Court File and Parties

CITATION: Jazz Solar Solutions Inc. v. Ontario Solar Provider Inc., 2016 ONSC 7297

COURT FILE NO.: 15-69920

DATE: 2016-11-23

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 7348291 CANADA INC. o/a JAZZ SOLAR SOLUTIONS INC., Plaintiff

AND: 241446 ONTARIO INC. o/a ONTARIO SOLAR PROVIDER INC., et. al., Defendants

BEFORE: MR. JUSTICE CALUM MACLEOD

COUNSEL: Thomas G. Conway & Carman M. Baru, for the Plaintiff J. Colin Alexander, for the Defendants

HEARD: July 21st, 2016

Endorsement

[1] This is a motion for summary judgment or partial summary judgment. There is no doubt that the defendants are indebted to the plaintiff pursuant to a contract but the extent of that indebtedness is in dispute. The question for the court is whether or not a trial is required to determine the matter?

[2] For the reasons that follow, I am granting partial summary judgment and I am directing the trial of a narrow set of issues.

Background

[3] In 2009 the Government of Ontario launched a series of programs designed to promote and develop renewable or "green" energy. The Feed-in Tariff program (FIT) is administered by the Independent Electricity System Operator (IESO)[^1] and was formerly administered by the late Ontario Power Authority (OPA). Under that program, the developer of an approved renewable energy project is guaranteed a long term stable price for electricity generated by the project.

[4] As part of the government's long-term energy strategy, the OPA was (and now the IESO is) given a mandate to facilitate the participation and engagement of aboriginal peoples in the electricity sector.[^2] As a consequence there is an Aboriginal Energy Partnership Program and certain advantages including funding are available for projects involving First Nations Aboriginal Communities (FNAC).

[5] In January of 2014 the plaintiff (JAZZ) entered into an agreement with the defendant (OSP) pursuant to which JAZZ would act as a consultant to OSP as a potential developer of photovoltaic (solar) renewable energy projects. JAZZ was to advise OSP and to facilitate negotiations with Ontario based FNACs with a view to developing solar projects through limited partnerships. The intent was to develop projects that would involve partial ownership by an aboriginal community (15%) and would qualify for the FIT program. The developer would be responsible for making the necessary application and bringing each project to completion. JAZZ would be paid fees based on the size of each project and due at certain milestones.

[6] Under the contract, JAZZ was to be paid in each instance where an agreement was made between OSP and a FNAC which resulted in an approved project. The fee was structured as follows. "$0.00" was to be paid as an initial retainer, "$.05 / W (DC)" was to be paid within 15 days of a "Notice to Proceed" and "$.10 /W (DC)" was to be paid within 15 days of receiving "the Commercial Operation Date". "Notice to Proceed" and "Commercial Operation Date" are apparently defined terms in the FIT2 contract. According to the plaintiff, it is self-evident that these milestones may arrive even if the developer is unsuccessful in bringing the project to fruition. The contract is concerned with the successful submission of project applications rather than the successful construction of the project which is the sole responsibility of the developer.

[7] The agreement also contains anti-avoidance language. For a period of three years after the contract was signed, the developer was not to attempt to circumvent the consultant by entering into any agreement with a FNAC introduced by the consultant for the "Express Purpose". Similarly during the same period, the consultant was not to circumvent the developer by entering into any arrangement with a building owner or investor introduced to the consultant by the developer for the "Express Purpose".

[8] By the time the contract was signed in 2014 the original FIT program (FIT1) had been revised and replaced with the FIT2 program. FIT2 refers to the "FIT Rules and standard FIT contract, Version 2.0" introduced by OPA in August of 2012. The contract between JAZZ and OSP refers in some places to the FIT program and in other places to FIT2 which was the version of the program in effect in January of 2014.

[9] Apparently OPA revised the FIT rules and contracts from time to time. At some point it introduced FIT3 but I was not told whether there was any material difference between FIT2 and FIT3. In any event, there were periodic revisions to the terms of the program and from time to time the OPA and later the amalgamated IESO has renumbered its documents. After FIT3 there was a FIT4 and there may by now be FIT5.

