Court File and Parties

Court File No.: CV-17-587776 Date: 2018-10-01 Superior Court of Justice – Ontario

Between: ENVIRO PARK SOLAR LTD., Applicant And: NISSA CORPORATION, Respondent

Before: Copeland J.

Heard: June 4 and August 1, 2018

Counsel: Mr. Jeffrey Levine and Ms Nicole Rozario for the Applicant Mr. Peter R. Jervis, for the Respondent

Endorsement

[1] The applicant, Enviro Park Solar Ltd., brings an application pursuant to rule 14 seeking a ruling on the interpretation of terms of a commercial lease in relation to using premises now owned by the respondent, Nissa Corporation, for a solar energy project.

[2] The application arises in a context where the respondent Nissa was not an original party to the lease, but is bound by it as a successor to the original landlord.

[3] I will outline in some detail the relationship between the parties, and the procedural history of this application.

[4] The original parties to the lease were the applicant, and its former parent company 1809765 Ontario Limited (“1809”). At that time, 1809 owned both 61A and 60A Enviro Park Lane in Napanee, Ontario. 1809 had entered into a Feed-in Tariff contract with the Ontario Power Authority dated July 23, 2013 (the “FIT contract”). Under that contract, 1809 was to supply solar power generated at the property back to the local electrical utility for a fee. 1809 then assigned the FIT contract to the applicant.

[5] 1809 and the applicant entered into the lease at issue regarding the use of the property for the solar generating project on July 27, 2015.

[6] Both the applicant and 1809 entered into financing agreements for the solar generating system with three other corporations. Unfortunately, between March 2016 and the spring of 2017, 1809 and the applicant defaulted on these loans, which resulted in one of the lender corporations taking control of 1809 and the applicant.

[7] The applicant is now owned by Lavender Glen Holdings Inc., which in turn is owned by 1784 Solar, LLC. For the purposes of this application, what matters is that the parties to the lease are at present not controlled by the same corporation.

[8] 1809 had previously entered into a mortgage with the Business Development Bank of Canada (“BDC”), when it purchased the property. Around the time that the lender corporation took control of 1809 and the applicant, BDC exercised its rights under the mortgage to take possession of the property, and thereby became entitled to the landlord’s rights under the solar rooftop lease with the applicant.

[9] On June 28, 2017, the respondent purchased both 61A and 60A Enviro Park Lane from BDC.

[10] When the respondent purchased the property, it was apparently under the understanding that it was not subject to a valid or continuing lease. As a result of its belief, the respondent took the position that it had acquired the property free and clear of the lease, and took various steps which prevented the applicant for exercising its rights under the lease. The applicant took the position that the lease did continue, and had never been validly terminated.

[11] As a result of this disagreement, in August 2017, the applicant brought a separate application in this court (file number CV-17-580396) seeking declarations that: (i) the lease was effective and binding on the parties to the lease and their successors; (ii) the applicant was the owner of the “Roof Equipment” and the “Connecting Equipment”; and (iii) the respondent had wrongly prevented the applicant from accessing the “Property”. The respondent took the position that the roof lease had been terminated prior to its purchase of the property, or in any event, after the expiry of the cure period.

[12] That application was heard by Justice Myers. On November 14, 2017, Justice Myers found that the roof lease had not been terminated. He granted all three orders sought by the applicant, as well as a small amount of damages related to the respondent having prevented the applicant from accessing the property, and resulting loss of solar power production.

[13] Following the ruling of Justice Myers, the respondent took the position that various aspects of how the solar generation system had been installed did not comply with the terms of the lease. In response, the applicant brought the application which is before me.

[14] When this application was first returnable before me, on June 4, 2018, after the applicant had made its full submissions, counsel for the respondent raised a jurisdictional issue related to an arbitration clause in the lease. Counsel for the respondent had not raised this issue in any of his written materials. After hearing brief submissions on the jurisdictional issue, and over the objection of counsel for the applicant, I adjourned the hearing to allow the parties to consider and brief the jurisdictional issue.

[15] Prior to the return date of the application, the parties came to an agreement to refer some of the issues originally raised in the application to arbitration, and to narrow the application before me to two issues. The agreement is set out in a letter to the court dated July 24, 2018, which I have placed in the court file. Thus, the only issues I need to decide are: 1) whether the applicant is entitled under the lease to have the inverters (which are part of the solar power system) located in the electrical room of the building at 61A Enviro Park Lane, rather than on the roof; and 2) whether the applicant is entitled under the lease to connect to the local utility system (the hydro grid) via the transformer located on the neighbouring property also owned by Nissa, 60A Enviro Park Lane (and previously owned by 1809, who entered into the lease). There are a number of specific requests for relief set out in the notice of application that relate to these two issues. But the primary issues are the two I have outlined.

