Court File and Parties

COURT FILE NO.: CV-17-587425-00CL DATE: 20181126 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: POTENTIA RENEWABLES INC., Applicant AND: DELTRO ELECTRIC LTD., Respondent

BEFORE: McEwen J.

COUNSEL: George Benchetrit and Michael Kril-Mascarin, for the Applicant Michael C. Mazzuca and Fred A. Platt, for the Respondent

HEARD: November 15, 2018

Endorsement

[1] This matter has returned before me, once again, to deal with issues arising out of my Reasons for Decision dated July 27, 2018 (the “Reasons”). The respondent, Deltro Electric Ltd., raises three issues and I will deal with each in turn. Since the appeal is pending and Deltro must shortly perfect its appeal I am releasing these reasons by way of endorsement.

Should KSV Advisory be appointed as Receiver?

[2] In my Reasons I afforded Deltro the opportunity to repay $2 million, failing which an interim receiver would be appointed to determine if a sensible plan of repayment could be made. If not, Potentia would be entitled to have a receiver appointed to effect a sale.

[3] As noted in para. 138 of my Reasons, Deltro objected to BDO being appointed. For the reasons noted I agreed that BDO should not be appointed and that another receiver would be appropriate.

[4] Potentia proposes that KSV be appointed as the interim receiver and, if necessary, the receiver.

[5] Deltro requested that it be able to cross-examine KSV with respect to issues of conflict.

[6] By way of Endorsement dated October 3, 2018, I ordered that Deltro would be allowed to conduct an oral cross-examination not to exceed 60 minutes of a KSV representative. I ordered that the cross-examination would be limited to the proposed receiver’s pre-retainer relationship, if any, with Potentia.

[7] The examination has taken place.

[8] KSV had counsel present during the cross-examination. Deltro takes the position that it was inappropriate for KSV to be represented by counsel. I disagree and I see nothing inappropriate with this. In my view, given the acrimonious dispute Potentia and Deltro, KSV was prudent to have counsel present, particularly where I ordered the limited cross-examination and it may be appointed as interim receiver by way of my earlier order.

[9] Deltro also objects to the fact KSV filed a factum on this motion. Once again, I see no problem with this having taken place. KSV did not take a partisan position in favour of Potentia in its factum, but rather simply provided the court with legal argument generally concerning the issue of its impartiality.

[10] The unequivocal evidence that has been given on behalf of KSV confirms that they had no prior relationship with Potentia. Deltro takes issue with some of the answers and undertakings. I have reviewed them and see nothing untoward. Deltro’s questions have been reasonably answered.

[11] Counsel for Deltro now also wishes to conduct a further examination of KSV to examine its relationship with Potentia’s counsel, Chaitons LLP.

[12] I do not propose to allow any further questioning.

[13] Chaitons LLP concedes that it has had previous dealings with KSV. This is not surprising. Deltro’s submission ignores the commercial realities of insolvency proceedings. It is well-known that various professional firms regularly interact with each other in insolvency proceedings. In the absence of an actual conflict there is nothing improper with this.

[14] As stated in para. 21 of the decision of Smurfit-Stone Container Canada Inc., Re:

If one were to insist on independent counsel and an independent court officer for every instance of perceived conflict of interest, restructuring proceedings of corporate groups would become completely unwieldy and unproductive.

[15] If I was to allow an unfettered right of cross-examination to determine if conflicts existed, such as is being proposed by Deltro, these proceedings would become similarly unyielding, unproductive, expensive, and completely out of proportion. There is no evidence to suggest any untoward relationship between Chaitons LLP and KSV. I am not prepared to allow what would amount to a fishing expedition.

[16] Based on the above, I am therefore satisfied that KSV should be appointed as the interim receiver and, if necessary, receiver to effect the sale.

Should leave be granted to Deltro to reargue its position that it did not repudiate the LOI?

[17] In this regard Deltro submits that it could not have repudiated the May 15, 2016, LOI since it was not a party to the LOI.

[18] Deltro submits that I have broad discretion to reopen and hear argument on this discrete issue since the final order has not yet been entered.

[19] While it is accurate that the final order has not yet been entered, the only remaining issue involves the choice of receiver which I have now resolved. The parties recently reattended in front of me to settle several disputes concerning the form of the order and those have been settled.

