2019 ONSC 6397

COURT FILE NO.: CV-19-623964-00CL

DATE: 20191115

SUPERIOR COURT OF JUSTICE – ONTARIO

• COMMERCIAL LIST

RE: GRASSHOPPER SOLAR CORPORATION, GSC SOLAR FUND I INC., ONE POINT TWENTY ONE GIGAWATTS INC., EGERTON POLAR POWER LP, and MPI GM SOLAR 1 LP

Applicants

AND:

INDEPENDENT ELECTRICITY SYSTEM OPERATOR

Respondent

BEFORE: HAINEY J.

COUNSEL: Marie Henein, Alex Smith, and David Postel for the Applicants

Alan Mark and Melanie Ouanounou for the Respondent

HEARD: October 7 and 8, 2019

ENDORSEMENT

background

[1] The applicants, who are in the process of constructing solar power projects pursuant to contracts with the respondent, seek declaratory relief with respect to the respondent’s assertion of a right to terminate their contracts.

Facts

[2] The respondent, the Independent Electricity System Operator (“IESO”) is responsible for the day to day operations of Ontario’s electricity system and for administering the wholesale electricity market. The Ontario Power Authority (“OPA”) was the entity responsible for power system planning and the procurement of new power generation. Effective January 1, 2015, the IESO and OPA entities were amalgamated and continued as the IESO. Concurrent with the amalgamation, the OPA’s mandate became part of the mandate of the IESO.

[3] The IESO operates within a legislative, regulatory and public policy framework. Although the IESO is not an agent of the Crown, the Minister of Energy, Northern Development and Mines (“Minister”) is responsible for the public policy framework within which the IESO operates. While the IESO has various powers under the Electricity Act, 1998, it does not itself have a broad policy mandate. Instead, the IESO’s approach to procurement of renewable energy must be consistent with the energy policy of the provincial government. The Minister has the power to formally direct the IESO to undertake, or refrain from undertaking, a particular course of action in respect of specific matters identified in the Electricity Act, 1998. The IESO’s mandate includes the power to enter contracts for the procurement of electricity, as long as it is done in a manner that is consistent with the purposes of the Electricity Act, 1998 and with the energy policy of the provincial government.

[4] In 2009, the Ontario government tasked the OPA to develop and administer a feed-in-tariff program (“FIT Program”) to encourage and promote the rapid development of renewable energy sources. The OPA developed the FIT Program as a standard offer procurement whereby successful applicants were offered standard contracts (“FIT Contracts”) with standard pricing to feed-in energy to Ontario’s electricity grid over a fixed term, of in most cases, twenty years.

[5] The applicant, Grasshopper Solar Corporation (“Grasshopper”), is an Ontario-based corporation and Canada’s largest fully-integrated solar energy company. Grasshopper is owned by the applicant, GSC Solar Fund I Inc. (“GSC”), which also has an ownership interest in, and effective control of, One Point Twenty One Gigawatts Inc., Egerton Solar Power LP, and MPI GM Solar 1 LP (together, “Contracting Applicants”), which hold eighteen FIT Contracts with the IESO. These FIT Contracts are identical for the purpose of this application.

[6] The FIT Contracts require the Contracting Applicants to construct ground-mounted solar facilities and generate electricity for a twenty-year term for the benefit of the IESO.

[7] Key thresholds under the FIT Contracts include the following:

(i) Receipt of a Notice to Proceed (“NTP”) from the IESO is governed by section 2.4 of the FIT Contracts. To receive NTP, the Supplier must meet the NTP-prerequisites listed in section 2.4(d) of the FIT Contracts. Issuance of the NTP by the IESO ends the phase of development in which the IESO can terminate a FIT Contract “in its sole and absolute discretion” with only minor financial consequences to the IESO;

(ii) The Milestone Date for Commercial Operation (“MCOD”) is a fixed date. If a Supplier has not achieved commercial operation by the MCOD, then the payment term is shortened; and

(iii) “Commercial Operation” happens when the Supplier meets the “Requirements for Commercial Operation” listed in section 2.6 of the FIT Contracts.

