COURT FILE NO.: CV-15-66152

DATE: 2019/01/10

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Hutchingame Growth Capital Corporation, Plaintiff

-and-

Independent Electricity System Operator, Defendant

BEFORE: Justice P.E. Roger

COUNSEL: Michael S. Hebert and Cheryl Gerhardt McLuckie, Lawyers for the Plaintiff

Thomas G. Conway and Benjamin Grant, Lawyers for the Defendant

HEARD: September 4 to 7, 10 to 14, 17, and October 5, 2018

REASONS FOR DECISION

P.E. ROGER, J.

Introduction and Factual Overview

[1] The plaintiff (HGC) seeks damages of $4,796,479.41 from the defendant (IESO), claiming breach of contract, negligent misrepresentation, and breach of the duty of good faith.

[2] For reasons that follow, I have decided that this action should be dismissed.

Key Participants

[3] Eric Hutchingame is the principal and directing mind of HGC; he is also the principal and directing mind of Sea to Sky Pollution Solutions Corporation (Sea to Sky), his investment companies. Mr. Hutchingame’s experience is primarily in restructuring businesses. He had no experience with biomass electricity generation projects prior to this venture.

[4] William Baker is a longtime acquaintance of Mr. Hutchingame (since the 1980s). Mr. Baker is the president and principal of Truestar Investments Ltd. (Truestar). Truestar is a venture capital firm incorporated in 2011. Mr. Baker had no prior experience with biomass or energy contracts of any kind.

[5] The amount of damages claimed by HGC represents the amount of consideration (or the price) that is stipulated in an assignment agreement dated May 15, 2014, between HGC and Truestar (Assignment to Truestar).

[6] IESO, previously the Ontario Power Authority (OPA), is a not-for-profit, statutory corporation constituted under the Electricity Act, 1998. It operated a Renewable Energy Standard Offer Program (RESOP). Under this program, the OPA entered into contracts to purchase energy from small renewable energy projects over an agreed period of 20 years.

[7] In the course of his dealings with the OPA and the IESO, Mr. Hutchingame dealt primarily with Mr. Devitt, a senior analyst with the OPA/IESO, and with Mr. Fogul, a senior Toronto insolvency lawyer retained by the OPA/IESO.

[8] 951584 Ontario Inc. (Greenview) is not a party to this action. In 2007, Greenview proposed to develop and construct a biomass renewable energy facility on a property it owned at Elephant Lake, near Bancroft, Ontario. Greenview was controlled by Mr. Frank Yantha. Mr. Yantha also controlled another corporation - 2172950 Ontario Inc.

Key Contracts

[9] On November 8, 2007, Greenview entered into a Renewable Energy Standard Offer Program Contract with the OPA (RESOP Contract). Under the RESOP Contract, Greenview was to generate electricity from renewable biomass at an agreed price for a period of 20 years, starting from the Commercial Operation Date (COD - date on which commercial operation is first attained), which in this case was on the third anniversary or on November 8, 2010. Greenview proposed to build this biomass electricity generation plant at its Elephant Lake property from previously used equipment that it had purchased.

[10] Greenview repeatedly failed to meet the Commercial Operation Date (COD of November 8, 2010). Greenview and the OPA eventually agreed to two extensions, extending the COD deadline to January 15, 2013. Greenview failed again to meet this revised COD deadline. In an effort to obtain an additional extension from the OPA, Greenview submitted a force majeure claim to the OPA, arguing that its failure to meet the COD was beyond its control; this claim was dismissed by the OPA on October 22, 2012. On the same day, the OPA advised Greenview that its failure to meet the COD would constitute an event of default under the RESOP Contract.

[11] In September 2012, as Greenview’s renewable biomass electricity generation project was unraveling, Mr. Hutchingame was approached by his longtime friend and trustee in bankruptcy, Kevin McCart.

[12] Mr. Hutchingame testified that the principal of Greenview, Mr. Frank Yantha, had approached Mr. McCart, who in turn approached Mr. Hutchingame. Mr. Hutchingame said that he then understood that “Greenview was a dead duck, a zombie”, that they were insolvent, with no possibility of completing the project.

[13] Mr. Hutchingame testified that he conducted a full review of Greenview’s documents, saw opportunities, and decided that the risk was worth going ahead. He testified that this project was pure risk. In Mr. Hutchingame’s words, he “committed $50,000 to the project to take a flyer.”

[14] Mr. Hutchingame then took control of Greenview. During his examination-in-chief, Mr. Hutchingame said that he told Mr. Yantha that he wanted full control and that he would run this through a soft receivership.

[15] On October 26, 2012, Mr. Hutchingame concluded an assignment agreement with 2172950 Ontario Inc. and Greenview, two companies controlled by Mr. Yantha (Assignment to HGC). Under this assignment agreement, 2172950 Ontario Inc. assigned to HGC all of its rights in the security of 2172950 Ontario Inc. in the debts of Greenview, including an August 2010 secured promissory note between 2172950 Ontario Inc. and Greenview in the principal amount of US $3,800,000, and the personal guarantee of Mr. Yantha. No evidence of this loan was presented at trial. As a result of the Assignment to HGC, for an investment of about $50,000, HGC instantaneously became, on paper, the largest secured creditor of Greenview by far.

[16] Although during his cross-examination Mr. Hutchingame initially said that he paid $50,000 for the Assignment to HGC, he later said that he probably paid $10,000 to $15,000, plus some expenses for professional fees. He also said that it was probably worth one dollar, and that Mr. Yantha was prepared to give it to him. No independent proof of this payment was presented at trial.

[17] Shortly thereafter, on November 21, 2012, Greenview – now effectively controlled by Mr. Hutchingame – filed a notice of intention to make a proposal under subsection 50.4(1) of the Bankruptcy and Insolvency Act. Mr. McCart was the proposal trustee.

[18] On December 7, 2012, Mr. McCart wrote to the OPA, advising them of this turn of event, and of Greenview’s plan to work with creditors to enable Greenview to continue with its business plan.

[19] On January 18, 2013, Mr. Hutchingame, on behalf of HGC, wrote to the OPA. The purpose of this letter was to seek an extension of the now expired COD deadline of January 15, 2013. Mr. Hutchingame indicates in this letter that if an extension is granted, as the largest financial stakeholder, he is willing to provide additional funding for Greenview to successfully complete the project. He indicates that his extensive due diligence convinced HGC that if the OPA consents to an extension, the project could achieve COD before the end of the 2013 construction season, and that the project is a minimum of 80% complete. He attributes much of the blame for Greenview’s failing to complete the project on a number of misrepresentations by L & S Engineering (Greenview’s occasional project engineer), saying that they failed to meet even the most minimum of professional standards. He concludes by saying that “HGC currently has almost $5,000,000 at risk in this project (based on the initial debt of US $3.8 million converting converted into CDN $ together with interest and expenses) and I believe that HGC and OPA’s interests align as although we both want the project to succeed, we are both adverse to any further involvement if it causes a deterioration of our position.”

[20] On February 12, 2013, in a further effort to extend the expired COD deadline, Mr. Hutchingame filed an amended force majeure claim with the OPA, which he prepared himself. In this claim, he again attributes much of the blame to L & S. This amended force majeure claim was rejected by the OPA on March 6, 2013.

[21] At about the same time, on February 14, 2013, Greenview filed an amended proposal under the provisions of the Bankruptcy and Insolvency Act, which was approved by the Court on March 1, 2013. Mr. Hutchingame testified that he wrote the proposal, and that it essentially dealt with priority issues between existing creditors.

[22] By letter dated March 8, 2013, Mr. Hutchingame also served a notice of arbitration under section 12.1 of the RESOP Contract on the OPA, proposing the trustee, Kevin McCart, as arbitrator, to resolve the force majeure and extension issue. However, the parties never proceeded to arbitration as the OPA agreed to extend the COD deadline.

[23] Indeed, following negotiations, the OPA, Greenview, and Greenview’s secured lenders entered into a Waiver and Amending Agreement which, among other things, extended the COD to November 8, 2015. The Waiver and Amending Agreement resulted following a meeting in Toronto on March 22, 2013. Prior to and following this meeting, the parties exchanged emails relating to outstanding fees and an independent engineering report requested by the OPA. On March 27, 2013, the OPA provided a draft Waiver and Amending Agreement to Mr. Hutchingame. Mr. Hutchingame requested three changes which were largely agreed to by the OPA, and on May 15, 2013, the Waiver and Amending Agreement was signed.

[24] As a result, two documents are key:

a) The RESOP Contract dated November 8, 2007 (attached in part as Schedule I); and

b) The Waiver and Amending Agreement dated May 15, 2013 (attached in part as Schedule II).

[25] Material to the issues in this action, the RESOP Contract provides, in part, that:

• A number of specified events of default. Most of which include a 30-day cure period from written notice of failure. For example, ceasing to satisfy the eligibility requirements in the program rules, or breaching certain representations is subject to the 30-day cure period. On the other hand, filing a proposal or an assignment in bankruptcy is not.

• Remedies of the OPA include, on written notice to the generator, termination of the agreement and suspension of payment, as provided. However, for acts of default specified at section 7.1 (19) or (20), which relate to various acts of insolvency such as filing a proposal or an assignment in bankruptcy, it provides that the RESOP Contract shall automatically terminate without notice effective immediately before such event of default, and that in such a case secured lenders shall have the rights available under section 9.2 (3).

• The rights and obligations of secured lenders are provided in part at section 9.2 and 13.4. These include the right of a secured lender to acquire or assign the generator’s interest (at section 9.2 (2)).

• Alternatively, in the event of termination, a secured lender may, within 90 days after the termination date, require the OPA to enter into a new agreement provided that the secured lender pays outstanding amounts (including reasonable legal fees), and cures any default existing immediately prior to termination that are capable of being cured (at section 9.2 (3)).

(See Schedule I, attached, for extracts of full text)

[26] The Waiver and Amending Agreement provides, in part, that:

• The COD is extended to November 8, 2015 (the 8th anniversary).

• Specified events of default under the RESOP Contract are waived.

• Various specified provisions of the RESOP Contract are amended.

• Greenview has to pay to the OPA certain amounts, which it paid.

• Greenview has to deliver to the OPA: by no later than May 31, 2013, confirmation of each of (i) its engineering team and (ii) the project management team, with their experience and qualifications; the results of an engineering/design review by no later than July 8, 2013; a project development plan within 15 business days of delivering the above; quarterly progress reports within 20 business days of the end of each fiscal quarter; and a renewable biomass fuel supply plan by May 8, 2015. As indicated below, this information was not delivered to the OPA.

• A breach shall be deemed to be a generator event of default under the RESOP Contract, provided that a 30-day cure period shall be applicable.