[16] I will set in more detail in relation to each issue, the positions of each party regarding interpretation of the lease. In very general terms, the applicant takes the position that the terms of the lease considered in the context of the surrounding circumstances when the lease was entered into, support its position regarding interpretation of the lease. The respondent argues that at the time the lease was entered into, the landlord and tenant (the original parties to the lease) were both corporations controlled by the same individual. The tenant was a wholly owned subsidiary of the original landlord. The respondent argues that in those circumstances, the original parties did not comply with the lease as they saw fit, and the way the solar system was constructed does not comply with the rights and obligations under the lease. As a result of its position on the interpretation of the lease, the respondent has been taking the position with the applicant that the applicant is required to pay new rents, and has threatened to disconnect the applicant’s solar system from the electrical grid (although the parties have agreed to maintain the status quo pending the determination of this application).

The Evidence

[17] The key portions of the lease for purposes of this application are as follows:

1. DEFINITIONS

“Access Right-of-Way” has the meaning ascribed to it in Section 2 hereof.

“Building” means, collectively, the building or buildings located on the Property.

“Connecting Equipment” has the meaning scribed to it in Section 2 hereof.

“Connecting Rights-of-Way” has the meaning ascribed to it in Section 2 hereof.

“FIT Contract” means the agreement no. F-003012-SPV-508 dated July 23, 2013 entered into between 1809765 Ontario Limited, and the OPA under the FIT Program with respect to the Roof Area and the Project, as such agreement may be amended, restated, replaced, renewed, assigned or otherwise amended from time to time.

“FIT Program” means the Renewable Energy Feed-In Tariff Program established by the OPA.

“Project” means the renewable energy generation project to be constructed on the Roof Area, and other areas defined in Section 6 hereof, and owned by the Tenant, for the purposes of solar power electricity generation and distribution pursuant to the FIT Program.

“Property” means the lands municipally known as 61A Enviro Park Lane, Napanee, Ontario and legally described in Schedule ‘B’ attached hereto [1], together with all easements, rights-of-way and other interests and appurtenances relating thereto.

“Roof” means the roof of the Building, including the roof membrane and roof structure.

“Roof Area” means the area on the Roof, as shown on the sketch attached hereto as Schedule ‘A’. [2]

“Roof Equipment” means the solar power generating panels and other related equipment located on the Roof Area, including, but not limited to, one or more inverters, which is used for the generation, metering and distribution of electricity from the Project, and includes such equipment as is required to secure, support, maintain and protect the solar power generating panels.

“Utility System” means the electricity distribution system owned and operated by the local electricity distribution company that provides electricity supply service to the Building.

2. ROOF AREA

Subject to the terms and conditions contained herein, the Landlord hereby grants to the Tenant:

(a) an exclusive lease of the Roof Area; and

(b) one or more rights-of-way to be shared in common with the Landlord and others entitled thereto, in, over, under, across and through the Building, the Property and those portions of the Roof, if any, which are not included in the Roof Area, in the location or locations shown on the Plans, for the purposes of the Project, including, without limitation:

(i) installing, operating, inspecting, maintain, repairing, replacing and removing all equipment required to connect the Roof Equipment to a transformer and distribute the electricity generated by the Project to the Utility System (the “Connecting Equipment”) including access to electrical panels and conduits to interconnect or disconnect the Project, which Connecting Equipment shall include, without limitation, conduits, cables, electrical wiring, wire management systems, electric meters, power distribution boxes, connecting hardware and inverters (the “Connecting Rights-of-Way”); and

(ii) access to the Roof Area and the Connecting Rights-of-Way (the “Access Right-of-Way”).

5. TENANT’S CONDITION

This Lease shall be conditional on the Tenant satisfying itself, in its sole and absolute discretion, that it has the ability to install and operate the Project on the Roof Area (the “Tenant’s Condition”), which ability shall include, without limitation:

(a) the Tenant having satisfied itself with respect to the title of the Property, the zoning and permitted uses for the Property, the environmental condition of the Property, the ability to connect the Project to the Utility System, and the suitability of the Roof for the Project. The Landlord agrees that from and after the Date of this Lease, the tenant may have unfettered access to the Property, the Building and the Roof upon forty-eight (48) hours prior notice to the Landlord, to conduct such tests and inspections as the tenant may reasonably require in order to satisfy itself with respect to the foregoing; provided that, promptly following all such tests and inspections, the Tenant shall, at its sole cost and expense, restore the Property, the Building and the Roof to their respective conditions prior to the carrying out of any such tests and inspections, and repair any damage caused to the Property, the Building or the Roof by any such tests and inspections.

