Executive Summary: Key Legal and Evidentiary Issues

• The Court found that both Master Purchase Agreements (MPAs) were time-and-materials contracts (with some materials on a cost-plus basis), not fixed-price or guaranteed maximum price contracts as alleged by EVRAZ.

• Applying modern principles of contract interpretation, the Court held that the parties were ad idem on all essential terms, including a compensation structure based on stipulated hourly labour rates and unit/cost-plus pricing for certain materials, with the electrical MPA subject to an invoicing Cap.

• The Court found express obligations on Brandt to optimize its workforce, provide weekly and monthly cost and progress reporting, and implement a “robust” change management system, and implied terms requiring Brandt to work diligently, with reasonable efficiency and in a commercially reasonable manner, to provide fulsome, timely and transparent cost reporting, and to issue change orders in a timely manner.

• Brandt was found to have materially breached both MPAs through project-management failures, including inefficient deployment of electricians on mechanical work, deficient reporting, and failure to implement timely change management; as a result, EVRAZ was entitled to terminate the MPAs for cause on November 9, 2018.

• The Court held that Brandt was entitled to be paid reasonable amounts for work performed on a time-and-materials basis (subject to a $92,700 reduction for inefficiencies), totalling $853,614.10 inclusive of GST after credits, while EVRAZ’s completion-cost counterclaim and set-off claims were dismissed.

• In the subsequent interest and costs decision, the Court held that Brandt’s 15% per annum, compounded monthly interest clause was incorporated but applied only to “properly issued” invoices, with other awarded amounts attracting Judgment Interest Act rates, and awarded Brandt costs of two times Column 5 of Schedule C, rather than a percentage of its actual legal fees.

Project background and contracts

Brandt Industries Canada Ltd and EVRAZ Inc. NA Canada entered into two Master Purchase Agreements for work on a pipe threading and finishing plant near Red Deer, Alberta, involving installation of heat-treat equipment supplied by SMS Elotherm GmbH and material-handling equipment from Automation Engineering Company LLC. The MPAs covered mechanical and piping (the M&P MPA, effective June 6, 2018) and electrical work (the Electrical MPA, effective July 10, 2018). Each MPA consisted of an EVRAZ Head Document, an Exhibit A, Brandt’s quote (with rate tables and budgetary pricing), Brandt’s standard terms and conditions, and an EVRAZ purchase order.

The Court noted that both parties were sophisticated commercial actors with prior dealings, that Brandt had familiarity with the retrofit building, and that most interactions under the MPAs occurred in 2018. Brandt claimed the MPAs were “cost-plus” with budgetary quotations and hourly billing; EVRAZ asserted they were fixed-price or “lump sum” agreements. Brandt sued for $1,430,900.38 plus interest and registered a builders’ lien for $1,362,762.00 (excluding interest). EVRAZ counterclaimed for $1,498,248.62 in alleged completion costs after terminating Brandt’s work on November 9, 2018.

Interpretation of the MPAs and compensation model

The Court applied modern principles of contract interpretation, including those from Sattva Capital, Chemtrade Electrochem and Earthco, reading each MPA as a whole, focusing on the actual words used, and considering the factual matrix without allowing surrounding circumstances to override the text. It concluded that:

• The MPAs expressly provided for labour on stipulated hourly rates, with equipment and certain “Other Equipment Rentals” and “Materials and Consumables” at “Cost + 15%”, weekly review and sign-off of man-hours, and monthly invoicing “based on actual costs in month”.

• The quotes expressly stated: “All services will be provided on a time and materials basis as per the rates provided in this document.”

• Both MPAs contained “Total Budgetary Pricing” tables showing installation and supply “Budget” amounts and estimated hours by labour category, but did not use the terms “lump sum”, “fixed price”, or “guaranteed maximum price”.

For the M&P MPA, the Court held that the absence of a fixed completion date (only an anticipated completion in “late September/October 2018”) and the express reliance on “budgetary” pricing meant there was no fixed price or guaranteed maximum price. The compensation “was expressly agreed to be based on time and materials, with some components of the materials to be invoiced on a cost-plus basis.”

