Court File and Parties

CITATION: Rayonier A.M. Canada Enterprises Inc. v. Independent Electricity System Operator, 2020 ONSC 5460

DIVISIONAL COURT FILE NO.: CVD-TOR-33-20JR

DATE: 20200914

SUPERIOR COURT OF JUSTICE – ONTARIO

DIVISIONAL COURT

RE: RAYONIER A.M. CANADA ENTERPRISES INC., Applicant

AND:

INDEPENDENT ELECTRICITY SYSTEM OPERATOR, Respondent

BEFORE: Lederer, J.

COUNSEL: George Vegh and Julie Parla, for the Applicant

Adam D. H. Chisolm, Neil Campbell and Nicole Rozario, for the Respondent

HEARD at Toronto: July 28, 2020

ENDORSEMENT

[1] Rayonier A.M. Canada Enterprises Inc. (Rayonier) operates a facility in Spruce Falls, Ontario dedicated to the production of newsprint and wood chips which are a raw material used in its manufacturing process. The operation requires a secure and reliable supply of electricity.

[2] The Independent Electricity System Operator (IESO) is a statutory body created under the Ontario Electricity Act.[^1] The objects of the IESO include to “direct the operation and maintain the reliability of the IESO-controlled grid” and to “establish and enforce criteria and standards relating to the reliability of the integrated power system”.[^2]

[3] In furtherance of carrying out its objects the IESO has promulgated Market Rules for the Ontario Electricity Market:

The objectives of the market rules are to govern the IESO-controlled grid and to establish and govern efficient, competitive and reliable markets for the wholesale sale and purchase of electricity and ancillary services in Ontario.[^3]

[4] It is said, by the IESO, that these rules are authorized under the Electricity Act.[^4]

[5] Pursuant to the Ontario Energy Board Act[^5] market participants are required to obtain a licence from the Ontario Energy Board (“OEB”). As a condition of receiving, from the IESO-controlled grid, the electricity it needs to operate the Spruce Falls facility, the IESO required Rayonier to register as a market participant. Rayonier has the requisite licence and registration. In its circumstances Rayonier does not take all of its electricity, as needed, from the grid. Rather it can and has taken some as “dispatchable load” meaning that it bids for this portion of its requirements and, when successful, this additional supply is made available.

[6] Beginning in 2010 the local electricity transmitter, Hydro One Networks Inc., was upgrading its transmission system to accommodate the expansion of the Mattagami hydro-electric dam. As a result, the Spruce Falls facility faced a number of power shutdowns. The loss of electricity interfered with Rayonier’s ability to carry on its business. Rayonier submitted bids to purchase dispatchable loads. The bids were timed so that electricity could be withdrawn after Hydro One’s work on the transmission system was scheduled to be completed. There were occasions when that work went beyond its scheduled time lines, thereby leaving the local transmission line out of service.

[7] As a result, and even though bids had been submitted, and accepted, the IESO could not supply electricity to the Spruce Falls facility during these outages. In circumstances where power cannot be transmitted due to constraints on the transmission system, market participants are entitled under the Market Rules to receive compensation, called Congestion Management Settlement Credits. Under this program Rayonier received $20,956,188.

[8] During April 2014, the IESO’s Market Assessment and Compliance Division commenced compliance investigations concerning Rayonier’s bidding practices undertaken in connection with the requirements of the Spruce Falls facility. On May 29, 2020 (six years later) Rayonier received a Notice of Non-Compliance and Order reflecting on this investigation. The Notice advised (and confirmed) that the investigation had covered the time period from September 9, 2010 to November 24, 2016. The letter which enclosed the Notice of Non-Compliance and Order referred to what had been ongoing communication with Rayonier under this and an earlier name (Tembec Enterprises Inc.):

In accordance with the Market Rules, Tembec has been provided with details of the COM125630 investigation and opportunities to address the matters at issue. The scope of the COM125630 investigation was described in related notices, including the Further Amended Notice of Alleged Breach issued to Tembec on May 17, 2018. Additional detail regarding the alleged breaches was provided in the draft Breach Assessment Report issued to Tembec on December 7, 2018. Detail regarding possible sanctions was provided in the Preliminary Sanction Assessment issued to Tembec on October 28, 2019. Tembec has been given the opportunity to address the breach allegations and potential sanctions, and to provide its views, in person or in writing.

[9] The draft Breach Assessment Report referred to in the letter was provided to Tembec Enterprises Inc. on December 7, 2018. It described the evidence and analysis assessed by the Market Assessment and Compliance Division investigation team, and the team’s recommendations regarding the determination that there had been breaches. IESO offered Tembec Enterprises Inc. the opportunity to provide written responses, including additional information Tembec believed may be pertinent. Any such information would be taken into consideration before final determination of any breach was made. On January 31, 2019, Tembec Enterprises Inc. did provide what the Notice of Non-Compliance and Order describes as “brief general submissions in response”. These are considered in the “Analysis and Determinations” sections of the Notice of Non-Compliance and Order.

[10] The Notice of Non-Compliance and Order considered and imposed sanctions. They required that:

(1) Rayonier receive a letter of non-compliance,

(2) Rayonier implement an internal compliance plan, and

(3) Rayonier pay a financial penalty it describes as “the single largest contested financial penalty ever issued by ISEO since the inception of the wholesale electricity market in Ontario in 2002”.