The Tenant’s Condition is for the sole benefit of the Tenant and may be waived by the Tenant in whole or in part in the tenant’s sole discretion. The Tenant shall give Notice to the Landlord within thirty (30) days after the satisfaction of the Tenant’s Condition. In the event that neither a Notice of satisfaction of the tenant’s Condition nor a Notice waiving the Tenant’s Condition has been delivered by the Tenant to the Landlord by 11:59 p.m. EST on the day which is the thirty-six (36) month anniversary of the date of this Lease, this Lease shall terminate and be of no further force and effect and neither Party shall have any further obligations or liability to the other, save and except for the Tenant’s obligations under Section 5(a) and Section 10(d) which shall survive the termination of this Lease.

6. USE AND ACCESS

(a) The Landlord acknowledges, consents and agrees that the Tenant, its contractors, agents and employees may use the Roof Area throughout the Term and any extension for the purposes of solar power electricity generation and distribution under the FIT Contract and agrees that, with respect to the Property and the Building, this use shall be exclusive to the Tenant and its contractors, agents and employees. The Landlord agrees that, in furtherance of such permitted use, the Tenant may install, operate, inspect, maintain, repair, replace, enhance, upgrade, remove and alter the Roof Equipment and the Connecting Equipment in its sole discretion, at any time or times, subject to the terms of this Lease. The Tenant hereby takes and leases from the Landlord the Roof Area together with (i) such rights, interests, rights-of-way, easements and privileges in any way pertaining thereto and set forth in greater detail herein and (ii) such rights of ingress and egress to the Property as may be reasonably necessary for the Tenant’s use of the Roof Area in accordance with the terms hereof, to have any to hold for and during the Term.

(b) The Landlord agrees that the Tenant and its contractors, agents, employees and invitees (including, without limitation, the OPA) shall have unrestricted access to the Roof Area, the Connecting Right-of-Way and Access Right-of-Way at all times during the Term, on a 24 hours per day, 7 day per week basis, provided that, except in cases of emergency, the Tenant shall use commercially reasonable efforts to provide the Landlord with at least twenty-four (24) hours prior notice of the need to access such areas and shall use commercially reasonable efforts to minimize any interference with the business of the Landlord or other Building tenants.

(d) In connection with the Tenant’s use of the Roof Area, the Tenant shall have the right, subject to compliance with all Applicable Laws and obtaining the Landlord’s consent, which consent shall not be unreasonably withheld, to (i) trim, cut down and remove flora adjacent to the Project to provide reasonable solar access, (ii) make necessary connections to the local electrical utility system so long as such connection will not cause an overload to such system(s), and (iii) access to all such areas of the Property for the purposes of performing the foregoing actions. The Tenant covenants to use its best efforts to minimize any disruptions to business operations on the Property in exercising its rights under this Section 6.

11. LANDLORD’S CONVENANTS

(b) The Landlord covenants and agrees to keep the Roof and the structural elements of the Building in good repair at all times during the Term, provided that the Landlord shall not initiate or conduct or carry on maintenance or other activities to, on or affecting the Roof or other parts of the Building or the Property, or on any lands adjacent to the Property, that it knows, or should reasonably know, may damage, impair or otherwise adversely affect the Project or its function (including activities that may adversely affect the Project’s exposure to sunlight), or cause the tenant to be in breach of its obligations under the FIT Contract.

[18] In addition to the terms of the lease, both parties filed affidavit evidence of the circumstances surrounding the entering into of the lease.

[19] The Supreme Court of Canada has held that evidence of surrounding circumstances can be admissible as relevant to understanding the mutual objective intentions of the parties as expressed by the words in the contract: Sattva Capital Corporation v. Creston Moly Corporation, 2014 SCC 53, [2014] 2 S.C.R. 633 at paras. 56-61. However, I am conscious that the Supreme Court cautioned in Sattva that: “while the surrounding circumstances will be considered in interpreting the terms of a contract, they must never be allowed to overwhelm the words of that agreement”. The Court further cautioned that the evidence of surrounding circumstances that is admissible consists only of the background that was or reasonably ought to have been within the knowledge of both parties at or before the date the contract was entered into. It does not permit evidence of the subjective intentions of the parties.

[20] The evidence of extrinsic circumstances filed by the parties falls generally into three categories: (i) evidence filed by the applicant relating to other contracts/loans that 1809 and the applicant entered into in relation to the development of the solar generating system; (ii) evidence filed by both parties regarding the mechanics of solar generating systems (in general) for the purpose of understanding the lease and the various parts of a solar generating system that are referred to in the lease, as well as the physical layout of the solar generating system at issue, as installed; (iii) evidence regarding the various events that led to Nissa becoming the landlord; and (iv) evidence filed by the respondent about the subjective intentions of the parties at the time the lease was entered into.

[21] I note that neither party cross-examined on the affidavits filed on the application. If credibility were seriously in issue, that would make it difficult for the court to decide what evidence to accept. However, as I will explain, the evidence in the first three categories is not in dispute. And I find that the evidence in the third category is not properly considered, pursuant to Sattva, in assessing the objective meaning of the lease.

