COURT FILE NO.: CV-19-617048-00CL
DATE: 20211117
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Greta Energy Inc. and Great Grand Valley 2 Limited Partnership
Plaintiffs
– and –
Pembina Pipeline Corporation and Bluearth Renewables Inc.
Defendants
Brendan Van Niejenhuis, Caitlin E. Milne and Senwung Luk, for the Plaintiffs
Mark Gelowitz and Sandy Hay for the Defendant Pembina Pipeline Corporation
R. Seumas Woods and Rebecca Torrance for the Defendant Bluearth Renewables Inc.
HEARD: October 13 & 14, 2021
C. Gilmore, J.
judgment on motions for summary judgment
INTRODUCTION
[1] This judgment relates to the hearing of three motions for summary judgment: the motion by the Plaintiffs Greta Energy Inc (“Greta”) and Great Grand Valley 2 Limited Partnership (“GG2”, collectively “the Plaintiffs”), the motion by the Defendant Pembina Pipeline Corporation (“Veresen” as will be described below), and the motion by the Defendant Bluearth Renewables Inc. (“Bluearth”, collectively “the Defendants.”)
[2] A change in ownership of one of the Defendants occurred after the parties filed their material in this matter. The Defendant Pembina was formerly known as Veresen Energy Infrastructure Inc. and referred to in all materials and throughout argument as “Veresen.” As such, I will refer to Pembina as Veresen in this judgment. The Order to Continue with respect to the new Title of Proceedings is dated October 13, 2021.
[3] This matter was case managed and scheduled on the understanding and agreement of all parties that summary judgment was the appropriate procedure in these circumstances.
[4] Veresen had originally brought a counterclaim which has now been dismissed on consent and a Notice of Discontinuance has been filed. The parties agree that there is therefore no need to deal with that counterclaim in this judgment.
[5] At the core of this case is the Plaintiffs’ allegation that the Defendants worked together to manipulate the pricing of assets being sold by Veresen in a bad faith attempt to prevent the Plaintiffs from exercising their Right of First Refusal (“ROFR”) over two of the assets being sold. The Plaintiffs further allege that the Defendants knowingly misled the Plaintiffs as to the bona fide nature of the price allocation for the subject assets resulting in a breach of the duty of good faith in contract. The Plaintiffs seek damages for conspiracy against both Defendants, damages for an ad hoc breach of fiduciary duty against Veresen, and damages for inducing breach of contract against Bluearth. The Plaintiffs also seek a dismissal of the Defendants’ motions.
[6] While the Plaintiffs sought $13M in damages in their original claim, after discovery they reduced the claim to $6.4M in damages being the amount they allege the Defendants artificially inflated the exercise price of the Plaintiffs’ ROFR over one of the wind farm assets – GV2. The Plaintiffs also seek damages based on the lack of opportunity to acquire 50% of GV2 rather than maintaining their 25% interest.
[7] Veresen seeks a dismissal of the claims by the Plaintiffs against it. Veresen’s position is that it has not breached any duty. The allocation of pricing of the assets was bona fide and represented what Bluearth was willing to pay for the package of assets and Veresen was willing to accept. The fact that the Plaintiffs were dissatisfied with the pricing that was ultimately used for the ROFRs does not mean that the Veresen acted dishonestly or in bad faith.
[8] Bluearth also seeks a dismissal of the Plaintiffs’ claims. Bluearth submits that it followed the process set by Veresen for the sale of its assets. Bluearth was willing to offer as much or as little as it believed appropriate, regardless of any possible effect on a ROFR holder. Bluearth did not conspire with Veresen to harm the Plaintiffs and the Plaintiffs’ claims should be summarily dismissed.
[9] As will be set out below, I accept the Defendants’ arguments and find that Veresen and Bluearth’s actions were not in violation of the Plaintiffs’ rights. Veresen set up a legitimate process to sell its assets and Bluearth engaged in that process with professional advice. It was not commercially unreasonable for Bluearth to pay a price for any or all of the assets that would pressure the ROFR holder not to exercise its rights.
BACKGROUND FACTS
The Parties
[10] Greta is an Ontario corporation with a head office in Toronto. GG2 is an Ontario limited partnership with a head office in Toronto. The General Partner of GG2 is GGV2 GP Inc., a corporation in which Greta is the sole shareholder. Mr. George Cholakis (“Cholakis”) was the Plaintiffs’ primary contact for the Defendants.
[11] Veresen is an Alberta corporation with its head office in Calgary. Mr. Scott Badham (“Badham”) and Mr. Mike Barer (“Barer”) worked at Veresen and were primarily involved in the transaction that is the subject of this litigation.
[12] Bluearth is an independent power producer which acquires, builds and operates wind, hydro and solar facilities across North America. Bluearth is a Manitoba limited partnership with its head office in Calgary. At the time of the events in this litigation, the Ontario Teachers Pension Plan (“OTPP”) owned more than 98% of Bluearth. The primary contact at Bluearth was Mr. Nick Boyd (“Boyd”).
[13] Prior to the asset sale which is the subject of this litigation, Veresen owned three wind farms in Ontario: Grand Valley 1 (“GV1”), Grand Valley 2 (“GV2”) and St. Columban (“SCELP”) (together the “Wind Facilities”).