[11] There is a second Notice of Non-Compliance and Order that is also the subject of the application for judicial review sought by Rayonier. This one was issued three days earlier, on May 26, 2020. It was the result of another compliance investigation. This one began on June 29, 2017. It concerned the allegations of delayed responses to Market Assessment and Compliance Division requests for information in the earlier investigation. The IESO provided a draft Notice of Non-Compliance on October 23, 2019. As with the subsequent Notices of Non-compliance and Order (May 29, 2020) Tembec Enterprises Inc. was provided an opportunity to make written submissions on this “Draft NNC”. The company responded with submissions on November 15, 2019 which were considered in the Notice of Non-Compliance and Order that was delivered. It required Rayonier to receive another non-compliance letter, produce certain information and documentation by June 16, 2020, and imposed a further financial penalty that was to be paid within 60 days.

[12] Both of the letters which accompanied delivery of the two Notices make clear that they are not the end of the process that was available to Rayonier. The letter dated May 26, 2020 ends the following paragraph:

The reasons for this decision and the text of the IESO’s order are set out in the Notice of Non-Compliance, which is attached as schedule A to this Letter of Non-Compliance. If Tembec disagrees with this decision, it may serve a Notice of Dispute pursuant to chapter 3, section 2.5.1 of the Market Rules. Pursuant to chapter 3, section 2.3.3 of the Market Rules, serving a Notice of Dispute will stay Tembec’s obligation to pay the financial penalty. Further, following Market Manual 2.6, section 1.3.10, if Tembec serves a Notice of Dispute within ten business days from the date of this Letter of Non-Compliance, the IESO will not publish these findings until after the dispute resolution process has concluded.

[13] The letter of May 29, 2020 concludes:

The Market Rules set out further opportunities for Tembec to seek to challenge the breach and sanction determinations, described in part below.

Tembec may challenge part or all of the Order by filing a notice of dispute (“Notice of Dispute”) pursuant to Chapter 3, section 2 of the Market Rules, as applicable. The Notice of Dispute commences a process by which such dispute (“Dispute”) may be resolved, including: first, good faith negotiations; secondly, mediation; and ultimately, arbitration. The Market Rules set out applicable timelines in relation to the filing of a Notice of Dispute.

Depending upon the nature of a Dispute, as set out in Chapter 3, section 2.3 of the Market Rules, the commencement of the dispute resolution process may have implications for certain obligations, including that the obligation to pay a financial penalty may be stayed pending the outcome of the dispute resolution process. Further, pursuant to Market Manual 2.6, should Tembec file a Notice of Dispute within ten business days of the date of this NNC/Order, the IESO will not publish the related determinations until after the Dispute has concluded.

As stated above, the Market Rules set out various timelines that may be applicable in respect of the Order or next steps contemplated by Tembec. Tembec should govern itself accordingly.

[14] The Market Rules provide a process for dispute resolution where a market participant, in this case Rayonier, wishes to question an order made against it.

[15] In this case Rayonier has determined that, in the circumstances it confronts, it wishes not to makes use of the dispute resolution process provided but rather that its concerns are better dealt with through judicial review. A Notice of Application for Judicial Review, bearing date June 2, 2020 is included in the Application Record prepared in support of a judicial review. There is no Court File Number associated with either the Notice of Application or the Application Record. A Court File Number does appear on the Parties Cost Agreement filed in respect of the two motions considered in this Endorsement. The two motions heard by the Court and decided by these reasons were argued as if, and on the basis that there is an ongoing judicial review. It is in furtherance of that judicial review proceeding that Rayonier has brought a motion to stay the implementation of the two Orders. For its part IESO seeks to quash the judicial review and through this means to bring the judicial review to an end.

[16] Upon it being raised by the Court, the parties acknowledged that the fundamental question at hand is whether the judicial review should be quashed. In the event that it is quashed there would be nothing left to stay and no purpose in considering a motion directed to that end. On the other hand, in the event that the judicial review is left to proceed, one might wonder whether it would inexorably follow that a stay would be granted. This would allow the judicial review to proceed unimpeded. Counsel for IESO did not agree. He expressed the concern that this was an issue that involved consideration of the broader public interest. I will return to this idea later in these reasons.

[17] The test applicable to a consideration of whether a judicial review should be quashed is well understood. Is it plain and obvious that the application cannot succeed?

[18] It is a high bar.

[19] In this case, an issue that has arisen is whether the inclusion, by the IESO in its market rules, of provisions allowing it to investigate alleged breaches and sanction those that are confirmed, is authorized by the applicable legislation. The Notice of Application for Judicial Review outlines the position to be taken on behalf of Rayonier. It is based on the understanding that the regulatory scheme is found jointly in the Electricity Act and the Ontario Energy Board Act. This legislation is said to establish three entities: the Market Surveillance Panel, the Ontario Energy Board and the IESO, each of which is invested with certain statutory powers. The Market Surveillance Panel and the Ontario Energy Board have the express authority under the two statutes to investigate compliance with the Market Rules including the production of evidence and documents.[^6] In contrast, it is submitted that the legislation does not provide the IESO, either directly or by inference or implication, with any investigative powers. In particular, the IESO is not authorized to create an investigatory regime that compels information or documentary production from market participants.