[8] Article 9 of the FIT Contracts provides in part as follows:

ARTICLE 9

TERMINATION AND DEFAULT

9.1 Events of Default by the Supplier

Each of the following will constitute an Event of Default by the Supplier (each, a “Supplier Event of Default”):

(a) The Supplier fails to make any payment when due or deliver, and/or maintain, the Completion and Performance Security as required under this Agreement, if such failure is not remedied within 10 Business Days after written notice of such failure from the Sponsor.

(b) The Supplier fails to perform any material covenant or obligation set forth in this Agreement (except to the extent constituting a sperate Supplier Event of Default) if such failure is not remedied within 15 Business Days after written notice of such failure from the Sponsor, provided that such cure period shall be extended by a further 15 Business Days if the Supplier is diligently remedying such failure and such failure is capable of being cured during such extended cure period.

(j) The Commercial Operation Date has not occurred on or before the date which is 18 months after the Milestone Date for Commercial Operation, or otherwise as may be set out in Exhibit A.

9.2 Remedies of the Sponsor

(a) If any Supplier Event of Default (other than a Supplier Event of Default relating to the Supplier referred to in Sections 9.1(e)s, 9.1(g), and 9.1(h)) occurs and is continuing, upon written notice to the Supplier, the Sponsor may terminate this Agreement.

[9] According to the IESO, one of the Contracting Applicants’ most basic obligations under their respective FIT Contracts is the time within which they are required to have their solar projects in commercial operation. This obligation is set out in Article 2.5(a) and (b) of the FIT Contracts as follows:

2.5 Milestone Date for Commercial Operation

(a) The Supplier acknowledges that time is of the essence to the Sponsor with respect to attaining Commercial Operation of the Facility by the Milestone Date for Commercial Operation set out in Exhibit A. The Parties agree that Commercial Operation shall be achieved in a timely manner by the Milestone Date for Commercial Operation.

(b) The Supplier acknowledges that even if the Facility has not achieved Commercial Operation by the Milestone Date for Commercial Operation and this Agreement is not terminated in accordance with Section 9.2 as a result of such failure, the Term shall nevertheless expire on the day before the twentieth or fortieth anniversary (as applicable) of the Milestone Date for Commercial Operation, pursuant to Section 8.1.

[10] The MCOD is defined in the FIT Contracts as follows:

The date set out in Exhibit A to the FIT Contract by which the Facility is required to attain Commercial Operation.

[11] The MCOD for the Contracting Applicants is during the month of September 2019.

[12] In June 2013, the OPA, published the following bulletin on its website (“Bulletin”):

June 17, 2013: Approach to project delays and potential Events of Default

In response to a number of questions the OPA has received regarding project delays and potential Supplier Events of Default, the OPA has developed the following approach to such delays. Please note that the information provided here is meant for informational purposes only and shall not be relied upon by Suppliers.

Suppliers will be sent a letter should they fail to meet their Notice to Proceed (NTP) Request date and/or their Milestone Date for Commercial Operation (MCOD). The letter will advise that the OPA will not act upon its termination rights arising under Sections 9.2(a) of the FIT Contract for those Suppliers that have not provided the OPA with a completed NTP Request in compliance with Section 2.4(c) of the FIT Contract and/or have not attained Commercial Operation of the Contract Facility on or before the MCOD pursuant to Section 2.5 (or Schedule 2 Special Terms and Conditions (Launch Applications)) of the FIT Contract.

This information does not constitute a waiver of any actual or potential default, nor does it amend the FIT Contract. The FIT Contract remains in full force and effect. For clarity, it shall remain a Supplier Event of Default (and the OPA maintains its right to terminate the Supplier’s FIT Contract) if the Commercial Operation Date has not occurred on or before the following:

• For solar rooftop facilities, the date which is six months after the Milestone Date for Commercial Operation pursuant to section 1.3 of Exhibit A of the FIT Contract.

