Court File and Parties

COURT FILE NO.: CV-12-465795 DATE: 20160707

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

THE POWER LIMITED PARTNERSHIP Plaintiff – and – ONTARIO ELECTRICITY FINANCIAL CORPORATION Defendant

Counsel: Blair W.M. Bowen and Martine S.W. Garland, for the Plaintiff Timothy Pinos and Emily Larose, for the Defendant

HEARD: January 20, 2016

REASONS FOR DECISION

JUSTICE W. MATHESON

[1] The defendant, Ontario Electricity Financial Corporation (“OEFC”), has moved for summary judgment. It seeks the dismissal of the plaintiff’s claims in their entirety on the basis that there is no genuine issue requiring a trial. OEFC is, for all purposes relevant to this application, the statutory successor to Ontario Hydro.

[2] The plaintiff, The Power Limited Partnership (“PLP”), is a non-utility generator that owns and operates a hydro-electric power generating facility at Nipigon Falls in northern Ontario.

[3] The plaintiff’s claims generally relate to the steps taken to negotiate and enter into an amended and restated power purchase agreement in 1999, at around the time that Ontario Hydro was restructured through legislative reform. The plaintiff claims negligent misrepresentation and dishonest contract performance. These claims relate to what the plaintiff was told about the execution of the amended and restated agreement and whether that agreement required Order in Council (“OIC”) approval. The plaintiff also alleges breach of a 2005 power purchase agreement and seeks related relief.

[4] The defendant submits that the plaintiff’s claims can and should be dismissed now because they are bound to fail. I agree. This is a case where the finalizing of an agreement was caught up in the course of a major legislative change. The plaintiff was notified of the status of the agreement and the reasons why it was not being delivered. The well-documented record does not show dishonesty or an attempt to mislead regarding the status of the agreement or the need for an OIC, let alone any invidious purpose such as an attempt to negotiate a better deal. Similarly, there was no breach of the 2005 power purchase agreement. A trial is not required to fairly and justly determine these issues.

Events giving rise to claim

[5] Prior to its restructuring in 1999, Ontario Hydro entered into numerous agreements to purchase power from privately owned, non-utility generators, also called NUGs. The NUG program was established in the late 1980s as a way of reducing the overall cost of producing electricity in Ontario. Ontario Hydro turned to the private sector to construct power generation facilities to assist in meeting anticipated growth in demand for electricity. The power purchase agreements entered into between Ontario Hydro and NUGs were typically long-term agreements that recognized that NUGs would invest significant capital to build and operate a power generating facility.

[6] Ontario Hydro entered into agreements with numerous NUGs across the province. The power purchase agreements between each of them were quite diverse in their terms and conditions. However, only Ontario Hydro was permitted to purchase the power, as provided for in the Power Corporation Act, R.S.O. 1990, c. P.18, which was then in force.

1991 Power Purchase Agreement

[7] Ontario Hydro entered into a power purchase agreement with PLP dated June 1, 1991 (the “1991 PPA”).

[8] The 1991 PPA set out the terms under which PLP could operate a power generating facility at Nipigon Falls and sell electrical power to Ontario Hydro. Under that agreement, PLP was obligated to construct the power generating facility and Ontario Hydro had a number of financial obligations in relation to the financing of the construction as well as for the purchase of the power generated by the facility. The 1991 PPA had a fifty-year term.

[9] In order to finance the construction of the facility, PLP raised about $15 million in equity and obtained long-term debt financing of $8.25 million from The Canada Life Assurance Company. Under the 1991 PPA, Ontario Hydro agreed to make guaranteed monthly payments to Canada Life to repay the Canada Life loan. Those guaranteed payments were calculated to amortize the loan over a period of 20 years, regardless of the amount of power produced at the Nipigon Falls facility and regardless of whether PLP breached the 1991 PPA. The guaranteed payments were intended to give comfort to Canada Life in deciding to advance the financing to PLP in that Ontario Hydro would be making those payments directly to Canada Life.

[10] The 1991 PPA formed part of a group of agreements regarding the Nipigon Falls project that were referenced under an agreement called the “Six Party Agreement” dated June 27, 1991. Among other things, the Six Party Agreement required that Ontario Hydro seek approval of the Lieutenant Governor in Council for the 1991 PPA, as then required by the Power Corporation Act.

[11] The 1991 PPA was approved by an OIC dated November 20, 1991. One of the issues that arose between these parties at a later stage was whether an additional OIC was required in relation to another PPA signed in 1999.

[12] The 1991 PPA was structured so that, for about eleven years, the total payments made by Ontario Hydro would exceed the value of the power generated at the Nipigon Falls facility. This imbalance created excess payments that Ontario Hydro recorded as a debt owing to it by PLP and was referred to as "Generator Debt". When the Canada Life loan had been repaid in full, the Generator Debt would also be repaid in full.

Nipigon Falls flood

[13] The Nipigon Falls facility commenced operation; however, it experienced problems in 1992 and 1995 as a result of flooding. The 1995 flood caused major equipment failures. As a result, the facility was no longer able to generate power or sell power to Ontario Hydro. The facility stopped operations. In turn, PLP was in breach of the 1991 PPA.

[14] As required under the 1991 PPA, Ontario Hydro continued to make the guaranteed payments to Canada Life. Those payments had to be made whether or not the facility was generating electricity and whether or not PLP was in default of its contractual obligations.

[15] Ontario Hydro agreed to allow the general partner of PLP to sell its interest and restructure PLP’s debt to facilitate getting the facility refurbished and back in operation.

Proposed PPA

[16] By letter dated July 25, 1997, Algonquin Power Corporation Inc. confirmed its intention to acquire PLP and the Nipigon Falls facility. However, its acquisition was conditional on reaching an agreement with Ontario Hydro regarding certain amendments to the 1991 PPA. The proposed amendments called for Ontario Hydro to make significant financial concessions, including a major reduction of the Generator Debt that would otherwise be owing by PLP. Ontario Hydro concluded that these concessions were acceptable to mitigate its losses, given its continuing long-term financial obligations under the 1991 PPA.

[17] By letter dated September 10, 1997, Ontario Hydro confirmed its agreement to certain amendments to the 1991 PPA. The letter provided that if the amendments were acceptable, the parties would enter into an amending agreement prior to the date that the refurbished facility was reconnected to the hydro grid and capable of delivering power. The Ontario Hydro letter was signed back by Mr. Boulanger of Yonge-St. Clair Financial Services Inc., as agent for the purchaser of the Nipigon Falls facility.

[18] In late 1997, the Extrudex Group purchased Algonquin Power’s interest in PLP through a wholly-owned subsidiary – 1200757 Ontario Limited.

[19] The parties then began addressing the need for an amended and restated power purchase agreement, including the financial concessions by Ontario Hydro. Concurrently, PLP was taking steps to rebuild and refurbish the facility. Its expectation was that the negotiation of the amended PPA would take a few weeks and that the facility would be up and running eight months after construction began. However, the negotiation of the amended agreement was not completed within that short period of time, nor was the facility up and running the next year.

[20] A number of drafts of an amended and restated PPA were exchanged between the parties. Throughout this period, PLP’s counsel dealt with Jill Medley at Ontario Hydro, a senior commercial specialist in the contract area. Ms. Medley was not a lawyer. Ms. Medley routinely noted in her correspondence that drafts of the PPA that she was sending were subject to further comments and revisions by Ontario Hydro’s solicitors.

