Executive Summary: Key Legal and Evidentiary Issues

• Allocation of demolition versus environmental rehabilitation obligations under the APS, and whether a Rehabilitation Plan was a precondition to 247’s duty to demolish.
• 247’s admitted failure to submit a demolition scope within 30 days and to complete demolition within 24 months, and the legal insufficiency of its excuses (weather, investigations, regulatory timing).
• Construction and enforcement of Talisman’s performance bond, including satisfaction of notice and “Owner Default” conditions and the meaning of “Balance of the Contract Price.”
• Assessment of Talisman’s conduct as surety, including its broad document demand and inaction, and whether any alleged prejudice or contractual variations discharged the bond.
• Determination of Graphic’s recoverable demolition and related costs (including the $750,000 holdback) and the effect of the bond’s $2,000,000 cap on Talisman’s concurrent liability.
• Rejection of 247’s salvage-based counterclaim for lack of contractual, proprietary and evidentiary foundation, and its inability to show a triable issue on quantum or title.

Factual background and sale of the Jonquière mill site
Graphic Packaging International Canada, ULC (Graphic) acquired and briefly operated a paper mill in Jonquière, Québec before ceasing operations in mid-2015. As the last operator, Québec environmental law imposed on Graphic a continuing public obligation to rehabilitate the contaminated site, including soil and groundwater, even if ownership changed. In December 2015, Graphic sold the mill property to 2477621 Ontario Inc. (247), a company created by the Bayshore Group whose business model focused on brownfields: buying contaminated industrial lands, demolishing improvements, extracting and selling metal, remediating contamination, and ultimately flipping the property for profit. The parties governed their transaction through an Agreement of Purchase and Sale (APS). The APS recognized that, despite the sale, Graphic remained liable under Québec environmental law for full site rehabilitation because it had been the owner when the mill last operated. Demolition of the mill itself, however, was carved out as 247’s responsibility, reflecting its interest in scrap value. The APS also required 247 to register a servitude (civil-law equivalent of an easement) in favour of Graphic to guarantee access for Graphic’s consultants and contractors until both demolition and environmental rehabilitation were complete.

Key contractual obligations and timelines under the APS
The APS imposed precise obligations on 247 regarding demolition. Within 30 days of closing, 247 had to provide Graphic with a detailed scope of work for demolition, including timelines, estimated costs and information on how demolition debris and hazardous substances would be managed. This information was to be incorporated by Graphic into the Rehabilitation Plan to be submitted to the Québec Environment Ministry. Separately, 247 was required to complete all “Demolition Activities”—defined broadly to include decommissioning, demolition, removal and disposal of buildings and equipment, plus the “Purchaser’s Work” of asbestos abatement and landfill closure—within 24 months of closing (the Holdback Period), or earlier if a later-approved Rehabilitation Plan so required. By contrast, the APS set no fixed end date for Graphic’s broader soil and groundwater remediation, but required it to proceed in accordance with Québec environmental and nuclear safety laws and any Rehabilitation Plan approved by the Ministry. Financially, the APS permitted 247 to retain a $750,000 holdback from the purchase price to fund the Purchaser’s Work, with section 2.05 and Schedule C setting out how actual asbestos and landfill costs would later be reconciled and reimbursed. To secure performance of 247’s demolition obligations, the APS also required 247 to obtain a $2,000,000 performance bond in Graphic’s favour. Both the APS and the bond selected Ontario law and the non-exclusive jurisdiction of Ontario courts, notwithstanding the Québec location of the property and regulators.

247’s salvage-first approach and failure to demolish
After closing, 247 prioritized salvage over demolition. Its principal acknowledged that for the first 12 to 18 months the focus was on auctioning and removing remaining equipment and uncontaminated metals that could be dismantled and sold without full demolition or complex decontamination. During this period, 247 did not submit the contractually mandated scope of work within 30 days, did not hire a demolition contractor, and did not commence structural demolition, even after obtaining a municipal demolition permit from the City of Saguenay in May 2016. Meanwhile, there were thefts and vandalism on the site and a fatal incident involving a security contractor employee, which triggered police and workplace safety investigations. 247 later pointed to these events, and to harsh Québec winters, as factors delaying its work. The court acknowledged the factual events but found they did not legally excuse the fundamental breach: 247 never met the basic pre-conditions of providing a scope of work or organizing and executing demolition within the agreed 24-month timeframe. On the regulatory side, Graphic continued environmental characterization of the site and kept the Québec Environment Ministry informed. The Ministry pressed Graphic to complete characterization and to remove the mill building, which was both a physical obstacle to sampling and the source structure overlying the contaminated plume. In August 2017, the Ministry issued a Notice of Non-Compliance to Graphic for failing to file a separate characterization plan related to demolition, further increasing regulatory pressure.