• For solar ground-mounted projects, the date which is 18 months after the Milestone Date for Commercial Operation pursuant to section 1.3 of Exhibit A of the FIT Contract, as amended by the OPA’s letter to Suppliers of August 2011.

• For all other FIT facilities, the date which is 18 months after the Milestone Date for Commercial Operation pursuant to 9.1(j) of the FIT Contract.

Questions about this approach to delays and potential Events of Default should be directed to your contract analyst.

[13] Consistent with the practice set out in the Bulletin, the IESO sent form letters to suppliers who failed to achieve commercial operation by the MCOD in which it stated that failing to achieve commercial operation within eighteen months of the MCOD would constitute a Supplier Event of Default.

[14] According to the IESO from the date of the Bulletin to March 2019 no FIT Contracts were terminated by it for failure to achieve commercial operation by the MCOD.

[15] In 2018, Ontario held a general election that resulted in the election of a majority government led by Doug Ford of the Progressive Conservative Party (“PC Party”). During the election campaign, the PC Party released a white paper entitled a Plan for the People that promised, among other things, to:

(i) Stop sweetheart deals by scrapping the Green Energy Act;

(ii) Cancel energy contracts that are in the pre-construction phase; and

(iii) Re-negotiate other energy contracts.

[16] Less than a week after assuming power, the Ford government fulfilled its promise to “Cancel energy contracts that are in the pre-construction phase” by issuing a directive from the Minister ordering the IESO “to immediately take all steps necessary to wind down all FIT 2, 3, 4 and 5 Contracts where the IESO has not issued NTP”. Consistent with the Minister’s directive, the respondent immediately terminated 758 renewable energy contracts.

[17] On March 29, 2019 the IESO sent each of the Contracting Applicants and the other Suppliers the following form warning letter (“Warning Letter”):

This notice is to remind you that the Milestone Date for Commercial Operation¹ for the FIT Contract is September 8, 2019. As of the date of this letter, the Facility has not yet attained Commercial Operation. As you are aware, the failure to attain Commercial Operation by the Milestone Date for Commercial Operation (the “MCOD”), as required by Section 2.5 of the FIT Contract, is a breach of, and constitutes a Supplier Event of Default under, Section 9.1(b) of the FIT Contract.

PLEASE NOTE that except as expressly provided in the FIT Contract, the MCOD will not be extended. Failure to attain Commercial Operation by this date will constitute a Supplier Event of Default, for which the IESO will terminate the FIT Contract pursuant to Section 9.2(a).

It is the IESO’s intent to strictly enforce its rights and remedies under the FIT Contract and the Supplier may not rely on any of the IESO’s past practices, waivers, statements or any actual or perceived indulgences regarding the achievement of the MCOD, whether with respect to this or any other contract, as a waiver of any of the IESO’s rights or remedies under the FIT Contract. For greater certainty, the IESO hereby specifically revokes its communication date June 17, 2013 referencing a previous approach to project delays and potential Events of Default, and retracts any past waivers of its right to terminate contracts for failure to achieve Commercial Operation by the MCOD.

The risk of whether or not the Facility achieves Commercial Operation by the MCOD rests solely with the Supplier and the IESO accepts no risk or liability in this regard. The receipt, review or discussion by the IESO of any project schedule, update or any other information or documentation provided by the Supplier to the IESO does not, and shall not be considered to, constitute an acknowledgement or warranty, express or implied, with respect to the accuracy, completeness or feasibility of such project schedule, update or other information or documentation, nor shall it constitute a waiver by the IESO of its right to insist upon strict compliance with the MCOD or of any other provision under the FIT Contract.