[21] In December 1998, Ms. Medley exchanged emails with in-house counsel at Ontario Hydro regarding the potential impact of an upcoming legislative change on the amended and restated PPA that was under negotiation. Specifically, the Energy Competition Act, S.O. 1998, c.15, had been passed in 1998 and it contemplated that the existing Power Corporation Act would be repealed on April 1, 1999.

[22] Ms. Medley asked in-house counsel what impact these changes would have on the requirement to get an OIC for the amended PPA. In reply, in-house counsel indicated that she had tried to draft the PPA such that OIC approval was not required.

[23] In early 1999, the parties arrived at the point of executing the amended and restated PPA. By letter dated March 1, 1999, Ms. Medley provided counsel to PLP with executable copies of the “Amended and Restated Power Purchase Agreement” (the “1999 PPA”).

[24] Ms. Medley’s cover letter noted that “final execution” of the 1999 PPA by Ontario Hydro was conditional upon obtaining consent from Canada Life, as required under the Six Party Agreement. That consent was provided the same day. However, her correspondence did not mention OIC approval. It was Ms. Medley’s belief that an OIC was not required, however, she did not communicate with PLP about this issue until after the restructuring of Ontario Hydro. Ms. Medley’s belief is not a factual issue. Her evidence on this application, put forward by PLP, makes it clear that she held that belief then and now.

[25] By letter dated March 9, 1999, counsel to PLP returned the copies of the 1999 PPA, executed by PLP, to Ontario Hydro for its execution. Ontario Hydro then executed the 1999 PPA. However, Ontario Hydro did not deliver the 1999 PPA to PLP. It was caught up in the implementation of the restructuring of Ontario Hydro that, coincidentally, happened at that time. The transition team decided not to return the executed copies to PLP until they had an opportunity to review the changes and determine if OIC approval was required.

Restructuring of Ontario Hydro

[26] The Energy Competition Act that was passed in 1998 was part of what the Ontario government described as its plan to create a fully competitive electricity market in Ontario. That Act provided for the reorganization of Ontario Hydro into five distinct corporations, effective April 1, 1999, among other changes. Under the reorganization, Ontario Hydro itself was continued and ultimately renamed OEFC.

[27] Among other legislative changes, the then Power Corporation Act was repealed.

[28] By notice dated April 16, 1999, all NUGs, including PLP, were given formal written notice under their PPAs that OEFC, as the continuation of Ontario Hydro, held all rights, obligations and liabilities relating to the PPAs formerly held by Ontario Hydro, including related financing agreements. However, operating agreements with NUGs were transferred to one of the new corporations – Ontario Hydro Services Company Inc. (“OHSC”). OEFC retained OHSC’s services to undertake the day-to-day administration of the PPAs on OEFC’s behalf.

[29] By letter dated April 22, 1999, Ms. Medley also provided Extrudex, PLP’s owner, with the above notice. At that point, she had moved to the position of Manager in the Contracts area at OHSC.

Status of 1999 PPA

[30] By June 18, 1999, Ms. Medley had told PLP that the 1999 PPA had been executed by Ontario Hydro before the restructuring, and told PLP why it had not then been delivered. By letter of June 18, 1999, counsel to PLP then wrote to OEFC. PLP’s counsel was a senior practitioner with extensive experience negotiating and finalizing contracts for numerous NUGs. He had been involved in the negotiation of the 1999 PPA and continued to represent the plaintiff in its contract steps thereafter.

[31] Counsel’s June 18 letter stated that PLP had been advised by Ms. Medley that the 1999 PPA had been executed by Ontario Hydro. The letter recounted what she told them that after the agreement had been finalized and executed, Ontario Hydro “apparently changed its mind and decided that indeed Cabinet approval was required.” The letter further stated that prior to Ontario Hydro being able to obtain Cabinet approval, the legislation changed and now no one wanted to take responsibility. In his letter, plaintiff’s counsel took the position that the 1999 PPA had been validly executed by Ontario Hydro and requested that it be delivered immediately.

[32] Ms. Medley’s evidence on this motion confirmed that, as part of the transition, OEFC had asked that the executed copies of the 1999 PPA not be returned until it had an opportunity to review the changes and determine if OIC approval was required.

[33] The parties met in July. Given the restructuring of Ontario Hydro, new people were involved on behalf of what was now OEFC. The new contact at OEFC followed up by letter dated August 19, 1999. He wrote that OEFC had reviewed the contractual arrangements relating to the Nipigon Falls facility and determined that Ontario Hydro did not secure an OIC approving the 1999 PPA. OEFC wrote that because the relevant provisions of the Power Corporation Act had been repealed in the meantime, it was considering appropriate courses of action and would respond further. It was OEFC’s consistent position then and thereafter that an OIC had been required.

[34] The August 19, 1999 letter also stated OEFC’s understanding that Ontario Hydro had informed PLP that OIC approval was required. That statement is disputed.

[35] The parties then embarked on discussions regarding an amended PPA. PLP’s main witness on this motion was Chris Abrahamse. Mr. Abrahamse is a partner in an accounting firm and provided business and accounting advice to PLP, including direct involvement with the PPA negotiations. He attests that PLP embarked on that negotiation because OEFC had refused to confirm that the 1999 PPA was signed and refused to deliver a copy of the 1999 PPA to PLP. However, the ample record on this motion demonstrated that PLP was promptly given the information by Ms. Medley, and it was never said to be wrong, nor was it wrong.

[36] By letter dated October 18, 1999, plaintiff’s counsel wrote to outline the general terms upon which they were willing to enter into discussions “to finalize a workable arrangement” with Ontario Hydro. In that letter, PLP’s counsel repeated that his clients believed that they had an enforceable PPA. OEFC does not dispute this proposition either. The 1991 PPA was still in force, pending execution of a formal amended and restated PPA before the Nipigon Falls facility was back online, which had not yet occurred.

[37] The dialogue between the parties continued in 2000. PLP expressed its frustration with the pace of the negotiations, highlighting its continued expenditures on the project and litigation it had to respond to arising from delays. By letter dated February 17, 2000, OEFC acknowledged PLP’s concerns and agreed that it was important to move forward. In that letter, OEFC agreed to proceed on the basis of the 1999 PPA and invited the plaintiff to contact a named individual to discuss the appropriate documentation to formalize the agreement.

[38] On April 4, 2000, the parties had a meeting. One of the issues discussed was the prospect of simply re-executing the 1999 PPA. OEFC confirmed that it could not do so because many of the terms were no longer capable of performance by OEFC due to the intervening legislated restructuring. A new agreement was required.

[39] An OEFC representative who was present at the April 4, 2000 meeting wrote an internal email in which he noted that: “[a]t the meeting I confirmed that we are not in a position to deliver the [1999 PPA] which was executed by Hydro”. This statement is disputed insofar as it says that PLP was told at the meeting that the 1999 PPA had been executed by Ontario Hydro.

[40] After the April 4 meeting, counsel to PLP wrote to OEFC by letter dated April 11, 2000, stating that at the meeting OEFC agreed to comply with the terms and conditions in the 1999 PPA. OEFC replied by letter dated April 18, 2000, clarifying its position with respect to the status of the 1999 PPA. Its letter stated, in relevant part, as follows:

… As you know, the [1999 PPA] was not approved by order-in-council as required under the Power Corporation Act prior to April 1, 1999. The [1999 PPA] was therefore not validly approved prior to the restructuring of Ontario Hydro pursuant to the Electricity Act, 1998.