[22] In general terms, I accept and find relevant the extrinsic evidence relating to the other contracts/loans that 1809 and the applicant entered into in relation to the development of the solar generating system. This evidence is in the affidavit of Jeffrey Gaia, generally at paragraphs 1-8, and 15-20 (and to some extent in the affidavit of Karl Hollett, on behalf of the respondent, at paras. 1-4). This surrounding information is relevant to interpreting the objective meaning of the contract in the broader context which prevailed at the time it was entered into. The substance of the various other contracts/loans that the applicant and 1809 entered into in relation to the solar generating system is not in dispute, so the absence of cross-examination does not concern me.

[23] I also rely on the evidence filed by the both parties about the mechanics of a solar generating system, for purposes of context to understand the lease, as well as the physical layout of the solar generating system at issue in this case, as installed (Gaia affidavit at paras. 9-12; this is also addressed to some extent in the affidavit of Mr. Hollett at paras. 5-7 and 9; and in the Dewshi affidavit at paras. 18-22, although I do not rely on the aspects of those paragraphs that provide opinion about the legal interpretation of the lease). This evidence is aimed at assisting the court to understand the various parts of a solar generating system, as those parts are referred to in the terms of the lease, and also to consider if the system as installed is consistent with the lease. This evidence was not disputed by the respondent.

[24] I also rely on the evidence filed by both parties about the series of events that led to Nissa becoming the landlord (Gaia affidavit at paras. 21-38; affidavit of Mohamed Dewshi at paras. 4-7). It is not relevant to interpreting the contract. But it is relevant as background to how this application came before the court.

[25] I find less reliable, and frankly, beyond the bounds of what Sattva allows, the evidence of the respondent which purports to provide evidence of the subjective intentions of the parties at the time the contract was entered into, or which purports to provide the respondent’s subject belief about whether the solar generating system, as installed, is consistent with the terms of the lease (Dewshi affidavit at paras. 8-10; 13-27; Hollett affidavit at paras. 12-21).

[26] With respect, these aspects of the evidence filed on behalf of the respondent are not properly considered in assessing the objective meaning of the lease. Mr. Hollett’s evidence is evidence about his subjective intention, and also about his own opinion about the interpretation of the contract. And Mr. Dewshi’s evidence, which in part echoes Mr. Hollett’s evidence but in hearsay form, suffers from the same problem. Further, other portions of Mr. Dewshi’s evidence provide his legal interpretation of the lease, which is also not admissible evidence.

[27] I also have concerns about the reliability of Mr. Hollett’s evidence about the subjective intentions of the parties at the time the lease was entered into. However, given the absence of cross-examination, I decide this issue on the basis that the evidence he gives about the subjective intention of the parties is beyond what is permitted by Sattva. This case exemplifies the reason that evidence of the subjective intent of the parties is not permitted. It is very easy, and convenient, for each side to a contract to claim after the fact something about the subjective intention of the parties; however, it is difficult for a court to confirm this type of subjective belief after the fact.

[28] For sake of clarity, I note that to the extent the portions of the Hollett and Dewshi affidavits which I have outlined as problematic also lay out factual evidence about the nature of the solar system at issue, as installed, and the physical layout of 61A and 60A Enviro Park Lane, I accept that that evidence is relevant and admissible, for the reasons set out at paragraph 23 above. As I have already noted, the facts about the physical set-up of the solar generating system as installed, are not in dispute.

[29] In light of my assessment of what evidence is appropriately considered, and what is not in assessing the meaning of the lease, the primary focus of my interpretation of the lease remains on the wording of the lease. The rest of the evidence is essentially context, to explain how a solar system works, how this particular solar system was built, and how this dispute ended up before the court.

[30] In considering the interpretation of the lease, I instruct myself that the agreement should be read as a whole, and to give effect to all of its provisions. It should be read in accordance with commercial principles and good business sense: Scanlon v. Castlepoint Development Corp., [1992] O.J. No. 2692, 11 O.R. (3d) 744 at para. 88 (ONCA); Weyerhaeuser Company Limited v. Ontario (Attorney General), 2017 ONCA 1007 at para. 65.

Analysis

(i) The Location of the inverters in the electrical room and not on the roof

[31] The solar panels which form part of this solar generating system were installed on the roof. The evidence is uncontested that the inverters, which also form part of the solar generating system, were installed in an electrical room on the main floor of the building, and not on the roof. The legal issue before me is whether the lease permits the inverters to be installed in the electrical room, or whether according to the lease the inverters must be installed on the roof.

[32] An inverter is a piece of equipment which changes the direct current (DC) produced from the solar panels into alternating current (AC) that can then be uploaded to the local or provincial electrical grid.