For the Electrical MPA, Exhibit A set a “Total Budget” of $1,329,660.00, and included the Cap: “Invoiced amount not to exceed value of Purchase order; $1,329,660.00 without Evraz authorization.” The Court found that:

• The electrical scope was also stated to be on a “time and materials basis”, with the same structure of hourly rates and cost-plus materials.

• The Cap was a ceiling on what Brandt could invoice “without Evraz authorization”, not a fixed or guaranteed maximum price; the parties could agree to increase it via authorization and change orders.

• The Electrical MPA also contained an anticipated completion in December 2018, and a specific clarification that “the Construction of the Electrical Supply and Installation package will be completed by Dec 30, 2018,” acknowledged by Brandt.

The Court concluded that both MPAs were time-and-materials contracts with some cost-plus elements, and that the Electrical MPA was “subject to the Cap”.

Express and implied contractual obligations

The Court identified several express obligations arising from the MPAs and the incorporated quotes:

• Brandt was to “seek to optimize personnel to minimize overtime” and provide supervisory personnel and planning.

• Brandt and EVRAZ were to review man-hours weekly “with appropriate sign off”, and Brandt would invoice monthly based on actual costs.

• Brandt represented that it “employs a robust change order management system to capture changes in scope, cost or delivery”, with change orders authorized by both Brandt’s project manager and the customer’s designate.

From these and the surrounding circumstances, the Court found the following implied terms in both MPAs:

• Brandt had an implied obligation “to perform the work diligently, with reasonable efficiency, and in a commercially reasonable manner,” including deploying appropriate crews, accurately billing hours worked, and not being compensated for “wasteful or uneconomical use of labour or materials.”

• Brandt had an implied obligation that “costs reporting would be fulsome, timely and transparent,” encompassing weekly man-hour reporting and monthly progress reporting that addressed work completed, costs compared to budgetary pricing, schedule impacts, anticipated challenges, and near-term work plans.

• Brandt had an implied obligation “to issue change orders in a timely manner” as part of implementing its “robust” change-management system, including tracking of cost and schedule changes.

The Court also held there were no implied terms converting the budgetary pricing into binding fixed prices or guaranteed maximum prices, and rejected EVRAZ’s theory that Brandt was bound to complete within a narrow percentage (for example, ±5%) of the budgets.

Changes, extra work, and the Elotherm equipment

The Court examined alleged changes and their impacts under Issue 5, including an executed M&P change order, nine Unexecuted Change Orders that Brandt claimed, and several “Claimed Undocumented Changes.” It found:

• One change order for additional pipe hangers and stands was executed by EVRAZ; Brandt was entitled to payment under it, but no schedule impact was identified in that change order.

• The Unexecuted Change Orders described work Brandt performed; the Court accepted that Brandt was entitled to payment for those amounts on the rates set out in the MPAs, but noted that they did not record any schedule impact.

• As to the “Claimed Undocumented Changes,” the Court found that not all were proven to be material changes, but did find that the late delivery and disassembled condition of the Elotherm equipment “was a change that created extra work for Brandt, that impacted the schedules of, and the cost of, the scopes of work under both MPAs.”

The Court accepted that EVRAZ’s project manager and electrical engineer were involved in directing Brandt’s work and that EVRAZ knew additional labour and materials would increase costs under the time-and-materials model. It found that Brandt had met the first three branches of the Impact Painting test (existence of extra work, owner instruction/authorization, and owner awareness of cost impact) in relation to some changes. However, it also found that Brandt did not raise scope and schedule impacts, or cost consequences, in a timely manner and did not operate its change-management system as contemplated.

The Court held that EVRAZ did not waive Brandt’s obligation to seek changes or provide proper reporting and did not acquiesce in the failure to issue change orders.