Pursuant to transfer orders under the Electricity Act, 1998, the power purchase agreements with non-utility generators (the “NUG Contracts”) that Ontario Hydro had entered into remained with OEFC which is the continuation of Ontario Hydro. OEFC is responsible for the payment obligations under the NUG Contracts. However, under the restructuring of Ontario Hydro certain business activities, including electricity transmission, distribution, generation, inspection, sale and metering activities of Ontario Hydro, were transferred to Ontario Power Generation Inc., Ontario Hydro Services Company, the Independent Market Operator and the Electrical Safety Authority or their respective subsidiaries, effective April 1, 1999.

As a result, OEFC is unable to perform certain of the obligations of Ontario Hydro under the NUG Contracts and similarly is unable to perform certain of the obligations which Ontario Hydro would have undertaken under the [1999 PPA]. As we have discussed with you, for this reason OEFC is not able to execute the [1999 PPA] in its present form. However, OEFC has agreed to treat the [1999 PPA] in the same manner as NUG Contracts which were executed by Ontario Hydro and approved by order in council under the Power Corporation Act prior to April 1, 1999.

As you know, OEFC is currently developing its position on the revisions to the NUG Contracts which are required to facilitate their integration into the market as the Province moves to open access. We will be contacting you shortly to pursue the execution of an agreement with your client which reflects these revisions. … [Emphasis added.]

[41] Thus, OEFC repeated its consistent position that the 1999 PPA had not been delivered because the required OIC approval had not been obtained prior to the restructuring of Ontario Hydro. The need for an updated agreement then became part of the process being followed for all NUGs, given the restructuring.

[42] By letter dated March 7, 2001, OEFC provided PLP with a draft PPA. This letter expressly acknowledged that the parties had previously “negotiated and agreed to the terms of” the 1999 PPA, repeating that “this agreement did not receive the requisite government approval at the time.” OEFC indicated that, in preparing the new draft agreement, it had “tried to be as consistent as possible” with the 1999 PPA and “generally made changes only where necessary” in light of the new regulatory regime. The main changes were highlighted in the cover letter and a black-line to the 1999 PPA was provided to PLP. As such, the proposed changes were clearly shown on the draft.

[43] There is no issue that PLP was represented by counsel throughout the negotiations. The plaintiff was in a position to respond and address any difficulties it had with the proposed PPA. Indeed, various changes were negotiated between the parties, including changes requested by PLP.

[44] The dialogue between these parties continued over the next few years, with intermittent periods of no activity. In late November 2004, OEFC sent PLP an execution version of the then proposed amended and restated PPA. PLP indicated that it would return executed copies shortly, but the amended and restated PPA was not fully executed until around its effective date in July 2005 (the “2005 PPA”).

2005 PPA

[45] The 2005 PPA sets out some of the history in its recitals, including a statement about the 1999 PPA, as follows:

WHEREAS: A. The Generator and Ontario Hydro entered into a Power Purchase Agreement dated June 1, 1991 (the “PPA”) for the sale of electrical power from the Generator to Ontario Hydro and for the sale of General Power from Ontario Hydro to the Generator. B. The Generator and Ontario Hydro subsequently negotiated and agreed to the terms of an amended and restated power purchase agreement on February 26, 1999 [the 1999 PPA], but this agreement did not receive the requisite government approval and consequently did not become binding on the parties. … [Emphasis added.]

[46] The 2005 PPA included an interpretative clause, as follows:

25.8 Each Party to this Agreement acknowledges and agrees that it has participated in the drafting of this Agreement and, accordingly, this Agreement shall not be interpreted either more or less favorably in favour of any Party to this Agreement by virtue of the fact that one Party or its counsel has been principally responsible for the drafting of all or a portion of this Agreement. [Emphasis added.]

[47] The 2005 PPA also included an entire agreement clause, as follows:

22.1 This Agreement constitutes the entire agreement between the Parties to this Agreement pertaining to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, negotiations and discussions, whether oral or written, of the Parties and there are no warranties, representations or other agreements between Parties in connection with the subject-matter of this Agreement except as specifically set forth herein. Notwithstanding the generality of the foregoing, the Parties agree: (i) that this Agreement supersedes and replaces the Power Purchase Agreement dated June 10, 1991, including but not limited to the letter agreement dated September 10, 1997 made between Ontario Hydro and Yonge-St. Clair Financial Services Inc. acting as agent for the Generator; and (ii) that this Agreement does not in any manner amend, modify, supersede or affect the validity or the binding effect of the Six Party Agreement dated June 27, 1991 made between Ontario Hydro, The Power Limited Partnership, BDM Developments Limited, Nipigon Power Limited, Barclay’s Bank of Canada, and Canada Life Assurance Company. [Emphasis added.]

[48] The 2005 PPA, as with the 1999 PPA, provided that the accumulated Generator Debt owing by PLP was written down to $2.7 million, a write-down of about $1.4 million by OEFC. The 2005 PPA included changes beyond those provided for in the 1999 PPA, including additional changes requested by PLP.

[49] Ultimately, the Nipigon Falls facility did not recommence delivering power to OEFC until May 2009. The restoration date was May 22, 2009.

[50] Between the effective date of the 1999 PPA and the restoration date, Ontario Hydro and then OEFC continued to make the monthly payments to Canada Life, without any ability to recover those payments from PLP. The payments for that period totaled about $11 million, to PLP’s benefit.

[51] In October 2010, as a result of a freedom of information request, PLP received documentation showing that the 1999 PPA had been signed by Ontario Hydro. PLP takes the position that this was when it “discovered” that the 1999 PPA had been signed. Mr. Abrahamse and PLP’s counsel on the negotiation attest that, prior to this time, they had become “firmly of the view” that the 1999 PPA had not been signed. This action was then commenced.

Action

[52] By notice of action issued October 18, 2012, followed by a statement of claim dated November 7, 2012, the plaintiff sued the defendant. Damages of $6 million are claimed. The following causes of action are alleged:

(i) breach of the duty of honest performance, generally referred to in this motion as the bad faith claim; (ii) negligent misrepresentation; and, (iii) certain claims for relief under the 2005 PPA.

[53] Both the bad faith and negligent misrepresentation claims are focused on the alleged concealment of the fact that the 1999 PPA had been signed by Ontario Hydro, and related steps including the question of whether or not OIC approval was required and what was done in that regard.

[54] Although not fully pleaded, rectification is sought in relation to certain of the claims under the 2005 PPA.

[55] The defendant advances defences to the merits of the claims, as well as estoppel and limitation period defences to most of the above claims.

[56] The parties have completed documentary production and, on this motion, have put forward the evidence of five witnesses all of whom have been cross-examined. OEFC’s witnesses are Kenneth Russell, Legal Counsel to the Ontario Financing Authority, which carries out OEFC activities, and Andrew Chan, Manager of Electricity Operations Group, which administers PPAs including the 2005 PPA. The plaintiff’s witnesses are Mr. Abrahamse, Ms. Medley and plaintiff’s counsel in the negotiations, Mr. Rubinoff.