[20] Notwithstanding the fact that the order has not yet been entered I am of the view that the decision of the Divisional Court in Brown (Trustee of) v. Municipal Property Assessment Corp. Region 14, 2014 ONSC 7137, resonates in this case. At para. 19 Justice Nordheimer wrote:

In my view, the mere fact that the technical requirements for the finality of the earlier order are missing, because the order was not signed and entered, does not permit a judge to vary that order in whatever manner s/he happens to consider to be appropriate at a later date. The principle of finality, that underlies the functus officio principle, weighs against that scope of authority and that type of alteration. Parties have a right to expect that once a matter is determined by a judge, it is over. Our rules of procedure do not envisage that parties will be allowed to reargue matters, except in very narrow circumstances.

[21] Based on the case law, I am of the view that it would only be open to me to reopen the case to avoid a miscarriage of justice: 1307347 Ontario Inc. v. 1243058 Ontario Inc., 2001 CarswellOnt 221 (ONSC) [1307347 Ontario Inc.].

[22] The argument now advanced by Deltro was available when the matter first appeared before me. I have, however, reviewed my Reasons, the documents Deltro produced for this motion, and considered Deltro’s argument. I see no basis to change the relevant findings in my Reasons. This is particularly so in light of Deltro’s admission at this motion that the January 28, 2017, letter sent by counsel for the “Deltro Group of Companies” to Potentia included both/either Deltro and DGL.

[23] Given that this matter is under appeal and will be heard by the Court of Appeal in February 2019, I believe it would be inappropriate to comment further and respectfully leave the issue now raised by Deltro to be determined on appeal.

Should leave be granted to Deltro to introduce new affidavit evidence?

[24] In my view, the affidavit evidence should not be admitted.

[25] In reaching this conclusion I am guided by the decision of Justice Nordheimer in 1307347 Ontario Inc., supra, wherein he stated:

4. The test is most recently stated by the Court of Appeal in 671122 Ontario Ltd. v. Sagaz Industries Canada Inc. (2000), 183 D.L.R. (4th) 488 (Ont. C.A.) where Sharpe J.A. said, at p. 499:

It was common ground between the parties before the trial judge and before this court that, in the circumstances of this case, the appellant had to establish two points:

1. that the evidence "might probably have altered the judgment" and,
2. that the evidence "could not with reasonable diligence have been discovered sooner".

(See Becker Milk Co. v. Consumers' Gas Co. (1974), 2 O.R. (2d) 554 (Ont. C.A.) at p. 557, (1974), 43 D.L.R. (3d) 498 (Ont. C.A.).)

9 I would consider it to be beyond peradventure that a court will not knowingly allow a miscarriage of justice to occur. As well, until the matter is determined otherwise, I accept that, to avoid such a miscarriage, a trial judge or a motions judge has the discretion to permit a matter to be reopened and new evidence to be admitted even if the evidence could have been placed before the court in the first instance. However, it is also my view that a miscarriage of justice involves more than just a finding that a different result might have occurred. It involves a finding that, absent the reopening of the matter and the reversal of the original determination, a fraud would be perpetrated or the giving of perjured evidence or the deliberate misleading of the court would be countenanced - see DeGroote v. Canadian Imperial Bank of Commerce, [1998] O.J. No. 1696 (Ont. Gen. Div.); affd. , [1999] OJ. No. 2313 (Ont. C.A.).

13 In terms of the second prong of the test, that is, whether the evidence could have been I obtained with reasonable diligence, it is clear to me that it could have been. Indeed, it is clear to me that the reason that these affidavits are now forthcoming from the defendant is the direct consequence of the criticisms which were levelled against the defendant in my reasons. While the defendant suggests that his former counsel never asked for this information (a fact which I am told the defendant's former counsel disputes), it seems to me that such a contention is not a reason to relieve against the reasonable diligence requirement. Otherwise, it would altogether become too easy for parties to gain “a second shot” at their desired relief simply by changing counsel and then claiming that the first counsel failed to address some issue that was fatal to their first attempt. I agree with Madam Justice Lax (and with Mr. Justice Wilkins whom she quotes) when she said in DeGroote v. Canadian Imperial Bank of Commerce, supra, at para. 14:

Unquestionably, there is prejudice to the defendants in this case. There is a long history to this litigation. The defendants properly brought a motion before the court under Rule 20 of the Rules of Civil Procedure. The plaintiffs resisted the hearing of the motion and were unsuccessful in that effort. They were also unsuccessful on the merits of the motion. It is no passing coincidence that it was only after reasons for judgment were released that the plaintiffs sought to re-open the judgment. As was aptly stated by Wilkins J. in Strategic, supra, at p. 421:

After the trial is complete and judgment is rendered, it is always a simple matter, utilizing hindsight, to go about reconstructing a better method of presenting the case when one finds oneself in the sorry position of loser.