[20] Counsel for IESO, to his credit acknowledged that it is not plain and obvious that this submission, standing on its own, cannot succeed. This being the case one might wonder how it is that the IESO can argue that the judicial review should be quashed. Like the question of whether or not there should be a stay based on concern for its impact from the perspective of a broader public, I will come back to this shortly.

[21] Before that, there is a second issue that is the subject of the judicial review which IESO submitted should be quashed. It is the proposition, made by Rayonier as the applicant, that the process leading to the issuance of the two orders is inherently biased and contrary to procedural fairness. This is because the regulatory scheme as set out in the Market Rules at chapter 3, section 6.2, provides that the investigation, prosecution and decision making resulting in the issuance of the two orders, are all to be carried out by the same agency. This structure is said to be inherently contrary to procedural fairness. The affected party, in this case Rayonier, never gets an opportunity to be heard creating what was referred to as “structural bias” or, at the least an apprehension of bias sufficient to undermine the process.

[22] The problem with this understanding is that it presumes the issuance of the Orders is the end of the process. It fails to account for the opportunities the process includes that allows for the affected party to discuss the situation with IESO, have it mediated, arbitrated and, if desired heard by the Ontario Energy Board. As demonstrated by the quotations noted above, the opportunity to dispute the Orders was made clear in the letters that delivered them. The ability to dispute an Order, seek mediation and arbitration are included in the Market Rules.[^7] The ability to appeal an order made under those rules to the Ontario Energy Board is statutorily imposed through the Electricity Act.[^8] Accordingly, Rayonier had options available to it under the dispute resolution regime included in the Market Rules. The issue is whether it is plain and obvious that the judicial review, insofar as it proposes that the regime is structurally biased, cannot succeed in circumstances where the procedures it offers have not been exhausted. Can it be said that such bias exists because the investigator is also the issuer of the order? Conceptually the order should be understood to be nothing more than the conclusion of the investigation, an investigation that allowed for input from the applicant for judicial review. The process includes, should the applicant choose to take up the opportunity, the ability to negotiate with the issuer of the order, have a mediator assist is looking for an acceptable resolution, have an arbitrator make an independent determination as to such a resolution and ultimately includes an appeal to the Ontario Energy Board.

[23] This problem was the issue of concern in the seminal case of Harelkin v. University of Regina[^9]. A student was required to discontinue his studies. The decision was taken without the student being heard, that is without his being offered the chance to explain, contradict or correct what was said against him. Rather than exercise his right to appeal to a committee of the university senate, he sought judicial review (certiorari). The trial judge quashed the order that had been made and ordered that there be a new hearing. This judgment was set aside by the Court of Appeal:

In this province the practice has been that when there is a right to appeal a certiorari should not be granted except under special circumstances.[^10]

[24] There were no special circumstances. This determination was upheld by the Supreme Court of Canada. The appeal to the Senate Committee was an adequate alternative remedy. The Committee was required to hold a hearing that would deal with precisely the same problem as had been determined and was the subject of the appeal demonstrating that the appeal could cure the apparent failure of natural justice.[^11] In the case before this Court, it is not the correcting of any past error so much as acknowledging that seeing the process through to its end would account for the missing constituent, namely the right of the Rayonier to be heard first by those conducting the investigation and subsequently, if requested or necessary, by others separate from them. This being so it is plain and obvious that a judicial review founded on the premise that the regime put in place through the Market Rules is structurally biased and inherently procedurally unfair, standing alone, cannot succeed. This conclusion is supported by Harelkin where the Supreme Court found that any hearing to be conducted by the Committee of the Senate would not be encumbered by the earlier decision.[^12] The Senate Committee would have been bound by the fact that the student had not been heard. Here there is no inherent bias in the structure of the process when it is considered in its entirety. It was not a failure. As arranged within the process the company was given a chance to comment. It did. Both negotiation and mediation would provide a further opportunity for its position to be brought forward. It they failed to resolve the dispute, a full hearing, by an arbitrator, would be available and would be followed by an appeal to the Ontario Energy Board, if either party required it.

[25] The problem, if there is one, is that the issue of structural bias does not stand alone, it is brought forward in company with the proposition that the decision maker, that is the IESO, is without authority or jurisdiction to create the dispute resolution process. As its counsel has conceded this is an issue that can be the subject of a judicial review.

[26] I return to the question of how, with the concession in place, counsel could, nonetheless, submit that the judicial review of that question should be quashed. Counsel relied on Harelkin and the principle it represents. Any adequate alternative remedy should be acted on prior to resorting to judicial review. The process the Market Rules offer being such a remedy means that the judicial review in its entirety should be quashed because those processes (negotiation, mediation, arbitration and an appeal to the Ontario Energy Board) have not been exhausted. The determination of whether to rely on an alternate remedy is an exercise of discretion. This being so, how can it ever be plain and obvious that an application for judicial review cannot succeed? It presumes the exercise of discretion in favour of the primacy of the alternative process.

[27] In Harelkin, at the Supreme Court of Canada, among the contentions made against the judgment in the Court of Appeal was that as a result of the failure to respect the right of the student to be heard (audi alterem partem) certiorari should have been granted as of right (ex debito justitiae)[^13].

[28] This is directly contradictory to the understanding that the granting of certiorari is discretionary:

The award of the writs usually lies within the discre­tion of the court. The court is entitled to refuse certio­rari and mandamus to applicants if they have been guilty of unreasonable delay or misconduct or if an adequate alternative remedy exists, notwithstanding that they have proved a usurpation of jurisdiction by the inferior tribunal or an omission to perform a public duty. On applications by subjects for certiorari to remove indictments the courts have always exercised a very wide discretion.[^14]

[Emphasis added]

[29] In the present situation, there can be no certainty as to how the discretion as to whether to grant certiorari or set aside the application in the face of the process set out in the Market Rules would be exercised. It is not plain and obvious that a full panel of the Divisional Court would rule in favour of the process set out in the Market Rules being left to be continued and the application for judicial review, as it presently stands, to be dismissed. With the full context set before it, it would be open to the court to proceed to consider the application for certiorari on the basis that the IESO was without authority to create and apply the dispute resolution process set out in the Market Rules. If the position being taken on behalf of Rayonier to the effect that there is no jurisdiction succeeds, the implications would extend well beyond this case. The method by which the IESO ensures compliance with the its Market Rules would be set aside.

[30] In Harelkin the Supreme Court of Canada notes that speed and efficiency can be factors in determining how best to proceed when exercising this discretionary choice:

The courts should not use their discretion to promote delay and expenditure unless there is no other way to protect a right. I believe the correct view was expressed by O'Halloran J. in The King ex rel. Lee v. Workmen's Compensation Board, at pp. 677-678 dealing [with] mandamus but equally applicable to certiorari:

Once it appears a public body has neglected or refused to perform a statutory duty to a person entitled to call for its exercise, then mandamus issues ex debito justitiae, if there is no other convenient remedy ... If however, there is a convenient alternative remedy, the granting of mandamus is discretionary, but to be gov­erned by considerations which tend to the speedy and inexpensive as well as efficacious administration of jus­tice ...

(Underlining is from the majority judgment in Harelkin)

This passage was quoted with approval by the British Columbia Court of Appeal in Regina v. Spalding at p. 382, in which it was held that the failure to respect the principle of natural justice in first instance could not be cured by the exercise of a right of appeal where the latter, apart from risking of being futile, could not be exercised except at considerable expense and inconvenience. It is not the case here. (O'Halloran J. also said in Lee that mandamus [was] not to be regarded as a secondary or unusual remedy but as a speedy, inexpensive and efficacious remedy; times have changed and certainly in this case, an appeal to the senate committee would be speedier than man­damus and certiorari, less expensive and as efficacious.)[^15]

[31] In the circumstances of the case before this court, it is evident that the more efficient means of dealing with the fundamental question of whether the IESO has the authority to set up and manage a dispute resolution process would be through an application for judicial review. As counsel for Rayonier pointed out mediation and negotiation are unlikely to resolve this kind of structural issue. An arbitrator concerned with allegations of improper conduct under the Market Rules may be prepared to consider his or her individual jurisdiction but being asked to rule out the dispute resolution regime as a whole may be too much to ask. It is unlikely that any determination made by a person in that position would be accepted as authoritative. Such a decision would reach well beyond the individual case in which it was considered. It seems reasonable to expect that, in time, the question would find its way to the Ontario Energy Board. It should be said that the Board has shown some reticence to deal with such issues.

[32] In Association of Major Power Consumers of Ontario Review of Market Rule Amendment the Board was asked to review an amendment to the market rules that had been approved by the IESO. The change concerned the calculation of the “market clearing price” for electricity. Among the issues raised was a concern for the process by which the amendment had been made. Did the Ontario Energy Board have jurisdiction to address allegations of the Association of Major Power Users to the effect that there were significant failures of procedural fairness by IESO.[^16]

[33] The Board ruled that it was constrained by the legislation and struck from the record the evidence related to the stakeholder process:

…AMPCO makes the point that a framework was established to govern the process by which these rules would be amended and implemented. They say that this procedure, despite the expectation they were entitled to, has not been followed.

That may or may not be the case, but this Panel is of the view that that is not a matter for our consideration. Mr. Vegh in his submissions questioned whether the Court should be a parallel Divisional Court. We don’t think it should be.

IESO may or may not have followed the rules of natural justice. And they may or may not have been required to do so based upon the different authorities that have been cited by the different parties. But that, we believe, is a matter to be determined by the Divisional Court, not the Ontario Energy Board.[^17]

The review at question is a judicial review and best reserved for the courts.[^18]

[34] There was an appeal to the Divisional Court. The question of whether the Ontario Energy Board should or could consider the fairness of the process adopted by the IESO was raised as part of an application for a stay of the implementation of the amendment:

AMPCO applied to the OEB to review, on two grounds, an IESO Market Rule Amendment MR-00331-R00 promulgated on January 17, 2007, namely:

(a) the IESO had breached the rules of natural justice and procedural fairness, in particular rule against bias and breach of legitimate expectations, and

(b) substantial issues relating the Market Rule Amendment.

The OEB held that it did not have jurisdiction to consider failures of procedural fairness and natural justice by the IESO in the course of a section 33 statutory review. IESO says that the Board found that these are questions for judicial review, best reserved for the court upon application for judicial review of the decision. IESO says that the words of the statute are “crystal clear” and there is no serious issue to be tried, because the Board correctly construed scope of its authority.[^19]

[35] As a motion for a stay, the Court was not required to rule on the substance of the issue. Rather the question was whether there was a serious issue to be tried.[^20] The judge found there was not. In part this was because the proposition that the OEB had, what would be an equivalent of the power of judicial review over the IESO, was not plausible.[^21] For this and other reasons the Court was “not…convinced” that the issues in question were so serious that a stay should be granted.[^22] While this does not necessarily stand as a fully considered determination of the issue, it does lend support for the concern that it is not plain and obvious that the exercise of the discretion as to whether the determination of the issues concerning jurisdiction of the IESO to put in place its dispute resolution process would inexorably be exercised in favour of leaving the question to be determined through the tools available within that regime as an adequate alternative remedy.

[36] While the issue is to be left to a hearing by a full panel of the Divisional Court it may be that the reverse will be the case. The broad impact of the issue, the limitations of some of the tools that make up the dispute resolution process (negotiation and mediation), the expectation that a decision of an arbitrator would not be taken as authoritative and the apparent reticence of the Ontario Energy Board to deal with such a question, all seem to militate against accepting the dispute resolution process as the speedy and efficacious means to resolve the issue. It may not be an adequate alternative remedy.

[37] I find that insofar as it questions the authority of the IESO to promulgate within the Market Rules, and implement the dispute resolution regime they include, I am not prepared to, and will not quash the judicial review that has been commenced. It is not clear that this regime represents an adequate alternative remedy.

[38] Does this finding have any impact on the conclusion that it is plain and obvious that, standing alone, the issue of whether the structure of the regime creates an inherent bias cannot succeed. If it is determined that the dispute resolution regime is an adequate alternate remedy to consider in determining the overall jurisdiction of the IESO to include the dispute resolution regime in the Market Rules would it function in the same way in respect of any alleged inherent bias the regime includes. It would not. The problem is different. As perceived by the regime the right to be heard evolves with and runs through each step of the process. Consultation before an order is made, followed by negotiation (discussion between the market participant and the IESO), mediation (further exchange with the assistance of a third party), arbitration (a hearing and decision by an independent third party) and, if necessary, an appeal to an expert tribunal (the Ontario Energy Board). In short, the presence or absence of bias cannot be determined until the process has run its course.

[39] Put simply:

• if a full panel of the Divisional Court exercises its discretion and dismisses the judicial review of the jurisdictional question on the basis that the dispute resolution regime provides an adequate alternative remedy both of the issues raised will be left to proceed through the process;

• if a full panel considers and finds that the IESO is without jurisdiction to promulgate the regime there will be no purpose in going on to examine whether the process contains a structural bias;

• but if in considering the jurisdiction of IESO, the Court concludes that it has the authority, the dispute resolution will remain in place and the issue of structural bias will be left to be determined once it has been fully engaged.

[40] I find that insofar as the jurisdiction of the IESO is challenged, the motion to quash the judicial review is dismissed. Insofar as the allegation of structural bias is raised the motion to quash is granted.

[41] This leaves the motion for a stay and whether one should be granted. As noted earlier in referring to the stay requested in Association of Major Power Consumers of Ontario v. Ontario Energy Board et.al., its reasons note that the applicable test is the one found in R.J.R. MacDonald (see: fn. 20). The test has three parts:

1. the applicant must demonstrate that there is a serious question or issue to be tried,

2. the applicant is required to demonstrate that irreparable harm will result if the relief is not granted, and

3. the Court is required to assess the parties’ situations to see who the balance of convenience favours.[^23]

[42] There may be circumstances where it is not plain and obvious that an issue that is raised cannot succeed and yet what is to be determined is not a serious issue that supports the need for a stay. This is not that case. The question of the jurisdiction of the IESO to include the dispute resolution regime in the Market Rules is fundamental to the oversight of those who participate in the electricity market. It is a serious issue and needs to be resolved.

[43] Any irreparable harm to Rayonier would arise from the need to comply with the sanctions imposed by the two orders. This would include the receipt of two letters of non-compliance, the preparation and implementation, by Rayonier, of a compliance policy, compliance with “specification 14 of the Supplemental Request for Information dated March 15, 2017” and the payment of two financial penalties. It may well be that, in the event that the judicial review succeeds, the money paid as penalties could be returned. The non-compliance letters could be sent back or revoked although not the ignominy that accompanies such documentation; an ignominy that can attach to the company and be felt by its employees. The compliance policy though implemented could be set aside but the effort that went into its preparation and any disruption associated with its implementation would not be recovered. Specification 14 of the Supplemental Request for Information requires the company, where it is claiming privilege for any “Records” that would otherwise be responsive to the “SRFI”, to provide a log of information that supports the privilege claim including (i) the date of the Record, (ii) a brief description of the Record, and (iii) the author and all recipients of the Record and (iv) where only a portion of a Record is subject to a claim for privilege, provide a copy of the remainder of the Record and indicate where the privileged material has been redacted. The log and the documents could be returned but what was learned from any review would not be forgotten. There is harm that is irreparable.

[44] The balance of convenience and the presence of irreparable harm are related. In this case the investigations began in April 2014. The period covered is September 9, 2010 to November 24, 2016. This led to the orders of May 26, 2020 and May 29, 2020. Given the time that has already passed, the complications associated with imposing the sanctions in advance of a judicial review that can be perfected and heard within a few months demonstrates that the balance of convenience lies with the company and the granting of the stay.

[45] On this basis a stay would be justified and granted. However, as already noted these concerns were not the subject of the submissions made on behalf of the IESO in opposing the stay. Rather the foundation for that opposition was that granting of the stay would be contrary to the public interest. In Manitoba (A.G.) v. Metropolitan Stores Ltd.[^24] the Supreme Court of Canada found that where a stay was sought in conjunction with an application to challenge legislation as contrary to the Charter of Rights and Freedoms the consideration of the balance of convenience should take the public interest into account. The case concerned the authority provided by the applicable Labour Relations Act empowering the Labour Relations Board to impose a first collective agreement. When the union applied to have the Board do so, the employer commenced proceedings to have the power declared invalid under the Charter. The employer then moved for a stay. It was refused by the Court of Queen’s Bench but granted by the Court of Appeal. The Supreme Court observed:

While respect for the Constitution must remain paramount, the question then arises whether it is equitable and just to deprive the public, or important sectors thereof, from the protection and advantages of impugned legislation, the invalidity of which is merely uncertain, unless the public interest is taken into consideration in the balance of convenience and is given the weight it deserves. As could be expected, the courts have generally answered this question in the negative. In looking at the balance of convenience, they have found it necessary to rise above the interests of private litigants up to the level of the public interest, and, in cases involving interlocutory injunctions directed at statutory authorities, they have correctly held it is erroneous to deal with these authorities as if they have any interest distinct from that of the public to which they owe the duties imposed upon them by statute.[^25]

[46] The Court referred to Morgentaler v. Ackroyd (1983).[^26] While awaiting a challenge to the validity of a provision of the Criminal Code, the applicant sought to enjoin the police from investigating his actions as that section might apply to them. The injunction was refused. If the application succeeded and the section was found to be contrary to the Charter no harm would result but if the validity of the provision prevailed any number of parties would have been left free to ignore the law to the detriment of the public and the public interest. It was only in exceptional cases that this sort of interlocutory relief would be granted.

[47] In Metropolitan the motions judge, in refusing the stay, had taken into account the public interest:

Krindle J. then considered the balance of convenience and I refer in this respect to the above‑quoted parts of her reasons for judgment. I am of the view that she applied the correct principles. More particularly, at p. 154, she looked at the public interest and at the inhibitory impact of a stay of proceedings upon the Board, in addition to its effect upon the employer and the union…[^27]

[48] It is this perspective on the balance of convenience that IESO relies on in submitting there should be no stay. I do not agree.

[49] In Metropolitan the Supreme Court described two ways in which such a stay could be imposed: the first the general suspension of the operation of the impugned provisions as they applied to the public at large (as in Morgentaler) and the second the exemption of the particular litigant seeking the stay. The Supreme Court said of Morgentaler:

It seems to me that the test is too high at least in exemption cases when the impugned provisions are in the nature of regulations applicable to a relatively limited number of individuals and where no significant harm would be suffered by the public.

[50] In the case before this Court, staying the two Orders would not, so far as I can see, restrain the ability of IESO to conduct its statutory mandate or interfere with its public duty to ensure “the adequacy, safety, sustainability and reliability of electricity supply”. A stay would not restrain the overall authority of IESO to manage the market for electricity. The relief Rayonier is seeking is specific to staying orders IESO has issued against it. It is the legality of those orders that is being challenged. All of which is to say that the approach is to exclude Rayonier rather than suspend the operation and function of IESO.

[51] This being so, what harm is being suffered by the public at large? The factum filed on behalf of IESO refers to the $20,956,188 Rayonier has received as Congestion Management Settlement Credits. Under the program this amount has been funded by “other market participants and ultimately ratepayers”. Spread over the public at large (ratepayers) there is not much damage being imposed on them as individuals. More importantly, the money has been owed for some years. A few more months won’t add much and, in any event a significant financial penalty has been imposed by IESO. As it stands only $2,500,000 is to be paid immediately, with additional portions being payable over a 10-year period, with $10,005,000 being suspended and not payable provided that Rayonier complies with certain compliance measures and does not commit any event of default.

[52] There is no significant harm suffered by the public.

[53] Finally, if Rayonier had behaved as the IESO prescribes, it would have served a Notice of Dispute and entered into the Dispute Resolution Regime. That process puts in place an automatic stay which is to say the parties and the public at large will be in no different position if a stay is granted in conjunction with the application for judicial review than they would have been if the dispute resolution process was utilized as IESO says it was designed.

[54] A consideration of the public interest does not support a determination that the balance of convenience lies against the granting of a stay. The balance remains in favour of the order sought.

[55] It is ordered that:

1. The motion that the judicial review be quashed insofar as it requests a consideration of the authority of IESO to promulgate and implement the dispute resolution regime as found in the Market Rules is dismissed.