Analysis

[57] The defendant has moved for summary judgment, dismissing this claim. The general principles applicable to a summary judgment motion are not disputed. The relevant portion of subrule 20.04(2) states as follows:

The court shall grant summary judgment if, (a) the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence. [Emphasis added.]

[58] As set out in Hryniak v. Mauldin, 2014 SCC 7, at para. 49, there will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits using the summary judgment process. This will be the case when the process: “(1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.”

[59] On a motion for summary judgment, the judge should first determine if there is a genuine issue requiring a trial based only on the evidence before him or her without using the fact-finding powers in subrule 20.04(2.1). If there appears to be a genuine issue requiring a trial, then, the motion judge may, at his or her discretion: (1) weigh the evidence, (2) evaluate the credibility of a deponent, or (3) draw any reasonable inference from the evidence unless it is in the “interest of justice” for these powers to be exercised only at trial: Hryniak, at para. 66. The proportionality principle means that “the best forum for resolving a dispute is not always that with the most painstaking procedure:” Hryniak, at para. 28.

[60] To defeat the use of Rule 20, the responding party must show that there is a genuine issue that requires a trial. The responding party must put its best foot forward: Sweda Farms Ltd. v. Egg Farmers of Ontario, 2014 ONSC 1200, at para. 26, aff’d, 2014 ONCA 878.

[61] If a trial is necessary for some of the claims in any event, it may not be in the interest of justice to use the fact-finding powers in Rule 20 to grant summary judgment because of the risk of duplicative proceedings or inconsistent findings of fact: Hryniak, at para. 60; Canaccord Genuity Corp. v. Pilot, 2015 ONCA 716, at para. 31; Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450, 120 O.R. (3d) 438, at paras 44-45. On the other hand, the most proportionate, timely and cost-effective approach may be to grant summary judgment: Hryniak, at paras. 60, 66 and 68. The crux of the issue is whether or not the judge is able to reach a fair and just determination on the merits using the summary judgment process.

[62] PLP submits that summary judgment is inappropriate because this case “involves a complicated and lengthy contractual relationship, and significant conflicting evidence on important issues.”

[63] Beginning with the contractual relationship, it was certainly long and had some complications, but it is well-documented and not the subject of significant factual dispute. A long and complicated relationship is not necessarily a barrier to a fair disposition of claims without a trial: Sweda Farms, at para. 32.

[64] Moving to the second objection, there are some areas of factual dispute, as one would expect in most cases. The question that arises is two-fold: (1) do these factual disputes need to be resolved in order to fairly and justly determine the claims or defences on their merits; and, if so, (2) is a trial required in order to do so. I will address those questions in the context of the specific claims and defences.

[65] OEFC’s summary judgment motion seeks a dismissal of PLP’s claims altogether. The claims, defences and other issues that have been raised are as follows:

(1) the bad faith claim; (2) the negligent misrepresentation claim; (3) OIC approval; (4) the limitation period defence; (5) estoppel by convention; and (6) the claims relating to the 2005 PPA.

(1) Bad faith

[66] PLP described its bad faith claim in its factum as follows:

The substance of PLP's complaint is that OEFC breached its duty of good faith and honest contractual performance by intentionally misleading PLP that OIC approval was needed to make the First Amended PPA binding on Ontario Hydro/OEFC. It did so in order to provide an excuse not to deliver the fully executed agreement to PLP and to reopen negotiations of the First Amended PPA which the parties had negotiated over a period of several months.

[67] As well, in the pleadings, PLP alleged that OFEC concealed the fact that the 1999 PPA had been signed by Ontario Hydro or misled PLP in that regard, and failed to take reasonable steps in regard to the OIC requirement and to implement the 1999 PPA.

[68] PLP’s bad faith claim is based upon the Supreme Court of Canada’s decision in Bhasin v. Hrynew, 2014 SCC 71, [2014] 3 S.C.R. 494. In that case, the Court acknowledged that there is a general organizing principle of good faith in contractual performance and a general duty to act honestly in the performance of contractual obligations: Bhasin, at para. 33. “This means simply that parties must not lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract.”: Bhasin, at para. 73.

[69] The duty of good faith is a general doctrine of contract law that imposes a minimum standard of honest contractual performance: Bhasin, at para. 74. It is not an implied term and therefore operates regardless of the intentions of the parties and the existence of an entire agreement clause: Bhasin, at para. 72; Canaccord Genuity, at para. 50.

[70] The duty of good faith is highly context specific and would likely have different implications in the context of a long-term contract of mutual cooperation than it would in a more transactional exchange: Bhasin, at paras. 47, 69.

[71] In considering this claim, it is important to begin by identifying the contractual obligation that was allegedly performed dishonestly. However, in this case, the course of conduct relied upon by PLP was the negotiation of a new contract, not the performance of an obligation under an existing contract. In essence, PLP accuses OEFC of intentionally misleading it in the course of negotiating and signing the 1999 PPA. The duty of honesty under Bhasin does not apply to a negotiation. PLP must tie this claim to a contractual obligation.

[72] Although the 1991 PPA was still in force, PLP does not allege that any obligation under it was being performed dishonestly. The 1991 PPA does not provide the foundation for a bad faith claim under Bhasin.

[73] In oral argument, PLP’s counsel raised for the first time the argument that the Six Party Agreement may provide the necessary contractual obligation to support this claim. That agreement did include an obligation that Ontario Hydro use its best efforts to obtain OIC approval. However, that contractual obligation was specific to the 1991 PPA. It did not impose an obligation in respect of amendments or replacement agreements. The obligation in the Six Party Agreement to obtain OIC approval for the 1991 PPA was fulfilled back in 1991.

[74] The only other potential contract was the 1999 PPA itself, but that was not advanced as a foundation for this claim, no doubt because it was still under negotiation at the relevant time.

[75] I therefore conclude that there was no contractual obligation to provide a basis for this claim. This claim therefore fails.

[76] Even if there was a contractual obligation, it is also plain on the factual record that there was no deliberate dishonesty, let alone dishonesty for the purpose of reopening negotiations. It was bad timing, and the parties agree that the timing was coincidental. Nor is there any factual dispute that has an impact on this conclusion.

[77] Beginning with the allegations regarding OIC approval, I observe that the question of whether or not an OIC was required is a legal question, not a matter of fact. I question whether a position on a legal issue could be found to be “dishonest” in any event, but I have not decided the motion on this basis since that issue was not argued before me.

[78] Moving to the evidence on OIC approval, Ms. Medley was the person at Ontario Hydro who was responsible for direct dealings with PLP. She did not believe OIC was required and therefore did not communicate such a requirement to PLP. This evidence is not only unchallenged by the plaintiff, but it was put forward by the plaintiff on this motion. Obviously, her failure to raise this requirement in her correspondence with PLP was not born of dishonesty or an attempt to mislead. It was a simple reflection of her belief, whether or not she was right about that legal issue.

[79] The defendant has produced a privileged letter from Smith Lyons to OEFC dated July 30, 1999, which includes the following statement: “In our conversation with Jill Medley, who was involved in negotiations of the [1999 PPA] with [PLP], we were informed that both parties were made aware (at least at a later stage of the negotiations) that an Order in Council was apparently required for the ARPPA, and both parties believed that it would be forthcoming.” Ms. Medley disputes this statement. For purposes of this motion, I need not resolve this factual dispute. I have disregarded this letter.