[33] The applicant argues that the lease provides for use of not only the roof area, but also includes rights-of-way over other areas. It points to s. 6(a) of the lease, and the language that: “The Tenant hereby takes and leases from the Landlord the Roof Area together with (i) such rights, interests, rights-of-way, easements and privileges in any way pertaining thereto and set forth in greater detail herein…”

[34] The applicant also relies on s. 2(a) and (b) of the lease, which provide that the landlord grants the tenant “and exclusive lease of the Roof Area”, and:

(b) one or more rights-of-way to be shared in common with the Landlord and others entitled hereto, in, over, under, across and through the Building, the Property and those portions of the Roof, if any, which are not included in the Roof Area, in the location or locations shown on the Plans, for the purposes of the Project, including, without limitation:

(i) installing, operating, inspecting, maintain, repairing, replacing and removing all equipment required to connect the Roof Equipment to a transformer and distribute the electricity generated by the Project to the Utility System (the “Connecting Equipment”) including access to electrical panels and conduits to interconnect or disconnect the Project, which Connecting Equipment shall include, without limitation, conduits, cables, electrical wiring, wire management systems, electric meters, power distribution boxes, connecting hardware and inverters (the “Connecting Rights-of-Way”); and

(ii) access to the Roof Area and the Connecting Rights-of-Way (the “Access Right-of-Way”).

[35] Thus, the applicant argues that s. 2 of the lease defines the right of way that is leased to the tenant pursuant to s. 6(a).

[36] The applicant argues that this interpretation of the lease is supported by the broad rights of access set out in s. 6(b) of the lease.

[37] The applicant further argues that although the definition of “Roof Equipment” includes inverters (see s. 1 Definitions), inverters are also included in the definition of “Connecting Equipment” pursuant to s. 1 and 2 of the lease. The definition of “Roof Equipment” allows inverters to be installed on the roof, but it does not restrict the roof to the only place they can be installed, since the s. 2 definition of “Connecting Equipment”, which also includes inverters, allows their installation elsewhere.

[38] The respondent argues that the lease is only for the rooftop, with a right to run wires outside to the hydro system. The respondent relies on the definition of “Roof Area”, and “Roof Equipment” in s. 1 of the lease. It is argued that “Roof Equipment” includes “inverters”, and that the court should therefore conclude that the inverters had to be installed one roof according to the terms of the lease.

[39] The respondent also argues that the plan for the solar system shows that the inverters were to be installed on the roof. The respondent further argues that the Electrical Safety Authority permit for the project supports the position that the inverters were to be installed on the roof.

[40] The respondent also argues that the insurance provisions in s. 9 of the lease support its reading of the lease, because the tenant is required to insure the “Roof Area”, and the landlord is required to insure the building.

[41] The respondent argues that based on the arguments above, any rights that were given to the applicant to place the inverters in the electrical room were given gratuitously when the landlord was the parent company of the tenant, and not pursuant to the lease. As such, they do not bind the respondent as the successor landlord under the lease.

[42] I agree with the applicant.

[43] The last 7 lines of s. 6(a) of the lease provide for the scope of what is leased by the tenant as follows: “The Tenant hereby takes and leases from the Landlord the Roof Area together with (i) such rights, interests, rights-of-way, easements and privileges in any way pertaining thereto and set forth in greater detail herein and (ii) such rights of ingress and egress to the Property as may be reasonably necessary for the tenant’s use of the Roof Area in accordance with the terms hereof, to have any to hold for and during the Term”. Section 6(a) is clear that the lease is not limited to the “Roof Area”.

[44] The definition of “Project” in s. 1 of the lease also supports that the construction of the project is not limited to the roof area: “’Project’ means the renewable energy generation project to be constructed on the Roof Area, and other areas defined in Section 6 hereof ….”.

[45] Section 2(b)(i) of the lease is clear that inverters are included in “Connecting Equipment” that may be located in places other than the “Roof Area”. Under the terms of the lease inverters fall within the definitions of both “Connecting Equipment” and “Roof Equipment” (see s. 1 Definitions of “Connecting Equipment” and “Roof Equipment”, and further specificity on meaning of “Connecting Equipment” in s. 2(b)(i)). Although the definition of “Roof Equipment” provides that the roof equipment is to be “located on the Roof Area”, and includes inverters, it is clear from section 2 of the lease that the “Connecting Equipment” is not limited to the rooftop location. Since the inverters are also included in the definition of “Connecting Equipment”, I find that the lease does not limit their installation to the Roof Area. Thus, the installation of the inverters in the electrical room is provided for by the lease.