[10] It appears that OSP made several successful bids for solar projects with FNAC investment and partial ownership. On June 14th, 2013 OSP advised JAZZ that 16 projects had been given approval by OPA. Fifteen of the listed projects were in partnership with Wikwemikong Unceded Indian Reserve and one with Missisauga #8 First Nation.[^3] The other named defendants are the limited partnerships that were established to own these projects. As the defendants put it, some of the initial discussions with FNACs were fruitful and became limited partnerships. Some, but not all, of the limited partnerships became prospective construction projects. Some of the prospective projects were built and are actually producing power.

[11] In July of 2013 OSP advised JAZZ that 12 of the listed projects had passed certain preliminary tests required by OPA. These were pre-construction tests and did not mean the projects had received Notice to Proceed. In December of 2013 OSP advised JAZZ that it would be best to discuss the projects when they are "closer to NTP" and that "OSP will notify you when the projects are at NTP and pay you accordingly".

[12] In January of 2014 there was a meeting between JAZZ and OSP in which anticipated NTP and COD dates were discussed for each of the 12 projects. Subsequent to that meeting JAZZ provided OSP with a chart showing each of the 12 projects and the anticipated fees which would be due to JAZZ.[^4] For certain of the projects, the fee had been adjusted from .15/w to .35/W. It does not appear that OSP took issue with those calculations.

[13] The background to the adjusted fees was an e-mail from OSP to JAZZ dated January 14, 2013 in which Christian Wentzel of OSP had proposed to Ketan Bhalla of JAZZ that OSP pay higher fees on 5 projects. This included a proposal for fees on two projects that might not be "signed". There were certain additional terms in that e-mail but JAZZ has treated it as an amendment to the original agreement. The reason for higher rates on these projects may be that they involve a higher percentage of first nation ownership and therefore qualify as a Contract Capacity Set Aside (CCSA) project with enhanced prospects for profit. Two of those projects are included in the January 2014 e-mail at the higher rates. The chart showing the calculation of rates for each of the 12 projects at either .15 /W or .35/W and the anticipated NTP dates was subsequently included in numerous communications between the parties without adverse comment by OSP.

[14] OSP made only two payments to JAZZ. In June of 2014 OSP paid $10,000.00 plus HST and in December of 2014 OSP paid $20,000.00 plus HST. In January of 2015 JAZZ issued a series of invoices and in February of 2015 it was advised by OSP that "we won't pay until construction starts, some projects have NtP but might not get built due to structural constraints" and that if they could not build they would not "be able to pay commission".

[15] No further payments have been made. JAZZ believes it is entitled to $518,823.25 in respect of the FIT2 projects that have proceeded at least to the NTP stage, in some cases to the COD stage and in several cases to the stage of actual power generation.

[16] The plaintiff has also determined that OSP has entered into partnerships with Wikwemikong and other AFNCs introduced by JAZZ which have resulted in approved projects under the FIT3 program. JAZZ takes the position that FIT3 projects are covered by the contract and fall within the anti-circumvention provisions. Fees accruing from the FIT3 projects would be an additional $200,000.00.

[17] While represented by previous counsel, the defendants filed what the plaintiff views as a pro-forma statement of defence containing blanket denials. The plaintiff contends that the statement of defence does not comply with Rule 25 and should be struck out. For its part, the defendant has served an amended defence making certain admissions and narrowing the issues. It asks leave to amend the pleading.

The issues in dispute

[18] The dispute between the parties turns on the following questions.

[19] The first question is an interpretation of the point when fees became due. Although the defendants concede that fees are due before the projects are constructed, they now try to draw a distinction between the OPA/IESO NTP and COD and what they call the "construction notice to proceed" and "construction commercial operation date".

[20] The second question is whether or not the e-mail from OSP to JAZZ constituted an amendment to the consulting agreement such that JAZZ is entitled to increased fees on certain projects. Determination of this issue is necessary to decide if JAZZ is entitled to higher rates on two of the FIT2 projects.

[21] The third question is whether the contract and the anti-avoidance provisions cover FIT3 projects and not just FIT2 and therefore whether OSP also owes fees on those projects.