[80] While in-house counsel had been trying to draft the agreement so as not to require an OIC, the final 1999 PPA did not accomplish that goal. There is no suggestion in the evidence that in-house counsel was not acting in good faith.

[81] In the course of transition, the new people becoming involved for OEFC wanted to review the matter including the issue of OIC approval. This was also confirmed in the evidence of the plaintiff’s witness, Ms. Medley. Once OEFC was ready to take a position on the subject, not long after the restructuring, it consistently took the position that OIC approval had been required for the 1999 PPA. PLP has not demonstrated that this position was anything other than OEFC’s good faith position on a legal issue.

[82] Nor has PLP demonstrated that OEFC took this position in order to reopen negotiations with PLP. Quite the contrary, OEFC repeatedly confirmed that it would proceed on the basis of the business terms as set out in the 1999 PPA and focus on implementing the contract changes needed to reflect the restructuring of Ontario Hydro, as it was doing with the other NUGs.

[83] As for disclosure of the fact that the 1999 PPA had been signed by Ontario Hydro, PLP was given that information directly from its main contact, Ms. Medley, at the relevant time in 1999. This is confirmed both in the June 18, 1999 letter from PLP’s counsel and in Ms. Medley’s evidence on this motion. Ms. Medley also told PLP that OEFC had concluded that OIC approval was needed. PLP had all of this information by June 1999.

[84] PLP submits that it was misled about the execution of the 1999 PPA because it was not told again, after being told by Ms. Medley, that it had been executed. In support of this submission, PLP relies on the absence of an affirmative written communication from OEFC stating that the 1999 PPA had been executed. It also relies on inferences its witnesses say they drew from certain written communications at later stages. Mr. Abrahamse attested that in April 2000, he took OEFC’s statement that it could not simply “re-execute” the 1999 PPA to mean that the 1999 PPA had not been signed by Ontario Hydro. He also indicated that he interpreted the April 18, 2000 letter as making that suggestion. PLP’s transaction counsel attested to the same effect.

[85] Mr. Abrahamse and Mr. Rubinoff attested that over time, for the above reasons, they came to believe that the 1999 PPA had not been executed. Assuming that this belief was honestly held, it does not amount to any dishonesty on the part of OEFC. Ms. Medley said it had been executed. OEFC did not say otherwise.

[86] OEFC obviously relies on the June 19, 1999 letter from plaintiff’s counsel to OEFC, which expressly stated what they had been told by Ms. Medley. OEFC also put forward an internal memorandum that indicates that at a meeting between the parties in April 2000, OEFC confirmed that the 1999 PPA had been executed. The plaintiff disputes the accuracy of this memo. However, it is not necessary to resolve that factual dispute. Even if I assume that the signing of the agreement was not mentioned at the meeting, it remains the case that the plaintiff was told the agreement had been signed back in June 1999 and the defendant never disputed the accuracy of that information. The evidence does not establish either dishonesty or an intention to mislead on the part of OEFC.

[87] In summary, I conclude that this claim fails for lack of a contractual obligation to provide a foundation for the claim. It would nonetheless fail for lack of the alleged dishonesty or attempt to mislead. The defendant did not lie or otherwise knowingly mislead the plaintiff about matters directly linked to the performance of a contract.

[88] This claim also fails on the basis of the limitation period defence, as discussed below.

(2) Negligent misrepresentation

[89] PLP alleges negligent misrepresentation, which is described in its factum as follows:

PLP's negligent misrepresentation claim centres around Ontario Hydro and OEFC providing inaccurate and misleading information to PLP during the negotiations of the [1999 PPA] and [2005 PPA].

[90] As such, the alleged misrepresentations took place in the course of a series of contract negotiations: the negotiation of the 1999 PPA and the negotiation of the 2005 PPA.

[91] There is no stand-alone duty of care with respect to contractual negotiations: Martel Building Ltd. v. Canada, 2000 SCC 60, at paras. 67-68. As put by the Supreme Court of Canada in Martel at para 67: “It would defeat the essence of negotiation and hobble the marketplace to extend a duty of care to the conduct of negotiations…” However, Martel leaves open the possibility that there may still be a claim for negligent misrepresentation.

[92] PLP relies on the oft-cited case of Queen v. Cognos Inc., [1993] 1 S.C.R. 87, at p. 110, which established that the following elements are required to make out a case for negligent misrepresentation:

(1) there must be a duty of care based on a "special relationship" between the representor and the representee; (2) the representation in question must be untrue, inaccurate or misleading; (3) the representor must have acted negligently in making said misrepresentation; (4) the representee must have relied, in a reasonable manner, on said negligent misrepresentation; and (5) the reliance must have been detrimental to the representee in the sense that damages resulted.

[93] The alleged inaccurate and misleading information has the same focus as the allegations put forward in support of the bad faith claim. In short, PLP submits as follows:

PLP alleges that OEFC misled and/or misrepresented the state of affairs to PLP by failing to advise PLP that OIC approval and/or misrepresenting that OIC approval was required and failing to advise PLP that Ontario Hydro had executed the contract.

[94] With respect to the alleged failure to advise that Ontario Hydro had executed the 1999 PPA, PLP was told that the 1999 PPA had been executed shortly after that occurred, by its own witness and primary contact, Ms. Medley. For the reasons stated above in the discussion of the bad faith claim, I conclude that there was no inaccurate or misleading statement bearing in mind all of the evidence and assuming that factual disputes are resolved in favour of PLP’s version of events.

[95] The other alleged misrepresentations relate to OIC approval. PLP asserts that the failure to advise it that OIC approval was required in the time leading up to March 1999, or the statements made saying it was required after that time, were misrepresentations.

[96] The question of whether OIC approval was required is a question of law, not a matter of fact. Ordinarily, it cannot provide the foundation for a claim of negligent misrepresentation: Orr v. Magna Entertainment Corp., 2009 ONCA 776, at para. 46; Petro-Canada Inc. v. Capot-Blanc et al., [1992] 620 (B.C.S.C.), at pp. 18, 20. A statement regarding the law is a mere opinion and in any event the law is presumed to be known to both sides: Petro-Canada Inc., at pp. 20-21; Rule v. Pals, [1928] 3 D.L.R. 295 (Sask. C.A.), at para. 13.

[97] Even if I disregard this barrier to PLP’s claim, I find that the misrepresentation claim is bound to be unsuccessful for a number of other reasons. To begin with, there is no evidence before me that establishes that either Ontario Hydro or OEFC acted negligently in making the alleged misrepresentations. In the absence of such evidence, the claim must fail.

[98] In addition, the claim is excluded by the 2005 PPA. Section 22.1 of the 2005 PPA expressly provides that the 2005 PPA supersedes all prior and contemporaneous agreements, understandings, negotiations and discussions, whether oral or written, and provides that “there are no warranties, representations or other agreements between [the parties] in connection with the subject matter of [the 2005 PPA]...” The 2005 PPA is a sophisticated commercial agreement negotiated at length between commercial parties, with PLP represented by experienced senior counsel. It expressly and effectively excludes the misrepresentation claim.

[99] In addition, this claim fails on the basis of the limitation period defence, as discussed below.

(3) OIC approval

[100] Both parties before me submit that I need not decide whether or not OIC approval was actually required for the 1999 PPA. That may be so, but I conclude that OIC approval was required, providing yet another reason why the related claims by PLP are bound to fail.