2. The motion that the judicial review be quashed insofar as it requests a determination that the dispute resolution regime found in the Market Rules is structurally or inherently biased is granted.

3. The motion to stay the implementation of the two orders of the IESO, pending the hearing and determination of the judicial review is granted.

[56] The parties advised the Court that they had agreed as to costs. The successful party, in respect of each of the two motions would be awarded costs of $32,500. Thus, where one party succeeded in respect of both motions, it would be awarded $65,000. Costs are discretionary. The decision is left to the Court. On the motion for the stay Rayonier was the successful party and on that account is awarded $32,500. On the motion to quash Rayonier was successful in that the judicial review remains outstanding but, nonetheless, success was mixed in that the issue regarding structural bias was quashed limiting what will be heard by the full panel of the Divisional Court. This being so I find it appropriate that the costs of that motion be to Rayonier in the amount of $16,250.

[57] In total costs to Rayonier in the amount of $48,750.

Lederer, J.

Date: September 14, 2020

[^1]: 1998 S.O. 1998, c. 15, Sched. A

[^2]: Ibid (Electricity Act) 6(1) (c) and (e), see as well Market Rules for the Ontario Electricity Market, Ch. 1, s. 3.1.1: The objective of the IESO-administered markets is to promote an efficient, competitive and reliable market for the wholesale sale and purchase of electricity and ancillary services in Ontario.

[^3]: Market Rules for the Ontario Electricity Market, Ch. 1, s. 4.1.1

[^4]: Market Rules for the Ontario Electricity Market, Ch. 1, s. 2.3.1. It refers to the Electricity Act, s. 32(1) which states: 32. (1) The IESO may make rules, (a) governing the IESO-controlled grid; (b) establishing and governing markets related to electricity and ancillary services.

[^5]: 1998 S.O. 1998, c. 15 Schedule B

[^6]: The Electricity Act, s. 37(1) states: The Market Surveillance Panel may investigate any activity related to the IESO-administered markets or the conduct of a market participant. The section goes on to allow the Market Surveillance Panel examine any documents or other things, whether they are in the possession or control of the person whose activities are being investigated or any other person (s. 37(2)), to require the attendance of any person and to compel him or her to testify and produce documents as would a justice of the Superior Court of Justice (s. 37(3)), to authorize a person to enter any business premises, other than premises used as a dwelling, during business hours for the purposes of conducting an investigation (s. 37(6)) and to make copies of any documents or records found in the course of that entry (s. 37(7), (8) and (11)) and, where appropriate to allow that person to obtain a search warrant in furtherance of an investigation (s. 37 (9) and (10)). The Electricity Act, s. 37.1(1) states: Every market participant shall deliver to the Market Surveillance Panel, at any time required by the Panel, any books, records or documents that are required to be kept by the market participant under the market rules or Ontario law. The section goes on to allow the Market Surveillance Panel to review and keep copies of any books, records or documents that are provided (s. 37.1(2)) and allowing a person authorized in writing by the Panel to enter the business premises of any market participant during business hours, and to examine and make copies of any books, records or documents (s. 37.1 (3)). Upon completion of an investigation the Electricity Act requires the Market Surveillance Panel to submit a report to the IESO and the Ontario Energy Board (s. 37(15) and (16)). The Ontario Energy Board Act imposes a requirement that every market participant obtain a licence issued and enforced by the Ontario Energy Board (s. 57). Every licence is deemed to contain a condition that the licensee comply with the applicable Market Rules (s. 70(4)). The Ontario Energy Board Act includes as an “enforceable provision” any condition of a licence issued under Part IV, V or V.1 of the Ontario Energy Board Act (s. 3(f)). The licence conditions are enforceable by the Ontario Energy Board (s. 88.3, s. 105, s. 112.0.1 and 112.0.2, s. 112.0.3, s. 112.3, s. 112.4, s. 112.5, s. 112.7 and s. 112.11). In particular, under the Ontario Energy Board Act, the Ontario Energy Board has the authority to appoint inspectors to, among other things, require participants to "provide documents, records or information" (s. 107 (1)), search offices and dwellings which are reasonably believed to contain relevant documents (s. 108 (2)) and "use any investigative technique or procedure to do anything described in a warrant (s. 112.0.2 (2) (d)). The Ontario Energy Board Act addresses the process by which an investigator may bring information to the Board in a hearing and the rights of parties with respect thereto (s. 112.05). The Ontario Energy Board Act provides that where the Ontario Energy Board intends to make a compliance order, it must provide the affected person with notice and the opportunity to request a hearing before an independent and impartial panel of Ontario Energy Board adjudicators (s. 112.2 (2) and (3)). Following a hearing, or if a person does not request a hearing, The Ontario Energy Board has the authority to make orders including (a) requiring a market participant to comply with an enforceable provision, including the Market Rules (s. 112.3 (1)), (b) suspending or revoking a market participant's license (s. 112.4 (1)) and requiring a market participant to pay an administrative penalty of up to $1 million for each day or partial day of noncompliance (s. 112.5)

[^7]: Market Rules for the Ontario Electricity Market Ch.3 s. 2.5 (Notice of Dispute, Negotiation and Response), 2.6 (Mediation) and 2.7 (Arbitration)