The performance bond: structure and critical provisions
To secure 247’s demolition obligations, Talisman Casualty Insurance Company, LLC (Talisman) issued a $2,000,000 performance bond. The bond designated Graphic as Owner, 247 as Contractor, and Talisman as Surety, and incorporated the APS as the underlying “Construction Contract.” The form was modified in several important ways: coverage was limited to demolition of the mill building; the usual requirement that the owner formally terminate the underlying contract as a precondition to calling on the bond was removed; and the definition of “Balance of the Contract Price” was replaced. Rather than adopting the standard bond definition (unpaid balance of the contract sum), a rider provided that “Balance of the Contract Price” meant the monies due and payable to 247 under the APS in accordance with Schedule C and section 2.05—provisions that dealt with reimbursement for the Purchaser’s Work (asbestos removal and landfill closure) and the application and reconciliation of the $750,000 holdback. Under section 3, Talisman’s obligation would arise only if: there was no “Owner Default” under the APS; Graphic first gave notice that it was considering declaring a contractor default and, if requested, participated in a conference among Owner, Contractor and Surety; Graphic then declared contractor default and notified Talisman; and Graphic agreed to pay the Balance of the Contract Price to Talisman or to a contractor selected to perform the work. The bond also gave the surety a menu of remedial options, including arranging for completion by the existing or a new contractor or, alternatively, investigating and paying a monetary sum in lieu of completion.

Notice of potential default and Talisman’s initial reaction
As 2017 advanced with no demolition scope and no visible demolition activity, Graphic moved to protect itself. On April 20, 2017, it wrote to 247, expressly characterizing the failure to provide a scope of work within 30 days as a breach of the APS and warning that the lack of progress made timely completion of demolition by December 2017 unlikely. On July 12, 2017, Graphic wrote to Talisman, giving the early notice contemplated by section 3.1 of the bond: it advised that it was considering declaring 247 in default, attached its earlier correspondence to 247 documenting the missed 30-day scope and lack of demolition, and requested a three-way conference to discuss the contractor’s performance. Talisman did not respond by convening or attending such a conference, effectively foregoing its contractual opportunity to engage in an early, pre-default resolution process. In September 2017, Graphic formally declared 247 in default of its obligations under the APS and notified Talisman, thus satisfying the declaration and notice requirements of section 3.2. Instead of electing one of its remedial options under the bond, Talisman responded in October 2017 with a lengthy, boilerplate document and information request covering a very wide array of topics—agreements, permits, corporate records, tax documents, environmental reports and more—within a tight deadline. The court later found that the bond did not entitle Talisman to this sweeping discovery-style request and that, in the urgent context of a looming demolition deadline and regulatory obligations, the response appeared more obstructive than remedial.

The “Owner Default” defence and interpretation of the APS
Both 247 and Talisman argued that Graphic was itself in default under the APS, which would bar invocation of the bond. Their theory was that demolition had to proceed “consistent with the Rehabilitation Plan,” so 247 could not lawfully or practically demolish the mill until Graphic had obtained Ministry approval of that plan and provided it. According to this reading, Graphic’s alleged failure to obtain an approved Rehabilitation Plan first amounted to an “Owner Default” that excused 247’s non-performance and prevented Talisman’s liability from arising. The court rejected this interpretation through a close reading of the defined terms and interconnected clauses. “Rehabilitation Plan,” as defined by reference to section 5.04, dealt with Graphic’s obligation—under Québec environmental law—to rehabilitate contaminated soils and groundwater in accordance with a plan approved by the Ministry. Section 5.03, however, placed on 247 an independent obligation to submit a demolition scope within 30 days and to complete demolition within 24 months, and it specifically required 247 to provide the information needed for the demolition component of the Rehabilitation Plan. In context, the phrase “consistent with the Rehabilitation Plan” meant that demolition was to be designed and executed in a way that could be integrated into the eventual approval and implementation of the overall rehabilitation project; it did not mean demolition was contingent on a fully approved site-wide plan. Practically, the mill building sat atop the polluted soil and groundwater plume, so its removal had to be an early stage of the cleanup, not something delayed until the end. The court therefore held that Graphic was not in contractual default to 247; it owed no duty to produce a fully approved Rehabilitation Plan before 247 could start, and the only party in breach of the APS at the end of the 24-month period was 247, which had failed to submit a scope or carry out demolition.