[46] The respondent argues that “rights-of-way” in s. 2(b)(i) of the lease should be read as meaning only a right to use or travel across the property apart from the roof, and not the right to permanently install anything on areas other than the roof (similar to the concept of a common law right of way across property). With respect, I do not accept that the meaning of “right-of-way” in s. 2(b) of the lease is so limited. Reading the lease as a whole, and in light of how a solar power system operates, clearly the lease intended for some equipment and wires to connect from the solar panels on the roof, out of the building, and to the local utility system. This equipment would necessarily be permanently installed. The language in s. 2(b) is very broad. In particular I note the language of:

• “in, over, across and through the Building, the Property and those portions of the Roof, if any, which are not included in the Roof Area….”
• “….without limitation….”
• “installing operating, inspecting, maintaining, repairing, replacing and removing all equipment required to connect the Roof Equipment to a transformer and and distribute the electricity generated by the Project to the Utility System (the “Connecting Equipment”) including access to electrical panels and conduits to interconnect or disconnect the Project, which Connecting Equipment shall include, without limitation, conduits, cables, electrical wiring, wire management systems, electric meters, power distribution boxes, connecting hardware and inverters (the “Connecting Rights-of-Way”);

[47] I note as well that the “access” right to both the Roof Area and the Connecting-Rights-of-Way is listed as a separate heading in s. 2(b)(ii). The separation of these rights in s. 2(b)(i) and 2(b)(ii) further supports the interpretation that the rights in s. 2(b)(i) are more than just access rights.

[48] Regarding respondent’s argument about the Electrical Safety Authority permit (tab 3E of the respondent’s record), I find that the permit’s comment about the location of the inverters (para. 4), does not limit them to within one metre of the solar panels. In fact, that term states: “Please ensure that the Inverters are located within 1m of the physical edge of the PV module or incorporate wiring methods as specified in Section 12. Bulletin 50-1-2 ”. Thus, it would allow the inverters to be located somewhere other than the roof. Thus, the ESA permit does not say anything that would lead me to deviate from what I find the lease says.

[49] Regarding the plan that the respondent filed through Mr. Hollett at tab 3B, as I have noted, this plan is dated “05/12/13”, which I take to be May 12, 2013. This is over two years before the lease was entered into. In the circumstances, I am not prepared to accept that this document was intended to be Schedule ‘A’ to the lease. As a result, it does not lead me to vary my reading of the terms of the lease.

[50] Further, I agree with the applicant that the insurance provisions in s. 9 of the lease do not support the respondent’s argument. The respondent’s argument regarding the insurance provisions is based on an incomplete reading of s. 9 of the lease. Section 9(a) requires the tenant to insure the “Project, including all Roof Equipment and Connecting Equipment”. It also requires the tenant to maintain liability insurance with respect to the Roof Area. Thus, the tenant’s insurance obligation is not limited to the Roof Area. The tenant’s obligation to have liability insurance for the Roof Area is consistent with the fact that its lease of the Roof Area is exclusive (pursuant to s. 2(a) of the lease). The tenant’s obligation to insure the Project, wherever the location, is consistent with the tenant’s lease of other areas not being exclusive (pursuant to s. 2(b) of the lease). The fact that the landlord is required to insure the building pursuant to s. 9(b) of the lease is not inconsistent with this interpretation of the lease.

[51] Thus, I find that the lease allows for the inverters to be installed in the electrical room. The respondent is not allowed to charge additional rent for the placement of the inverters in the electrical room.

(ii) The connection to the transformer on the neighbouring property

[52] The second issue relates to the connection of the solar generating system to the local electrical utility system via a transformer that is located on 60A Enviro Park Lane.

[53] Most of the system is located in the building or on the roof at 61A Enviro Park Lane, and additionally, there are wires leaving the building. The wires connect to a transformer substation located in a building on 60A Enviro Park Lane, en route to the local utility system.

[54] The AC current from the inverters is carried via electrical wires to the transformer substation. The substation distributes power to the local or provincial electricity grid. Thus, connecting to the transformer is necessary to move the solar power generated from the inverters to the local or provincial electrical grid. Without a connection through the transformer, it would not be possible to transmit the power generated by the solar system to the local or provincial grid.

[55] It is not in dispute that at the time the lease was signed, both properties were owned by 1809, then the landlord. It is also not in dispute that at present, both properties are now owned by the respondent, acquired from BDC, which had acquired them from 1809 pursuant to a mortgage with 1809.

[56] The applicant argues that the lease contains in provisions which provide a right to connect to the local utility system via the transformer located on 60A Enviro Park Lane.

[57] In this regard the applicant relies on several provisions of the lease. Section 5(a) regarding the tenant’s conditions provides that the lease was conditional on the tenant satisfying itself of “the ability to connect the Project to the Utility System”. [3] Section 6(d) provides that the tenant shall have the right, subject to the landlord’s consent, which shall not be unreasonably withheld, to “make necessary connections to the local electrical utility system so long as such use and connection will not cause an overload to such system(s)”. Section 11(b) provides that the landlord covenants, inter alia, “not to initiate or conduct or carry on maintenance or other activities to, on or affecting the Roof or other parts of the Building or the Property, or on any lands adjacent to the Property, that it knows, or should reasonably know, may damage, impair or otherwise adversely affect the Project or its function….”