[^8]: Electricity Act s. 36(1) states: 36 (1) A person who is subject to an order made under the market rules may appeal the order to the Board if the order, (a) requires the person to pay a financial penalty or other amount of money that exceeds the amount prescribed by the regulations; (b) denies the person authorization to participate in the IESO-administered markets or to cause or permit electricity to be conveyed into, through or out of the IESO-controlled grid; or (c) terminates, suspends or restricts the person’s rights to participate in the IESO-administered markets or to cause or permit electricity to be conveyed into, through or out of the IESO-controlled grid. In this case it is clause 36(1)(a) that applies. O.Reg. 12/01 (Appeal from Penalties Imposed Under the Market Rules), s. 1: 1. The amount of $10,000 is prescribed for the purpose of clause 36 (1) (a) of the Act. The penalty imposed in this case is for more than $10,000.

[^9]: 1979 18 (SCC), [1979] 2 S.C.R. 561

[^10]: Harelkin v. University of Regina, ibid (fn. 10) at p. 574 quoting 1977 1434 (SK CA) at para. 8 in turn quoting Re Wilfong; Cathcart v. Lowery (1962), 1962 1962 289 (SK CA), 37 W.W.R. 612 at 615, 37 C.R. 319, 32 D.L.R. (2d) 477

[^11]: Ibid at p. 588

[^12]: Ibid at p. 591

[^13]: The Supreme Court of Canada noted that while ex debito justitae literally means “as of right” the application of the principle is not necessarily that directed or definitive: To say in a case that the writ should issue ex debito justitiae simply means that the circumstances militate strongly in favour of the issuance of the writ rather than for refusal. But the expression, albeit Latin, has no magic virtue and cannot change a writ of grace into a writ of right nor destroy the discretion even in cases involving lack of jurisdiction (p. 576).

[^14]: Harelkin v. University of Regina, supra (fn. 10) at p. 575 quoting P.P.G. Industries Canada Ltd. v. The Attorney General of Canada 1975 204 (SCC), 1976 2 S.C.R. 739, at p. 749. This is not true of all the prerogative writs. The quotation goes on: The fact that some of the prerogative writs were discretionary came to be directly linked with their desig­nation as prerogative writs. Thus, in one case, it was said: "An application for mandamus is an application to the discretion of the court; a mandamus is a prerogative writ and is not a writ of right". But although none of the prerogative writs is a writ of course, not all are discre­tionary. Prohibition, for example, issues as of right in certain cases, and habeas corpus ad subjiciendum, the most famous of them all, is a writ of right which issues ex debito justitiae when the applicant has satisfied the court that his detention was unlawful. These two writs, therefore, are not in the fullest sense writs of grace. (de Smith, Judicial Review of Administrative Action, 3rd ed., p. 510).

[^15]: Ibid at p. 593 The cases referred to in the quotation are The King ex rel. Lee v. Workmen's Compensation Board is found at 1942 241 (BC CA), [1942] 2 D.L.R. 665 and Regina v. Spaulding found at 1955 418 (BC CA), [1955] 5 D.L.R. 374.

[^16]: Association of Major Power Consumers of Ontario Review of Market Rule Amendment (10 April 207/07, EB-2007-0040 at p. 9) where it is noted that it was the position of the Association that the mandate of the Ontario Energy Board was not limited by s. 33(9) of the Electricity Act. The section which considered the Board’s authority in respect of amendments to the Market Rules: 33 (9) If, on completion of its review, the Board finds that the amendment is inconsistent with the purposes of this Act or unjustly discriminates against or in favour of a market participant or class of market participants, the Board shall make an order, (a) revoking the amendment on a date specified by the Board; and (b) referring the amendment back to the IESO for further consideration. Rather, it was submitted that the Board had a “plenary review jurisdiction” allowing it to examine the allegation of an unfair process.

[^17]: Ibid at Appendix A: Excerpt from Transcript of Oral Hearing Held March 29,2007 at p. 90

[^18]: Ibid at Appendix A: Excerpt from Transcript of Oral Hearing Held March 29,2007 at p. 91

[^19]: Association of Major Power Consumers of Ontario v. Ontario Energy Board et. al (2007), Toronto 207/07, at para. 11

[^20]: As the judge hearing the motion noted the test for a stay is the test for the granting of an injunction as set out in R.J.R. MacDonald Inc. v. Canada (Attorney General), 1994 117 (SCC), 1994 1 S.C.R. 311 at p. 334. The first part of the three-part test requires the applicant to demonstrate that there is a serious question to be tried.

[^21]: Association of Major Power Consumers of Ontario v. Ontario Energy Board et. al, supra (fn. 19), at para. 21

[^22]: Association of Major Power Consumers of Ontario v. Ontario Energy Board et. al, supra (fn. 19), at para. 23

[^23]: As found in these reasons see: Association of Major Power Consumers of Ontario v. Ontario Energy Board et. al, supra (fn. 19), following paras. 16, 23, and 31.

[^24]: 1987 79 (SCC), [1987] 1 SCR 110

[^25]: Manitoba (A.G.) v. Metropolitan Stores Ltd, ibid, at para. 57

[^26]: 42 O.R. 659.

[^27]: Manitoba (A.G.) v. Metropolitan Stores Ltd, supra (fn.24) at para.99