(See Schedule II, attached, for extracts of full text)

Key Transactions & Events

[27] To give some context, after successfully concluding the Waiver and Amending Agreement on May 15, 2013, which extended the time to complete the project to November 8, 2015, one might have expected some activity to meet the May and July 2013 deadlines (outlined above), and one might also have expected, at some point, some boots on the ground or work at the site to ensure that the revised COD was met. Instead, the evidence discloses no immediate real action to meet the May and July 2013 deadlines, and thereafter, the evidence discloses little by way of actual concrete steps. However, the evidence shows that:

• Greenview filed an assignment in bankruptcy (on February 24, 2014 - this bankruptcy was triggered by Mr. Hutchingame);

• HGC and Truestar executed an assignment agreement to convey HGC’s rights under the RESOP Contract to Truestar (on May 15, 2014 – this assignment was not disclosed until after this action was started);

• Truestar concluded an agreement of purchase and sale with Sea to Sky to purchase all of the assets of Greenview, including the RESOP Contract (on July 21, 2014); and

• A vesting order confirming the purchase of Greenview’s assets by Truestar was obtained without prior notice to the OPA (August 21, 2014).

[28] Mr. Hutchingame testified that after concluding the May 15, 2013 Waiver and Amending Agreement, he started putting the team together but was slowed down by heart issues and heart surgery in December 2013.

[29] During his examination-in-chief, Mr. Hutchingame explained what he did, including that Mr. Harrington, of Harrington Mechanical Ltd., was getting ready to do welding, and how in May 2013, L & S Engineering attended to determine the amount of work and cost remaining. He also mentioned that he was circling back to people and contractors previously involved. However, despite the tight timelines provided in the Waiver and Amending Agreement (which required some concrete steps by July 2013), Mr. Hutchingame was often vague about who these people and contractors were, what they did, and when. Mr. Baker also described what was done. However, other than hiring a person to watch over the property and a person to assemble all of the equipment and a contractor team (Theo), their descriptions were often vague on specifics.

[30] By letter dated May 31, 2013, Mr. Hutchingame, on behalf of HGC, wrote to the OPA that he will assume the ultimate responsibility for project management and that L & S Engineering will, on an interim basis, continue as the engineering team while HGC continues to review available alternatives. This was HGC’s attempt to comply with section 5 (d) of the Waiver and Amending Agreement which, as outlined above, required that by May 31, 2013, the generator deliver confirmation of each of the engineering team and project management team.

[31] Meanwhile, Mr. Devitt was following up with Mr. Hutchingame about the management and engineering team, and the results of the engineering/design review.

[32] In a letter dated July 3, 2013, Mr. Hutchingame implicitly agreed that his letter of May 31, 2013 (described above) was deficient. In the July 3 letter, Mr. Hutchingame indicates that he retained KSH Engineering to provide a detailed review and make recommendations on the project management team, and that he has now been able to transition to KSH Engineering. In fact, he never transitioned to KSH.

[33] KSH’s initial letter is dated May 14, 2013, and follows up on HGC’s invitation to submit a proposal to provide engineering services for the completion of the biomass project. KSH’s study report is dated July 17, 2013. It outlines a number of concerns, and estimates the cost to complete the project at $12,150,000.

[34] At trial, Mr. Hutchingame said that he strongly disagreed with the KSH report, that he thought that it was ridiculous, that KSH were not interested in administering this project, and that they inflated costs because they were nervous about their potential liability. However, Mr. Hutchingame provided no evidence in support of his allegations that this report or its estimates were flawed.

[35] Although at trial Mr. Hutchingame said that KSH told him that they were not interested in being his engineers on this project, he admitted that he never told this to the OPA, and that he continued to allow the OPA to think that KSH might be the engineers on the project. For example, in an email to Mr. Devitt dated September 16, 2013, Mr. Hutchingame indicates that he was extremely disturbed with the content of the KSH report, but that they would need clarification from the proposal trustee and creditors if the prior budget to commercial operation had to be increased above the previously contemplated $1M amount. Similarly, in another follow-up email to Mr. Devitt, dated July 21, 2014, Mr. Hutchingame indicates that he is diligently working on advancing this project, stating: “As you know KSH has budgeted the cost of completion as between $8,000,000 to $10,000,000 but I have not any other estimates from Truestar. In the interim, I have contacted all of the previous contractors and have asked them to be able to hit the ground running if and when Truestar green lights completing the project.” Mr. Hutchingame’s stated position at trial, namely, that he thought that the KSH report was ridiculous, is also implicitly contradicted by a number of emails and documents exchanged between himself and Mr. Baker (even Mr. Hutchingame’s email to Mr. Mark Froud does not go as far as what Mr. Hutchingame stated at trial).

[36] On September 5, 2013, Mr. Devitt wrote to Mr. Hutchingame that “you have also failed to deliver the updated plan”, and asked for a specific date for the overdue updated plan. As indicated above, Mr. Hutchingame responded on September 16, 2013, that all parties were still committed, and that he was working with the proposal trustee. He added that “Either way we’ll have ample time to complete the project before the November 2015 deadline based on a Spring 2014 start date.”

[37] It is apparent from the evidence that starting about September 2013, Mr. Hutchingame was contemplating Greenview filing for bankruptcy. By email dated October 3, 2013, Mr. McCart asked secured creditors what their position would be in the event of the bankruptcy of Greenview. On October 16, 2013, Mr. Hutchingame provided a copy of Mr. McCart’s email to Mr. Devitt, indicating that they were revising their plan several times, that he was waiting to hear from secured creditors (about priority), and that he was handcuffed until he heard back from the secured creditors. Mr. Devitt’s refusals to admit that he then knew that Greenview might file an assignment in bankruptcy were simply not convincing. I find that by October 16, 2013, the OPA was aware that the bankruptcy of Greenview was a possibility.

[38] On November 5, 2013, Mr. Hutchingame emailed certain answers to Mr. Devitt, including that he was trying to determine priority issues between secured creditors, that Greenview was considering an assignment (in bankruptcy), that he would like to assign the RESOP Contract but that it would probably require court approval, that he was “totally frustrated” in his ability to proceed, and that he anticipated requiring court approval to proceed as the terms of the proposal did not appear to be adequate.

[39] On November 18, 2013, Mr. Hutchingame advised Mr. Devitt that he had been diagnosed with heart issues that would require surgery in December 2013. He also indicated that he anticipated that Greenview would file an assignment in bankruptcy and that it would take several weeks to convey the Greenview assets to another entity so that it could finance the completion of the project. He concluded by saying that he did not anticipate that any detailed planning document would be available until March or April 2014. In fact, none of the review results, updated plan, or confirmation of the engineering and project management team were produced to the OPA in March or April 2014, or at any time thereafter.

[40] I find that none of the items that were required to be delivered by Greenview to the OPA, under section 5 (c) and (d) of the Waiver and Amending Agreement (described, in part, above at paragraph 26), were delivered.

[41] I also find that following the KSH report, it became apparent to Mr. Hutchingame, or he became concerned, that completing the biomass project would be more difficult and uncertain than anticipated, and likely more expensive. This would also have been apparent to Mr. Hutchingame from the June 10, 2013 Harrington Mechanical Ltd. report, and from the undated L & S Engineering report that he received in June or July 2013. We see that Mr. Hutchingame’s next steps are somewhat concerned with resolving priority issues amongst creditors. Indeed, other than obtaining the extension to November 8, 2015, there is no evidence of any real concrete step on the biomass project or of fulfilling Greenview’s obligations to the OPA.

[42] On February 7, 2014, Mr. Hutchingame (Sea to Sky) prepared and served a notice of intention to enforce security on Greenview for a stated secured indebtedness of $616,893.

[43] On February 24, 2014, Greenview filed an assignment in bankruptcy (with Mr. McCart as trustee). The statement of affairs indicates that HGC is by far the largest creditor at a stated $4.85M, and Sea to Sky the largest secured creditors at a stated $725,000.

[44] Mr. Baker testified that in 2012, Mr. Hutchingame had raised the possibility of Mr. Baker investing in this project. Additional investment discussions occurred, and in May 2013, Mr. Baker loaned $205,000 to Sea to Sky for this project, as debtor in possession financing.

[45] On May 15, 2014, HGC and Truestar concluded an assignment agreement (the Assignment to Truestar). As indicated at paragraphs 4 and 5 above, Mr. Baker is the president and principal of Truestar. I find that the Assignment to Truestar was prepared by Mr. Baker and Mr. Hutchingame, without legal assistance.

[46] The Assignment to Truestar provides that for $4,769,479.41, and subject to conditions, Truestar purchases from HGC certain assets, including: the RESOP Contract, the Waiver and Amending Agreement, and the US $3.8M security for the debt owing by Greenview to 2172950 Ontario Inc. The conditions include the Government of Ontario assigning various security agreements to HGC, and the trustee in bankruptcy of Greenview obtaining court approval to vest to HGC, free from all liens or encumbrances, all of the assets of Greenview (including all contracts with the OPA).

[47] The amount of consideration agreed to in the Assignment to Truestar is the plaintiff’s basis for damages in this action. That amount is premised, in part, on the debt owing by Greenview, which security was purchased by HGC in 2012 for $50,000, or less (see paragraph 16 above). Also potentially impacting the value of these assets, I note the following: Greenview had just filed for bankruptcy on February 24, 2014, there had been little concrete progress on the renewable biomass electricity generation project since May 2013, the project might cost more and be more complicated than initially anticipated, and the extended COD deadline of November 2015 at the very least loomed larger. As well, both Harrington Mechanical Ltd. and KSH had projected higher than anticipated costs; and some uncertainty certainly existed over the possibility of missing drawings explaining how the equipment should be assembled, over what the TSSA (Technical Standards and Safety Authority) would allow or not allow to be reused, and over what the actual cost and actual time to completion would be.

[48] Despite the above, Mr. Baker agreed that the amount of consideration (or the agreed upon price) provided in the Assignment to Truestar would require Truestar to pay HGC/Mr. Hutchingame almost 100 cents on the dollar; which Mr. Baker admitted was unusual, in such circumstances. All the same, Mr. Baker testified that $4.7M was a fair amount to “my shareholders.”

[49] The Assignment to Truestar is also surprising for its minimal content considering the stated amount of consideration. For example, it was prepared without legal advice, and it does not provide how and when the agreed upon amount is to be paid; Mr. Baker and Mr. Hutchingame apparently had a verbal understanding that it included a property transfer. It also does not provide when the conditions are to be met, and what happens if they are not met; Mr. Hutchingame admitted that he has not made a demand for payment from Truestar. Such drafting is surprising when also compared to the more thorough May 2013 letter of intent and loan agreement between Truestar and Sea to Sky, for a much smaller loan ($205,000).

[50] Also confounding is the fact that the Assignment to Truestar was not disclosed to the OPA/IESO, or to the secured creditors until after this action was started. Mr. Hutchingame admitted this, and said that he had no obligation to tell anyone. I note that section 13.4 (1) of the RESOP Contract requires written notice to the OPA, and that section 63 (4) of the Personal Property Security Act might possibly have required notice to the Ontario Minister of Finance, a secured lender. Mr. Hutchingame said that only he and Mr. Baker were aware of the Assignment to Truestar.

[51] Following Greenview’s assignment in bankruptcy on February 24, 2014, the OPA had prepared a draft letter, dated May 27, 2014, which it never sent. The plaintiff argues that this shows bad-faith. The letter was prepared by the OPA in order for it to be ready to give notice to secured lenders, immediately after the required 90 days, that they no longer had rights exercisable under section 9.2 (3) of the RESOP Contract, and that no new agreement would be entered into. This letter was not sent because on May 15, 2014, Mr. Hutchingame gave notice to the OPA that he intended to proceed under section 9.2 (2) of the RESOP Contract.