The IESO reserves all rights and remedies under the FIT Contract and at law, including the right to exercise any rights and remedies at any time and from time to time including its right to terminate the FIT Contract under Section 9.2(a).

This letter is being provided pursuant to the FIT Contract only and shall not be deemed to be an acknowledgement or notification by the IESO under the IESO Market Rules. …

[18] As set out in the Warning Letter, the IESO specifically revoked the Bulletin and now takes the following position:

(a) Failure to achieve commercial operation by the FIT Contracts’ MCOD constitutes a Supplier Event of Default which entitles the IESO to terminate the contract; and

(b) Contrary to the practice set out in the Bulletin, the IESO will terminate FIT Contracts if commercial operation is not achieved by the MCOD.

[19] The Warning Letter reduced the time available for the Contracting Applicants to achieve commercial operation from 24 to 6 months, a deadline that has been extremely difficult to meet.

[20] Numerous Suppliers considered the Warning Letter inconsistent with the FIT Contracts. The Canadian Solar Industries Association coordinated a response and, with the support of Grasshopper and other Suppliers, the KL Solar application (Court File No. CV-19-622166-00CL) was commenced on June 19, 2019 (“KL Application”).

[21] In the interim, on May 21, 2019, the Grasshopper group of companies completed negotiations that had been in process since late 2018 and entered into agreements to acquire the companies that brought the KL Application.

[22] On July 29, 2019, after negotiations with the IESO were unsuccessful, the Contracting Applicants brought this application which I heard at the same time as the KL Application. I intend to release a separate endorsement with respect to the KL Application which raises the issue of estoppel by convention with respect to the IESO’s right to terminate for failure to achieve commercial operation by the MCOD.

issues

[23] I must decide the following issue on this application:

• Does the IESO have the right to terminate the FIT Contracts for the applicants’ failure to achieve commercial operation by the MCOD?

Positions of the parties

[24] The applicants submit that the wording of the FIT Contracts and their context make it clear that failure to achieve commercial operation by the MCOD is not a Supplier Event of Default that allows the IESO to terminate the contract. They further submit that the IESO’s interpretation of its termination rights under the FIT Contracts is commercially unreasonable. According to the applicants, if there is any ambiguity in the FIT Contracts as to whether failure to achieve commercial operation by the MCDO is a Supplier Event of Default the doctrine of Contra Proferentem should be applied such that the contract is construed against the IESO.

[25] The IESO submits that there is no basis in fact or law for the interpretation of the FIT Contracts advanced by the applicants and that the words in the contract clearly and unambiguously provide for a termination right upon the failure of a supplier to achieve commercial operation by the MCOD. The IESO further submits that its interpretation of its termination right is consistent with the rest of the contract and gives effect to all of its provisions while the applicant’s position does not. According to the IESO, its interpretation is also consistent with the factual matrix and “does not lead to commercially absurd results”.

analysis

General Principles of Contractual Interpretation

[26] The law is well-settled that the primary goal of contractual interpretation is to determine the objective intent of the parties to the contract and the scope of their understanding. The Supreme Court of Canada made this clear in Creston Moly Corp. v. Sattva Capital Corp. 2014 SCC 53 at para. 47 as follows:

Regarding the first development, the interpretation of contracts has evolved towards a practical, common-sense approach not dominated by technical rules of construction. The overriding concern is to determine “the intent of the parties and the scope of their understanding” … To do so, a decision-maker must read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract. Consideration of the surrounding circumstances recognizes that ascertaining contractual intention can be difficult when looking at words on their own, because words alone do not have an immutable or absolute meaning:

No contracts are made in a vacuum: there is always a setting in which they have to be placed … In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating …

[27] In Ventas Inc. v. Sunrise Senior Living Real Estate Investment Trust 2007 ONCA 205, the Court of Appeal for Ontario outlined at para. 24 the following principles of contractual interpretation that apply to my interpretation of the FIT Contracts:

Counsel accept that the application judge correctly outlined the principles of contractual interpretation applicable in the circumstances of this case. I agree. Broadly stated – without reproducing in full the relevant passages from her reasons (paras. 29-34) in full – she held that a commercial contract is to be interpreted,

(a) as a whole, in a manner that gives meaning to all of its terms and avoids an interpretation that would render one or more of its terms ineffective;

(b) by determining the intention of the parties in accordance with the language they have used in the written document and based upon the “cardinal presumption” that they have intended what they have said;

(c) with regard to objective evidence of the factual matrix underlying the negotiation of the contract, but without reference to the subjective intention of the parties; and (to the extent there is any ambiguity in the contract),

(d) in a fashion that accords with sound commercial principles and good business sense, and that avoid a commercial absurdity.

Interpretation of the Words of the FIT Contracts

[28] Applying these principles to the interpretation of the IESO’s rights to terminate the FIT Contracts, I have concluded that the IESO does have the right to terminate the FIT Contracts for failure to achieve commercial operation by the MCOD for the following reasons.

[29] The FIT Contracts expressly provide that time is of the essence with respect to attaining commercial operation by the MCOD in s. 2.5(a) as follows:

2.5 Milestone Date for Commercial Operation

(a) The Supplier acknowledges that time is of the essence to the Sponsor with respect to attaining Commercial Operation of the Facility by the Milestone Date for Commercial Operation set out in Exhibit A. The Parties agree that Commercial Operation shall be achieved in a timely manner and by the Milestone Date for Commercial Operation.

[30] Time is of the essence clauses require strict compliance and failure to observe a timeline in a contract in which it is stated that “time is of the essence” will entitle the other party to terminate the contract. The Court of Appeal for Ontario made this clear in Di Millo v. 2099232 Ontario Inc. 2018 ONCA 1051 at para. 31 as follows:

31. A “time is of the essence” clause is engaged where a time limit is stipulated in a contract. The phrase “time is of the essence” means that a time limit in an agreement is essential such that breach of the time limit will permit the innocent party to terminate the contract.

[31] Section 2.5(b) of the FIT Contracts also refers to the IESO’s right to terminate the contract for failure to achieve commercial operation by the MCOD as follows:

(b) The Supplier acknowledges that even if the Facility has not achieved Commercial Operation by the Milestone Date for Commercial Operation and this Agreement is not terminated in accordance with Section 9.2 as a result of such failure, the Term shall nevertheless expire on the day before the twentieth or fortieth anniversary (as applicable) of the Milestone Date for Commercial Operation, pursuant to Section 8.1.

[32] The words in s. 2.5(b) “even if the facility has not achieved Commercial Operation by the Milestone Date for Commercial Operation and this Agreement is not terminated in accordance with s. 9.2 as a result of such failure” supports the IESO’s interpretation of its termination rights under the FIT Contracts. This is because the words “as a result of such failure” make it clear that the IESO has the right to terminate the FIT Contracts under s. 9.2 for failure to achieve commercial operation by the MCOD. There is no other way to interpret these words which would have to be ignored if I were to adopt the applicants’ interpretation.

[33] The definition of the MCOD in Appendix I of the FIT Contracts also supports the IESO’s interpretation because it defines the MCOD as the date “by which the facility is required to attain Commercial Operation”.

[34] In light of these sections of the FIT Contracts I have concluded that the Contracting Parties’ obligation to achieve commercial operation by the MCOD is a “material covenant or obligation” in the contract. As a result, s. 9.1(b) applies to the Contracting Parties’ failure to achieve commercial operation by the MCOD.

[35] I do not accept the applicants’ submission that if failure to achieve commercial operation by the MCOD was meant to be an Event of Default it should have been specifically listed in s. 9.1. Achieving commercial operation by the MCOD is a fundamental obligation under the FIT Contracts. A breach of this obligation is included in s. 9.1(b) because it constitutes a failure to perform a material obligation. This breach is not listed as a separate event of default in s. 9.1. so that the words “except to the extent constituting a separate Suppliers Event of Default” in s. 9.1(b) do not apply to it. It is a different breach than the event of default set out in s. 9.1(j) which is only applicable if commercial operation has not been achieved 18 months after the MCOD.