[26] In this regard, I should initially note that I do not take serious issue with Drs. Lowe and Estwick’s explanation that they could not have provided affidavit evidence earlier when they were sitting members of government (they are no longer so). They did not, however, indicate this when the letters were originally filed, nor did counsel for Deltro advise of this fact at the hearing of the application.

[27] I did note in para. 79 of my Reasons that affidavit evidence would have been preferable. Nevertheless, I considered the letters authored by Drs. Lowe and Estwick on their merits. As noted, I held that they were equivocal and non-specific.

[28] Furthermore, while the affidavit evidence of Drs. Lowe and Estwick now states that Final Approval had been obtained, all of this evidence could have been provided at the hearing of the application. It was well-known to Deltro that Potentia took the position that Final Approval had not been obtained and, as I noted at para. 79 of my Reasons, Deltro proceeded at the hearing without any further documentation or efforts to provide viva voce evidence. Specifically, no efforts were made to obtain further evidence from Drs. Lowe and Estwick.

[29] As was the case in 1307347 Ontario Inc., supra, the affidavits have now been produced to respond to the criticisms in my Reasons leveled against the evidence of Drs. Lowe and Estwick. All of this evidence, albeit without accompanying affidavits, could have been produced with reasonable diligence along with an explanation as to why affidavit evidence could not be obtained from Drs. Lowe and Estwick. As was the case 1307347 Ontario Inc., it is my view that Deltro is now looking for a “second shot” to address the exact issue in dispute i.e. Final Approval.

[30] I accept that I should exercise my discretion to permit new evidence if a miscarriage of justice would take place.

[31] As stated in 1307347 Ontario Inc., however, a miscarriage of justice involves more than just a finding that a different result might have occurred. In this regard, the courts have generally considered issues such as fraud and deliberate misleading.

[32] This case falls well short of such an exceptional circumstance. The affidavit evidence simply produces additional evidence that Deltro now seeks to rely upon. The affidavits remain equivocal. Both affiants depose that they are not aware of any official documentation that would be provided by the government for Final Approval. I accept Potentia’s submission that these statements simply constitute the affiants’ personal belief and do not constitute any cogent evidence on the issue on behalf of the Government of Barbados. I also find it strange that the affiants would not be aware of such documentation and I still question the fact that none exists.

[33] Further, the new evidence does not change my finding that Deltro repudiated the Agreements. Beginning at para. 100 of my Reasons, I found that Deltro repudiated the Agreements concerning the Barbados Project by way of its counsel`s January 28, 2017 letter.

[34] As noted in my Reasons, Deltro, as a result of the dispute concerning the DR LOI took the position that it was no longer obliged to honour any contractual obligations to Potentia – including the Barbados Project.

[35] At the time of Deltro`s repudiation the parties were still within the 12 month period in which Deltro could have achieved Final Approval. It is therefore uncertain as to whether Deltro would have repudiated the Agreements in circumstances where Final Approval had been previously granted as alleged by Drs. Lowe and Estwick.

[36] If Deltro would have repudiated the Agreements in any event, the new affidavit evidence even if accepted, would not have affected the outcome of the Application. This was not argued before me at the original hearing.

Disposition

[37] For the reasons above, KSV is appointed as interim receiver and, if necessary, receiver.

[38] Deltro’s motion to reopen the application is dismissed.

[39] KSV is not seeking costs. Potentia was successful on the motion. If the parties cannot agree on costs, written submissions can be provided to me, not to exceed three pages, excluding bills of costs. Deltro is to provide its submissions within 14 days with Deltro to respond seven days thereafter and any reply by Potentia to follow within five days.

McEwen J. Date: November 26, 2018