[52] On May 15, 2014, Mr. Hutchingame wrote to the OPA informing them that HGC and Sea to Sky had elected to invoke their rights under section 9.2 (2) of the RESOP Contract. His brief email does not specify precisely how they wished to invoke their rights under this provision, and the email makes no reference to Truestar or to the Assignment to Truestar of the same date. Section 9.2 (2) provides that a secured lender may enforce any secured lender’s security agreement and acquire the generator’s interest and may sell or assign the generator’s interest.

[53] On May 23, 2014, the OPA responded to Mr. Hutchingame’s email, including that:

• The original contract terminated on February 24, 2014, as a result of Greenview’s default under section 7.1 (20) (Greenview’s bankruptcy).

• It assumes that the secured lenders are invoking their rights under section 9.2 (3) of the RESOP Contract.

• HGC and Sea to Sky must decide who will become the new generator.

• The proposed new generator must pay all reasonable costs and expenses including legal fees of the OPA in connection with Greenview’s default and preparation of the new agreement and documents. That it incurred to date legal fees of $4,868.71, that the estimated fees of preparing the new agreement and related documents are $15,000 (with no cap on reasonable legal fees), and that it requires a prepayment of $10,000 as security for those future legal fees.

• The proposed new generator must obtain the written consent of the other secured lenders (Ministry of Finance and Ministry of Natural Resources).

• The proposed new generator must cure the default under section 5 (c) (ii) of the Waiver and Amending Agreement (updated plan - the OPA later added that an engineering team and a project management team was also required under section 5 (d)).

• The proposed new generator must provide confirmation that the generator maintains its connection queue with Hydro One (section 7.1 (7) of the RESOP Contract).

[54] Mr. Hutchingame testified that he was gob smacked by the response of the OPA; that he considered it to be a declaration of war. Nonetheless, he did not respond. He did not mention the Assignment to Truestar (and did not proceed to Bankruptcy Court within 30 days to seek relief against the OPA as he claims was available).

[55] Rather, Mr. Hutchingame behaved for quite some time as if he was pursuing efforts to comply with the above noted requests of the OPA. For example:

• May 27, 2014, Mr. Hutchingame wrote an email to Mr. Devitt thanking him for the comprehensive response of the OPA.

• May 27, 2014, Mr. Hutchingame wrote to Mr. Baker that “OPA is stalled at the moment but never say never.” He did not even mention the OPA’s letter of May 23, 2014. He did not mention to Mr. Baker how frustrated he now says that he was with the OPA’s letter of May 23. Instead, he continued to look at fiscally advantageous ways of structuring financing.

• On May 27, 2014, he asked Harrington Mechanical Ltd. whether they are available during the summer 2014, and also asked them for suggestions for project managers, and for an estimate for the timeline to complete work. On May 28, 2014, Mr. Harrington responded: “This is only a guess at this time because we don’t have proper engineering drawings. After engineering drawings we would estimate 10 to 12 months to have an operational system. With new equipment the system would probably take 4 to 6 weeks to commission, but with used equipment parts may have to be replaced etc., and they could have long delivery times - therefore to be conservative I would plan for 8 to 12 weeks.” Note that no evidence was provided at trial that the plaintiff ever had proper engineering drawings. No evidence was presented on how long these might take to prepare (if they were not otherwise available). No expert evidence, properly admissible, was presented about whether the project could be completed, about the timeline, or about the cost of completing a workable biomass electricity generation project.

• On June 9, 2014, Mr. Baker told Mr. Hutchingame that he could borrow funds for the project either mid-June or end of June and he asked when the project would need funds. On June 9, Mr. Hutchingame responded “end of June I can stall everything else”. This is not at all as if they were at war with the OPA.

• June 12, 2014 letter of his lawyer to the Ministry of Finance budgeted $15,000 for “Future OPA fees likely required to finalize arrangements”. This shows an intention to proceed as indicated by the OPA in their May 23 letter.

• June 25, 2014 letter of his lawyer to the Ministry of Finance that “With respect to the OPA fees, OPA has advised that they have already incurred $5,600 which they will want to recover in order to move forward. The balance will be to arrange the closing with any Purchaser and accordingly this should be an expense of the assets.” Again, this shows an intention to proceed as indicated by the OPA in their May 23 letter.

• July 21, 2014, Mr. Hutchingame wrote to Mr. Devitt and others, as indicated above, that he was diligently working on advancing this project; however, considering the cost of completion budgeted by KSH of between $8M to $10M he had not received other estimates from Truestar, and had contacted previous contractors asking that they be ready to hit the ground running if and when Truestar green lights completing the project. Mr. Hutchingame does not mention that he disagrees with the OPA’s letter of May 23, that he was in shock after receiving their letter, or that he wished to go to court for a ruling. I agree with the evidence of Mr. Hutchingame that he was then waiting for the vesting order, and that this was then the only thing that mattered to him.

• July 23, 2014 emails between Mr. Hutchingame and Mr. Baker relate to financing using flow through shares, and to assembling a management team. Mr. Baker indicated that the biggest challenge would be assembling a management team that can be held up to the brokers and investors as a good, credible team capable of executing, with a capable operation officer. Mr. Hutchingame responded referring to their obligations under section 5 (d) of the Waiver and Amending Agreement that: “While I am playing around with the financial stuff but we have a year to staff those needs … The key requirement is the project manager … In order to avoid any interruption with the OPA assignment we should minimize any changes … I am currently approved for para 5 of the OPA extension … so it is better to just fade away. I retained L & S engineering for that requirement and assumed as the project manager. Let sleeping dog as the OPA goes but we definitely need someone to drive the bus.” It is virtually impossible to reconcile this document with Mr. Hutchingame’s stated position at trial that he was at war with the OPA. Rather, like most other documents, this document shows that he was intending on proceeding with the project as outlined by the OPA in their May 23 letter. It also shows that despite some prodding by Mr. Baker, Mr. Hutchingame is not taking concrete proactive steps to hire and put in place a project management team.

• July 25, 2014 email from Mr. Hutchingame to Mr. Baker provided a copy of the L & S Engineering report, and indicated: “Here is the other engineering report which has a very different view. I think we should hope for the best and plan for the worst.”

• Mr. Hutchingame and Mr. Baker prepared a prospectus to generate financing for the project, and in an email dated July 25, 2014, Mr. Hutchingame wrote to Mr. Baker that the budget is too low, that “$1.2 is just not enough and should allow at least twice as much.” At trial, Mr. Hutchingame claimed that he did not remember when this document was written or what its purpose was; it’s obviously the draft of a prospectus seeking financing for the project. This prospectus also mentions a 5% royalty for the assignment which is not mentioned elsewhere; at trial Mr. Hutchingame denied that he would have received this royalty. At trial he said that he was still considering how to make it work, that RESOP project was going to be the anchor tenant, and they were looking at what else they could do with the site. I note that this prospectus misrepresents the situation; it indicates, for example, that: engineering studies provided clear guidance on the steps needed to assemble the equipment into a working biofuel plant, and that the OPA deadline of November 2015 may be extended.

• August 8, 2014, Mr. Devitt sent an email to Mr. Hutchingame asking him to provide an update regarding his current plans for this contract considering the OPA’s response on May 23, 2014. August 11, 2014, Mr. Hutchingame responded that he was working with the secured creditors and could not provide any meaningful responses until priority issues were satisfactorily resolved, indicating: “but (the other secured creditor) hasn’t yet confirmed any specific funds, even the payments to your organization, the OPA. This uncertainty makes it impossible to provide any meaningful responses until the issue is satisfactorily concluded.” Again, Mr. Hutchingame makes no mention of how insulted he apparently was by the OPA’s May 23 letter.

• September 16, 2014 email of Mr. Hutchingame to Mr. Devitt, in which Mr. Hutchingame answered questions of the OPA, indicated that the requested fees would be paid, that they were working on an updated plan, were committed to facilitate the COD by November 2015, that the qualification and expertise of every member of the engineering team and project management team will be provided, and that Mr. Baker was unable to proceed until the secured creditors just recently consented to the Truestar purchase.

[56] Rather than immediately raising with the OPA his stated concerns to their letter of May 23, 2014, insisting to proceed with an assignment under section 9.2 (2) of the RESOP Contract, or giving notice of arbitration as provided in the RESOP Contract, Mr. Hutchingame proceeded, without notice to the OPA, to obtain from this court a vesting order confirming the sale of all assets to Truestar.

[57] Indeed, on July 21, 2014, Truestar and Sea to Sky concluded an agreement of purchase and sale. For $500,000, payable within 30 days of obtaining court approval for the vesting of the assets in the purchaser, and subject to conditions, Truestar purchased from Sea to Sky all of the assets of Greenview, including: all real estate, land, equipment, building, intellectual-property, and all of the contracts with the OPA, free from all liens, encumbrances or claims affecting any of the assets.

[58] In a letter dated June 12, 2014, HGC’s lawyer wrote to the Ontario Ministry of Finance, a secured creditor, in an effort to convince them to step away from their security. The lawyer wrote “You have now received an offer of $500,000 for the purchase of all of the assets of Greenview Power which we believe to be a fair and reasonable offer.” The lawyer also outlined amounts paid by Truestar and payable in priority to the Ministry of Finance, and arrived at a balance of $120,235 remaining to be disputed between the secured creditors. The lawyer further stated “As you are aware, Greenview… entered into a management agreement with … HGC to satisfy 5(d) of the OPA Waiver Amending Agreement Date that HGC become the project management team for the Project; and that Sea to Sky …, in its capacity as Interim Funder, agreed to warrant and guarantee any and all Greenview’s existing and future financial obligations while in the proposal and with the full knowledge and consent of the Trustee. Pursuant to the Contract, fees amount to approximately $450,000.” HGC later agreed to forego this amount. The Ontario Ministry of Finance responded with a number of questions. HGC’s lawyer replied to those questions, still seeking reimbursement for the amount of costs sought by the OPA in its May 23 letter, that “Truestar is completely arms-length to Sea to Sky or Hutchingame Growth Capital. There are no common shareholders, officers or directors between any of these entities.”

[59] Mr. Hutchingame painted an inaccurate picture of the transaction when he instructed his lawyer to respond as he did above - not disclosing that he and Mr. Baker were long-time acquaintances, and not disclosing the $4.7M Assignment to Truestar, both of which were obviously material to the assessment that this secured creditor was trying to make of whether the $500,000 purchase price offered by Truestar for the assets of Greenview was reasonable.