[22] A fourth question now introduced by OSP is whether there are projects that proceeded without OSP participation and thus excuse OSP from paying fees. OSP now alleges that the "Heffner" and "Eiler" projects are projects in which the landowner dealt directly with the AFNC and not in partnership with OSP.

[23] A sixth question is whether there is any liability on the limited partnerships or whether all liability is limited to OSP. Related to this is the question of whether or not additional parties should be added. OSP has "rebranded" itself as Solar Provider Group but it is not clear whether this is a new corporate entity.

[24] My task on this motion is to decide if it is fair and reasonable to decide some or all of these issues on the basis of the paper record or if any of these are genuine issues requiring a trial within the meaning of Rule 20. If I conclude that some form of trial is required, there are various options including a mini-trial or summary trial as well as a traditional full blown trial process.

The test for summary judgment

[25] Summary judgment is appropriate under Rule 20 when the moving party can demonstrate there is no genuine issue requiring a trial. Because of the amendments to the Rule in 2010 and the decision of the Supreme Court of Canada in Hryniak v. Maudlin[^5], Rule 20 is no longer to be regarded as an extraordinary remedy. The court is to determine matters summarily whenever it is just to do so without the full forensic machinery of a classical trial.

[26] Rule 20 may be visualized as providing the court with four separate possibilities. The first possibility is to grant summary judgment or partial summary judgment on the record. Pursuant to Rule 20.02 (2) a responding party is required to put its best foot forwards by showing on the basis of substantive evidence that there is merit to its position. A plaintiff moving for summary judgment is entitled to judgment if the evidence before the court contains all necessary elements of proof and the defendant's evidence is insufficient to prevail against it. This is essentially the manner in which the rule operated before the amendments.[^6]

[27] The second possibility, if the motion is being heard by a judge, is to utilize the expanded powers provided under Rule 20.04 (2.1) including if necessary a mini-trial under Rule 20.04 (2.2) to decide questions of credibility or weight.

[28] A third possibility (which was also part of the pre-amendment rule) is either to grant judgment on liability or on a point of law with a further process to determine quantum if necessary,[^7] or to grant an order for an expedited trial of the only issues that are in dispute.[^8] In either case, the court may devise an expedited and summary process if that is appropriate.[^9]

[29] Of course a fourth possibility is to dismiss the motion because summary judgment does not appear appropriate on the evidence contained in the motion record. I note in passing that despite the changes in the rule and despite the mandate from the Supreme Court of Canada to apply the rule robustly, this is the outcome in approximately one third of reported summary judgment motions.[^10]

Analysis

[30] There is no reason not to grant summary judgment on the admitted liability. The defendant OSP acknowledges the validity of the original contract and it acknowledges that on five of the projects it owes fees. On four of those projects where NTP and COD have been provided, it concedes it owes fees of $.15 / W and on the 5th project, (Consetoga Solar I) it acknowledges that NTP has been provided and it owes a fee of $.05 / W. The acknowledged liability net of the $30,000.00 already paid is $184,688.00 + HST[^11]. There will be judgment for this amount against OSP in favour of the plaintiff.

[31] The more difficult question is whether or not it is appropriate to grant summary judgment on any of the other issues in dispute. I am deeply sceptical about the position now being taken by the defendant that the Hefner and Eiler projects should be excluded from any calculations because they are not partnerships between OSP and an AFNC. Mr. Seyfarth now deposes that OSP was cut out of these projects because the landowner entered into a direct partnership with the first nation but he gives no details of how this came about or what role OSP continues to play in those projects. These projects have always been included in the lists exchanged between the parties. He also deposes that the Hunters Bay Solar project did not proceed and denies that fees are owing for that project. It is odd that this information does not appear earlier in the evidentiary record.