[101] Prior to April 1, 1999, under the Power Corporation Act, Ontario Hydro required OIC approval to authorize it to enter into a power purchase agreement. Ontario Hydro did not otherwise have authority to do so. Subsection 28(2) of the Act, as it then was, provided as follows:

(2) In particular, but without limiting the generality of subsection (1), the Lieutenant Governor in Council, upon recommendation of [Ontario Hydro], may authorize [Ontario Hydro] to, (h) contract with any person generating, transmitting or distributing power, or proposing to do so, to supply power to [Ontario Hydro], and require any person generating, transmitting or distributing power to supply so much thereof as [Ontario Hydro] may require… [Emphasis added.]

[102] As stated in the 1999 PPA itself, it was a contract “For the Purchase of Power from the 5.3MW Hydraulic Generating Facility on the Namewaminikan River in the Township of Sandra”. The preamble stated that “The Generator agrees to restore, own and operate the Generating Facility… and desires to sell electrical power exclusively to Hydro” and that the “parties are willing to enter into an agreement for the supply of power by the Generator to Hydro…” Covenants to this effect are made in ss. 4.1 and 5.1 of the 1999 PPA.

[103] The 1999 PPA was a “contract with any person generating, transmitting or distributing power… to supply power to [Ontario Hydro]” under subsection 28(2) (h) of the Power Corporation Act. An OIC was required under the pre-April 1, 1999, legislative regime.

[104] The Power Corporation Act was repealed on April 1, 1999, by s. 28, Schedule E of the Energy Competition Act. Schedule A of the Energy Competition Act was the Electricity Act, 1998. Section 54 of the Electricity Act continued Ontario Hydro, which ultimately became OEFC. Section 55(1)(c) provided that the OEFC was to administer the “assets, liabilities, rights and obligations” that were not transferred to other entities created through the restructuring.

[105] Part X of the Electricity Act contained the transition provisions between the Power Corporation Act and the new statutory regime. Section 119 provided for a deemed OIC in limited circumstances, as follows:

If the approval of the Lieutenant Governor in Council was at any time required under the Power Corporation Act or a predecessor of that Act with respect to an asset, liability, right or obligation that is to be transferred by or pursuant to a transfer order, the approval shall be deemed to have been given. [Emphasis added.]

[106] The 1999 PPA was not the subject of a transfer order. As a result, the s. 119 transition provision did not provide retroactive OIC approval of the 1999 PPA.

[107] I conclude that prior to the legislative changes, OIC approval was required. That was OEFC’s consistent and accurate position.

(4) Limitation period defence

[108] OEFC also submits that PLP’s claims with respect to the duty of honesty and negligent misrepresentation are barred by the applicable limitation period. It submits that these claims arose before the effective date for the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B, and are therefore the subject of a six-year limitation period that expired long before this action was commenced in 2012.

[109] PLP disputes this defence based upon discoverability. PLP submits that the claim was timely because it was commenced within two years after receipt of the executed 1999 PPA in response to an access to information request in 2010.

[110] The discoverability principle provides that a limitation period commences when the plaintiff discovers the underlying material facts or, alternatively, when the plaintiff ought to have discovered those facts by the exercise of reasonable diligence. This concept has now been captured in s. 5 of the Limitations Act, 2002.

[111] PLP issued its Notice of Action in this matter on October 18, 2012. However, PLP knew, by April 18, 2000, at the latest, the following material facts:

(i) that Ontario Hydro had signed the 1999 PPA before April 1, 1999; (ii) that the agreement had not received OIC approval before April 1, 1999; (iii) that OEFC did not deliver the agreement to PLP; and, (iv) that OEFC would not re-execute the agreement because the contract required the performance of functions and obligations by Ontario Hydro, which OEFC could not perform due to the restructuring.

[112] PLP therefore had all of the necessary information to understand the status of the 1999 PPA by 2000, including the position of OEFC in that regard. At that time, the limitation period was six years, yet this action was not commenced for twelve years.

[113] Both PLP witnesses on this motion attest that it was not until they saw the signed 1999 PPA in 2010 that the pieces came together and they realized that the defendant had been “misleading” them “all along”. For purposes of this motion, I accept that this was their belief at that time. The limitation period defence still prevails. Whatever PLP’s actual belief, based on uncontested facts, PLP ought to have known the above matters by April 2000 at the latest, if not before.

[114] It is enough that PLP was told by their main contact person, Ms. Medley, that the 1999 PPA had been signed (by June 19, 1999) and they were never told that it had not been signed. By that time they also knew that there was no OIC. They obviously knew that the executed agreement had not been delivered to them by that time. And they were told in April 2000, if not before, that the agreement would not be re-executed. A reasonable person with the abilities and in the circumstances of PLP would have known all of the necessary facts by that time.

[115] Although not the focus of submissions before me, there is also the question of when PLP knew or ought to have known that there was damage. Given that the damage claims are generally focused on the delay between the execution of the 1999 PPA and the 2005 PPA, and the allegedly disadvantageous terms in the 2005 PPA, damage was either known or ought to have been known as of the 2005 PPA. By this time, a two-year limitation period applied. Again, this action was not commenced within two years of that time; it was commenced about seven years later.

[116] The duty of honesty and negligent misrepresentation claims are therefore also statute-barred.

(5) Estoppel by convention

[117] In its defence, OEFC also relies on estoppel by convention to defeat both the bad faith and misrepresentation claims. Estoppel by convention applies where there is mutual assent regarding a common assumption of fact or law that forms the basis of the transaction that the parties have entered into: Ryan v. Moore, 2005 SCC 38, at para. 4. In this case, the common assumptions that OEFC relies upon are found in the recitals to the 2005 PPA. The recitals expressly state that the 1999 PPA did not receive the requisite government approval and consequently did not become binding on the parties. OEFC submits that PLP cannot now challenge these statements, having agreed to the 2005 PPA.

[118] There is no doubt that PLP agreed to the recitals in the 2005 PPA. It is not clear to me that resort to estoppel by convention adds much to the barriers to these claims.

(6) Claims related to the 2005 PPA

[119] PLP also raises certain issues regarding the 2005 PPA in particular. The issues relate to the Occasional Payment Rate, capacity and targets. The cause of action is breach of contract, and in one area, rectification is claimed.

[120] These issues require the interpretation of the 2005 PPA. A contract should be interpreted “as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract”: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, at para. 47.

[121] In interpreting a contract, the court should take a practical, common sense approach not dominated by technical rules of construction, with due regard for proper evidence of surrounding circumstances: Sattva, at para. 47.

[122] The nature and extent of evidence of the surrounding circumstances that may be considered in interpreting a contract is not unlimited. As set out in Sattva, at para. 58:

The nature of the evidence that can be relied upon under the rubric of “surrounding circumstances” will necessarily vary from case to case. It does, however, have its limits. It should consist only of objective evidence of the background facts at the time of the execution of the contract… [T]hat is, knowledge that reasonably ought to have been within the knowledge of both parties at or before the date of contracting… [Emphasis added.]

[123] I address each of the claims put forward alleging breach of the 2005 PPA, applying these principles.

[124] Occasional Payment Rate: Under the 2005 PPA, PLP is eligible to be paid the Occasional Payment Rate for all power generated that exceeds 120% of the monthly Target Generation without limitation, except for the s. 4.2 Capacity Power limit.