247’s late commitment to perform and the Ministry’s role
After the contractual demolition deadline had already expired, 247 attempted to re-engage. In an April 17, 2018 letter, it made an irrevocable commitment to complete its APS obligations. It named Tregon Demolition Inc. and Colling Haulage as its chosen demolition and hauling contractors, promised to submit a scope of work by May 2, 2018, undertook to contact the Ministry for guidance on disposal of hazardous materials, and committed to commence demolition activities no later than June 4, 2018. Graphic accepted this renewed plan while expressly reserving all rights under the APS and the bond. 247 then prepared and submitted a demolition plan to the Ministry, but the Ministry declined to treat it as the operative plan because it had been prepared in 247’s name, not Graphic’s. The Ministry required Graphic to adopt the plan formally and to provide additional documentation and technical detail (professional sign-off, sequencing, sampling methodologies, and precise control measures). Graphic complied, effectively converting 247’s plan into Graphic’s plan for regulatory purposes. In June 2018, the Ministry approved the amended demolition plan, and a new municipal demolition permit issued to 247. Shortly thereafter, the Ministry gave notice of its intention to order demolition by a specific date and then issued an order compelling demolition by that deadline. Despite its written assurances, 247 did not meaningfully commence demolition, and the Ministry remained dissatisfied with the lack of progress.

Graphic’s takeover via Québec injunctions
Faced with a firm regulatory order and 247’s pattern of delay, Graphic proceeded to ensure that demolition would occur in time. It notified both 247 and Talisman that it had engaged its own demolition contractor to be on site when the order’s start date arrived, given the risk that 247 would again fail to act. 247 contended that having personnel and stakeholders present on site amounted to starting demolition, but the Ministry did not accept this as substantive compliance. To secure lawful access and control over the property, Graphic applied to the Québec Superior Court for injunctive relief. On an interlocutory basis, Graphic obtained an order permitting it to retake possession of the Jonquière site, demolish the mill, dispose of debris and carry out related work in accordance with the Ministry-approved plan. Later, in June 2019, the Québec court granted a permanent injunction recognizing 247’s non-performance and the Ministry’s dissatisfaction with site activities, and authorizing Graphic to complete the demolition and rehabilitation. Acting under these Québec court orders and regulatory directives, Graphic’s contractor, Demolition Plus, demolished the structures, managed contaminated rubble and hazardous substances, and handled any salvageable metals as part of an integrated cleanup.

Talisman’s denial of liability and the “Balance of the Contract Price”
While the demolition and remediation were underway under court supervision, Talisman maintained a cautious distance. It insisted that Graphic provide the extensive documentation requested in October 2017 and, after eventually receiving a substantial volume of material, formally denied liability under the bond. Among other grounds, it asserted that Graphic was in default under the APS for failing to provide a Rehabilitation Plan, that Graphic had not properly declared contractor default, that Graphic had not satisfied section 3.3 because it had not agreed to pay the “Balance of the Contract Price,” and that Graphic’s unilateral actions—hiring its own demolition contractor, obtaining injunctions, and overseeing salvage—had materially prejudiced the surety’s rights and discharged it. In an especially novel argument, Talisman’s coverage counsel asserted that the “Balance of the Contract Price” was effectively the remaining salvageable metal which, if sold, would cover or offset demolition costs, and that Graphic’s sale of those materials through its salvage contractor without making them available to Talisman prejudiced its rights. The court rejected this theory, holding that the bond’s redefinition of “Balance of the Contract Price” clearly tied the concept to monies due and payable under the APS via Schedule C and section 2.05—that is, to asbestos and landfill reimbursement mechanics related to the $750,000 holdback—not to speculative salvage value. Because 247 had essentially done none of the Purchaser’s Work, there was nothing “due and payable” to it when Graphic triggered the bond, so Graphic’s position that the balance was nil was correct. Moreover, when Graphic’s lawyers wrote in August 2018 that the Balance of the Contract Price was nil and that Graphic had hired its own demolition contractor who would begin work, the court interpreted that correspondence as satisfying section 3.3: Graphic had agreed to pay whatever balance existed (zero) to a contractor selected to perform the work.

Suretyship principles, alleged prejudice and variation of contract
In analyzing Talisman’s liability, the court emphasized that compensated performance bonds are commercial instruments meant to provide real security to owners when a contractor fails to perform. While sureties are entitled to rely on clear conditions precedent and may be discharged by material, risk-increasing variations of the underlying contract made without their consent, courts are also cautious not to allow technicalities to defeat the essential protective purpose of the bond. On the facts, the court held that all conditions for Talisman’s obligation had been met: Graphic was not in Owner Default; it gave timely early notice under section 3.1, including a request for a conference which Talisman ignored; it declared contractor default and notified Talisman under section 3.2; and it agreed to pay the Balance of the Contract Price (properly understood as nil) to a selected contractor when it engaged Demolition Plus to perform the demolition. Talisman’s arguments that Graphic’s conduct had prejudiced its rights or varied the bonded contract—by granting 247 extra time, seeking injunctions, hiring a replacement contractor, and managing salvage—were rejected. Granting additional time for 247 to perform did not increase Talisman’s risk; the injunctions were necessary to enable compliance with Ministry orders and did not change the substance of the demolition obligation; and Talisman had never proposed a concrete plan to step in, select its own contractor or exploit salvage value for offset. In short, Talisman had ample opportunity to act under the bond but chose inaction and later attempted to manufacture technical defences.