[32] Similarly it is strange that there is no record of any objection to the fee estimates based on higher rates for the projects originally identified in Mr. Wentzl's e-mail of January, 2013. The parties appear to have behaved as if that e-mail evidenced an amendment to the agreement for certain "capacity set aside projects". The subsequent exchange of e-mails with anticipated fees which apparently passed without adverse comment from OSP could be viewed as subsequent conduct supporting the position of the plaintiff.[^12]

[33] Now the defendant takes the position that the original rates were never modified. The defendant argues that the Wentzl e-mail was a conditional offer which was never accepted, that the condition was not fulfilled and that there was no consideration for the amendment of the contract. It denies liability for the higher fees.

[34] Finally, the defendant's evidence that OSP always proceeded on the basis that the milestone dates were not the OPA definitions for Notice to Proceed and Commercial Operation Date but some other definition relating to actual construction dates in accordance with some undefined "industry standard" seems to come very late in the day. Moreover this evidence may contradict the clear wording of the agreement and therefore offend the Parol Evidence Rule. In the Sattva case, the Supreme Court of Canada has affirmed that evidence of subjective intention of a party is not admissible to prove the meaning of a contract.[^13]

[35] Summary judgment motions cannot be decided on the basis of scepticism. They must be decided on the basis of analysis of the available evidence bearing in mind that as the moving party, the plaintiff has the onus to show that summary judgment is appropriate and that it is entitled to such judgment.[^14]

[36] In Sattva, the Supreme Court has determined that contractual interpretation is almost always a question of mixed fact and law that contractual interpretation depends not only on the words of the contract but on the surrounding circumstances.[^15] This is particularly the case where, as here, the contract is not a standard form commercial contract or one that is in wide use.[^16] In fact the contract in question is almost impossible to construe without an understanding of the surrounding factual matrix. For example, it is necessary to understand the specifics of the FIT program, the relationship between the parties and the expertise each purportedly brought to the table in order to interpret the meaning of the contract.

[37] This is particularly so when there is a dispute concerning the inclusion of FIT3, whether there was an effective amendment to some of the rates and whether the milestones in the contract referred to definitions in the FIT program or some other "industry standard". I could perhaps decide one of those issues by simply considering the onus of proof and making negative inferences pursuant to Rule 20.02. And I considered the possibility of a mini-trial to assist with findings of credibility and weight. After due consideration, however, I am of the view that a mini-trial would not be adequate and instead the appropriate disposition of the motion is to order trial of an issue.

[38] Trial of an issue is appropriate because, at least in my view, there is evidence that would be required to construe the contract that is not currently before the court. The plaintiff, for example, wishes to show that the meaning of the contract encompasses any partnerships with AFNCs under the FIT program and is not limited to FIT2 despite the fact that FIT2 is mentioned in the agreement. In my view that requires a deeper understanding of the FIT program, the differences between FIT1, FIT2, FIT3 and FIT4 and the reasons the OPA renumbered the program. This is necessary to determine what the intention of the contract would have been at the time it was signed.

[39] Similarly, the cryptic nature of the e-mail which purported to amend the rates does not allow the court to determine if there is a reason for the increased rates, what that reason was and whether there was binding offer and acceptance. It may be surmised from certain references in the e-mail and in subsequent exchanges that these projects were "capacity set aside" projects but the exact meaning of that term, what advantages it would provide for OSP and whether an amendment was necessary or justified is not clear.

[40] The defendant's recent position that the milestone dates were not OPA approval dates could probably be decided by way of summary judgment because the defendant has simply asserted that OSP always believed these were dates related to actual construction. There is no evidence to demonstrate the existence of an industry standard or to show that this was a common understanding. If this was the only issue I would have been inclined to grant judgment or to conduct a mini-trial on the issue in order to assess the credibility and weight of the defendant's evidence. But given the trial I propose to order, it is more just to assess the meaning of these provisions against a contextual background along with the question of the FIT3. It is difficult to assess whether the defendant is in breach of its obligations of good faith as imposed by the Bhasin decision[^17] without first hearing all of the evidence of context.

[41] The defendants have suggested that the limited partnerships should be let out of the action. No motion for summary judgment was brought in that regard and I do not have any evidence by which to assess the merits of the claim for unjust enrichment. If there is to be a trial, however, it would make sense to also try that issue because to do otherwise would require a second trial.