[60] The trustee’s motion materials seeking approval of the sale to Truestar were not served on the OPA. Oddly, the motion was brought under section 100 of the Courts of Justice Act, rather than under section 84.1 of the Bankruptcy and Insolvency Act. Further, it appears from the trustee’s affidavit that the trustee (since deceased) was also not aware of the $4.7M Assignment to Truestar because it is not disclosed in his affidavit or motion materials. The trustee’s affidavit, sworn July 28, 2014, indicates that the renewable energy project was never completed, that Greenview is the owner of land, machinery, and that: “A potential asset of the Bankrupt is the RESOP Contract. Based on the estimated costs to complete the RESOP contract and timing issues for compliance, the value of the RESOP Contract is uncertain.” It also indicates that there are approximately $8M of secured claims against the property of the bankrupt, and that “The Property is in a state of disrepair.” The trustee adds: “There is a deadline date of November 2015… I am advised by … counsel for Sea to Sky that if this deadline is not met, there will be no renewals and any monies spent to that date will be lost… many milestones and events have to occur… the timing is very tight. This is a very risky and speculative investment for any purchaser.”

[61] On August 21, 2014, on the trustee’s recommendations and effectively unopposed, the court granted an order confirming the sale agreement, and vested all of Greenview’s and the trustee’s rights in the property and the purchased assets in Truestar, free and clear of any and all security interests, charges etc., for $500,000. Effectively, this order also discharged the claims of all secured creditors, who then had a claim to the $500,000 sale proceeds as per their mutual agreement (reached on the incomplete information disclosed by Mr. Hutchingame).

[62] On August 21, 2014, Mr. Hutchingame provided a copy of the vesting order to Mr. Devitt.

[63] On September 4, 2014, the OPA wrote to Mr. Hutchingame, essentially confirming the terms of their letter dated May 23, 2014. The OPA was clear in its communications with the trustee and Mr. Hutchingame that their position was that the RESOP Contract had not been transferred under the vesting order, that it had been terminated by the bankruptcy of Greenview, and that it could only be assigned by following the process mandated by section 9.2 (3) of the RESOP Contract; the evidence shows that this was understood by Mr. Hutchingame and Mr. Baker.

[64] In October 2014, Mr. Hutchingame reiterated that there was no automatic termination of the RESOP Contract upon the bankruptcy of Greenview. The OPA disagreed. Nonetheless, the parties exchanged emails and seemingly made efforts to resolve issues arising from the vesting order and the RESOP Contract. Mr. Baker hired someone to move the project forward or to liquidate the assets on the property. In an October 15, 2014 email to Mr. Hutchingame, Mr. Baker wrote that he had been advised by this man, Theo, that: “The turbine looks good but will need outside confirmation … If the turbine doesn’t work we are dead in the water … However Theo feels good it’s working fine.” No evidence was presented at trial addressing whether or not the turbine required for the biomass generation project was in working condition. This was denied by Mr. Hutchingame, but at this point Truestar was considering the value of the scrap metal on its newly acquired property (quoted by Theo at about $4M).

[65] On October 17, 2014, Mr. Hutchingame was asked by the trustee and by Mr. Baker to respond to the OPA’s position that the RESOP Contract had not been transferred under the vesting order (let’s get this resolved, asked Mr. Baker). Mr. Hutchingame wrote to Mr. Baker that he was preparing a response to the OPA and that “It is clear that they want to “cooperate” but need to jump through the hoops.” Mr. Hutchingame then wrote to the trustee making reference to section 9.2 (3) of the RESOP Contract, which again contradicts his stated position at trial.

[66] Despite what Mr. Hutchingame said at trial, it is quite clear from this email that in October 2014, he understood that the OPA was required to enter into a new contract if all of the conditions of sections 9.2 (3) were met. At trial, Mr. Hutchingame said that he was being sarcastic, but clearly the content and the tone of his email to the trustee of October 17, 2014, are more indicative of an intention to proceed under section 9.2 (3) and of efforts to reassure all recipients, including Mr. Baker, that things would work out with the OPA. This interpretation is supported by Mr. Hutchingame’s subsequent letter to the OPA dated October 21, 2014.

[67] Consistent with his email dated October 17, 2014, Mr. Hutchingame’s letter to the OPA dated October 21, 2014 makes no mention of his alleged shock and dismay at their position. Rather, the content and tone of his letter are indicative of efforts at working towards addressing the stated concerns of the OPA. For example, he indicates that he will immediately retain and proceed with a new independent engineering and cost review to meet the COD of November 2015, but that he requires possession of the project and contract in order to update the project development plan because engineers and financing prospects require an existing RESOP Contract. Other than what he and Mr. Baker said, Mr. Hutchingame provided no independent evidence that engineers, including the engineers listed in that letter, would otherwise have been retained. Similarly for financing, Mr. Hutchingame provided no independent evidence (admissible for its truth), and was contradicted by Mr. Baker who indicated that Truestar had the financial means to proceed with the project.

[68] On October 24, 2014, the OPA responded that they required the vesting order be corrected, and thereafter would proceed with the process envisioned by section 9.2 (3), clearly outlining how Mr. Hutchingame could successfully obtain a new contract.

[69] On November 3, 2014, the lawyer for the trustee wrote to HGC’s lawyer and to Mr. Fogul that he was expecting a response about how they wished to proceed, and indicated that the trustee “is not content to continue with the status quo and will be scheduling a date before a judge to revoke the vesting order and authorize the trustee to sell the property if I do not hear anything from you by the end of today.” On November 3, Mr. Fogul responded that he would prepare a list of outstanding issues from the OPA’s perspective.

[70] On November 4, 2014, as promised, Mr. Fogul wrote to outline outstanding issues. He repeated that defaults under the agreement would have to be cured prior to a new one being signed, as required by section 9.2 (3), and repeated that the OPA was not prepared to grant extensions or to waive any requirements. Particularly, he outlined that the following was required:

• an updated plan, as per section 5 (c) (ii) of the Waiver and Amending Agreement;

• confirmation of each of the engineering team and project management team, as per section 5 (d) of the Waiver and Amending Agreement; that excuses provided to date were not acceptable;

• that the generator’s position in the connection queue needed to be maintained, as per section 7.1 (7) of the RESOP Contract;

• that the updated plan needed to confirm that the generator held a valid generator license, as per section 7.1 (b) of the RESOP Contract;

• that the updated plan needed to address that a renewable biomass fuel supply plan was to be delivered before the anniversary, as per section 5 (c) (iv) of the Waiver and Amending Agreement;

• that arrangements needed to be made for the payment of outstanding and contemplated fees for the new agreement, as per section 9.2 (3) of the RESOP Contract; and

• that the purchaser needed to sign a confidentiality agreement, as per section 12 (b) of the Waiver and Amending Agreement.

[71] During their evidence at trial, both Mr. Hutchingame and Mr. Baker indicated that the connection queue with Hydro One was confirmed, and that Mr. Baker or Truestar could pay the amounts required to accomplish the above.

[72] On November 5, 2014, Mr. Hutchingame’s lawyer responded to Mr. Fogul that he had received his November 4 letter stating: “Thanks, Harry. We are looking at it”.

[73] On December 15, 2014 (the letter is dated December 14), Mr. Hutchingame wrote to the OPA to provide an update. He did not mention any concern about the OPA’s letter of November 4, or raise any issue about their insistence on proceeding under section 9.2 (3). He confirmed their position in the connection queue with Hydro One (their position in the connection queue was indeed confirmed). He indicated that they are engaged in a detailed engineering review (no independent evidence was provided at trial that they were then engaged in a detailed engineering review), and indicated that this review “strongly recommended to use the availability on the grid for solar rather than biomass generation”, asking what options are available to amend the contract to utilize solar rather than biomass (no evidence was provided at trial of an engineer strongly recommending to use solar rather than biomass, and this would be in breach of the RESOP Contract). Mr. Hutchingame testified that he was then trying to get the job done and that he was considering solar rather than biomass.

[74] At trial, Mr. Hutchingame frequently said that after the Assignment to Truestar, he took a backseat position to Mr. Baker, letting him drive the process; that he was no longer involved. This is contradicted by most of the correspondence and documents, which show that Mr. Hutchingame was still involved. It is also contradicted by the evidence of Mr. Baker at trial, who said that Mr. Hutchingame was responsible for ensuring that the RESOP Contract could be transferred to them. What follows is an example of what Mr. Hutchingame said at trial about his involvement, and of how it is contradicting by contemporaneous documents.

[75] It appears quite probable that prior to January 2015, Mr. Hutchingame and Mr. Baker came to the realization that the old equipment could not successfully be reused. I arrive at this conclusion because: they provided no evidence that they ever found the drawings required to reassemble the used equipment (a number of their contractors had informed them that these were missing and required); they provided no evidence that the turbine was in working condition (one of their contractor had informed them that they were dead in the water if it was not in working order); Mr. Hutchingame inquired about solar rather than biomass (saying that this was recommended by his engineers); and in an email of January 13, 2015, Mr. Baker told a potential investor that on the advice of their engineers they had decided to build a new plant rather than using the existing old equipment. As indicated, no engineering evidence was presented by the plaintiff at trial.

[76] During his cross-examination on the topic of this January 13, 2015 email (in which Mr. Baker says that they have decided to build a new plant), Mr. Hutchingame testified that he had no knowledge of this, that he did not know what Mr. Baker was doing, that he did not care, and that he was not involved (despite the fact that he was copied on this email). Mr. Baker on the other hand testified (generally and specifically with regards to this email) that he understood that Mr. Hutchingame was the point person with the OPA and that Mr. Hutchingame was working to resolve issues with the OPA. Moreover, many of the emails exchanged between Mr. Hutchingame and Mr. Baker confirm that Mr. Hutchingame was still very much involved. Oddly, these same emails and the testimony of Mr. Baker, who when he testified did not seem to know all that much about this project, indicate that Mr. Baker was not significantly involved despite having purchased these assets for over $4.7M.

[77] During his cross-examination, Mr. Baker testified that he was then telling the truth in his January 13, 2015 email. Mr. Baker wrote in that email:

In the update letter, Mr. Hutchingame has confirmed that ELR Energy is the assignee. He also indicates ELR is interviewing engineering firms. This occurred and resulted in a situation whereby the result was a decision to seek a partner to build a new plant as opposed to using the existing old equipment.

OPA charges over $20K to formally transfer the agreement and until such time as we know who will be the go forward entity, we are holding that in abeyance.

I agree that the timeframe is too short and we will need to have an extension but won’t approach OPA until we have a credible partner to ensure OPA that an extension is warranted. They’ve already granted 3 extensions to the contract and we will need significant assurances if we go back for a 4th.

[78] I prefer this contemporaneous document to the evidence of Mr. Hutchingame because the evidence of Mr. Hutchingame is often contradicted by the documents. As well, documents prepared by Mr. Hutchingame often contain exaggerations and misstatements, and they are also often unsupported by the evidence.

[79] I find that this email of January 13, 2015, from Mr. Baker fits well with the bulk of the evidence: the old equipment could not be reused, a new plant would be required, and they understood that they could not meet the COD of November 2015. I make these findings, which are also supported by emails exchanged between Mr. Baker and Theo, including those referring to Wellons.

[80] Also, Mr. Baker testified that, given the timeframe, they decided that they would finance the project themselves. Mr. Baker stated that if financing was not available, Truestar had the means to finance this project. He said that they were pursuing investors, but that he was not counting on it. Mr. Baker agreed that he, and to his knowledge, Mr. Hutchingame, never approached the OPA for an extension.