[36] The IESO’s interpretation of s. 9 of the FIT Contracts also gives meaning to all of the provisions of the FIT Contracts whereas the applicants’ interpretation gives no effect to the following provisions in the FIT Contracts:

(a) the “time of the essence” provision in Section 2.5(a) has no significance;

(b) the qualifying language in Section 2.5(b) of the FIT Contracts (“and this Agreement is not terminated in accordance with Sections 9.2 as a result of such failure”) must be read out of that section;

(c) the express definition of “MCOD” is ignored; and

(d) According to the applicants’ interpretation no default rises to the level of a supplier event of default under s. 9.1 unless that default is explicitly stated as an individual and separate event of default. If this interpretation is correct, s. 9.1(b) would be rendered entirely ineffective because it does not expressly enumerate any specific type of default, other than to say that it must be a breach of a “material covenant or obligation.”

[37] The applicants’ interpretation also conflicts with the force majeure provision in Article 10 of the FIT Contracts which specifies in s. 10.3 that it applies to an event that prevents a party from performing its obligations under the contract.

[38] Section 10.1(a)(iii) provides as follows:

If, by reason of Force Majeure:

(iii) Either party is unable, wholly or partially, to perform or comply with its other obligations (other than payment obligations) hereunder, including the Supplier being unable to achieve Commercial Operation by the Milestone Date for Commercial Operation,

then the party so affected by Force Majeure shall be excused and relieved from performing or complying with such obligations …

[39] Section 10.1 (f) further provides as follows:

If an event of Force Majeure causes the Supplier to not achieve Commercial Operation by the Milestone Date for Commercial Operation, then the Milestone Date for Commercial Operation shall be extended for such reasonable period of delay directly resulting from such Force Majeure event …

[40] These sections of the Fit Contracts make it clear that achieving commercial operation by the MCOD is an obligation under the contract. Otherwise, these Force Majeure provisions relating to the failure to achieve commercial operation by the MCOD would be unnecessary.

[41] I do not accept the applicants’ submission that the IESO’s interpretation gives no effect to s. 9.1(j) of the Fit Contracts. According to the IESO, the purpose of having the “long-stop termination right” in s. 9.1(j) is to have a clearly defined hard stop commercial operation deadline with no cure period where the IESO elects not to enforce its right to terminate the contract under s. 9.1(b) for failure to achieve commercial operation by the MCOD. I accept this explanation. The termination right for failure to achieve the MCOD in s. 9.1(b) is not mutually exclusive of the long-stop termination right in s. 9.1(j). For the same reason, there is no basis to read down the broader termination right in s. 9.1(b) so as not to include any defaults in meeting commercial operation not covered by the narrower termination right in s. 9.1(j). This principle of contractual interpretation is only appropriate where two provisions of a contract are inconsistent with each other. There is no inconsistency between s. 9.1(b) and s. 9.1(j).

[42] The applicants submit at para 42 of their factum that because s. 8.1 shortens the guaranteed revenue period under the FIT Contracts,

by each day that passes from MCOD until Commercial Operation is achieved … This incentive scheme illustrates not only that the Contract anticipates that Commercial Operation might not be achieved by MCOD but also that the Contract provides for consequences should this occur.

[43] I do not accept this submission because the reduction of the guaranteed revenue period will only occur if the IESO waives its right to terminate the contract for failure to achieve commercial operation by the MCOD. This is what the IESO did in every case prior to the Warning Letter. However, if the IESO terminates the contract under s. 9.1(b) for failure to achieve commercial operation by the MCOD, s. 8.1 will not come into play.