[14] GV1 was owned by Grand Valley 1 LP (“GV1LP”) of which Veresen was a 75% owner. Greta owned most of the remaining 25% shares. Greta and Veresen each owned 50% of the shares of the General Partner of GV1LP, Grand Valley Wind Farms Inc. (“GVWF Inc.”). GVWF Inc. was governed by a Shareholders Agreement (“the GV1 SA”). Section 7.1 of the GV1 SA provided a ROFR for both Veresen and Greta with respect to the opposite party’s interest in GV1.
[15] GV2 was owned by Grand Valley 2 Limited Partnership (“GV2LP”) of which Veresen was a 75% owner. GG2 owned the remaining 25%. GV2LP was governed by the Grand Valley 2 Limited Partnership Agreement (“GV2 LPA”) to which Veresen and GG2 were parties. Section 7.2 of the GV2 LPA provided a ROFR identical to the one in GV1 SA for both Veresen and GG2 with respect to the opposite party’s interest in GV2.
[16] Veresen was a 90% owner of SCELP. The remaining 10% was owned by 2177958 Ontario Inc. (“217”), which in turn was owned by Mr. Jose Menendez (“Menendez”). No ROFR was held by Veresen or Mendenez over the other’s interest in SCELP. However, SCELP was governed by the St. Columban Limited Partnership Agreement (“St. Columban LPA”) to which Veresen and 217 were parties. Pursuant to the St. Columban LPA, 217 could unilaterally block the sale of Veresen’s interest in SCELP.
The Sale is Announced
[17] In August 2016, Veresen issued a press release announcing its intention to sell the Wind Facilities, its hydro facilities, two natural gas plants in Ontario, district energy facilities in Ontario and Prince Edward Island and a waste heat generation facility in British Columbia. The hydro facilities were made up of three assets in British Columbia; Veresen’s 100% interest in Lower Clowhom hydro facility (“Clowhom”), its 99% interest in Furry Creek hydro facility (“Furry Creek”) and its 100% interest in the Dasque and Middle Creek hydro facilities (“Dasque Middle”, and together, the “Hydro Facilities”).
[18] The Wind Facilities have been described above and included Veresen’s 75% interest in GV1LP, its 75% interest in GV2LP and its 90% equity interest in SCELP.
Bluearth Bids on the Renewable Assets
[19] Bluearth had been waiting for the sale announcement. When the announcement was made, Bluearth contacted Veresen’s financial advisor, TD Securities Inc. (“TD”), to ask about the sale process. Bluearth then signed a Confidential Information Memorandum (“CIM”) to allow it access to financial models for Veresen related to revenue and expenses over time. The information was to be used by Bluearth’s financial advisor to value the business. The CIM also contained information about the ROFRs on GV1 and GV2.
[20] Veresen indicated that it preferred an en bloc sale of all of its power assets but would consider a sale of multiple packages to multiple parties if it achieved Veresen’s sale objectives. Veresen did not ask bidders to break down the price on an asset by asset basis.
[21] Boyd headed up Bluearth’s team to coordinate its bid. Bluearth retained RBC Capital Markets (“RBC”) as financial advisors, and used the Veresen model as a base for it own financial model for the Wind and Hydro Facilities, in order to make an informed bid.
[22] On January 6, 2017 Boyd sent the Bluearth Board of Directors a slide deck recommending that Bluearth invest up to $199M of its own equity, obtain some new financing, take on the existing project debt and obtain $125M in new project financing on SCELP (as SCELP was a debt free asset). The presentation contemplated a 10% internal rate of return (“IRR”) on the equity investment. The Bluearth Board formally approved this proposal on January 12, 2017.
[23] On January 13, 2017 Bluearth submitted a bid for the Wind and Hydro Facilities in the amount of $599M (the “Binding Proposal"). Specifically, those assets were GV1, GV2, SCELP, Clowhorn, Furry Creek and Dasque Middle. Veresen advised Bluearth on January 20, 2017 that its bid was successful and invited Bluearth to begin the process of negotiating a purchase and sale agreement (“PSA”).
Planning for and Receiving the ROFR Notices
[24] Greta had always been interested in acquiring Veresen’s interest in GV1 and GV2. As early as the spring of 2016, Greta, through Cholakis, contacted Mr. Andrew Cogan (“Cogan”) of Fengate Capital Management Ltd. (“Fengate”) to provide financial support for Greta’s intended acquisition of GV1 and GV2. Fengate agreed to help Greta exercise the ROFRs in exchange for Greta and Fengate each holding a 50% interest in the projects. Fengate worked with Greta to provide modeling to support its investment in the project and to convince its lenders to increase existing debt. However, Cogan confirmed that this deal changed when it became clear that Greta did not have anything more than $2M to contribute to any combination of the GV1/GV2 purchase. The final structure, therefore, saw Fengate acquiring all of Veresen’s 75% interest in either GV1 or GV2.
[25] At the end of 2016, Greta and Fengate received approval from their lead lender to increase the project debt to $151M thereby paving the way for Greta to exercise its ROFR on GV2 and possibly GV1.
[26] As a 25% owner of the limited partnerships that owned GV1 and GV2, Greta already had informational advantages over other bidders. As well, Greta knew the projects’ strengths and weaknesses. Greta was in a superior position to increase debt on GV1 and GV2 because it would acquire them as the sole owner. Other bidders did not have this advantage.