Damages, bond cap and the $750,000 holdback
Having found both 247 and Talisman liable, the court turned to damages. Graphic adduced business records and invoices showing that, after taking over the work, it entered into a demolition contract with Demolition Plus initially for about $5.4 million, later increased (to include abatement plans and other environmental controls) to approximately $6.54 million, and that its total demolition-related costs were $6,672,713.45. It also showed that the net proceeds realized from scrap metal sales were substantially less than the costs associated with extraction, sorting, transport and disposal, resulting in no net salvage profit but rather an additional cost burden. Neither 247 nor Talisman offered competing expert evidence or attacked specific invoices; instead, they urged that quantum should be left for trial. The court held that, in a straightforward breach of contract setting where the non-breaching party has reasonably procured substitute performance because both contractor and surety failed to act, the proper measure of damages is the reasonable cost of completion. Given the detailed invoices, the absence of concrete challenge, and the court’s summary judgment powers, there was no genuine issue requiring a trial on quantum. In addition to the completion cost, 247 had never returned the $750,000 purchase-price holdback that had been earmarked for the Purchaser’s Work. Because 247 fundamentally failed to perform the demolition and related obligations, the court held that this amount also formed part of 247’s liability to Graphic. However, the holdback did not increase Talisman’s exposure. The court treated the bond’s $2,000,000 amount as the effective maximum value of the demolition risk Talisman had agreed to cover: Talisman’s concurrent liability to Graphic was therefore capped at $2,000,000, with any excess loss to be borne by 247.

247’s counterclaim over salvage value
247 counterclaimed against Graphic, alleging that by taking control under the Québec injunction and arranging demolition and salvage itself, Graphic had converted valuable metals left on the site and sold them for less than market value. 247 asserted that it had estimated the remaining salvage value at several million dollars before dispossession. The court scrutinized this claim and found it wanting both legally and evidentially. The APS was silent about any ongoing, protected salvage rights for 247; it simply required 247 to demolish the buildings and perform the specified landfill and asbestos work. 247 had already removed and sold much of the readily accessible, uncontaminated high-value scrap during its own salvage operations, and it acknowledged that thefts and vandalism had reduced the remaining materials while it had control of the site. It offered no reliable inventory, accounting or expert evidence to bridge the gap between its round-number value estimates and the actual condition of the site at the time Graphic took over. Graphic, in contrast, produced records showing that its salvage contractor sold scrap at prevailing market prices and that extensive contamination (for example, lead paint) rendered a significant portion of the remaining metal uneconomic. The Québec injunction and Ministry orders required Graphic to demolish and dispose of the buildings and rubble; any salvage recovered in that process was part of an overall demolition and remediation effort for which 247 had already defaulted. The court concluded that 247 had no proprietary or contractual right to insist that Graphic preserve or deliver remaining scrap for its benefit and that, in any event, 247’s own conduct and poor record-keeping made it impossible to establish a credible loss. As a result, the counterclaim was dismissed on summary judgment without a trial.

Summary judgment framework and overall result, including total award
Applying Ontario’s Rule 20 summary judgment test and the Supreme Court’s guidance in Hryniak v. Mauldin, the court held that it could make the necessary findings of fact, apply the law, and reach a just result more proportionately and efficiently than by a full trial. The key disputes were issues of contractual and bond interpretation, the satisfaction of suretyship conditions, and the reasonableness of documented completion costs; the material facts of non-performance and regulatory escalation were not seriously contested. The judge therefore granted summary judgment entirely in favour of Graphic Packaging International Canada, ULC. Judgment was issued against 2477621 Ontario Inc. for breach of contract in the amount of $6,672,713.45, plus $750,000 representing the wrongly withheld purchase-price holdback, for a total monetary award of $7,422,713.45 against 247. Talisman Casualty Insurance Company, LLC was held concurrently liable to Graphic under the performance bond, but only up to its bond limit of $2,000,000, leaving 247 liable for the balance of the loss. 247’s counterclaim relating to alleged loss of salvage value was dismissed. The court encouraged the parties to agree on costs and left the amount of costs undetermined, with a timetable for further submissions if necessary. Accordingly, Graphic emerged as the successful party with a total damages judgment of $7,422,713.45, supported in part by Talisman’s concurrent surety liability of up to $2,000,000, while the specific amount of any costs award in Graphic’s favour remained to be fixed at a later date.