Imperial Oil Ltd. v. Nova Scotia Light and Power Co., (1977) 16 N.R. 172 (SCC)

• Judge: Martland, Judson, Ritchie, Spence and Dickson, JJ.
• Court: Supreme Court (Canada)
• Case Date: June 24, 1977
• Jurisdiction: Canada (Federal)
• Citations: (1977), 16 N.R. 172 (SCC);16 NSR (2d) 488;2 ACWS 312;16 NR 172;1977 CanLII 234 (SCC);[1977] 2 SCR 817;77 DLR (3d) 1

Imperial Oil v. N.S. Power (1977), 16 N.R. 172 (SCC)

MLB headnote and full text

Imperial Oil Limited v. Nova Scotia Light and Power Company Limited

Indexed As: Imperial Oil Ltd. v. Nova Scotia Light and Power Co.

Supreme Court of Canada

Martland, Judson, Ritchie, Spence and Dickson, JJ.

June 24, 1977.

Summary:

This case arose out of a claim for an increase in the price of heavy fuel oil. The claim was made by an oil company pursuant to an escalation clause in a contract for the sale of heavy fuel oil manufactured by the oil company at its Dartmouth, Nova Scotia refinery. The defendant purchased the heavy fuel oil for its thermal power plants in Nova Scotia. The sales contract was for 6 years from 1970 to 1976. The escalation clause provided for an increase in the price of the heavy fuel oil for "any new tax, duty, charge or fee on the product or its production, manufactured, sale or delivery . . .". See paragraph 3. The oil company claimed, pursuant to the escalation clause, $16,507,942.00 for new taxes imposed by Venezuela on exports of crude oil purchased by the oil company. The trial court dismissed the claim for a price increase based on the taxes imposed by Venezuela. However, the trial court awarded the oil company $332,966.00 for amounts paid by the oil company into the Maritime Pollution Claims Fund.

On appeal to the Nova Scotia Court of Appeal the appeal was allowed in part in a judgment reported 16 N.S.R.(2d) 488; 16 A.P.R. 488. The Nova Scotia Court of Appeal affirmed the finding of the trial court that the escalation clause in the sales contract applied only to heavy fuel oil and its production in Nova Scotia and did not apply to crude oil purchased by the oil company outside of Nova Scotia. However, the Nova Scotia Court of Appeal reduced the award of $332,966.00 for amounts paid by the oil company into the Maritime Pollution Claims Fund. The Nova Scotia Court of Appeal reduced such award to $170,621.00 because the only portion of the Maritime Pollution Claims Fund levy that the oil company could pass on to the defendant pursuant to the escalation clause was that part of the levy which related to the shipment of heavy fuel oil by the oil company from its Dartmouth refinery to thermal plants of the defendant. In addition, the Nova Scotia Court of Appeal affirmed the findings of the trial judge that an "exploitation tax" and a "complimentary tax" could not be passed along to the defendant pursuant to the escalation clause.

On appeal to the Supreme Court of Canada the appeal was dismissed and the judgment of the Nova Scotia Court of Appeal affirmed.

Mines and Minerals - Topic 8268

Oil and gas - Product sales agreements - Escalation clauses - An oil company sold heavy fuel oil manufactured at its Dartmouth, Nova Scotia refinery to an electric power company for its thermal plants in Nova Scotia - The sales contract for the heavy fuel oil was for six years from 1970 to 1976 and contained an escalation clause - The escalation clause provided for an increase in the price of heavy fuel oil for "any new tax, duty, charge or fee on its product or its production, manufactured, sale or delivery . . ." (see paragraph 3) - The oil company claimed under the escalation clause from the electric power company for new taxes imposed by Venezuela on exports of crude oil purchased by the company - The Supreme Court of Canada dismissed the oil company's claim for an increase in the price of the heavy fuel oil - The Supreme Court of Canada held that the escalation clause applied to taxes or duties imposed with regard to the bunker fuel oil and not crude oil - See paragraph 9.

Statutes Noticed:

Canada Shipping Act, R.S.C. 1970, c. S-9 [para. 10].

Counsel:

J.J. Robinette, Q.C., G.D. Finlayson, Q.C., and J.A. Keefe, for the appellant;

W.B. Williston, Q.C., R.N. Pugsley, Q.C., E.A. LeBlanc, Q.C., W.C. Graham, J.G. Godsoe and R.K. Jones, for the respondent.

This case was heard on May 25 and 26, 1977, at Ottawa, Ontario, before MARTLAND, JUDSON, RITCHIE, SPENCE and DICKSON, JJ., of the Supreme Court of Canada.

On June 24, 1977, MARTLAND, J., delivered the following judgment for the Supreme Court of Canada: