SUPERIOR COURT OF JUSTICE – ONTARIO

COMMERCIAL LIST

RE: Canadian Solar Solutions Inc., Applicant

AND:

RA Solar Leasing Inc., Respondent

BEFORE: D. M. Brown J.

COUNSEL:
V. DaRe, for BDO Canada Limited, the Receiver of RA Solar Leasing Inc.

P. Guy and K. Montpetit, for the Applicant

B. Morris, for RA Solar Ltd.

HEARD: January 25, 2013

REASONS FOR DECISION

I. Receiver’s motion to secure information relating to the debtor

[1] On November 26, 2012, Newbould J. appointed BDO Canada Limited as receiver and manager of “all of the assets, rights, property and undertaking of RA Solar Leasing Inc. associated with, arising out of, or in any way or manner related to any and all of the Projects funded in whole or in part by Canadian Solar pursuant to the Master Purchase Agreement dated November 10, 2011 (the “Property”)”. By order made January 18, 2013, I approved a sales and marketing process for the Property.

[2] A dispute has arisen between the Receiver and Steve Marshall, a principal of the debtor and of a related company, RA Solar Ltd., concerning the scope of the standard “duty to provide access and co-operation to the receiver” provisions of the Appointment Order which are found in the Model Receiver Appointment Order used on the Toronto Region Commercial List. Specifically, the Receiver and Mr. Marshall disagree about the extent of the Receiver’s ability to access and to use a Solstice Database and Valuation Model which Mr. Marshall deposed are owned not by the Debtor, but by the related company, RA Solar Ltd.

[3] The Receiver has brought this motion seeking an order that Mr. Marshall “forthwith deliver, make copies of or provide immediate, unfettered and continued access to the Debtor’s Property and Records (as those terms are defined in the Appointment Order) in favour of the Receiver upon the Receiver’s request including, without limitation, the Valuation Model (as defined in the First Report) and the Debtor’s Solstice Database (as defined in the First Report)”.

II. Evidence

A. The business of the debtor and the appointment of the Receiver

[4] Canadian Solar Solutions Inc. operated in the solar power business, concentrating on the solar photovoltaic market providing turnkey solar solutions for residential, commercial and farm markets in Canada. RA Solar Leasing Inc. leased rooftops from homeowners for the purpose of developing solar power generating facilities which complied with the requirements of the Ontario MicroFIT Program.

[5] On November 10, 2011, Canadian Solar, RA Solar Leasing Inc. (“RA Leasing”) and RA Solar Inc. (“RA Ltd.”) entered into a Master Purchase Agreement. (Mr. Marshall clarified that RA Solar Inc. was a misnomer; the proper name was RA Solar Ltd.). Canadian Solar was the “Vendor”, RA Leasing was the “Purchaser” and RA Ltd. was the “Manager”. RA Leasing would originate projects and arrange for their management, while Canadian Solar would fund and construct the projects. As described by Newbould J. in his reasons dated November 26, 2012:

[4] The parties entered into a Master Purchase Agreement dated November 10, 2011 and amended on February 27, 2012. The term of the MPA was for 6 months expiring on May 10, 2012. The MPA provided, provided, among other things:

• RA Solar was to source residential rooftop projects for development and construction of Rooftop Solar Photovoltaic Electricity Generation Facilities (section 4(a)).

• Canadian Solar was required to fund the acquisition, development and construction of the projects, initially up to a maximum amount of $5 million (section 6(a)).

• Canadian Solar was to do all of the work on the projects, including providing the required engineering services, equipment procurement, labour, materials, equipment and tools and services and construct and install all equipment necessary to complete the projects (Sections 2.1 and 2.5 of EPC Terms and Conditions)

• The parties would work to find a third party buyer for the portfolio of projects constructed and share in the net proceeds of such sale (section 7(b)).[1]

Each rooftop leased by RA Leasing from a homeowner was described as a “project”. Each Project was supported by an installation and lease agreement.

[6] Canadian Solar terminated the MPA on April 30, 2012 as a result of alleged defaults by RA Leasing. At the time RA Leasing owed Canadian Solar approximately $4.329 million. Last October Canadian Solar applied for the appointment of a receiver over RA Leasing. The latter opposed the application. By order made November 26, 2012, Newbould J. appointed the Receiver.

[7] In its First Report dated January 9, 2013, the Receiver reported that it had identified 148 projects, of which 126 were fully funded by Canadian Solar, with the rest either partially-funded by Canadian Solar or funded by another provider, Heliene Inc. RA Leasing operated from premises shared with Hybrid Partners Ltd. Hybrid Partners owned both RA Leasing and RA Ltd. Two directors of RA Leasing, Mr. Marshall and Mr. G.F. Kym, were directors of both RA Leasing and Hybrid. RA Leasing did not employ any employees, but used the services of three individuals provided through a management agreement with Hybrid. The Receiver was not able to reach an agreement with Hybrid to continue the management of the projects of RA Leasing.

B. Receiver’s requests for copies of the Valuation Model and Solstice Database

[8] The Receiver learned from Canadian Solar that RA Leasing had developed a spreadsheet valuation model (the “Valuation Model”) for due diligence purposes when RA Leasing was attempting to sell its project portfolio prior to the appointment of the Receiver. The Valuation Model calculated the present dollar value of each project in the portfolio based on various factors. The Receiver believed that the Valuation Model “will be of significant importance to prospective purchasers of the Projects in the proposed marketing and sales process”.

[9] The Receiver also learned that RA Leasing was using an electronic database, called Solstice (the “Solstice Database”), which contained electronic copies of agreements and documents relating to the Projects.

[10] On December 17, 2012 the Receiver wrote Marshall requesting the usernames and passwords needed to gain online access to the Solstice Database, a copy of the Solstice Database, and a copy of the Valuation Model for the projects.

[11] On December 19 Marshall responded that the Solstice Database and Valuation Model did not belong to RA Leasing. He stated: “You have all of the information in the drop box [for the database], more than happy to sell it to cdn solar with the model if they want it”.

[12] The Receiver did not accept that response, and on January 4, 2013, the Receiver wrote to Marshall referring to paragraph 5 of the Appointment Order and stated:

[W]e hereby demand that you deliver to us, no later than 5 p.m. on Monday, January 7, 2013, the valuation model referred to in our Letter. We also hereby demand that you provide us with the usernames and passwords to access the RA Solar Solstice database, as well as provide us with access to obtain a full copy of same…

[13] Marshall did not comply with the Receiver’s demand, but responded that the Receiver could buy the Solstice Database for $75,000 and the Valuation Model for $55,000. This motion then ensued.

C. The use of the Valuation Model and Solstice Database by RA Leasing

The Solstice Database

[14] Several provisions of the Master Purchase Agreement imposed on RA Leasing, as Purchaser, and RA Ltd., as Manager, obligations to collect and maintain a broad range of information about each Project, and the MPA provided Canadian Solar, as Purchaser, with significant rights to access such information.

[15] Section 4 of the Master Purchase Agreement described the project origination responsibilities of the Purchaser – i.e. RA Leasing. Section 4(a)(ix) provided that RA Leasing would undertake and perform all acts necessary to identify and procure viable projects, including “providing a customer relationship management system CRM to support the installation crews”. Section 4(j) described, in some detail, the elements of the customer relationship management system:

4(j). The Purchaser shall provide the Vendor [Canadian Solar] with complete access to the Purchaser’s database, customer relationship management system, or equivalent files or records, containing, in respect to each Project, at a minimum:

(i) the Homeowner address and contact information;

(ii) the Solar System size for the Site;

(iii) aerial based photographs of the Site, with module and roof layout diagrams showing module orientation and spacing between the module array and roof lines, and locations of vents and other obstructions on the roof;

(iv) the PVSyst (or equivalent) report applicable to the Site;

(v) copies of relevant agreements with the Homeowner; and,

(vi) records of any known Site-specific conditions that would reasonably be anticipated to be material to the access and construction of the Site.

[16] Section 8(a) of the MPA provided that RA Ltd., as the Manager, “shall be responsible for managing, operating and maintaining the Project after the Substantial Completion Date”. Pursuant to Section 8(b) RA Ltd. and RA Leasing were to “enter into a management agreement providing for the Manager’s management, operation and maintenance of the Projects. Such agreement shall be subject to the prior written approval of the Vendor.” The Manager’s responsibilities included (i) “monitoring the generation of each system on a daily basis, and maintaining a database of initial bench marks and historical performance” (s. 8(b)(i)) and (ii)) “maintaining a CRM system” (s. 8(b)(iv)). Significantly, section 8(e) of the MPA provided that neither RA Ltd. or RA Leasing could assign the management agreement without the prior written consent of Canadian Solar “which consent may be unreasonably withheld”.

[17] Section 11 of the MPA provided Canadian Solar with broad rights of access to information in the possession of RA Leasing and RA Ltd.:

The Purchaser [RA Leasing] and Manager [RA Ltd.] shall provide…the Vendor [Canadian Solar]…with continuous access at all reasonable times to all information, records, and data, including without limitation all corporate, financial, technical and other data, accounts, books and records of, and all policies of insurance, contracts, Leases, deeds and other documents in the possession or control of, the Purchaser or the Manager…to enable the Purchaser (sic) to confirm or investigate any matter or circumstance relating to the Projects or this Agreement including without limitation…the operations and maintenance of the Projects…and any other matter the Vendor reasonably requires to be confirmed or investigated, and the Purchaser and Manager shall promptly furnish to the Vendor…such information, records, and data as the Purchaser (sic) may reasonably request form (sic) time to time.

[18] Section 10(d) of the MPA provided that “any obligations of the Parties arising prior to the effective date of the termination shall survive termination and be a fully binding and enforceable obligation of the relevant Party.”

[19] Patrick Pavlik, a project manager with Canadian Solar, deposed that up until the appointment of the Receiver, RA Leasing had complied with its obligations under the MPA to provide Canadian Solar with access to the Solstice Database. In December, 2011, RA Leasing sent Canadian Solar password information so that it could logon to the Solstice Database. At that time Rene Daoust of RA Leasing had written to Canadian Solar:

Using the RA Solar database, on each file you can find the google maps location. You can also find the customer information and all the files related to the projects but if you prefer, you can still use the Dropbox to access the customer files.

Trevor/Tom: As mentioned last week, if you want to use your CRM, we can generate you excel/CSV to load the info in your database.

Veronica will send to everyone Your Login Info.

Upon the appointment of the Receiver, RA Leasing revoked Canadian Solar’s access to the Solstice Database.

[20] An “Introduction to the Database” document sent in December, 2011 by RA Leasing to Canadian Solar included several screen shots of the database which showed the type of information recorded in the Solstice Database for each Project.

[21] Marshall deposed that the Solstice Database is the property of RA Ltd. According to Marshall, hard costs of $50,000 were spent to develop the Solstice Database. Marshall produced several invoices by which, he deposed, RA Ltd. had paid for the development of the Solstice Database. The invoices identified the purchaser of the Solstice Project as “RaSolar”, but did not specify which RaSolar company was involved.

[22] Marshall also filed a letter from the accountant for RA Ltd., Sloan Partners LLP, according to which, he deposed, the accountant had confirmed that the monies spent on the research to develop the Solstice Database were advanced by RA Ltd. I cannot draw such a conclusion from the letter. The Sloan Partners letter attached the unaudited financial statements of RA Ltd. for 2010 and 2011 and referred to, without attaching, a number of cheques which paid for the Solstice Database. But, the accountants stated that management had provided the information about what work the disbursements were spent on, and they had not performed an audit or a review engagement in respect of the financial statements. Accordingly, on the evidence before me, I cannot determine which RA entity owns the Solstice Database.

The Valuation Model

[23] Marshall testified that one of the functions of the Valuation Model was to calculate the internal rate of return, as well as the profit and revenue measures, for each Project.[2] Information which reposed in the Solstice Database was used in the calculations performed with the Valuation Model.[3] Marshall confirmed on cross-examination that prior to the appointment of the Receiver, Canadian Solar was given full access to the Valuation Model.[4] Marshall believed that if all the information for the projects in the Valuation Model was printed, hundreds of pages would result, or “a huge amount of documentation”.[5]

[24] According to Pavlik, of Canadian Solar, the Valuation Model was used to evaluate power generation and unit cost, as well as the rate of return for a project, and the project information was culled, in part, from the Solstice Database. Hatch Ltd. approved the Valuation Model, a step which in the solar power industry is regarded as signifying that prospective buyers of a project could rely on the methodology used in the Valuation Model.

[25] Pavlik deposed that when Canadian Solar decided to fund the projects, RA Leasing provided it with due diligence reports which contained representations about the rate of return for a project based upon the Valuation Model. Pavlik expressed the view that the Valuation Model would be critical to prospective buyers conducting their due diligence of the projects in receivership, and:

[I]t is hard to imagine that any third party would choose to invest or purchase the assets subject to the Receivership without the benefit of a Hatch-approved or similar valuation model and the information in the Solstice Database.

Marshall acknowledged that the RA companies gave Canadian Solar the IRR numbers for each project.[6]

[26] Pavlik also understood that when RA Leasing acquired solar system projects from third parties, it used the Valuation Model to inform the purchase decision. Pavlik further deposed that prior to the appointment of the Receiver:

RA Solar Leasing Inc. never differentiated between the ownership of the Valuation Model as between RA Solar Leasing Inc., RA Solar Inc. or RA Solar Ltd. In fact, in most of the correspondence to and from Canadian Solar and RA Solar Leasing Inc., RA Solar Leasing Inc. would identify themselves simply as “RA Solar”, making it impossible to differentiate between the various affiliated RA Solar entities.

[27] Marshall deposed that RA Ltd. spent about $150,000 in hard costs to develop the Valuation Model. He filed some bank statements and cheques which he stated recorded payments of the Model’s development costs. Most of those cheques and transactions recorded on the bank statements pre-dated the March 31, 2011 incorporation of RA Leasing. However, those statements and cheques identified the payor as Paradigm Energy Ventures Ltd., the previous name used by Hybrid Partners Inc.; they did not mention RA Ltd. even though that company had been incorporated by that point of time. Marshall testified that the payments by Hybrid were a loan by it to RA Ltd., and the co-owners of Hybrid and its subsidiary RA companies, had funded Hybrid. Marshall also pointed to the letter from Sloan Partners dealing with the 2010 and 2011 unaudited statements of RA Ltd. but, again, those were unaudited and the accountant simply relied on information provided by management. On the evidence before me, I cannot determine which RA entity owns the Valuation Model.

[28] Marshall testified that the Valuation Model could be used for any solar project, not just those developed by RA Leasing. On cross-examination Marshall stated that the projects in this receivership amounted to only 800 kW of generating capacity out of 50 MW with which RA Ltd. was “involved right now”. When pressed on this point, Marshall acknowledged that the only solar projects in which RA Ltd. has been involved which had reached substantial completion were those subject to the receivership.[7]

[29] The Receiver believes that the Valuation Model will be of significant importance to prospective purchasers of the projects in the marketing and sales process for several reasons:

(i) The Model contains detailed information regarding each project used to calculate the expected revenues and expenses over the term of the project, as well as each project’s internal rate of return;

(ii) The existence of the information will save the Receiver considerable time, effort and expense in compiling the same information for the sale process data room.

III. Positions of the parties

[30] The Receiver submitted that paragraphs 4, 5 and 6 of the Appointment Order dealing with the debtor’s records require Marshall to provide immediate, unfettered and continued access to, as well as copies of, the Solstice Database and the Valuation Model.

[31] Marshall, on behalf of RA Ltd., took the position that both the Solstice Database and Valuation Model were not owned by RA Leasing so therefore he was not required to deliver them to the Receiver. RA Ltd.’s counsel, in a January 22, 2013 letter, stated its position as follows:

To summarize my client’s position, Ra Solar Ltd. is prepared to supply to the Receiver any and all information it has that belonged to the company currently in receivership. It would also allow an inspection of the Financial Model and the Solstice/Database to be made by a representative of the Receiver to allow the Receiver to ensure that there is no further information required by the Receiver regarding either the Financial Model or the Solstice/Database. That being said, to be clear, it is Ra Solar Ltd.’s position that any and all information pertaining to Canadian Solar and the projects has already been delivered to Canadian Solar. Indeed, without information, Canadian Solar would not have approved any of the projects.

…[I]f the Receiver still wishes to inspect the software to see if there is any more information, as stated previously, my client is agreeable to same. Of course, in this case, the Receiver shall be required to execute a confidentiality agreement.

The Receiver’s Application is being contested on the basis that these items have been paid for and developed by Ra Solar Ltd., who has a copyright over the same…

[32] In a January 24, 2013 email to the Receiver counsel for RA Ltd. elaborated on his client’s position:

Ra Solar Ltd. is prepared and has always been prepared to let the Receiver have access to past results calculated in the Financial Model and Solstice/Database (the “Program”) that pertain in any way to Leasing, provided that any party who views same sign a confidentiality agreement acknowledging Ra Solar Ltd.’s copyright…What I am concerned about is that the Receiver wishes to use the Program, developed by Ra Solar Ltd., with potential new purchasers. It is this future use of Ra Solar Ltd.’s copyrighted programming that is objected to.

Ra Solar Ltd. is concerned that even with regards to the Receiver having access to the information regarding Leasing, there may be confidential information pertaining to parties other than those involved in the within litigation. My client requires that the Receiver execute a confidentiality agreement on this point.

[33] Canadian Solar supported the position taken by the Receiver, and it also took the position that as a creditor of RA Leasing it was not waiving any rights which it might have over the Valuation Model and the Solstice Database.

IV. Analysis

A. The Appointment Order and the governing legal principles

[34] Paragraphs 4, 5 and 6 of the Appointment Order tracked the sections in the Model Order dealing with the duty to provide access and co-operation to the receiver:

4. THIS COURT ORDERS that (i) the Debtor, (ii) all of its current and former directors, officers, employees, agents, accountants, legal counsel and shareholders, and all other persons acting on its instructions or behalf, and (iii) all other individuals, firms, corporations, governmental bodies or agencies, or other entities having notice of this Order (all of the foregoing, collectively, being "Persons" and each being a "Person") shall forthwith advise the Receiver of the existence of any Property in such Person's possession or control, shall grant immediate and continued access to the Property to the Receiver, and shall deliver all such Property to the Receiver upon the Receiver's request.

5. THIS COURT ORDERS that all Persons shall forthwith advise the Receiver of the existence of any books, documents, securities, contracts, orders, corporate and accounting records, and any other papers, records and information of any kind related to the business or affairs of the Debtor, and any computer programs, computer tapes, computer disks, or other data storage media containing any such information (the foregoing, collectively, the "Records") in that Person's possession or control, and shall provide to the Receiver or permit the Receiver to make, retain and take away copies thereof and grant to the Receiver unfettered access to and use of accounting, computer, software and physical facilities relating thereto, provided however that nothing in this paragraph 5 or in paragraph 6 of this Order shall require the delivery of Records, or the granting of access to Records, which may not be disclosed or provided to the Receiver due to the privilege attaching to solicitor-client communication or due to statutory provisions prohibiting such disclosure.

6. THIS COURT ORDERS that if any Records are stored or otherwise contained on a computer or other electronic system of information storage, whether by independent service provider or otherwise, all Persons in possession or control of such Records shall forthwith give unfettered access to the Receiver for the purpose of allowing the Receiver to recover and fully copy all of the information contained therein whether by way of printing the information onto paper or making copies of computer disks or such other manner of retrieving and copying the information as the Receiver in its discretion deems expedient, and shall not alter, erase or destroy any Records without the prior written consent of the Receiver. Further, for the purposes of this paragraph, all Persons shall provide the Receiver with all such assistance in gaining immediate access to the information in the Records as the Receiver may in its discretion require including providing the Receiver with instructions on the use of any computer or other system and providing the Receiver with any and all access codes, account names and account numbers that may be required to gain access to the information. (emphasis added)

[35] As I wrote in GE Real Estate v. Liberty Assisted Living about the scope of paragraph 5 of the Model Order:

As can be seen, the defined term “Records” is not limited to documents owned by 285. Instead, it encompasses documents “related to the business or affairs of 729285”. As the Reports of the Receiver disclose, 285 and its principals have stated that some information relating to the business or affairs of 285 will be found on records owned by related companies. That state of affairs has resulted from a decision of the Liberty Group of companies to operate its affairs and maintain its records in an inter-connected and co-mingled fashion. Consequently, for the Receiver to exercise the powers granted to it under the Appointment Order, it is inevitable that the Receiver will have to inspect and consider documents owned by companies related to 285. If the Respondents have intermingled the records of their companies so that documents relating to the business or affairs of 285 are owned by, or are under the control of, other Liberty Group companies, that does not permit the Respondents to deny access to those documents or to a computer server on which they are stored. Paragraphs 8 and 9 of my Appointment Order are not limited to documents owned by 285; they encompass documents “relating to the business or affairs of 729285”. With all due respect, nothing could be clearer.[8]

B. The Solstice Database

[36] The evidence clearly established that the Solstice Database contains information “related to the business or affairs of the Debtor”, specifically detailed, material information about each Project as well as material documentation for each Project. The information in the Solstice Database relating to the business of RA Leasing, including the projects which it originated and developed pursuant to the MPA, constitutes “Records” within the meaning of section 5 of the Appointment Order. That information must be provided to the Receiver in accordance with sections 5 and 6 of the Appointment Order.

[37] On the evidence it is unclear which RA entity owns the Solstice Database – RA Leasing or RA Ltd. In the circumstances of this case, which entity owns the Solstice Database is irrelevant to the obligation of RA Ltd., RA Leasing and/or Marshall, as “Persons” within the meaning of the Appointment Order, to provide the Receiver with the information on that database regarding the business and projects of RA Leasing. Under the MPA, RA Leasing established a database CRM for the Projects and its affiliate, RA Ltd., managed the projects and information relating to the projects, once developed. Section 11 of the MPA gave Canadian Solar broad rights to access such information, whether it was in the possession of RA Leasing or RA Ltd. Under that agreement, the parties had agreed to maintain information about the debtor’s business by placing that responsibility largely in the hands of RA Ltd., as Manager. Since that was the way the parties to the MPA agreed to manage RA Leasing’s business-related information, it is not now open to RA Ltd. or Marshall to try to erect barriers to that information which never existed while the debtor carried on business prior to the receivership. The evidence showed that Canadian Solar had no difficulty accessing information on the Solstice Database until the date of the Appointment Order. I can only conclude that RA Ltd. and Marshall have delayed in helping the Receiver to obtain full access to, and copies of, the information stored on the Solstice Database in order to squeeze some money out of the Receiver.

[38] I give no effect to RA Ltd.’s argument that because it may hold copyright in the Solstice Database software program, that program and the information stored on it, do not fall within the ambit of section 5 of the Appointment Order because the Copyright Act, R.S.C. 1985 contains statutory provisions which prohibit such disclosure. First, I have concluded that the evidence filed is not sufficient to make a finding as to which RA entity owns the software program or might enjoy copyright in it. Second, RA Ltd.’s interpretation of the closing language of paragraph 5 of the Appointment Order is flawed. That portion of the Appointment Order reads:

provided however that nothing in this paragraph 5 or in paragraph 6 of this Order shall require the delivery of Records, or the granting of access to Records, which may not be disclosed or provided to the Receiver due to the privilege attaching to solicitor-client communication or due to statutory provisions prohibiting such disclosure.

RA Ltd. did not refer to any case law which has interpreted the phrase, “due to statutory provisions prohibiting such disclosure”, as carving out from the obligation to disclose to a receiver Records which might constitute “works” in which copyright resides. Nor did RA Ltd. point to any provision in the Copyright Act which would prohibit disclosure of any such Record to a receiver. Indeed, in general terms copyright law prevents the unauthorized copying of a work, not its disclosure.[9] Moreover, RA Ltd.’s proffered interpretation of the Model Order argument, if accepted, would seriously undermine the ability of receivers to access and copy electronic records relating to the operation of a debtor’s business to the extent those records might constitute “works”. In an age when most information is stored in electronic form, such an argument would deprive receivers of information necessary to perform their court-directed duties and enable debtors, or those related to them, to hold hostage vital information required by receivers. I see no basis in law, or in the practicalities of receiverships, for the argument advanced by RA Ltd.

[39] The record reveals that RA Ltd. and Marshall are hindering the Receiver’s efforts to obtain Records under the Appointment Order, most recently by trying to impose conditions on the Receiver’s access to Records, such as entering into confidentiality agreements and acknowledgements of copyright. The Solstice Database is a “Record” within the meaning of sections 5 and 6 of the Appointment Order, and I order RA Ltd. and Marshall to comply with those sections of the Appointment Order forthwith – i.e. by 5 p.m., tomorrow, Wednesday, January 30, 2013.

[40] Marshall contended that RA Leasing had provided the Receiver with all information on the Solstice Database via a Dropbox account, although he conceded that the Dropbox medium was not as easy to use as the Database.[10] The Receiver was not satisfied that all information had been disclosed via the Dropbox. Pursuant to sections 5 and 6 of the Appointment Order it is for the Receiver to determine the method by which it wishes to access and obtain the Records. Accordingly, if the Receiver asks for a copy of the Solstice Database containing the Records, then RA Ltd. and/or Marshall must provide a copy. If the Receiver would prefer on-line access, then RA Ltd. and/or Marshall must comply with that request.

C. The Valuation Model

[41] There is no doubt that the Valuation Model, whichever entity may own it, contains and has generated information about the financial performance of the Projects. The November 9, 2011 RA Solar Due Diligence report provided by RA Leasing to Canadian Solar contained information about the internal rate of return for certain Projects calculated by using the Valuation Model, as well as statements by RA Leasing confirming that certain Project portfolios met target IRRs “based on our proprietary model (approved by Hatch)”. The Valuation Model therefore was used by RA Leasing to make the business case to Canadian Solar to provide funds to acquire additional Projects.

[42] Although the use of the Valuation Model may have been more limited to the project-acquisition aspect of RA Leasing’s business, the evidence disclosed that the Valuation Model contains and has produced information “related to the business or affairs of the Debtor”, specifically the anticipated IRR of each Project, or portfolio of Projects. That data, and the Valuation Model computer program containing such data, constitute “Records” of the debtor. Consequently, paragraph 5 of the Appointment Order requires RA Ltd. and Marshall, as “Persons”, to “provide to the Receiver or permit the Receiver to make, retain and take away copies thereof and grant to the Receiver unfettered access to and use of accounting, computer, software and physical facilities relating thereto…”