[27] After Bluearth was advised that its bid was successful, Bluearth and Veresen began working on a draft PSA. A term of the draft PSA required Bluearth to provide a bona fide allocation of the purchase price of GV1 and GV2 for the purpose of the ROFR notices. Accordingly, on February 15, 2017 Bluearth provided a preliminary breakdown for the Wind Facilities as follows:
a. GV1: $55.714M
b. GV2: $151.206M
c. SCELP: $172.747M
[28] These price allocations were set out in an email dated February 15, 2017 from Boyd to Badham and Barer. In the same email, Boyd indicated that this was an initial pricing allocation with the possibility of a reallocation of $5M from SCELP to GV1 and GV2. Veresen did not take issue with the reallocation given that it was more likely that the sale of GV1 and GV2 would close, because the SCELP sale was subject to Menendez’s consent. Bluearth had to be satisfied with the price attributed to each asset, in case the others did not close (either due to Greta’s exercise of the ROFR on GV1 or GV2, or Menendez’s withholding of consent on SCELP). It also had to be certain it was not attributing an amount too low for any assets, thereby enhancing their attractiveness to the ROFR holders.
[29] Later, on February 17, 2017 Boyd emailed Barer and Badham with the “Final Pricing Allocation”, indicating that Bluearth was “[p]utting all $5 million on GV 2”, rather than dividing the $5M reallocation between GV1 and GV2. As such, the Final Pricing Allocation was:
a. GV1: $55,713,509
b. GV2: $156,212,774
c. SCELP: $167,740,004.
[30] The prices in the Final Pricing Allocation were not identical to those in Bluearth’s internal financial models. Bluearth ultimately agreed to offer $6.4M more for GV2 and a correspondingly lower amount for SCELP than what was in its modeling. While Bluearth’s position is that these prices accurately reflected the projects’ value and the unique risks associated with each of them, Bluearth concedes that this reallocation would have made it more difficult for Greta to exercise its ROFR. The reallocation for pricing and the reasons for it form the core of the dispute between the parties as Greta claims the reallocation was improper and induced Veresen to breach its obligations to Greta as a ROFR holder.
[31] It is important to note that GV1, GV2 and SCELP were very different assets that had been in operation for different lengths of time. Each charged a different rate for the electricity it generated and had different amounts of debt associated with it.
[32] Bluearth and Veresen signed a final version of the PSA on February 18, 2017 using the same prices as in the Final Pricing Allocation. The ROFR notices were sent to the Plaintiffs on February 23, 2017 using those same prices. It is important to note that if Greta exercised either of its ROFRs on the projects or if the SCELP consent was not secured, Bluearth would still be obligated to purchase all of the remaining assets at the price it committed to in the Final Pricing Allocation. The ROFR notices issued by Veresen to the Plaintiffs indicated a price of $55,713,509 for GV1 and $156,212,774 for GV2.
[33] Once the ROFR notices were received Fengate immediately engaged in internal modeling using Bluearth’s pricing in the ROFR notices. Based on that modeling Fengate considered providing funding for Greta to purchase Veresen’s interest in GV1 and GV2. The deal would include Fengate stepping into Veresen’s position as the 75% owner of the LPs that owned the two projects and 50% owner of the general partners that operated them.
[34] Greta made five separate requests for documents and information from Veresen between January and March 2017. After receiving the information, and after consideration by Fengate’s investment committee, Fengate approved the investment in GV2 but not GV1. As such only the ROFR on GV2 was exercised. Greta complained that it did not receive all of the information it requested from Veresen. Veresen’s position was that it provided all the information that was required under the GV1 SA and the GV2 LPA.
[35] On March 14, 2017 Greta sent Veresen notices exercising the ROFR on GV2 and waiving the ROFR on GV1.
[36] Bluearth’s acquisition of Veresen’s interest in GV1 was conditional on a corporate reorganization as required by the laws governing investments by pension funds, including the OTPP as the majority shareholder in Bluearth. However, Greta refused to consent to the reorganization unless Bluearth paid its associated legal fees and demonstrated to its satisfaction that the purchase price allocation had not been “gamed” with respect to the Final Price Allocation and, in particular, the allocation as between GV2 and SCELP.
[37] In response to Greta’s allegation about “gaming” pricing, Veresen and Bluearth worked together to assemble information outlining how the Final Pricing Allocation had been reached by Bluearth. Veresen prepared a responding email setting out why it believed the price allocation was reasonable and Bluearth indicated that it was not in the business of “gaming” purchase price allocations in an attempt to discourage the exercise of the ROFRs. Further, Bluearth’s position was that it was prepared to buy out Greta’s interest in GV1 at the price agreed upon by Veresen. This statement is challenged by Greta as will be set out below.
[38] Greta refused to consent to the required corporate reorganization of GV1 and that sale did not close. Bluearth purchased Veresen’s interests in SCELP and the Hydro Facilities as per the terms of the PSA. Veresen (now Pembina) continues to own 75% of GV1 and Greta owns 25%. Greta purchased Veresen’s interest in GV2 for the same price Bluearth had agreed to pay, after exercising the ROFR. Fengate used its portion of the increased debt to finance its purchase of Veresen’s interest. Greta took out its portion of $10M in cash.