[81] On January 21, 2015, Mr. Devitt wrote again to Mr. Hutchingame asking once more for a status update. On January 26, 2015, Mr. Hutchingame responded that “I have been actively involved in the process but the reporting goes directly to Truestar but I am awaiting Truestar independent review results.” No evidence about this independent review and results was presented at trial.

[82] The OPA responded that they require the review results. On January 27, 2015, Mr. Hutchingame replied:

My current situation best describes the following quote attributed to Donald Rumsfeld “There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don’t know. But there are also unknown unknown. There are things we don’t know we don’t know.”

I received some review results but there are multiples review and are still ongoing and Truestar has not yet received the final reports. The most problematic aspect of one of the unfinished reports is that after review Not-Arc Steel Fabricators found that the existing Wellons boiler plant will not be sufficient to operate the steam turbine at full capacity…Given that potential of litigation any documentation availability for release is subject to the review and approval of Truestar’s lawyers. However, the larger issue is that although there are several proposed workarounds and alternatives being examined and that all parties understand the urgency, there is simply nothing conclusive available to forward. [Emphasis added.]

The turbine is not an issue as per the attached report and am forwarding the initial report but it is under review and anticipate revisions. We are anxious as you are to secure reliable data but the limited available documentation is taking longer than anticipated.

(None of these alleged reviews and reports were presented at trial)

[83] Mr. Devitt responded on January 28, 2015, asking for a schedule for the expected delivery of these engineering and design studies. Mr. Hutchingame responded that they were working on several streams in parallel, that the projects situation was somewhat fluid, that the updated plan was not complete, but that they were considering three scenarios:

1. complete and augment the current system to achieve commercial operation;

2. replace the Wellons Boiler rather than repair and supplement the current boiler;

3. use a totally different process to use manure rather than wood for renewable biomass.

He added “I am uncertain when the Dresser rand report was delivered to Truestar because I was not copied on the proposal. I believe Dresser Rand was on-site in December to complete the review and I received a copy of the PDF a few weeks ago. I do not have a report for either Wellons or Nor-Arc Fabricators and received the update verbally.” None of these reports was presented at trial.

[84] Mr. Devitt was trying to be helpful, and in January 2015, he answered questions of Mr. Hutchingame and provided information about the position of the OPA. Mr. Hutchingame agreed that Mr. Devitt was trying to find solutions, and that Mr. Devitt told him very clearly that the final date would not be extended.

[85] At some point, probably in late 2014, Mr. Hutchingame prepared an executive summary showing that they were contemplating multiple usages for the Elephant Lake property, none of which was a biomass project. He testified that this was a draft document, for discussion only, prepared for the audience of Mr. Baker as they were considering everything. Mr. Hutchingame downplayed this document, saying that Mr. Baker was considering the development of his property, and that he could not speak for what Mr. Baker’s plans were; however, he had to admit that the document refers to Sea to Sky and that some of the ideas were his. Mr. Hutchingame admitted that in an email sent to Mr. Baker on February 3, 2015, he stated “I think we need to extend the length of the runway. November is just too soon”; that he never sought an extension of the COD from the OPA; that he then considered as a last resort seeking an extension through litigation if required; that he did not start an action to extend the deadline, but instead sued for damages.

[86] Later in February 2015, in answer to repeated requests from Mr. Devitt for updates, Mr. Hutchingame indicated that the yet to be delivered updated plan was dictated by economics not engineering, and that confirming a reliable cost-effective renewable biomass supply plan was a condition precedent to the OPA. On February 23, Mr. Hutchingame also indicated: “I am not in a position to speak on behalf of Truestar or provider a reliable timeline. However, I understand that the greater includes the lesser because if renewable fuel is unavailable the engineering is moot. It is all about economics not engineering and the timeline is being driving by the due diligence by potential financial partners.” On March 26, 2015, Mr. Hutchingame wrote to Mr. Devitt that he was waiting for final instructions from Truestar, that he would forward them as soon as he receives them, and that he was essentially just acting as Truestar’s agent and doing its bidding.

[87] Mr. Hutchingame and Mr. Baker both confirmed that Mr. Baker had the funds necessary to comply with the OPA’s letter of November 4, 2014. Mr. Hutchingame also said that this would have cost about $75,000, but that it would have been a bad business decision because they did not have a contract and the OPA would have “screwed them around”. As indicated above, I note however that in a number of emails, dated late 2014 and early 2015, Mr. Hutchingame refers to engineers being on-site and to ongoing reviews, none of which was filed at trial.

[88] Mr. Baker testified that he instructed Mr. Hutchingame to be more aggressive with the OPA, and to send a letter putting their position on the record. On April 1, 2015, Mr. Hutchingame wrote to the OPA that he was considering all of his rights and remedies, and denied the position of the OPA (outlined in their letters dated May 23, 2014, September 4, 2014, November 4, 2014, in emails between Mr. Fogul and the lawyer for the trustee, and later on April 10, 2015). Interestingly, although in the April 1 letter Mr. Hutchingame invokes their rights under section 9.2 (2) of the RESOP Contract, he does not ask for an extension of time to complete the project. Similarly, in his longer letter dated April 15, 2015, he also does not seek an extension of time. Indeed, although both Mr. Hutchingame and Mr. Baker wanted the OPA to adhere to the vesting order, neither ever sought an extension of the RESOP Contract despite the fact that by then it clearly could not be met.

[89] On April 16, 2015, Mr. Hutchingame wrote to Mr. Baker that he was considering suing because “Truestar has screwed me out of the $4,000,000 and blamed it on the OPA claiming the contract had been terminated.” However, he never made a demand from Truestar because he said it would have been a losing proposition.

[90] Mr. Baker testified that Truestar still owns the Elephant Lake property; that they are still looking at options to optimize the opportunities and value of this property. He confirmed that Truestar paid $500,000 plus about $60,000 in various expenses (a $205,000 loan was also advanced as DIP financing to Sea to Sky) for this property.

[91] On October 15, 2015, the plaintiff issued the statement of claim in this action.

[92] The plaintiff argues, for a number of reasons that will be addressed in my analysis, that it should have been entitled to proceed with the Assignment to Truestar under section 9.2 (2) of the RESOP Contract, and that it could then have met the COD. The defendant, since May 23, 2014, has continually taken the position that the assignment in bankruptcy of Greenview was an act of default which automatically terminated the RESOP Contract (by sections 7.1 (20) and 7.2 (2)), and therefore that the secured lender was required to proceed under section 9.2 (3) if it wished to require the OPA to enter into a new agreement.

Issues

[93] In its statement of claim, the plaintiff seeks damages for breach of contract, negligent misrepresentation, and breach of the duty of good faith by the defendant. Key issues resulting from these claims, and from the many arguments raised by the parties include the following:

1. Has the plaintiff proven a breach of contract? The answer to this question includes considering what were the rights of the plaintiff under the RESOP Contract following the bankruptcy of Greenview? It also includes determining whether the RESOP Contract automatically terminated when Greenview made an assignment into bankruptcy? The answers to these questions will answer the plaintiff’s arguments relating to negligent misrepresentation and breach of the duty of good faith.

2. Has the plaintiff proven an entitlement to damages? The answer to this question includes considering: Whether the plaintiff has proven an enforceable agreement with Truestar? Whether the plaintiff failed to mitigate its damages? Whether the plaintiff’s damages are excluded by section 10.1 of the RESOP Contract?

Analysis and Conclusions

General Principles

[94] The parties agree on the law applicable to contractual interpretation.

[95] Briefly, the primary object of contract interpretation is to give effect to the intention of the parties at the time of contract formation. The court must read a contract as a whole, with the words used given their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of the contract - the factual matrix. The subjective intentions of the parties are not relevant. However, while the court considers the circumstances of a written contract, those circumstances cannot overwhelm the words of the agreement. The interpretation of a written contractual provision must always be grounded in the text and read in light of the entire contract. If there is doubt or ambiguity about the meaning of a contractual provision, the principle of contra proferentem requires that it be interpreted against the party who drafted the agreement. As well, if a contract remains ambiguous after considering its text and its factual matrix, the court may consider the subsequent conduct of the parties. There is also a general organizing principle of good faith underlying many facets of contract law, and a general duty of honesty in contractual performance. And considerations of good faith inform the process of giving effect to the intention of the parties during contractual interpretation. (See: Sattva Capital v. Creston Moly, 2014 SCC 53, [2014] 2 S.C.R. 633, at p. 656 – 658; Bhasin v. Hrynew, 2014 SCC 71, [2014] 3 S.C.R. 494, at paras, 45, 63 – 65, 73, 93; Shewchuk v. Blackmont Capital Inc., 2016 ONCA 912, 404 D.L.R. (4th) 512, at paras. 39 – 46; RBC Dominion Securities Inc. v. Crew Gold Corporation, 2017 ONCA 648, 73 B.L.R. (5th) 173, at para. 45; Consolidated Bathurst v. Mutual Boiler, 1979 CanLII 10 (SCC), [1980] 1 S.C.R. 888, at p. 899 – 900; and Clarke v. Alaska Canopy Adventures LLC, 2014 ONSC 6816, at paras. 34 – 37.)

[96] Section 65.1 (1) of the Bankruptcy and Insolvency Act provides that if a notice of intention or a proposal has been filed in respect of an insolvent person, no person may terminate or amend any agreement with the insolvent person by reason only that the insolvent person is insolvent, or that a notice of intention or a proposal has been filed in respect of the insolvent person. (See for example: Crystalline Investments Ltd. v. Domgroup Ltd. (2002), 2002 CanLII 9612 (ON CA), 58 O.R. (3d) 549 (C.A.), at paras. 6 – 10, affirmed by the S.C.C., 2004 SCC 3, [2004] 1 S.C.R. 60)

[97] Section 65.1 (5) of the Bankruptcy and Insolvency Act provides that any provision in an agreement that has the effect of providing for, or permitting, anything that, in substance, is contrary to section (1) is of no force or effect.

[98] Section 69 (1) of the Bankruptcy and Insolvency Act provides in part and subject to certain exceptions that on the filing of a notice of intention by an insolvent person, no creditor has any remedy against the insolvent person or his/her/its property, or shall commence or continue any action, executed an or other proceedings, for the recovery of a claim provable in bankruptcy.

[99] Section 84.1 (1) of the Bankruptcy and Insolvency Act provides that on application by a trustee and on notice to every party to an agreement, a court may make an order assigning the rights and obligations of a bankrupt under an agreement to any person who is specified by the court and agrees to the assignment. In deciding whether to make such an order, subsection (4) provides that the court is to consider, among other things, whether the person to whom the rights and obligations are to be assigned is able to perform the obligations, and whether it is appropriate to assign the rights and obligations to that person. Section 84.1 (1) allows the trustee to apply to the court for permission to assign the contract, depending on the circumstances and so long as the provisions of the statute are met, even if a party to the contract had the right to terminate the contract for breach of a condition, or even over the objections of such a party (see: Ford Motor Company of Canada Ltd. v. Welcome Ford Sales Ltd., 2011 ABCA 158, 77 C.B.R. (5th) 278, at paras. 30, 37-41).