[125] PLP claims that OEFC arbitrarily and unilaterally reduced the Occasional Payment Rate. It alleges that OEFC made a “unilateral change in policy” that was “contrary to the intention of the parties” under the 2005 PPA, resulting in a reduction in the rate at which it pays for occasional power.

[126] The definition of Occasional Payment Rate in the 2005 PPA is as follows:

1.38 “Occasional Payment Rate” means the rate or rates expressed in cents per kilowatt hour as determined from time to time by OEFC’s Board of Directors for occasional purchases of electrical energy from generating facilities. [Emphasis added.]

[127] Although resort to the history of the clause is not required, I note that this definition was part of the very first draft of what became the 2005 PPA. That first draft was provided to PLP in 2001, including a black line between the draft agreement and the 1999 PPA in order that all proposed changes be obvious. That same definition remained part of the agreement going forward through to its execution in 2005 and was not raised by PLP as an issue in the negotiation.

[128] The Occasional Payment Rate is also a defined term in the 1991 and 1999 PPAs. It is defined differently in each of the 1991, 1999 and 2005 agreements. The first two definitions are formulaic and were based upon the rate that Ontario Hydro paid for purchases from direct customers. A new definition was needed because after the restructuring in 1999, there was no longer an Ontario Hydro that made occasional purchases from direct customers. There was therefore no rate for such purchases that could be used in a formula.

[129] Applying accepted contract interpretation principles, the definition in the 2005 PPA is clear and unambiguous. The rate is to be determined by the Board. The evidence failed to demonstrate that the Board erred in some way that could be an arguable breach. PLP’s argument appeared to more focused on the fact that the definition was changed, as of the 2005 PPA. It appears that PLP is essentially arguing that the new definition ought not have been introduced into the 2005 PPA. But, there is no breach of the agreement on its clear terms.

[130] Further, the applicable two-year limitation period has expired. PLP was aware of the actual Occasional Payment Rate that it now complains of by June 2009. The Rate was set out in the monthly statements sent by OEFC to PLP. The first of those statements was sent to PLP in June 2009 with respect to generation during the first month when the refurbished plant began to produce electricity, which was May 2009. PLP did not issue this claim until October 2012, about 3 ½ years later.

[131] Capacity: PLP further claims that OEFC wrongly capped its purchase of energy from PLP. This claim focuses on changes to what is now s. 4.2 of the 2005 PPA. That section provides as follows (the emphasis shows the additional words in the 2005 PPA that were not present in prior agreements):

The Generator shall sell all Capacity Power exclusively to OEFC, with such sale not to exceed 4,788 kilowatt-hours in any one-hour period, at any time without the prior written consent of OEFC. Any electrical power produced by the Generator and delivered to OEFC at the Delivery Point in excess of 4,788 kilowatt-hours in any one hour period without OEFC's prior written consent shall be at no charge to OEFC.

[132] The additional words in the 2005 PPA introduce a one-hour cap. PLP submits that the imposition of a one-hour cap was not intended by the parties, and seeks the remedy of rectification. Although not properly pleaded, this motion proceeded on the basis that rectification was claimed for this issue.

[133] Where the terms of a written agreement do not accord with the true agreement between the parties, equity has the power to rectify that written agreement so as to make it accord with the true agreement: McLean v. McLean, 2013 ONCA 788, at para. 5, citing Snell’s Equity, 32nd ed. (London: Sweet & Maxwell, 2010) at para. 16-001.

[134] What is rectified is not a mistake in the transaction itself, but a mistake in the way in which that transaction has been expressed in writing: McLean, at para. 5, citing Snell’s Equity.

[135] The question that the court must answer is whether the totality of the evidence supports the conclusion, on a balance of probabilities, that an agreement was in place but that an error was made recording it. This is an objective inquiry: McLean, at para. 60.

[136] The 2005 PPA is clear and unambiguous on the issue of the cap. On a proper construction of that agreement, leaving aside the issue of rectification, there was no breach. The claim for rectification changes the analysis and expands the scope of relevant evidence. However, recourse to that expanded evidentiary record does not establish an entitlement to rectification, nor does that decision turn on matters of factual dispute.

[137] In support of its claim for rectification, PLP relies on the cover letter that accompanied the first draft of the 2005 PPA to show mutual intention. That letter, dated March 7, 2001, stated, “We have tried to keep this revised agreement as consistent as possible with the [1999 PPA] and have generally made changes only where necessary in light of the new regulatory regime.” Alone, that letter does not substantiate the plaintiff’s claim for rectification. It is qualified in its wording, saying that OEFC “tried to” keep the agreement consistent and “generally” made only the necessary changes. Further, this particular change was not proposed at that time. It was introduced at a later stage in the negotiations. It was therefore not attached to the expression of intention set out in the letter.

[138] PLP submits that the changes that OEFC made to s. 4.2 were not required or necessary to comply with the new regulatory regime. Even if that were so, over the years, the negotiation included other proposed changes by both sides.

[139] PLP further submits that since power cannot be stored or sold to anyone else, it made no commercial sense to have an hourly cap on the generation of power. For purposes of this motion, I accept the argument that it did not make commercial sense from PLP’s standpoint. That alone does not mean there had been a mistake in the way in which the transaction had been expressed in writing. There is additional relevant factual context regarding why the facility came to produce power in excess of the cap.

[140] Each of the 1991, 1999 and 2005 PPAs included the provision that the sale of power was not to exceed 4,788 kilowatt-hours. The newly refurbished distribution facility, which did not come online until 2009, had increased capacity. Its capacity was not 4,788 kilowatt-hours. It was 5,800 kilowatt-hours.

[141] As a result, about four years after entering into the 2005 PPA, PLP went into operation with a significantly higher capacity. The cap provided for in s. 4.2 was exceeded in three separate months over the period of about 1½ years after the plant went online. PLP inquired about the cap in an email from an accountant at Extrudex, PLP’s owner, on June 30, 2009. Other inquiries were made thereafter and OEFC noted the limit in s. 4.2.

[142] PLP’s response to these three instances was not to allege that the 2005 PPA misstated the true agreement. On the contrary, by letter dated December 21, 2010, PLP wrote to formally request an increase in the capacity power limit for the facility from the 4,788 kilowatt-hours specified in s. 4.2 to 5,800 kilowatt-hours. In its letter, PLP noted the above three months in which the generation exceeded the ceiling in s. 4.2. In addition to requesting an increase in the capacity power limit, PLP asked OEFC to give consideration to the fact that it had not been paid for the excess power in those three months and asked that it compensate PLP at a rate and using a calculation that PLP left up to OEFC. That letter did not assert that s. 4.2 did not accord with the true intention of the parties when entering into the 2005 PPA.

[143] By letter dated May 6, 2011, OEFC replied that it was not prepared to amend the existing capacity power limit in s. 4.2. However, it proposed that it would agree to amend the 2005 PPA to make payment for production that exceeded the hourly capacity power limit, on proposed terms set out in the letter. On that basis, it also indicated that it would pay for the three months of excess capacity generation. However, PLP did not accept the proposed terms. Accordingly, OEFC continued to pay only for that power generated and supplied that fell within the s. 4.2 limit.