[42] In conclusion there will be summary judgment against OSP for the admitted balance owing along with pre-judgment interest pursuant to the Courts of Justice Act to run from each of the admitted milestone dates until the date of judgment.

[43] There will be an order for trial of the following issues:

a. The proper interpretation of the contract and specifically:

i. Do the FIT3 projects come within the scope of the contract?

ii. Was the contract amended to provide higher rates for certain projects?

iii. Were the NTP and COD milestones achieved when the OPA / IESO granted approval or did the contract require actual construction dates?

b. Are the Heffner and Eiler projects covered by the contract or did circumstances over which OSP had no control take them out of the scope of the contract?

c. Do the limited partnership defendants have any liability to the plaintiff because they may be unjustly enriched by the plaintiff's efforts?

[44] Based on the answers to those questions, the amounts due under the contracts should be readily calculated and if the parties cannot reach agreement there may be a reference or other short hearing to calculate the amounts due.

[45] Unless I am very much mistaken, these are the only issues that are in dispute and the answer to these questions plus the calculation of amount will fully dispose of the litigation.

Next Steps

[46] Counsel are to confer and to seek agreement on the use of the existing affidavit material and transcripts for the purpose of the issues trial. There will also be a trial scheduling and management conference.

[47] Counsel are also to seek agreement on the costs of the motion and failing agreement they may either agree to make brief written submissions of no more than 3 pages each within the next 30 days or I may be spoken to.

Conclusion

[48] In conclusion, there will be judgment against OSP for $184,688.00 plus HST and pre-judgment interest to be calculated by the parties or argued along with the costs.

[49] There will be an order for trial of the issues defined at paragraph 43 to be followed by a determination of the quantum of fees owed as set out in paragraph 44.

[50] There will be a trial management conference on a date to be set by the Registrar. The defendants' request to amend the pleading may be dealt with at that conference or by way of motion. I did not hear argument on this point at the summary judgment motion.

[51] Costs of the motion are reserved until after counsel have agreed or made argument in the manner set out above.

Mr. Justice Calum MacLeod

Date: November 23, 2016

[^1]: A not-for profit corporation controlled by a government appointed Board and recently merged with the Ontario Power Authority, the IESO has a complex mandate which includes management of the electricity market and promotion of cleaner energy sources and technologies. See the Electricity Act, 1998, S.O. 1998, c. 15, Sched. A, as amended. [^2]: Part II.2 of the Act [^3]: P. 67, motion record [^4]: Tab I of the motion record [^5]: 2014 SCC 7; [2014] 1 S.C.R. 87 [^6]: Mehdi-Pour v. Minto Developments et al 2010 ONSC 5414 (Master); affirmed 2011 ONSC 3571 (Div.Ct.); leave to appeal refused Oct. 20, 2011 (M40188) (C.A.) [^7]: Rule 20.04 [^8]: Rule 20.05 [^9]: See Rule 25.05 (2) in particular subrules (f) & (j) & Rule 55.01 (1) [^10]: See Legal Analytics, Mona Datt, CCLA Civil Litigation Conference, 2016. This information may be gleaned from a statistical review of reported decisions. Reported decisions may over represent the number of successful summary judgment motions because motions that are abandoned, discontinued or dismissed with a handwritten endorsement will not show up in the reported caselaw. [^11]: P6, supplemental affidavit of Sebastian Seyfarth. The amounts set out in the chart are before HST. [^12]: See Montreal Trust Co. of Canada v. Briminghahm Lodge Ltd., 1995 438 (ON CA), [1995] O.J. No. 1609 (C.A.) [^13]: Sattva Capital Corporation v. Creston Moly Corporation 2014 SCC 53; [2014] 2 S.C.R. 633 @ Para 59 [^14]: Corchis v. KPMG Peat Marwick Thorne 2002 41811 (Ont. C.A.) [^15]: Sattva, supra, paras 56 - 61 [^16]: Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co. 2016 SCC 37 @ paras. 21 – 32 [^17]: Bhasin v. Hrynew 2014 SCC 71; [2014] 3 S.C.R. 494