Findings on breach and termination

Under Issue 6, the Court considered whether EVRAZ terminated the MPAs for cause or for convenience. Clause 11 of the Head Documents allowed EVRAZ to terminate on written notice, with clause 11(c) specifying that “in the event of termination other than as a result of the Provider’s breach,” including termination for convenience, EVRAZ must pay all reasonable costs to the date of termination, demobilization costs, and a 10% markup. The Court implied that only a “material breach” would relieve EVRAZ of termination-for-convenience payments.

The Court found that Brandt materially breached both MPAs in several ways:

• Brandt did not provide the weekly man-hour reporting and monthly progress reports required by the MPAs; the first substantive cost information was sent on October 12, 2018, in “Project Summaries” as of September 30, which showed substantial expenditure relative to the budgetary pricing.

• Brandt did not implement a timely or structured change-order process despite its “robust” change-management language, and did not issue change orders for major issues such as Elotherm’s equipment condition until very late.

• Brandt deployed electricians—billed under the Electrical MPA—to perform mechanical work under the M&P scope and initially billed them at the higher electrical rate; although Brandt later reallocated these hours to the M&P MPA at the lower rate, it did not address the inefficiency caused by using electricians for mechanical tasks.

The Court held that these failures showed Brandt did not perform “diligently, with reasonable efficiency, and in a commercially reasonable manner,” and did not satisfy its express and implied reporting and change-management obligations. It therefore concluded that Brandt’s breaches were material and that EVRAZ was entitled to terminate both MPAs for cause on November 9, 2018. Accordingly, Brandt was not entitled to termination-for-convenience compensation or demobilization costs.

The Court also considered, in the alternative, an argument that an October 26, 2018 email from a Brandt executive constituted a repudiatory breach, but found that this email was not necessary to its conclusion because material breaches had already occurred, and in any event, did not treat it as a repudiation that had been accepted in the termination notice.

Quantum, invoices, and adjustment for inefficiencies

On quantum (Issue 7), the Court held that Brandt had to prove its claim on a balance of probabilities and that, in a time-and-materials context, its labour and material charges could be established using its Invoicing Summaries (which detailed hours, classifications, rates, and materials), rather than merely the face of the one-page invoices.

Brandt’s unpaid invoices totalled $1,430,900.38 (including GST) across both MPAs. From the detailed November 20, 2018 Invoicing Summary, the Court determined Brandt’s reasonable costs, excluding GST and after deducting for inefficiencies, to be:

• Electrical MPA: $1,191,335.29.

• M&P MPA: $1,438,707.46.

The Court then reduced the M&P figure by $92,700 to account for the inefficiency of electricians performing mechanical work. It based this on 927 hours at $100/hour, reflecting a 40% reduction applied to 2,316 electrician hours reallocated to the M&P MPA, which the Court found appropriate given Brandt’s control over crew deployment and the noted inefficiency. With GST added and prior payments credited, the net outstanding amounts were:

• Electrical MPA: $531,039.71.

• M&P MPA: $322,574.39.

The Court held that the total outstanding sum of $853,614.10 (inclusive of GST) was owed to Brandt under the MPAs. It also found that Brandt was not entitled to any additional sums for termination for convenience or demobilization, and that EVRAZ had failed to prove its alleged completion costs and therefore had no damages or set-off.

The Court concluded that Brandt’s builders’ lien was valid “in the amount of $853,614.10, plus interest.”

Interest decision: scope and application of the Brandt interest clause

In the later Interest decision, the Court addressed how to calculate interest on the $853,614.10 judgment. The Brandt Terms and Conditions provided that invoices were payable within 30 days, and that the customer “shall pay Brandt interest on any overdue amounts at the rate of 15% per annum, compounded monthly.” The Court had previously found that this interest clause (the Brandt Interest Provision) was incorporated into the MPAs and applied, but had not determined its detailed application.

On further submissions, the Court held that:

• The Brandt Interest Provision applies only to “invoices properly issued by Brandt” and only to “overdue amounts” in such invoices.