THE LAW AND THE ISSUES
Issue 1: Is Summary Judgment Appropriate?
[39] The parties do not dispute that summary judgment is the proper procedure in this case. I agree. There are, with few exceptions, no disputed underlying facts and no relevant issues of credibility. The record before the Court is complete and voluminous.
[40] The well-known three-part test in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, at paras. 47-50, is therefore met in that the process and the record allows this Court to make the necessary findings of fact, apply the law to the facts, and allows for a proportionate, expeditious and cost-effective means to achieve a just result.
Issue 2: Did Veresen Breach its Contractual Duty of Good Faith and Honest Performance in Administering the ROFR Process?
[41] The Plaintiffs allege that Veresen breached its duty of good faith by:
a. Attempting to defeat the GV2 ROFR by being reckless or wilfully blind to the intention and effect of Bluearth’s offer, which was to defeat the ROFR
b. Taking no steps to ensure the Final Pricing Allocation was fair with respect to the ROFR process, and
c. Agreeing with Bluearth to manipulate the pricing allocation of the Wind Facilities to discourage or frustrate the Plaintiffs in exercising their ROFRs.
[42] There is no doubt that a ROFR is an important contractual right. The holder of such a right is entitled to a process conducted in good faith. The holder of a ROFR must be given a clear opportunity to pay the same price offered by a third party and accepted by the seller. I agree with Veresen’s counsel that the dynamic between the ROFR holder and the third-party buyer can be described as a “competition.” The third-party buyer may offer a reduced price, but at their own peril, as the asset may be purchased by the ROFR holder at a discount. If the third-party buyer offers a higher price in order to discourage the ROFR holder, it does so knowing the ROFR may be waived and it may be left buying an overpriced asset. I therefore accept that the process is a nuanced one involving sophisticated financial advice and strategic considerations where the assets are as valuable as the ones for sale in this case.
[43] Contracting parties (in this case the Plaintiffs and Veresen) must perform their duties honestly and in good faith. This duty applies to all contractual obligations and rights. The Supreme Court of Canada, most recently in C.M. Callow Inc. v. Zollinger, 2020 SCC 45, at para. 53, sets out the parameters of the duty:
Good faith is thus not relied upon here to provide, by implication, a new contractual term or a guide to interpretation of language that was somehow an unclear statement of parties’ intent. Instead, the duty of honesty as contractual doctrine has a limiting function on the exercise of an otherwise complete and clear right because the duty, irrespective of the intention of the parties, applies to the performance of all contracts and, by extension, to all contractual obligations and rights. This means, simply, that instead of constraining the decision to terminate in and of itself, the duty of honest performance attracts damages where the manner in which the right was exercised was dishonest.
[44] Applying Callow to the facts of this case, Veresen was required to act in good faith towards the ROFR holder when it solicited offers, accepted them, and negotiated the terms of the sale. I find that it did so, as will be detailed below.
[45] The Plaintiffs submit that the bidding process established by Veresen was not fair because it only required bidders to bid on an entire package, thereby creating an after the fact opportunity for re-allocation of pricing as occurred with Bluearth. I do not agree.
[46] A package price for the Wind and Hydro Facilities of $599M was offered to Veresen via TD on January 13, 2017. There is nothing in the terms of the existing contracts between the Plaintiffs and Veresen that required an allocation of asset price at this stage. The evidence at para. 40 of Badham’s affidavit sworn May 17, 2021 was that Bluearth made an en bloc bid based on TD’s advice. TD informed Bluearth that its position was that an en bloc bid was acceptable. Everyone was aware that a price allocation would be required down the line once the final PSA was signed. There is therefore no reason to find any bad faith or unfairness with respect to the bidding process at this stage.
[47] The Plaintiffs allege that Veresen consciously permitted Bluearth to artificially inflate GV2’s price and thereby artificially reduce SCELP’s price before delivery of the ROFR notice. It is important to review the email exchange between Boyd, Badham and Barer from February 15-17, 2017 to fully understand what happened.
[48] On the morning of February 15, 2017 Boyd emailed Badham and Barer with a copy to Tsering Lama (Bluearth’s internal financial analyst). Boyd writes:
As you know, our bid from January 13 [2017] included project financing on the unlevered assets as CP [condition precedent] to close, therefore there is very little risk premium associated with the unlevered assets. Since that time we have been able to hold price but would suggest there is some required re-allocation of value (which we are discussing internally).
I think we are further advanced on wind than hydro allocations. I will likely suggest a reallocation of $5 million dollars from St. Columban [SCELP] to Grand Valley ($1.2 to GV1 and $4.8 to GVII).
In an affidavit, Boyd acknowledged that the $4.8M he suggested he might reallocate to GV2 was an error: he intended to suggest a reallocation of $1.2M to GV1 and $3.8M to GV2, for a total of $5M.
[49] Two days later, Barer responded to Boyd, copying Badham, as follows:
Nick.
We’d like to take you up on your offer to reallocate $5.0 mil as per your email below. Do you mind providing the revised allocation to Patrick (and your counsel) for inclusion in Schedule 3.12 ?
