent the total estimated value of the six identified projects."

'Novel cause of action'

The company admitted this was a "novel cause of action," since no company has ever successfully sued for lost profits on contracts it may have won in the future.

Vale challenged the claim for lost profits from future jobs, and the judge in the case agreed.

"First, the claim is entirely speculative," the transcript said. "Priestly cannot prove that Vale will tender any of the identified projects. It entirely within Vale’s control whether it proceeds with the six identified demolition projects at all … In essence, Priestly is seeking damages that may never materialize."

Secondly, there was no promise that Priestly would be awarded future contracts, even if there were no issues with No. 1 Cottrell contract.

"Even if Vale did not act honestly or in good faith in carrying out the No. 1 Cottrell contract, that does not create a continuing contract between Vale and Priestly or an obligation on the part of Vale to award contracts to Priestly for future work," the transcript said.

Even a strong and positive relationship would not have obliged Vale to award the company any future work, the judge wrote.

"Even if the parties to a contract have a longstanding relationship, the duty of good faith does not require parties to negotiate new contracts when the contract between them does not contain an automatic renewal provision," the judge said.

In addition to striking more than $6 million from Priestly's claim, the judge also awarded court costs of more than $10,000, which Priestly must pay to Vale within 30 days of the decision, dated Nov. 4.

While striking the claim for lost future profits, Priestly's lawsuit for $2.413 million related to work done on the original project can proceed.

Read the full transcript here.