[100] Section 84.2 (1) of the Bankruptcy and Insolvency Act provides that no person may terminate or amend any agreement with a bankrupt individual by reason only of the individual’s bankruptcy or insolvency. That section, on its wording, is applicable to individual bankrupts, as opposed to corporate bankrupts. However, where the bankrupt is a corporation resort may be had to the common law doctrine of fraud upon the bankruptcy law in circumstances that would deprive creditors of value otherwise available (see for example: Canadian Imperial Bank of Commerce v. Bramalea Inc. (1995), 1995 CanLII 7262 (ON SC), 33 O.R. (3d) 692 (Ct. J. (Gen. Div.); and Aircell Communications Inc. (Trustee of) v. Bell Mobility Cellular Inc., 2013 ONCA 95, 14 C.B.R. (6th) 276, at para. 12).

Has the Plaintiff Proven a Breach of Contract?

[101] For reasons that follow, the plaintiff has not proven a breach of contract.

[102] The RESOP Contract terminated on February 24, 2014, when Greenview filed an assignment into bankruptcy. The termination of the RESOP Contract gave the plaintiff the right to obtain a replacement contract under section 9.2 (3) of the RESOP Contract.

[103] The text of the RESOP Contract is unambiguous – an assignment into bankruptcy automatically terminates the RESOP Contract without notice.

[104] Section 7.2 (2) provides that the RESOP Contract terminates automatically, without notice, act, or formality, upon an event of default in section 7.1 (20). Section 7.1 (20) defines bankruptcy as such an event of default.

[105] I do not agree with the plaintiff’s arguments that the statutory stay resulting from section 69 of the Bankruptcy and Insolvency Act prevented the automatic termination of the RESOP Contract because the effect of such a stay is to prevent creditors of an insolvent person from pursuing claims provable in bankruptcy against the insolvent person. The termination of the RESOP Contract under section 7.2 (2) was not for the recovery of a claim provable in bankruptcy (see sections 69 (1) and 69.3 (1) of the Bankruptcy and Insolvency Act).

[106] I do not agree with the plaintiff’s arguments that section 65.1 of the Bankruptcy and Insolvency Act had the effect of voiding for all purposes section 7.2 (2). The plaintiff seems to argue that because he triggered a proposal before he triggered a bankruptcy, section 7.2 (2) of the RESOP Contract was not only of no force or effect in the event of insolvency or a proposal, but that it was “void by operation of a statute is a nullity and has no force and effect”, and relies for this proposition on Schnarr v. Blue Mountain Resorts Limited [2018 ONCA 313, 140 O.R. (3d) 241, at para. 79, application for leave to appeal to the S.C.C. filed May 28, 2018]. Firstly, I do not believe that Schnarr stands for the proposition argued by the plaintiff, and secondly, the facts and the law in Schnarr are very different and not applicable to those in this action.

[107] I agree that as a result of section 65.1 of the Bankruptcy and Insolvency Act: (1) the defendant could not terminate the RESOP Contract by reason only that Greenview was insolvent, or had filed a notice of intention or a proposal; and (2) section 7.2 (2) of the RESOP Contract was of no force or effect to terminate the RESOP Contract by reason only that Greenview was insolvent, or had filed a notice of intention or a proposal.

[108] However, section 65.1 of the Bankruptcy and Insolvency Act is not relevant to a bankruptcy. The automatic termination of the RESOP Contract on February 24, 2014, resulted from Greenview’s bankruptcy, not because of Greenview’s status as an insolvent person or because of Greenview’s earlier proposal. Section 84.2, not 65.1, is the relevant provision in connection with bankruptcies, and section 84.2 is applicable only to individual bankrupts, not to corporate bankrupts.

[109] The common law doctrine of fraud upon bankruptcy law has no application to the facts of this case. This doctrine operates where a contractual provision causes an inequity between creditors of the bankrupt. Here, the termination of the RESOP Contract on the bankruptcy of Greenview does not offend the public policy expressed in the cases relied upon by the plaintiff (Bramalea and Aircell).

[110] The Waiver and Amending Agreement did not replace the RESOP Contract; it specifies that the terms of the RESOP Contract remained in effect and governed the relationship between the parties, except as expressly modified or amended by the Waiver Agreement. Nothing in the Waiver and Amending Agreement modifies or amends the meaning of sections 7.1 (20) and 7.2 (2).

[111] Section 6 of the Waiver and Amending Agreement does not include the subsequent assignment in bankruptcy. The preamble of the Waiver and Amending Agreement refers to the proposal as the BIA Event of Default; it does not refer to or include any future bankruptcy of Greenview. As well, section 10(d) of the Waiver and Amending Agreement provides that the Waiver and Amending Agreement “shall not be deemed to waive or modify in any respect the rights of the OPA under the Contract except as expressly provided for in this Waiver and Amending Agreement.” Nothing in the Waiver and Amending Agreement expressly waives the OPA’s rights in the event of a bankruptcy.

[112] I also disagree with the plaintiff that section 10(b) of the Waiver and Amending Agreement eliminates any automatic terminations of the RESOP Contract and provides a thirty-day cure period for any breach of both the Waiver and Amending Agreement or the underlying RESOP Contract. This is a misinterpretation of section 10(b). Section 10(b) is directed at new obligations contained in the Waiver and Amending Agreement. The Waiver and Amending Agreement contained new obligations, and without section 10(b), the rights of the OPA in respect of these obligations would be unspecified. Section 10(b) is directed at covenants and provisions of “this Agreement”. In fact, the words “this Agreement” are used many times in the Waiver and Amending Agreement, and in every instance it is apparent that the words refer to the Waiver and Amending Agreement, and not the RESOP Contract. As well, the plaintiff’s interpretation of section 10(b) would lead to an absurd result: suggesting that the OPA must give the plaintiff an opportunity to cure any default under the RESOP Contract, even ones which have no cure.

[113] Mr. Hutchingame testified repeatedly that section 2 of the Waiver and Amending Agreement gave the plaintiff the right to have any dispute with the OPA addressed by a bankruptcy court. Section 2 of the Waiver and Amending Agreement is a common contractual provision, also contained in the RESOP Contract, which simply reminds parties that contractual terms may be limited by legislation; it does not provide the parties with additional rights.

[114] The factual matrix of the Waiver and Amending Agreement includes the sophistication of the parties. As a self-described experienced and sophisticated businessperson, Mr. Hutchingame understood the primacy of the text of written agreements and the significance of entire agreement clauses; he testified as such. He said quite clearly that he is not relying on any representation, or anything but the written agreements. Mr. Hutchingame’s understanding was highlighted when he answered that he is a bottom line guy, that he understood that until the deal’s done, it’s not done. In any event, nothing in the circumstances of the Waiver and Amending Agreement demonstrates any common intention of the parties regarding the impact of the future bankruptcy of Greenview.

[115] The discussions of the parties do not show any such common intention. Mr. Devitt and Mr. Fogul testified that neither of them ever discussed what would happen in the event of a bankruptcy of Greenview with Mr. Hutchingame. For his part, Mr. Hutchingame testified that there was “not a single instance” of discussion of the automatic termination provisions of the RESOP Contract prior to the OPA’s letter of May 23, 2014, well after the Waiver and Agreement was made.

[116] Contrary to what the plaintiff argues, the content of Greenview’s proposal demonstrates that the focus of the secured lenders, of Greenview, and of the OPA was on the success of the proposal, not on its failure.

[117] Mr. Hutchingame testified that he wrote Greenview’s proposal, and shared it with the OPA during the negotiation of the Waiver and Amending Agreement. It is apparent that the proposal was written in the context of a priority dispute between the plaintiff and the Ontario government, as secured lenders of Greenview. Mr. Hutchingame testified that the proposal resolved this priority dispute. Mr. Hutchingame testified that the proposal contemplated paying every creditor 100 cents on the dollar, because he didn’t want to lose anybody previously involved in the project. Further, the proposal stipulated that Greenview must successfully achieve commercial operation by the deadline contained in the OPA agreement. Clearly, the facts of the proposal demonstrate that a primary purpose of the Waiver and Amending Agreement was for the proposal to succeed.

[118] The priority dispute between the secured lenders also shows that the plaintiff’s interpretation is not plausible. Mr. Hutchingame testified that, at the time of the proposal, the amount owing on the loan guaranteed by the government was $2.1M, while the amount owing to the plaintiff was $4,769,479.41. It is not plausible that the secured lenders – both of whom were parties to the Waiver and Amending Agreement – shared a common intention that, in a bankruptcy, the plaintiff could simply sell the RESOP Contract to a third party for the face value of the plaintiff’s security ($4.79M), leaving the other secured lender to be paid only with a share of the sale of Greenview’s physical assets.

[119] By contrast, an interpretation – that a bankruptcy causes a termination – is more consistent with the context of the priority dispute. Under this interpretation, Greenview’s bankruptcy would give both secured lenders the right, under section 9.2 (3), to obtain a new agreement, provided the secured lenders reached agreement among themselves as to how to proceed. This interpretation makes sense.

[120] The plaintiff argues that the waiver of the “BIA Event of Default” must include more than the filing of a proposal, because section 65.1 of the Bankruptcy and Insolvency Act already overrode any termination of the RESOP Contract resulting from the filing of a proposal. However, I agree that the impact of section 65.1 following Greenview’s proposal is not entirely straightforward. The OPA could have applied to the court under subsection 65.1 (6) of the Bankruptcy and Insolvency Act for discretionary relief from the provision’s effects. In any event, at the time, there was at least some uncertainty which explains the need for the parties to expressly waive any default attributable to Greenview’s filing of a proposal.

[121] The plaintiff also argues that a bankruptcy was clearly a possibility under the bankruptcy laws that govern the proposal process and that it is unimaginable that the OPA did not consider this possibility when entering the Waiver and Amending Agreement. I find that this argument does not assist in interpreting the Waiver and Amending Agreement because even if both parties knew that Greenview’s bankruptcy was a possibility, it does not follow that the parties shared a common intention about what would happen in the event of a bankruptcy. If anything, the knowledge of both parties that bankruptcy was possible makes it particularly significant that the parties omitted any reference to a future bankruptcy in the Waiver and Amending Agreement, and did not delete or amend the provisions of sections 7.1 (19) and (20). If these parties intended to waive the consequences of a future bankruptcy, they would have said so, as they did for many other provisions to the RESOP Contract.

[122] The plaintiff also argues that all parties understood that Mr. Hutchingame would be in control of Greenview after the Waiver and Amending Agreement. It was common knowledge that Mr. Hutchingame would play an important role in the project. However, I agree with the defendant that this does not mean that an assignment in bankruptcy had no significance.

[123] I also agree with the defendant that the automatic termination on Greenview’s bankruptcy did not lead to harsh or punitive consequences for the secured lenders of Greenview. Section 9.2 (3) gave secured lenders the right to step in and preserve the value of the RESOP Contract.

[124] In conclusion, the text of the Waiver and Amending Agreement and of the RESOP Contract is clear: the RESOP Contract would automatically terminate in the event of Greenview’s bankruptcy. Secured lenders would have the right to obtain a new agreement under section 9.2 (3). Nothing in the factual matrix is inconsistent with the straightforward meaning of the contractual text.