[50] That evening, Boyd writes to Barer and Badham as follows:
Mike – just FYI that it’s as below. Putting all $5 million on GV2 LP. Let me know if any issue with that.
Final Allocations
Grand Valley 1 Limited Partnership $ 55,713,509
Grand Valley 2 Limited Partnership $156,212,774
St. Columban Energy L.P .* $167,740,004
Clowhom* $ 82,467,631
Furry Creek $ 20,140,891
Dasque -Middle* $116,725,191
$599,000,000
[51] There is no evidence that Veresen had access to the materials presented to Bluearth’s Board or its financial modeling. Badham’s sworn evidence was that the price allocation in the February 15, 2017 email was the first time he had seen any price allocation from Bluearth. He was “supportive” of the change in allocation of funds to GV1 or GV2 because those deals had a better chance of closing. There was always a concern on the part of Veresen that Mr. Menendez would not consent to the sale of SCELP (which he had a right to do), resulting in uncertainty about the closing of that sale.
[52] At this point, these were only discussions about price allocations. The Final Pricing Allocation was not required until the PSA was finalized and the ROFR notice went out. The emails on February 15-17, 2017 cannot be described as evidence of an intended breach of any duty owed to the Plaintiffs by Veresen. Veresen had no obligation to object to the reallocation by Bluearth. Veresen only needed to decide if it would accept the price offered by Bluearth.
[53] Veresen confirmed this in its email to Cholakis on June 4, 2017. This email was provided in response to one of the Plaintiffs’ requests for information from Veresen, after the Plaintiffs had challenged the purchase price allocation. Veresen provided a chart of valuation metrics from TD and wrote:
As part of the sale process, Veresen did not ask BER [Bluearth] for a rationale for their purchase price allocation and was not privy to BER's valuation in preparing their bid or purchase price allocation, however, we believe that the allocation was bona fide and reasonable.
We understand your concern but do not believe that any "games are being played" with respect to purchase price allocation and note that if the valuation for GV1LP is, as you've asserted, higher than you would have expected, then Greta's option to sell its 25% stake at equivalent valuation should be relatively attractive.
[54] The Plaintiffs complain that Bluearth deliberately reallocated the pricing as between GV2 and SCELP in a strategic attempt to hinder the exercise of the Plaintiffs’ ROFR over GV2. The Plaintiffs allege that Veresen knew that this was Bluearth’s purpose but did not disclose that to the Plaintiffs.
[55] The problem with this argument is that it fails to recognize the enormity of the financial commitment Bluearth made when it executed the final PSA with Veresen. That is, Bluearth was obligated to purchase the assets at the allocated prices set out in Schedule 3.12 of the PSA even if some of the assets were not available because of exercised ROFRs or the withdrawal of consent for SCELP. Had both ROFRs been exercised and Menendez withheld his consent on SCELP, Bluearth would still have had to purchase Clowhom, Furry Creek and Dasque Middle for a total of over $218M.
[56] The leading case on the breach of duty of good faith in the context of ROFRs is GATX Corp. v. Hawker Siddeley Canada Inc., 1996 CanLII 8286 (Ont. S.C.). In that case, Hawker Siddeley owned a controlling 55% block of shares in CGTX, a large railcar leasing operator. GATX owned the other 45% of the shares in CGTX. GATX and Hawker Siddeley were parties to a Shareholder’s Agreement which provided for a ROFR in the event that either party received a bona fide offer from a third party to buy its shares in CGTX.
[57] Hawker Siddeley wanted to sell its shares in CGTX. It entered into an agreement with a third party, PROCOR, and created a new subsidiary company to frustrate GATX’s ability to exercise its ROFR.
[58] Justice Blair set out some basic principles related to ROFRs, which are not disputed by either party. At para. 71 the Court stated:
There is, however, another basis upon which I am equally convinced that the Procor transaction cannot proceed except on the foregoing basis. It is well established that the grantor of a right of first refusal must act reasonably and in good faith in relation to that right, and must not act in a fashion designed to eviscerate the very right which has been given. This is an illustration of the application of the good faith doctrine of contractual performance, which in my view is a part of the law of Ontario.
[59] The Plaintiffs argue that Veresen acted in the same manner as Hawker Siddeley in attempting to frustrate the ROFR. The Plaintiffs submit that Veresen is not entitled to knowingly frustrate the exercise of the ROFRs or to permit such efforts by the purchaser. While the Plaintiffs conceded that the ‘deceit’ in the GATX case was different, the intent was the same.
[60] The Plaintiffs say they were not treated fairly by Veresen for several reasons. First, Veresen set up a bidding process for an entire package rather than for individual assets. This permitted Bluearth to unfairly re-allocate the purchase price of individual assets.
[61] The position taken by the Plaintiffs on this point is not accurate. Veresen set up a “package” bidding process based on advice from TD whose position was that a better price could be obtained that way. In any event, the PSA did not require an allocation of the purchase price as between assets. That allocation only occurred because it was required by the ROFR notice.