[144] PLP submits that it did not realize the impact of the change in wording implemented in s. 4.2 of the 2005 PPA until the refurbishment was back in operation in 2009. I assume that was the case for the purposes of this motion. However, the late realization of the impact of a contract clause does not entitle a contracting party to have rectification unless it can demonstrate that it was the common intention of the parties, when entering into the agreement, to have a different result. That has not been demonstrated here, bearing in mind the totality of the evidence.

[145] A second capacity issue was also raised by PLP. It claims that OEFC has failed to pay for “Excess Generation”, and that it was always the intention of the parties that the Generator Debt would be reduced by multiplying the Excess Generation of Energy by the Occasional Payment Rate.

[146] Excess Generation is defined in the 2005 PPA at s. 1.22 as follows:

“Excess Generation” means that amount of energy expressed in kilowatt hours for any Month for a Time of Delivery Period determined in the Month by subtracting 120% of the Target Generation for a Month from the Actual Generation for the same Month.

[147] PLP’s entitlement to compensation in respect of Excess Generation under the 2005 PPA is different during and after the Amortization Period. During the Amortization Period, there is no provision for payment for Excess Generation. However, after the Amortization Period, OEFC must pay for Excess Generation as provided for in the 2005 PPA. On the evidence before me, it has done so. Since PLP has continued to have New Generator Debt after the Amortization Period, it has continued to receive a credit to that debt account in respect of Excess Generation, as applicable.

[148] In oral argument, counsel to PLP submitted that the claim for rectification may also apply to this issue. I assume that it does for the purposes of this motion. However, PLP has again failed to demonstrate that it was the common intention of the parties, when entering into the 2005 PPA, to have a different agreement, bearing in mind the totality of the evidence.

[149] Monthly targets: Lastly, PLP claims that OEFC arbitrarily established monthly targets for the production of Capacity Power, settling the payment for energy on a monthly basis rather than in accordance with the seasonal targets in the 2005 PPA. PLP alleges that to do so, even if the seasonal target had not been reached, is a breach of contract.

[150] This issue arises because the agreement sets out seasonal targets but also requires that certain calculations and that payment be made on a monthly basis. This issue was not given significant attention in either the written or oral argument. It was presented in only a very general way, especially by PLP.

[151] Schedule “A” to the 2005 PPA sets out terms and conditions for payment of Capacity Power. “Target Generation” is defined in s. 16(d) of Schedule A, and provides different targets for each of four seasonal periods of delivery. Those four seasonal periods are: Winter on-peak, Winter off-peak, Summer on-peak and Summer off-peak. Those periods are each defined. For example, Winter on-peak is the period from October to the end of March, between 7 AM and 11 PM local time, Monday to Friday, except public holidays.

[152] “Target Generation” is used in a number of sections in Schedule “A”. Significantly, it forms part of calculations in ss. 12 and 13, which provide that certain payments must be made by OEFC. However, ss. 12 and 13 use a monthly time period for the required calculation. For example, s. 13 provides as follows:

13. If at the end of the Amortization Period the New Generator Debt has not reached zero, then OEFC will pay the Generator for Actual Generation up to 120% of the Target Generation for each Month at the Bonus Payment Rate only. The sum of the amount of money for each Month determined by multiplying the Actual Generation up to 120% of the Target Generation for the Month by the difference between the Final Thirty Year Rate and the Bonus Payment Rate, together with the amount of money determined by multiplying the Excess Generation in the Month by the Occasional Payment Rate for the Month will be retained by OEFC to reduce the New Generator Debt to zero. Notwithstanding this Section 13, Schedule “A” of this Agreement, the New Generator Debt account balance shall be due and payable in full on the twentieth (20th) anniversary of the Restoration Date. [Emphasis added.]

[153] Hence, although Target Generation is defined using four seasonal time periods, s. 12 requires that calculations be made using the Target Generation “for each Month”. Month is defined as a calendar month. This is also the case in ss. 12 and 14, which are other payment provisions.

[154] In addition, these payments include Bonus Payments. Like the definition of Target Generation, the Bonus Payment Rate is prescribed in s. 16 on a seasonal basis. However, monthly time periods are used in the definition of Bonus Payment in s. 1.8 of the agreement, and again the clause requires a calculation of “Target Generation for the Month”:

“Bonus Payment” means that amount of money determined by multiplying the Bonus Payment Rate for the appropriate Time of Delivery Period for a given Month by the Actual Generation for the same Month up to 120% of the Target Generation for the Month. [Emphasis added.]

[155] In turn, s. 3(b) Schedule “A” provides that OEFC must make its required payments monthly:

Payments for Capacity Power delivered to OEFC that are owing to the Generator pursuant to this Agreement will be paid within 21 business days of the end of the Month in which the Capacity Power was delivered to OEFC. [Emphasis added.]

[156] Thus, the 2005 PPA requires that the payments be calculated on a monthly basis and paid monthly.

[157] Although the Target Generation is presented on an aggregate basis, the 2005 PPA does include monthly breakdowns in another Schedule. Schedule “B” describes the Generating Facility and Delivery Point. Section 3 gives a monthly breakdown of Average Capacity Power Output (net of Internal Load) for each month in both the on-peak and off-peak periods. Section 4 gives a monthly breakdown of “Restored” Average Capacity Power Output (net of Internal Load) for each month in both the on-peak and off-peak periods.

[158] When the plant came back online in 2009, OEFC began by using the figures in s. 3 of Schedule “B”, which total to the same amount as the Target Generation figures. As of December 2009, it concluded that the “Restored” figures in s. 4 of Schedule “B” should be used, which are slightly different, although the payments in 2009 would not have been any different whether calculated using s. 3 or s. 4. Going forward, the “Restored” figures were used. PLP has not challenged this change from s. 3 to s. 4.

[159] PLP claims that the payments should be settled on a seasonal, rather than a monthly basis. This is contrary to the plain words of the agreement, including ss. 3, 12, 13 and 14, which expressly require monthly calculations and monthly payments. No other interpretation was presented to me that the words of the 2005 PPA could reasonably bear, other than the interpretation advanced and used by OEFC. No potential for ambiguity has been demonstrated by PLP.

[160] Interpreting the 2005 PPA as a whole, giving the words used their ordinary and grammatical meaning, it is clear and unambiguous that Target Generation must be translated into a monthly figure. This is required to calculate the amount that must be paid and payment must also be made on a monthly basis. Although the 2005 PPA does not define Target Generation on a monthly basis, it provides a method to translate the aggregate figures into the necessary monthly figures, which was used by OEFC. PLP has failed to establish a breach of contract.

Summary judgment

[161] I conclude that I can determine the issues on this motion fairly and justly without a trial. I am confident that I have found the necessary facts and applied the relevant law to the evidence filed and that it is in the interests of expedient, affordable and proportionate justice to do so in this case. I have not needed to make any credibility findings that would necessarily require a trial in any event. Indeed, for the purposes of this motion, I have proceeded on the assumption that any relevant factual disputes that arise on the evidentiary record are resolved in favour of the plaintiff’s position. I have therefore proceeded to decide the matter on this motion for summary judgment. There is no genuine issue requiring a trial.

Conclusion

[162] This action is dismissed. If the parties are unable to agree on costs, OEFC shall make its submissions by delivering brief written submissions together with a costs outline by July 29, 2016. PLP may respond by delivering brief written submissions and any other material by August 18, 2016. This timetable may be modified on agreement between the parties provided that I am notified of the new timetable by July 29, 2016.

Justice W. Matheson

Released: July 7, 2016