[125] The plaintiff also argues bad faith and negligent misrepresentations.

[126] I disagree with the plaintiff’s argument and find that good faith contractual performance and the common law duty to act honestly in the performance of contractual obligations did not impose on the defendant the obligation to tell the plaintiff that the RESOP Contract would terminate in the event that Greenview made an assignment in bankruptcy because this should have been quite obvious to the plaintiff from the clear language of the RESOP Contract. The defendant did not lie or otherwise knowingly mislead the plaintiff. The duty of honesty in contractual performance “does not impose a duty of loyalty or of disclosure or require a party to forgo advantages flowing from the contract”. (see Bhasin, at para. 73)

[127] The OPA might have acted more transparently upon learning that Greenview had filed for bankruptcy, rather than waiting silently for the 90-day period to expire. However, I do not find that this constituted bad faith or acting in breach of the general duty of honesty in contractual performance because the OPA did not lie or otherwise mislead the plaintiff, and the OPA’s understanding of section 9.2 (3) of the RESOP Contract was straightforward and correct. I also find that thereafter the OPA acted honestly and in good faith, and made all reasonable efforts to facilitate the plaintiff’s obtaining a new agreement under section 9.2 (3) of the RESOP Contract; this is quite apparent from the evidence and from the many follow-up emails of Mr. Devitt, of Mr. Fogul, and from the timely letters from the OPA explaining clearly to the plaintiff the position of the OPA and what was required from the plaintiff to obtain a new contract.

[128] Considering my earlier findings, the plaintiff’s submissions with regards to alleged negligent misrepresentations are without merit. The plaintiff failed to prove that the defendant made any statement that was untrue, inaccurate, or misleading, that the plaintiff relied on such a statement to its detriment, or that such reliance led to the plaintiff’s damages.

[129] In addition, the plaintiff presented no independent or expert evidence that it could have met the COD deadline, and the evidence rather demonstrates that its failure to do so resulted from many intrinsic failings, including its lack of experience in such projects and repeated procrastination. Indeed, the evidence indicates and the plaintiff agrees in its submissions that “The evidence of William Baker was clear that Truestar had the funds available to complete the project and was putting the necessary elements in place to move forward, including an engineering team, contractors and a supply of biofuel.” Other than blaming the OPA for what the plaintiff alleges resulted from the OPA’s contractual position, no independent evidence was presented by the plaintiff explaining why, considering the above and that Mr. Baker had the necessary resources, it nonetheless did not meet the COD deadline (or seek an additional extension).

Has the Plaintiff Proven an Entitlement to Damages?

[130] For reasons that are outlined above, the plaintiff has not proven an entitlement to damages. In the alternative, for reasons outlined below, the plaintiff has nonetheless also not proven an entitlement to damages.

Firstly

[131] The plaintiff has failed to prove that if the defendant had taken a different position the plaintiff would have successfully assigned the RESOP Contract to Truestar under section 9.2 (2), and would have received $4,769,479.41. Even if the plaintiff’s own pleading, submissions, and evidence are accepted, the plaintiff’s loss was caused by Greenview’s long-standing defaults under the RESOP Contract, not by the defendant insisting on section 9.2 (3).

[132] Indeed, the plaintiff could not have assigned the RESOP Contract without first curing the outstanding defaults. Section 9.2 (2) provides that a secured lender may “enforce any Secured Lender’s Security Agreement and acquire the Generator’s Interest in any lawful way and, without limitation, may sell or assign the Generator’s Interest provided such sale or assignment complies with the requirements of section 13.4.”

[133] Section 13.4 provides that “No assignment of this Agreement shall be valid or effective and no change of Control shall be permitted if the assigning Party is in default at the time of the assignment or change of Control.”

[134] Greenview’s obligations under the Waiver and Amending Agreement were unmet on May 15, 2014, and remained unmet thereafter. It was therefore impossible for the plaintiff to assign the RESOP Contract.

[135] The plaintiff argues that Greenview was not in default because the OPA did not give Greenview formal notice of a default, with a 30-day period for Greenview to cure the default. However, this argument conflates a default by the Generator, and the OPA’s decision whether to require a cure. Although the OPA must observe a 30-day cure period before terminating the RESOP Contract for certain defaults, this does not mean that the RESOP Contract is in good standing, without default, unless the OPA has attempted to terminate it. I agree with the defendants that defaults remain outstanding whether or not the OPA has previously insisted on their cure.

[136] The plaintiff suggests that, unlike a generator, secured lenders are not required to correct any outstanding defaults before assigning the RESOP Contract to a third party. I agree with the defendant that this suggestion would provide the secured lenders with greater rights in the RESOP Contract than a generator, and that such an interpretation is inconsistent with the final sentence of section 9.2 (2), which states: “Despite anything else contained in this Agreement, any Person to whom the Generator's Interest is transferred shall take the Generator's Interest subject to the Generator's obligations under this Agreement.”

Secondly

[137] The plaintiff failed to mitigate its damages.

[138] A party suing for breach of contract must take reasonable steps to mitigate its damages (Nashville Contractors Ltd. v. Middleton, [1984] O.J. No. 99 (C.A.), at para. 5). In its letter of May 23, 2014, and thereafter, the OPA offered to enter into a new agreement with the plaintiff provided that the plaintiff take certain steps. Other than curing the existing defaults, the OPA asked the plaintiff to:

a. Pay the IESO’s legal fees for preparing the new agreement (estimated at $14,868.71);

b. Obtain the consent of the other secured lender; and

c. Confirm that the generator continued have a place in Hydro One’s connection queue.

[139] None of these steps, or the additional steps later requested by the OPA, required an unreasonable effort or expenditure on the part of the plaintiff, and the evidence shows that none would have been an obstacle.

[140] Acting reasonably, the plaintiff should have obtained a new agreement with the OPA, and then assigned that agreement to Truestar.

Thirdly

[141] At law, damages outside the reasonable contemplation of the parties at the time they enter a contract are too remote to be recoverable. I agree with the defendant that at the time of the Waiver and Amending Agreement, the OPA could not have reasonably foreseen the plaintiff’s secretive and counterproductive conduct demonstrated by Mr. Hutchingame between May 23, 2014 (when the plaintiff learned of the OPA’s position), and April 2015 (when the plaintiff began sending demand letters to the OPA). I agree that it was the plaintiff’s conduct, not the OPA’s position that ultimately caused the transaction with Truestar to fail.

[142] The plaintiff received the OPA’s letter on May 23, 2014, nearly eighteen months before the COD deadline of November 8, 2015. Mr. Hutchingame did not disclose the OPA’s position immediately to Truestar. Mr. Hutchingame testified that he told Mr. Baker that they needed a vesting order, but he didn’t give him “one of the details”. Although Mr. Hutchingame testified that he considered the OPA’s letter of May 23, 2014 to be a “declaration of war”, he did not object, preferring not to give the OPA “free discovery”.

[143] Rather, as explained above, the plaintiff decided to obtain a vesting order in the hope that it would resolve his dispute with the OPA. As well, the vesting order approved the sale of Greenview’s physical assets to Truestar for $500,000 free and clear of the claims of any lender, including the other secured lender.

[144] As explained above, the circumstances leading up to the vesting order are unusual. For example:

a) The correspondence between the plaintiff and the other secured lender (in which the parties negotiate the distribution of $500,000 from the sale of Greenview’s assets) does not mention the plaintiff’s intention to assign the RESOP Contract to Truestar for $4,769,479.41. Despite the fact that lenders had an unresolved priority dispute, and despite the requirements of the Personal Property Security Act, the plaintiff said on cross-examination that he did not think he had to tell the other secured lender.

b) Similarly, the motion record does not disclose the assignment of $4,769,479.41 to the court. Rather, the motion record presents evidence to show that $500,000 is a reasonable offer for all the assets of Greenview. Mr. Hutchingame admitted that he had a chance to see the motion record before it was filed. Mr. Hutchingame likely did not advise the trustee of the true nature of his dealings with Truestar.

c) Despite the plaintiff’s intention to use section 84.1 of the Bankruptcy and Insolvency Act, neither the motion materials nor the vesting order refer to section 84.1, nor was the motion record served on the OPA (section 84.1 requires notice to every party to an agreement). As well, this section requires the court to consider whether the person to whom the rights and obligations are to be assigned is able to perform the obligations, and whether it is appropriate to assign the rights and obligations to that person – no evidence addressing these factors was presented to the court.

d) The motion was without notice to the OPA. On a motion without notice, a moving party is required to give full and fair disclosure of all material facts, and the failure to do so may be sufficient grounds to set aside the order. However, despite the plaintiff’s intention to use the vesting order to resolve its dispute with the OPA, the motion materials do not advise the court of the OPA’s position (that the RESOP Contract had terminated).

[145] Mr. Hutchingame’s approach during the summer of 2014 stands in contrast to his more assertive behaviour in the winter and spring of 2013. Mr. Hutchingame testified that he had hundreds of phone calls with Mr. Devitt in the spring of 2013 and that he often benefitted from Mr. Devitt’s help and input. The plaintiff then also threatened to start an urgent arbitration over the denial of a force majeure claim.

[146] Mr. Baker testified that, after the vesting order, he began to prepare the project for construction in the fall of 2014. Mr. Baker carried out this work from roughly September 2014 to January 2015, and he spent roughly $60,000. Throughout this time, Mr. Baker testified that he was relying on Mr. Hutchingame to sort out contractual issues with the OPA.

[147] In a letter sent on September 5, 2014, the OPA reiterated that the plaintiff would need to obtain a new contract under section 9.2 (3). In response, Mr. Hutchingame provided various partial updates in an email on September 16, 2014.

[148] In October 2014, Mr. Fogul, raised concerns with the wording of the vesting order, which appeared to include the RESOP Contract. As Mr. Fogul explained, the discussion of these concerns culminated in a conference call on October 24, 2014 between Mr. Fogul, Mr. Ostroff (counsel for the Trustee), Mr. Hebert (counsel for the plaintiff), and Mr. Hutchingame. Mr. Fogul and Mr. Hutchingame’s evidence is consistent: the result of the call was that Mr. Fogul would provide a list of requirements from the OPA for a new agreement. Mr. Fogul delivered that list on November 4, 2014. He never heard back from Mr. Ostroff, Mr. Hebert, or Mr. Hutchingame.

[149] There was continued correspondence between the plaintiff and Mr. Devitt from December 2014 to March 2015. When asked about some of this correspondence, which referred to “the potential of litigation”, Mr. Hutchingame testified that he was being “deliberately opaque” in his communications with the OPA.

[150] In April 2015, when it was too late to proceed with the project, Mr. Hutchingame sent a letter to the OPA that the plaintiff and Truestar “categorically deny” that the RESOP Contract had terminated the previous year. Mr. Baker testified that he asked Mr. Hutchingame to send this letter, and that he told Mr. Hutchingame that they had to put their position “on the record”. Mr. Baker testified that, at this point, he thought that Mr. Hutchingame should have been much more forthright and worked much quicker to get the OPA to the table and get the contract back to where it was supposed to be. He said that he had been “badgering” Mr. Hutchingame to get the OPA to the table so they could get the project built.