[62] The Plaintiffs further submit that Veresen consciously permitted and encouraged Bluearth to artificially inflate the price of GV2. This is not borne out by the evidence. First, Bluearth made the re-allocation for what this Court finds to be legitimate reasons. Those reasons included reducing the price of the SCELP asset to reflect the fact that there was some concern about whether that asset would sell at all, given both Menendez’s right to withhold his consent, and the financing needed to purchase the SCELP asset. While Bluearth has never denied that moving up the price of GV2 was related to the ROFR, that was not the sole consideration in the pricing allocation. Project financing on the “unlevered assets” (i.e., SCELP) was a condition precedent for closing for Bluearth and specifically mentioned in the February 15, 2017 email by Mr. Boyd.
[63] Further, I accept Veresen’s argument that there is no correct price for a ROFR, only what the vendor offers and the purchaser is willing to accept. The concept of fair market value in the context of a ROFR was also discussed in Chase Manhattan Bank of Canada v. Sunoma Energy Corp., 2001 ABQB 142, 283 A.R. 260 (“Chase Manhattan (ABQB)”), aff’d 2002 ABCA 286, 317 A.R. 308 (“Chase Manhattan (ABCA)”). In that case, the Court grappled with the “allocation dilemma.” Citing Clifford D. Johnson & David J. Stanford, “Rights of First Refusal in Oil and Gas Transactions: A Progressive Analysis” (1999) 37(2) Alta. L.R. 316, at p. 334, the Court adopted the following approach, at para. 32 (my emphasis):
[F]air market value is not necessarily of particular, or even any, relevance; a wide range of values could be attributed to a particular ROFR-encumbered property by different parties based on their different assessment of the upside potential associated with undeveloped properties, or even the development potential for mature properties. The ROFR holder's perception of fair market value may not be even remotely close to the purchaser's notion of such value, i.e., what it would have been prepared to pay for the property if it was sold on a stand-alone basis. Moreover, there may be a value enhancement resulting from the package deal that would not otherwise exist, such as access to processing facilities and the like.
[64] This entirely answers the Plaintiffs’ argument that Veresen acted in bad faith by failing to make enquiries into or take steps to determine the reasonableness of the price. In this case, as in Johnson and Stanford’s summary, the Plaintiffs’ perception of fair market value did not match up with what Bluearth was prepared to pay for GV2 in particular. However, I find that cannot equate to a breach of the duty of good faith. It is simply the commercial reality of a large acquisition. However, if I am wrong and some evidence of fair market value was required, no such expert evidence was tendered by the Plaintiffs.
[65] The Plaintiffs argue that Veresen’s insistence that the prices were not “gamed” was false and misleading when it later came out that Veresen worked with Bluearth to conceal the fact that the price allocation was altered after Bluearth’s binding bid was submitted. The change in price allocation should have been disclosed to the Plaintiffs.
[66] I do not find that Veresen engaged in any form of misleading behaviour intended to dissuade the Plaintiffs from exercising the ROFRs. In fact, it is clear from the evidence that Veresen provided the Plaintiffs with all documents requested in the five separate requests for information made by the Plaintiffs. Cholakis confirmed this by way of undertaking following his examination. Further, Cholakis confirmed at his examination that the Plaintiffs had sufficient information to determine they would waive the ROFR on GV1.[^1]
[67] The February 15-17, 2017 exchange of emails between Boyd, Badham and Barer set out a discussion of the re-allocation and Bluearth’s reasons why they proposed it. There is nothing in those emails which could be interpreted as an attempt to sideline the ROFR process nor was Veresen obligated to disclose those discussions to the Plaintiffs. It must be kept in mind that those emails occurred before the final PSA and during the period after the signing of the Binding Proposal. The Binding Proposal did not commit Bluearth to buy the assets, only to enter into exclusive negotiations with Veresen. The intent of the communication, as I read it, was to move towards putting a definitive agreement in place, not to create one at that time.
[68] In Callow, the Court held that the duty of honest performance in contract does not impose a duty of disclosure so long as a party does not knowingly mislead another party: at paras. 3, 77 and 81-82. While the Plaintiffs contend that Veresen “actively mislead” the Plaintiffs by failing to disclose the change in price allocation, I do not find this is the case. Veresen was obligated to provide a pricing allocation in its ROFR notice. Since it is clear from GATX and Manhattan Bank that fair market value of an asset is not necessarily a consideration in a ROFR case, Veresen provided the pricing that Bluearth was willing to pay. The Plaintiffs could (and did) decide to waive or exercise their ROFR over GV1 and GV2. Interestingly, the Plaintiffs waived the ROFR on the GV1 asset without complaint, despite the fact that the price for GV1 was not “gamed”.
[69] The Plaintiffs complain that Veresen did not meet the required level of honesty and good faith expected in contractual dealings. Veresen had access to critical information concerning the purchase price that the Plaintiffs did not. However, it should not be overlooked that the Plaintiffs had a 25% interest in GV1 and GV2, so they knew how they operated and had access to internal financial information about them. Further, they had the benefit of financial modeling from Fengate. The Plaintiffs were not as disadvantaged as they would have this Court believe. It appears they were simply unhappy with the price of the GV2 asset and now parse through emails and other documents to give them the meaning that suits them.
[70] In summary I find that in the context of this commercial transaction, Veresen acted with the level of expected good faith and without any dishonesty.
Issue 3: Did Veresen Breach any Fiduciary Duty it may have Owed to the Plaintiffs in the Sale Process?