• Invoices that contained amounts for electricians performing M&P work but did not account for the inefficiencies (the 40% reduction later imposed by the Court) were not “properly issued,” because they did not accord with Brandt’s obligations under the M&P MPA.

• Invoices that included termination-for-convenience markups and “Demobilization” charges were also not “properly issued,” because Brandt was terminated for cause and not entitled to those items, and it had not proven any demobilization costs.

The Court held that Brandt was not entitled to 15% per annum, compounded monthly interest on amounts contained in such improper invoices. For those portions of the judgment derived from improper invoices, interest would instead accrue at the statutory rate under the Judgment Interest Act, from 30 days after the invoice date to the date of judgment. The Court noted that EVRAZ had calculated Judgment Interest Act interest on the impugned components, and submitted a total interest figure of $982,527.42 on the $853,614.10 award, while Brandt had previously calculated interest at 15% compounded on the entire award in an amount of $1,506,300.56 for comparison purposes. The Court directed the parties to attempt to agree on the allocation between contractual and statutory interest and to seek a further short hearing if needed.

Costs decision and treatment of settlement offers

On costs, the Court applied Rules 10.31 and 10.33 of the Alberta Rules of Court. It observed that:

• Brandt was “partially successful” on its claim, recovering approximately 60% of the amount it claimed in unpaid invoices ($853,614.10 of $1,430,900.38), and that EVRAZ was unsuccessful on its counterclaim.

• The underlying construction project was complex, but the litigation itself was not; the main issues were contractual interpretation and factual findings on performance and termination, and no expert evidence was led.

Brandt sought an award of 45% of its total legal fees and taxes (claimed at $1,495,385.27) plus disbursements of $33,233.07, or alternatively three times Column 5 of Schedule C. EVRAZ argued for single Column 5 costs and raised concerns about the proportionality of Brandt’s claimed fees and the effect of heavy redactions in Brandt’s fee accounts.

The Court found:

• It would be possible in principle to award a percentage of “reasonable and proper costs,” but proportionality was a concern because Brandt’s claimed legal costs exceeded both its judgment recovery and its original claim value.

• Brandt’s invoices were substantially redacted, which impeded assessment and submissions on reasonableness.

• Conducting a full assessment of reasonable and proper costs, then revisiting proportionality, would be cumbersome and not justified in the circumstances.

The Court therefore declined to award costs based on a percentage of actual fees and instead held that costs should be awarded by reference to Schedule C.

Brandt also relied on a January 29, 2025 Calderbank offer that combined: a payment of $1,700,000 inclusive of interest and costs; the delivery of 250 tonnes of specified steel by EVRAZ to Brandt (valued by Brandt at $238,875 and by EVRAZ at $398,821.50); and mutual releases including a release of Brandt for past pipe purchases, which EVRAZ said totalled $424,996.67. The Court found that this offer was “unclear, imprecise, and uncertain” because it lacked a specified method for valuing the steel and did not quantify the value of the release of EVRAZ’s claim for past pipe purchases. It concluded that it was reasonable for EVRAZ not to accept such an offer and declined to treat it as a valid basis for double costs.

Balancing all Rule 10.33 factors, the Court decided it was “appropriate and proportional” to award Brandt costs of two times Column 5 of Schedule C (rather than single or triple Column 5). It gave specific directions on certain Bill of Costs items, including:

• Confirming that the number of trial days was 9.5 for purposes of Items 11(3) and 11(4).

• Allowing Item 12 (for written argument) based on the pre-trial brief, at Column 5 doubled.

• Disallowing “consulting services” costs for Jeff Dell, who was a lay witness, on the basis that consulting services are not recoverable and lay witness costs are not recoverable under Schedule C.

The Court directed Brandt to prepare a revised Bill of Costs on the basis of two times Column 5, incorporate the specified adjustments, and circulate it to EVRAZ. If the parties could not agree, they were to arrange a further one-hour hearing to resolve any remaining disputes on the Bill of Costs.