[151] I agree with the defendant that the following conclusions can be drawn from events between May 23, 2014 and April 2015, and make these findings:

a) Mr. Hutchingame was seeking to recover the full value of his security ($4.7M) through an assignment to Truestar, without disclosing this fact to another secured lender with whom he was in a priority dispute. Mr. Hutchingame was therefore motivated not to have open communications with other parties about how to move the project forward.

b) Mr. Baker entirely relied on Mr. Hutchingame to ensure the OPA was agreeable to transferring the RESOP Contract to Truestar, but Mr. Hutchingame was being deliberately opaque with the OPA.

c) Rather than working with the OPA to get a new agreement, Mr. Hutchingame attempted to avoid dealing with the OPA’s position by obtaining a vesting order, without telling the OPA (or the court) of the intended effect of the vesting order.

d) Compared to Mr. Hutchingame, Mr. Baker was prepared to invest time and money into the project, and Truestar could have financed the project. Mr. Baker also testified that none of the OPA’s November 4, 2014 requirements would have been an impediment.

[152] When the evidence is viewed as a whole, I find that the conduct of Mr. Hutchingame is the probable cause of the project’s failure and of the failed Assignment to Truestar. Mr. Hutchingame’s dealings were secretive, and he delayed directly addressing the OPA’s position until April 2015, when it was too late.

[153] When the OPA entered into the RESOP Contract and the Waiver and Amending Agreement, it could not have reasonably contemplated that a secured lender would behave this way. Such damage is too remote to be claimed from the OPA.

[154] As well, the plaintiff argues that the OPA asked them to amend the vesting order obtained without notice to the OPA; however, the plaintiff does not identify any barrier to the trustee, the plaintiff, and Truestar obtaining an amendment to the vesting order on consent. If the evidence of Mr. Hutchingame and Mr. Baker is believed, all of these parties had a common interest in allowing the project to succeed.

[155] The plaintiff also suggests that the OPA’s requirements for a new contract under section 9.2 (3) were a moving target, but the plaintiff does not explain why those requirements would have been impossible (considering the evidence).

[156] As well, the plaintiff suggests that a potential financier, Neutopia, required an existing RESOP Contract to move forward, but no one from Neutopia testified at this trial.

Fourthly

[157] Section 10.1 of the RESOP Contract excludes claims for indirect, incidental, or consequential damages, including loss of profits. It provides:

10.1 Exclusion of Consequential Damages

Notwithstanding anything contained herein to the contrary, neither Party will be liable under this Agreement or under any cause of action relating to the subject matter of this Agreement for any special, indirect, incidental, punitive, exemplary or consequential damages, including loss of profits, loss of use of any property or claims of customers or contractors of the Parties for any such damages, but nothing herein shall preclude any claim by the Generator to receive the Contract Payments in respect of Contract Energy that is in fact Delivered under this Agreement during the Payment Period.

[158] I disagree with the arguments of the plaintiff and find that the text of section 10.1 captures the plaintiff’s claim. The only damage claimed by the plaintiff are the loss of the assignment of the RESOP Contract to Truestar, and this relates “to the subject matter” of the RESOP Contract.

[159] I agree with the defendant that the purpose of section 10.1 can be inferred from its context. The OPA, when signing hundreds of RESOP contracts, did not want to assume liability for unknown dealings of parties such as Greenview and the plaintiff; as section 10.1 provides, the liability of the OPA would be limited to payments for energy. The plaintiff’s opaque dealings with Truestar are a perfect example of the losses intended to be excluded by section 10.1.

[160] The plaintiff’s suggestion that section 10.1 does not apply to a secured lender, because a lender is not a “Party” to the RESOP Contract is inapplicable because section 10.1 protects parties, which include the OPA. The plaintiff, who is suing the OPA based on provisions of the RESOP Contract, cannot argue that only some provisions of the RESOP Contract still have any effect.

[161] I also disagree with the plaintiff’s suggestion that section 10.1 should be interpreted against the defendant under the rule of contra proferentem. As indicated above, that rule applies where there is an ambiguity; section 10.1 is not ambiguous.

Fifthly

[162] The plaintiff has not proven an enforceable agreement with Truestar.

[163] As indicated above, I have many issues and reservations about the Assignment to Truestar. In addition to what is mentioned above, the Assignment to Truestar lacks features ordinarily seen in commercial agreements of this importance.

[164] As a result, I find more probable that the Assignment to Truestar was not an enforceable obligation, but an aspiration that Truestar would purchase the RESOP Contract from the plaintiff provided that the two partners got all of their “ducks in a row”; they never did.

Conclusion

[165] This action is dismissed.

[166] If the parties are unable to agree on costs within 30 days from the date of these reasons, they shall provide to my assistant written submissions not exceeding five pages, plus relevant documents: by the defendant within 40 days from these reasons, by the plaintiff within 50 days from these reasons, and any reply by the defendant limited to two pages within 55 days from the date of these reasons for decision. If written submissions on costs are not received by the end of February 2019, I will assume that the parties have reached an agreement on costs.

Justice P.E. Roger

Date: 2019/01/10

SCHEDULE 1

Renewable Energy Standard Offer Program Contract (November 8, 2007 – extracts from)

Section 7 – TERMINATION AND DEFAULT

7.1 Events of Default by the Generator

Each of the following will constitute an event of default by the Generator (each, a “Generator Event of Default”), notwithstanding the occurrence of any event of Force Majeure, unless indicated otherwise:

(1) The Generator or the Contract Facility fails or ceases to satisfy the eligibility requirements set out in the Program Rules and such failure or cessation is not remedied within the Cure Period.

(3) The Contract Facility fails to achieve Commercial Operation on or before the eighth anniversary of the Contract Date.

(19) By agreement, decree, judgment or order of a Governmental Authority, the Generator agrees to be treated as or is adjudicated bankrupt or insolvent or any substantial part of the Generator’s property is sequestered or subject to the appointment of a third party and such agreement, decree, judgment, order or appointment continues in effect unrevoked, undischarged and unstayed for a period of thirty (30) days after the entry or implementation thereof.

(20) The Generator dissolves, winds up or liquidates, or makes an assignment for the benefit of its creditors generally under any Insolvency Legislation, or consents to the appointment of a receiver, manager, receiver-manager, monitor, trustee in bankruptcy, or liquidator for all or part of its property or files a petition or proposal to declare bankruptcy or to reorganize pursuant to the provision of any Insolvency Legislation.

7.2 Remedies of the OPA

(1) In addition to all other rights and remedies it may have at law or in equity, and subject to Section 9, if any Generator Event of Default (other than a Generator Event of Default referred to in Section 7.1(19) or 7.1(20) occurs and is continuing, upon written notice to the Generator, the OPA may:

(a) terminate this Agreement; and/or

(b) suspend any or all Contract Payments owing to the Generator until such Generator Event of Default has been remedied to the satisfaction of the OPA, in its sole discretion; and/or

(c) set off any amounts payable by the generator to the OPA against any payments due to the Generator under this Agreement.

(2) Notwithstanding Section 7.2(1), upon the occurrence of a Generator Event of Default referred to in Sections 7.1(19) or 7.1(20) this Agreement shall automatically terminate without notice, act or formality, effective immediately before the occurrence of such Generator Event of Default, in which case, for certainty, the Secured Lender shall have the rights available to it under Section 9.2(3).

SECTION 9 – LENDER’S RIGHTS

9.2 Rights and Obligations of Secured Lenders

(1) While a Secured Lender’s Security Agreement remains outstanding, and provided that the OPA has received from the Generator prior written notice of the name and address for notice of the Secured Lender, no Generator Event of Default (other than those set out in Section 7.1(19) and 7.1(20)) shall be grounds for the termination by the OPA of this Agreement unless any notices required to be given under Sections 7.1 and 7.2(1) have been given on the same day to the Generator and to the Secured Lender and the applicable cure period, if any, set out in Section 7.1 has expired without a cure having been effected either by the Generator or the Secured Lender, who shall have the right (but not the obligation) to cure such default, in which event, the OPA shall accept performance by the Secured Lender as if it had been performed by the Generator.

(2) A Secured Lender may, subject to the provisions of this Agreement, enforce any Secured Lender’s Security Agreement and acquire the Generator’s interest in any lawful way and, without limitation, may sell or assign the Generator’s Interest provided such sale or assignment complies with the requirements of Section 13.4 and provided further that if the Secured Lender is the owner or is in control or possession of the Generator’s Interest, then it shall be entitled to and bound by all of the Generator’s rights and obligations hereunder so long as it is the owner or is in control or possession of the Generator’s Interest. Despite anything else contained in this Agreement, any Person to whom the Generator’s Interest is transferred shall take the Generator’s Interest subject to the Generator’s obligations under this Agreement.

(3) In the event of the termination of this Agreement prior to the end of the Term due to a Generator Event of Default, the OPA shall enter into a New Agreement, which New Agreement shall be effective as of the Termination Date and shall be for the then-remainder of the original Term of this Agreement and otherwise upon the terms contained n this Agreement, provided that the Secured Lender delivers to the OPA a written request thereof within ninety (90) days after the Termination Date; provided further that the OPA’s obligation to enter into a New Agreement is conditional upon the Secured Lender (a) paying all sums that would, at the time of the execution and delivery thereof, be due to the OPA under this Agreement but for such termination, (b) otherwise fully curing any defaults under this Agreement existing immediately prior to termination of this Agreement that are capable of being cured, (c) paying all reasonable costs and expenses, including legal fees, incurred by the OPA in connection with such default and termination, and the preparation, execution and delivery of such New Agreement and related agreements and documents, provided, however, that with respect to any default that could not be cured by the Secured Lender until it obtains possession, such Secured Lender shall have the applicable cure period commencing on the date that it obtains possession to cure such default, and (d) if there is more than one Secured Lender’s on the Security Agreement outstanding in respect of which the OPA has received the notice described in Section 9.2(1), delivering to the OPA the written consent of all other Secured Lenders with respect to such New Agreement.

SCHEDULE 2

Waiver and Amending Agreement (May 15, 2013 – extracts from)

10. Other

(b) In this Agreement:

(i) breach of any covenant or other provision hereof by the Generator; or

(ii) a representation or warranty that is incorrect or untrue in any material respect,

Shall be deemed to be a Generator Event of Default under the RESOP Contract, provided that a thirty (30) calendar day cure period shall be applicable thereto, and pursuant to which the OPA may inter alia pursue any remedy available to it under Section 7.2 of the RESOP Contract, including (but not limited to) the termination of the RESOP contract.

COURT FILE NO.: 15-66152

DATE: 2019/01/10

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Huthingame Growth Capital Corporation, Plaintiff

-and-

Independent Electricity System Operator, Defendant

BEFORE: Mr. Justice P.E. Roger

COUNSEL: Michael S. Hebert and Cheryl Gerhardt McLuckie, Counsel for the Plaintiff

Thomas G. Conway and Benjamin Grant, Counsel for the Defendant

REASONS FOR DECISION

Justice P.E. Roger

Released: 2019/01/10