[71] The Plaintiffs allege that Veresen owed the Plaintiffs a fiduciary duty on the basis that they were partners or shareholders, or on the basis that the context of the parties’ relationship and Veresen’s conduct gave rise to such a duty. Veresen’s position is that the fiduciary duty claim is both statute-barred and not supported by the evidence.
[72] In Alberta v. Elder Advocates of Alberta Society, 2011 SCC 24, [2011] 2 S.C.R. 261, at para. 36, the Supreme Court confirmed the established framework for determining whether there is an ad hoc fiduciary relationship. The test requires:
(a) an undertaking by the alleged fiduciary to act in the best interests of the alleged beneficiary or beneficiaries;
(b) a defined person or class of persons vulnerable to a fiduciary’s control (the beneficiary or beneficiaries); and
(c) a legal or substantial practical interest of the beneficiary or beneficiaries that stands to be adversely affected by the alleged fiduciary’s exercise of discretion or control.
[73] Specifically, the Plaintiffs argue that the ROFR provisions included an implied undertaking to act in the Plaintiffs’ best interests during the ROFR process. In the GV2 process, GG2 was vulnerable as Veresen had more information than the ROFR holder and could control whether and how that information was provided. Finally, the Plaintiffs stood to be adversely affected by Veresen’s exercise of control or discretion in the ROFR process. Veresen therefore owed an ad hoc fiduciary duty to the Plaintiffs in the context of the ROFR.
[74] Veresen denies any such ad hoc duty exists. Veresen relies on PIPSC v. Canada (Attorney General), 2012 SCC 71, [2012] 3 S.C.R. 660, at para. 124, for the proposition that the claimant to such a duty must establish the presence of an implied or express undertaking to act in the best interests of a beneficiary. More specifically, that Veresen would forsake its own interests in favour of the interests of the Plaintiffs.
[75] Such an undertaking is difficult, if not impossible, to fit into a commercial relationship such as this one. While Veresen insisted on a provision in the PSA which permitted it to reject an unreasonably low price allocation, this cannot be interpreted as creating the undertaking described as a “duty of loyalty” in PIPSC. This provision was clearly intended to protect Veresen from having to consider unreasonable bids for individual assets, in the event that the en bloc sale did not go forward because the sale of particular assets was blocked. The provision was insisted on by Veresen in the context of self-interest and not to protect the Plaintiffs. I find that the Plaintiffs’ argument here must fail as there is no evidence that Veresen undertook to forsake the interests of all others in favour of the Plaintiffs: see PIPSC, at para. 124.
Issue 4: Did the Defendants Conspire Against the Plaintiffs?
[76] The Plaintiffs allege that the Defendants conspired against the Plaintiffs by:
a. Agreeing together to the allocation of Bluearth’s offers for the predominant purpose of causing injury to the Plaintiffs;
b. Acting together to structure the Final Pricing Allocation knowing that the allocation was a breach of contract and a breach of Veresen’s fiduciary duties, and
c. Conspiring to actively mislead and deceive the Plaintiffs as to the good faith basis for Bluearth’s allocation of value.
[77] The Defendants submit that there is no evidence of a conspiracy and the claim must be dismissed.
[78] There are two categories of civil conspiracy recognized by Canadian law: predominant purpose, and unlawful means. In Canada Cement LaFarge Ltd. v. British Columbia Lightweight Aggregate Ltd., 1983 CanLII 23 (SCC), [1983] 1 SCR 452, at pp. 471-472, the Supreme Court set out the two categories:
a. Whether the means used by the Defendants are lawful or unlawful, the predominant purpose of the Defendants’ conduct is to cause injury to the Plaintiffs;
b. Where the conduct of the Defendants is unlawful, the conduct is directed towards the Plaintiff (alone or with others), and the Defendants should know in the circumstances that the injury to the Plaintiff is likely and does result.
[79] The Plaintiffs allege that the conduct of Bluearth and Veresen in conspiring to present a manipulated purchase price allocation to defeat the exercise of the ROFR breached Veresen’s duty of good faith owed to the Plaintiffs. Bluearth and Veresen ought to have been aware that such conduct would likely cause injury to the Plaintiffs. The conduct of the Defendants was unlawful and should result in the payment of damages.
[80] The difficulty that the Plaintiffs face with the conspiracy claim is in proving that the pricing reallocation was predominantly intended to frustrate the exercise of the ROFRs or harm the Plaintiffs.
[81] A review of the evidence related to the pricing allocation is important. In early April 2017, Cholakis requested further information from Veresen so he could better understand the rationale for the pricing allocation. Barer provided the following explanation in response:
Veresen views the purchase price allocation as reasonable and doesn't gain from the allocation between the three wind LPs as the ROFR effectively ensures that Veresen receives the same total proceeds regardless of who buys each LP interest. As you can see from the above table, the relative valuations of the three [Wind Facilities] were very close. Any differences between valuations could be attributable to differences in projects, estimates and risk of future cash flow between Veresen and [Bluearth] as well as differences in the terms of the partnership agreements governing each LP. In short, Veresen believes that the allocation was bona fide and reasonable.
[82] As a show of good faith, Bluearth offered to open a discussion with Greta concerning Bluearth agreeing to buy Greta’s 25% interest in GV1 for $6.4M, based on the same valuation as its offer for Veresen’s 75% interest in GV1. Notwithstanding these responses and offers from Veresen and Bluearth, Greta continued to insist that it had insufficient information to conclude the ROFR process had been run in good faith.