Parties’ Subjective Intention

[44] Although there is a good deal of evidence about the parties’ subjective understanding as to the meaning of the FIT Contracts and the rights of termination, I have disregarded this evidence as it is not relevant to my interpretation of the contracts. The jurisprudence on this issue is clear and comprehensively summarized by Geoff Hall in Canadian Contractual Interpretation Law, 3^rd ed. (Toronto: Lexis Nexis Canada, 2016) at s. 2.5.1 as follows:

… the exercise is not to determine what the parties subjectively intended but what a reasonable person would objectively have understood from the words of the document read as a whole and from the factual matrix.

Factual Matrix

[45] In interpreting the words used in the FIT Contracts I must do so in a manner that is consistent with the surrounding circumstances known to the parties at the time of the formation of the contracts. Objective facts known to the parties when they entered into the FIT Contracts will constitute the factual matrix against which the words used in the contract will be interpreted.

[46] The applicants have not identified any aspects of the factual matrix which support their interpretation of the IESO’s termination rights under the FIT Contracts. However, in 2016, when the Contracting Applicants entered into the FIT Contracts the surrounding circumstances included the following information which was contained in the Bulletin:

• The OPA would not act upon its termination rights under s. 9.2(a) of the FIT Contracts for failure to achieve commercial operation by the MCOD in accordance with s. 2.5 of the contract; and

• The information in the Bulletin was for informational purposes only and should not be relied upon by Suppliers and did not constitute a waiver of any actual or potential default or an amendment to the FIT Contracts

[47] Although the Bulletin confirmed the OPA’s practice of waiving its right to terminate FIT Contracts for failure to achieve commercial operation by the MCOD, it confirmed the OPA’s position that it had the right to terminate Fit Contracts under s. 9.2(a) for failure to achieve commercial operation by the MCOD. This should have been known to the Contracting Applicants when they entered into the FIT Contracts.

[48] The IESO’s interpretation of its termination rights under the FIT contracts is therefore consistent with the factual matrix.

Commercial Reasonableness

[49] It is clear that I must interpret the FIT Contracts in accordance with sound commercial principles and good business sense and avoid an interpretation that would lead to a commercial absurdity. The applicants submit the IESO’s interpretation is commercially unreasonable.

[50] However, I have concluded that the IESO’s interpretation of its termination rights under the FIT Contracts is commercially reasonable. It makes good business sense that the IESO may elect to terminate the contract on the MCOD if commercial operation has not been achieved by that date. However, if it elects to waive its termination right under s. 9.2(a) at the MCOD, then its next termination right arises eighteen months later under s. 9.1(j). This termination regime does not result in the “extreme uncertainty about the contract’s viability” that the applicants allege. It is a commercially reasonable interpretation of the IESO’s termination rights under the FIT Contracts.

Contra Proferentem

[51] The applicants rely upon the principle of contra proferentem and submit that if an ambiguity exists as to whether a failure to achieve commercial operation by the MCOD entitles the IESO to terminate the FIT Contracts the contract should be construed against the IESO.

[52] However, the principle of contra proferentem cannot be applied unless the court first concludes that the contract is ambiguous. In this case I have not found any ambiguity in the provisions of the FIT Contracts that would invoke the contra proferentem principle.

[53] Further, s. 1.12 of the FIT Contracts expressly forecloses the application of this principle. As a result, the principle of contra proferentem does not apply in this case.

CONCLUSION

[54] For the reasons set out above the application for an order declaring that failure to achieve commercial operation by the MCOD does not constitute a Supplier Event of Default is dismissed. Since the MCOD has already passed my order will not take effect until thirty days after the date of this endorsement so that the applicants may seek appellate review before the FIT Contracts are terminated.

COSTS

[55] If the parties cannot settle costs they may schedule a 9:30 a.m. attendance with me.

[56] I thank counsel for their helpful submissions.

HAINEY J.

Date: November 15, 2019