Executive Summary: Key Legal and Evidentiary Issues

• Wave Dynamics International Inc. (WDI) sued the Attorney General of Canada for breach of contract after Canada terminated a contract for the supply of Light Marker Distress devices (LMDs) to the Canadian Armed Forces.
   
• Canada applied for summary determination under Rule 17A.01 of the Rules of the Supreme Court, 1986, arguing no genuine issue for trial existed.
   
• Conflicting evidence on whether design changes were initiated by Canada or WDI, and on the status of the delivery deadline, raised material factual disputes unsuitable for summary resolution.
   
• WDI's president, James Locke, disputed that the Safety of Life at Sea (SOLAS) testing was failed, while Canada treated the same testing issues as substantive non-conformity justifying termination.
   
• Questions of waiver and estoppel arising from Canada's continued engagement with WDI after the original delivery deadline passed required credibility assessments beyond affidavit evidence.
   
• Ernie Parolin, the Department of National Defence's Life Cycle Manager, was identified through discovery as a key witness but filed no affidavit, further undermining the sufficiency of the summary trial record.

Facts of the case

In October 2015, Canada awarded Wave Dynamics International Inc. ("WDI") a contract to deliver Light Marker Distress devices ("LMDs") for the Canadian Armed Forces, with an initial delivery date of 1 December 2015. The specifications were complex and no existing commercially available product met Canada's requirements, meaning substantial engineering, design, and testing were necessary to produce a compliant LMD. After the contract was awarded, design changes occurred that required further engineering and testing. There was conflicting evidence as to whether Canada or WDI initiated these changes; regardless, they caused delay, and the contract's delivery date was amended from 1 December 2015 to an "estimated delivery schedule" of full delivery by the end of April 2016.

The product was not ready by the end of April 2016, but Canada did not terminate the contract at that time. WDI, with Canada's continued engagement, carried on its redesign, testing, and certification work throughout the spring and summer of 2016. On 22 August 2016, WDI informed Canada that its most recent testing had indicated some minor quality issues. The following day, on 23 August 2016, Canada issued Amendment 2 requiring WDI to immediately stop all work. There was no evidence that WDI's authorized representative signed Amendment 2 as required under the contract terms. On 24 August 2016, WDI provided a "Test Report Update and Status" indicating that all testing would be completed by the first week of October 2016. Throughout the fall of 2016, WDI tried unsuccessfully to obtain a status update from Canada, and on 17 November 2016 wrote to the Member of Parliament for St. John's East, Nick Whalen, in an effort to get a response. On 12 December 2016, Canada wrote to WDI advising that it had not received any deliverables and was terminating the contract for default. On 2 March 2018, Canada further advised WDI that, because the contract was terminated for default, there would be no reimbursement for costs.

Policy and legislative provisions at issue

The application was governed by Rule 17A of the Rules of the Supreme Court, 1986, S.N.L. 1986, c. 42, Sch. D. Rule 17A.01(1) permits a plaintiff or defendant to apply to the court with supporting affidavit material or other evidence for a summary trial seeking judgment on or dismissal of all or part of a claim. Rule 17A.03(2) authorizes a judge to dispose of an application by way of summary judgment where the court decides there is a genuine issue with respect to a claim or defence, unless the judge is unable on the whole of the evidence to find the facts necessary to decide the questions of fact or law, or it would be unjust to decide the issues on the application.

Reasoning and analysis

Justice Mellor framed two issues: whether there was a genuine issue for trial, and whether the requirements of the threshold test for a summary trial under Rule 17A were met. On the first issue, applying the test from Marco Ltd. v. Newfoundland Processing (1995), 130 Nfld. & P.E.I.R. 317, Justice Mellor found that WDI's claim for breach of contract was not spurious. WDI clearly had a contract, and the central question — whether Canada's conduct and its failure to terminate in accordance with the contract's express terms amounted to waiver or estoppel — was a genuine issue requiring resolution at trial.

Having found a genuine issue, the court proceeded to apply the threshold test drawn from Dalley v. Northern Arm (Town), 2016 NLTD(G) 68. The threshold enquiry required, first, that the applicant establish an appropriate evidentiary basis and, second, that it be appropriate to deal with the matter by summary trial. Justice Mellor was satisfied that there was an appropriate evidentiary basis on the question of default. However, he was not convinced that the matter was appropriate for summary determination. On the key question of the delivery deadline, the evidence was in direct conflict: Mr. Locke's affidavit stated that at the time Canada issued the stop work order there was no agreed-upon delivery date, while Canada's affiant Ms. Thériault stated in discovery that there was no firm delivery deadline, yet Ms. Hallman maintained there was a revised delivery date of the week of 10–17 May 2016, and Canada's own termination letter referred back to the original contractual timelines. The court noted that this conflict could not be resolved by cross-examination of affiants alone and that viva voce evidence was necessary to determine whether Canada's continued engagement after April 2016 was a strategic attempt to negotiate delivery from an underperforming supplier or whether it constituted a waiver of its right of termination.

On the testing issue, James Locke's affidavit characterized the testing difficulties as minor, while Canada's evidence treated the same issues as substantive non-conformity justifying termination. Ernie Parolin, the Department of National Defence's Life Cycle Manager, was identified in discovery as having viewed the testing as a complete failure, but no affidavit was filed containing his evidence, leaving a significant gap in the record unsuitable for summary resolution.

Ruling and overall outcome

Justice Mellor concluded that the matter was not appropriate for summary trial under Rule 17A and dismissed Canada's application. WDI, as the successful party on the application, was awarded costs in accordance with Column 3 of the Scale of Costs in the Appendix of Rule 55 of the Rules of the Supreme Court, 1986, S.N.L. 1986, c. 42, Sch. D. The exact quantum of those costs was not specified in the decision; the matter of the underlying breach of contract claim was directed to proceed to trial in accordance with Rule 40.