[43] RA Ltd. and Marshall contended that complying with paragraph 5 of the Appointment Order would work an unfair result because RA Ltd. had paid to develop the Valuation Model. I see no unfairness in the result. First, RA Leasing, in its November 9, 2011 RA Solar Due Diligence report to Canadian Solar described the Valuation Model as “our proprietary model”. Such language would suggest to the reasonable reader that RA Leasing owned the Valuation Model. Second, at the January 18, 2013 hearing I adjourned the access to records portion of the motion for a week to afford RA Ltd. the opportunity to file evidence on “the issue of the ownership and/or inclusion of the valuation software + database in the debtor’s assets”. The evidence filed by RA Ltd. was insufficient to determine which RA entity owns the Valuation Model, as I set out in paragraph 27 above.

V. Summary and Costs

[44] For the reasons set out above, I grant the Receiver’s motion. I conclude that the information, documents and data about the business of the debtor, RA Leasing, and its Projects contained in the Solstice Database and the Valuation Model, as well as both those computer programs which contain the information, constitute “Records” within the meaning of paragraph 5 of the Appointment Order. I order RA Ltd. and Marshall, as “Persons” within the meaning of the Appointment Order, to comply with paragraphs 4, 5 and 6 of the Appointment Order no later than 5 p.m. on Wednesday, January 30, 2013.

[45] I wish to stress that the order the Receiver has sought, and which I have granted, is designed to ensure that RA Ltd. and Marshall comply with paragraphs 4, 5 and 6 of the Appointment Order so that the Receiver can secure possession of all information relating to the business and affairs of the debtor. However, I have stated that the evidence filed proved insufficient to make any finding as to which RA entity owned the Solstice Database and Valuation Model. From the submissions made at the hearing it was apparent that the Receiver had not yet decided precisely how it would use the Records obtained under paragraphs 4, 5 and 6 in the approved marketing and sales process, more specifically in its data room. Let me observe that the evidence clearly revealed that RA Leasing, through its management agreement with RA Ltd., maintained and managed the information about its Projects through the Solstice Database. That was the way in which it kept its business records on an on-going basis, and I am inclined to the view that the Receiver is entitled to present the information contained in the Solstice Database to potential purchasers through that database since that was the mode by which RA Leasing maintained its business records.

[46] By contrast, the evidence revealed that the Valuation Model was used at discrete points in the past to generate IRR-related information about each Project, but the IRR numbers for each project were not updated on a regular basis. While the Receiver may decide that the most efficient way by which to secure the information on the Valuation Model related to the debtor’s business would be to obtain a copy of that computer program, in my view the Receiver cannot grant access to the Valuation Model to potential purchasers without a determination of which entity owns the Valuation Model. Certainly the historic information about the Projects contained in the Valuation Model can form part of the data available to potential purchasers for due diligence purposes. But, I do not think it would be open to the Receiver or potential purchasers to use the Valuation Model to generate new calculations about the Projects without first securing a determination about which entity owns the Model.

[47] I would encourage the parties to try to settle the costs of this motion. If they cannot, any party seeking costs shall serve and file with my office written cost submissions, together with a Bill of Costs, by Wednesday, February 6, 2013. Any party opposing costs may serve and file with my office responding written cost submissions by Friday, February 15, 2013. The costs submissions shall not exceed three pages in length, excluding the Bill of Costs.

[48] Such responding cost submissions should include a Bill of Costs setting out the costs which that party would have claimed on a full, substantial, and partial indemnity basis. If a party opposing a cost request fails to file its own Bill of Costs, I shall take that failure into account as one factor when considering the objections made by the party to the costs sought by any other party. As Winkler J., as he then was, observed in Risorto v. State Farm Mutual Automobile Insurance Co., an attack on the quantum of costs where the court did not have before it the bill of costs of the unsuccessful party “is no more than an attack in the air”.[11]

D. M. Brown J.

Date: January 29, 2013