[58] The respondent argues that nothing in the lease gives the applicant the right to connect to the electrical utility system by using a piece of property other than 61A Enviro Park Lane. The respondent argues that for this reason, the applicant cannot connect to the electrical grid via the transformer on 60A Enviro Park Lane unless it pays additional rent.

[59] The respondent argues that there is no reference in the lease to 60A, and that “Property” in the lease is specifically defined in s. 1 with reference to 61A.

[60] The respondent argues that what the applicant is seeking in relation to the use of 60A Enviro Park Lane is an easement, and as such, it could only be created by a specific grant of a right, citing Barbour v. Bailey, 2016 ONCA 98 at paragraphs 56-60.

[61] I agree with the applicant.

[62] The lease defines the “Property” as “the lands municipally known as 61A Enviro Park Lane, Napanee Ontario and legally described in Schedule ‘B’ attached hereto, together with all easements, rights-of-way and other interests and appurtenances relating thereto.” The respondent is correct that the lease does not specifically refer to 60A Enviro Park Lane.

[63] However, reading the lease as a whole supports the applicant’s submission that it has the right to connect to the electrical utility system via the transformer located on 60A.

[64] In particular, s. 6(d) gives the tenant a right, subject to the landlord’s consent, which shall not be unreasonably withheld, to “make necessary connections to the local electrical utility system so long as such use and connection will not cause an overload to such system(s)”. Further, s. 11(b) provides that the landlord covenants, inter alia, “not to initiate or conduct or carry on maintenance or other activities to, on or affecting the Roof or other parts of the Building or the Property, or on any lands adjacent to the Property, that it knows, or should reasonably know, may damage, impair or otherwise adversely affect the Project or its function….”

[65] These terms of the lease were entered into in a context where the landlord at the time the lease was entered into owned the neighbouring property at 60A Enviro Park Lane. I find that reading these sections in this context which prevailed at the time the lease was entered into, supports the interpretation that the lease includes a right on the part of the tenant to connect to the local utility system using the transformer on 60A Enviro Park Lane.

[66] The centrality to the solar project and the lease of the ability to connect to the local utility system is clear in the term in s. 5(a) of the tenant’s conditions regarding the lease being conditional on the tenant satisfying itself of the ability to connect the project to the local utility system as a condition to the validity of the lease.

[67] The respondent argues that the language in s. 11(b) is limited to activities of the landlord that would block exposure to sunlight. I reject this narrow interpretation. Section 11(b) is clearly broader than that, since it limits the landlord’s activities: “on or affecting the Roof or other parts of the Building or the Property, or on any lands adjacent to the Property ….”. Further, the language of “… including activities that may adversely affect the Project’s exposure to sunlight…” is quite clear that the section is not limited only to activities by the landlord that would interfere with exposure to sunlight.

[68] The respondent further argues that the use of the words “any lands adjacent” in s. 11(b) does not include 60A because 60A is across a road, and not immediately attached to 61A. Plans and photos of the two properties included in the record show that there is a small roadway between them, and that the two properties face each other and run parallel to each other across this small roadway.

[69] In the context of reading the lease as a whole, and the meaning of the word “adjacent”, I reject the respondent’s argument. The respondent reads the lease as if it says “adjoining”, which is not the word used in the lease. The Canadian Oxford Dictionary, second edition (2004), defines “adjacent”, inter alia, as: “lying near or adjoining”. Black’s Law Dictionary, Tenth Ed. (Thomson Reuters: 2009), defines “adjacent” as: “lying near or close to, but not necessarily touching”. These definitions support a broader reading of the term “adjacent” in the lease, which does not require that a property actually touch 61A Enviro Park Lane to be “adjacent” to it. Rather it has to be nearby (and I would add, sufficiently nearby to affect the solar project, given the need to read the lease as a whole).

[70] It is also important that s. 11(b) of the lease is clearly referring to a property or properties other than 61A owned by the landlord. 60A was a nearby property owned by the landlord at the time the lease was entered into (and still is, although the landlord has changed).

[71] In light of these definitions, and that at the time the lease was entered into the landlord owned both 60A and 61A, and the fact that 60A is the neighbouring property to 61A (just across the small roadway), I find that 60A is “adjacent” to 61A within the meaning of s. 11(b) of the lease.

[72] In relation to both legal issues, the respondent cautions against using subsequent conduct of the parties to inform what was intended at the time the lease was formed, citing Shewchuk v. Blackmont Capital Inc., 2016 ONCA 912 at paras. 37-50. Shewchuk is, of course, binding on me. The conclusions I come to in this case about the interpretation of the lease are based on reading the terms of the lease as a whole, and not based on the subsequent conduct of how the solar system at issue was in fact constructed.

[73] I reject the respondent’s argument relying on Barbour v. Bailey, supra. Barbour v. Bailey, supra dealt with a very different situation, a party claiming the existence of a prescriptive easement from one property in favour of another. I find that Barbour v. Bailey is not applicable to the situation involving the lease in this case. The applicant in this case is not arguing that 60A has an easement in favour of 61A. Rather, it is arguing that the lease, properly construed, provides it with certain rights to connect to the electrical utility system, via 60A. For the reasons I have explained, I find that it does.

[74] For similar reasons, I reject the respondent’s arguments based on the Statute of Frauds, R.S.O. 1990, c. S-19, and the Conveyancing Law of Property Act, R.S.O. 1990, c. C-34. The applicant is not arguing that there is some other agreement not reduced to writing. Rather, the applicant argues that its right to connect to the utility system via the transformer located at 60A is contained within the terms of the lease. For the reasons set out above, I find that the lease gives the applicant a right to connect to the local utility system via the transformer located on 60A Enviro Park Lane. However, I find that that right is not in the nature of a property right that would invoke either the Statute of Frauds or the Conveyancing Law of Property Act.

[75] Thus, I find that the lease provides for the tenant to connect to the local or provincial utility system through the transformer substation located on 60A Enviro Park Lane. The respondent is not entitled to disconnect the solar system from the transformer.

Conclusion

[76] For the reasons set out above, the application is granted in relation to the issues that the parties agreed to leave before me, apart from the applicant’s request for a key to the electrical room (which I discuss below).

[77] I make the following declarations:

(i) The applicant does not owe any rent on a monthly basis or otherwise for space occupied by any Connecting Equipment on the Property beyond the rent set out in the lease;

(ii) The respondent is required to maintain a connection to the Utility System so that electricity generated by the applicant’s solar panels can be transmitted to the local electrical distribution company for sale; and,

(iii) The applicant is not required to indemnify the respondent for any expense incurred in granting the applicant access to the Access Right-of-Way.

[78] I further make the following order. The respondent is enjoined from:

(i) Disconnecting the Building from the Utility system without further order of the court; and,

(ii) Disturbing in any way the roof Equipment or Connecting Equipment, including the inverters located in the electrical room. This portion of the order is subject to the decision made in the arbitration/mediation regarding the issue of fixing the roof. I remain seized if there is dispute on this issue after the arbitrator has ruled.

[79] With respect to the applicant’s request to be given a key to the exterior door to the electrical room, I reject that request at this time, but will remain seized of the matter in the event that the respondent does not provide the applicant with access in accordance with s. 6(b) of the lease.

[80] The reason I do not order the respondent to provide a key at this time is that it is not a right expressly provided for in the lease. Rather, s. 6(b) provides a right of access to the applicant and those acting on behalf of the applicant, to the “Roof Area”, the “Connecting Right-of-Way” and the “Access Right of Way” at all times during the term of lease, 24 hours a day, 7 days a week, provided that, except in cases of emergency, the tenant take commercially reasonable efforts to give the landlord 24 hours notice. In light of my decision on the first issue above, the electrical room is part of the “Connecting Right-of-Way”, and included in the access rights.

[81] Although there appear to have been issues with the respondent giving the applicant access the building pursuant to s. 6(b) of the lease the lease before the previous application heard by Justice Myers was decided, there is no evidence that access has been an issue since Justice Myers rendered his decision.

[82] As noted, s. 6(b) of the lease requires the respondent to give access to the applicant at any time, usually on 24 hours notice, but such notice is not required in an emergency. As a practical matter, the easiest way to do this would probably for the respondent be to give the applicant a key. However, since the lease does not provide for a key, if the respondent continues to give the applicant access in accordance with s. 6(b) of the lease, no further order will be required. But if the respondent going forward does not provide access in accordance with s. 6(b) of the lease, I remain seized, and the applicant may return the application before me to renew its request for a key.

Costs

[83] I did not hear submissions regarding costs during the hearing of the application. If the parties are unable to come to agreement regarding costs, I will receive submissions in writing on the following schedule. The applicant may file its cost outline and written submission within 30 days of this decision. The respondent may file its cost outline and submissions within 20 days after the applicant’s submission is filed. All costs submissions are limited to a costs outline, and three pages of submissions.

Justice J. Copeland Released: October 1, 2018

[1] No Schedule ‘B’ was, in fact, attached to the lease.

[2] No Schedule ‘A’ was, in fact, attached to the lease. In light of the failure to attach the schedules to the lease, I am not prepared to interpret the lease based on the assertion of Mr. Hollett in paragraph 8 of his affidavit that a document he now provides (at tab 3B) was intended to be Schedule ‘A’ to the lease. The document at tab 3B is dated “05/12/13”, which I take to be May 12, 2013, over two years before the lease was entered into. In the circumstances, I am not prepared to accept that this document was intended to be Schedule ‘A’ to the lease.

[3] The applicant acknowledges that s. 5(a) is a term dealing with a condition precedent to the lease, and not an ongoing right. However, the applicant argues that read with the other terms of the lease, it supports the interpretation that a right to connect to the local utility system was part of the lease.