[83] In a June 2017 email, reproduced earlier in this decision at para. 53, Barer told Cholakis that Veresen did not ask for Bluearth’s rationale for their price allocation. He added that, if the valuation for GV1 was higher than Greta expected, Bluearth’s offer to purchase Greta’s 25% interest at the equivalent valuation “should be relatively attractive”.
[84] Further, there is no evidence that Veresen had information related to the presentations made by Bluearth to its Board or any of its internal consultations. Rather the evidence shows that Bluearth made some 77 refinements to its financial modeling to come to conclusions about the value of each asset. After Bluearth was selected as the purchaser it changed some of the model inputs, resulting in a reallocation of $6.4M from SCELP to GV2. The Plaintiffs submit that this adjustment was intended to prevent the Plaintiffs from exercising the ROFR for GV2, and that Veresen knew this but did nothing to alert the Plaintiffs.
[85] However, there is no evidence of this serious allegation. What there is evidence of is that Veresen was informed of the price reallocation and Bluearth’s reasoning for it which was that the SCELP asset closing was much riskier than that of GV2 and that the GV2 asset required different financing.
[86] While it is true that under the terms of the PSA, Veresen could reject an unreasonable price allocation if it saw fit, it did not reject the reallocation made by Bluearth. I accept Veresen’s position that it did not reject the reallocation because it was still prepared to accept the revised price for SCELP and GV2.
[87] As has been adverted to above, the fair market value of GV2, or the price which the Plaintiffs thought was reasonable for GV2 does not factor into it. The reallocation was still within the range that Veresen was prepared to accept. What would have been unreasonable would have been an allocation of prices intended to discourage Greta from exercising its ROFR in the hope that Veresen would adjust the price downward once the election not to exercise the ROFR had been made. In such a scenario the Court, based on the principles in GATX, would most likely have found an intention to conspire to “eviscerate” the exercise of the ROFR. However, that is not the case on these facts nor would it have been possible based on the terms of the PSA.
[88] One further consideration is worth mentioning here. There is no evidence that the Defendants knew that the Plaintiffs would feel compelled to exercise its ROFR at what they thought was an inflated price. That is, the Plaintiffs’ actions and the result of those actions were not reasonably foreseeable to the Defendants. In the end, the ROFR for GV2 was triggered and not defeated.
Issue 5: Did Bluearth’s Conduct Amount to an Inducement of Breach of Contract?
[89] The Plaintiffs allege in their Statement of Claim that Bluearth was aware of the ROFRs held by the Plaintiffs over the GV1 and GV2 assets. Using this knowledge, they departed from their good faith allocation of value as between GV1, GV2 and SCELP for the “express purpose of discouraging or frustrating the Plaintiffs’ exercise of the ROFRs”: para. 43 of the Amended Statement of Claim.
[90] The essence of the Plaintiffs’ claim against Bluearth is that it owed a duty to Greta. I find that no such duty existed and that Bluearth was entitled to act in its own self-interest. Further, as will be seen in the extracts from Chase Manhattan and the appeal from that case, while they have considered whether a duty might exist for third parties, no Canadian court has ever found such a duty to exist.
[91] Chase Manhattan involved a package of properties sold under a receivership. The package price was $4.35M. The plaintiff held a ROFR over part of the package, to which $1M of the package price was allocated. Similar to the case at bar, the plaintiff took the position that the allocated prices did not reflect fair market value. In Chase Manhattan (ABQB), at para. 34, the Court, in holding that there was no breach of the duty of good faith by the bidder, and citing Johnson and Stanford, at p. 335, noted as follows:
From the perspective of the ROFR holder, it will not suffice to simply argue that the allocated price does not in its view represent fair market value. While that may provide an indication that the allocation has been unfairly made or 'loaded up,' that alone will certainly not be conclusive. The ROFR holder will have to demonstrate on the evidence that the allocation principles applied by the purchaser and accepted by the vendor were unreasonable in the circumstances, or in other words that a duty of good faith has been breached.
[92] On appeal, the Alberta Court of Appeal considered the issue of whether the duty of good faith existed where there was no privity of contract. The Court held that even if such a duty existed, it was not breached on the facts of the Chase Manhattan case.
[93] In Chase Manhattan (ABCA), at para. 29, the Court of Appeal approved of the lower court’s reasoning, at paras. 37 and 38, that a difference in valuation was insufficient evidence of a breach of the duty of good faith:
In the final analysis, the Court would need to see more evidence of a breach of the duty of good faith, beyond evidence showing that Best Pacific [the ROFR holder] would have assigned a different value to the Hillsdown Assets.
Best Pacific has not met the evidentiary hurdle of showing that the Receiver or Eravista [the buyer] breached their duty of good faith. It is simply not enough for the ROFR holder to present a different valuation from that provided in the ROFR notice. Accordingly, I find that the Notice given to Best Pacific was a valid ROFR notice.
[94] The Court of Appeal also held, at para. 27, that “it is far from obvious that Eravista owed a duty of good faith to Best. There was no privity of contract between them.”
[95] I agree with Bluearth that it is fair to say that it was in competition with Greta to obtain the assets. As such, Bluearth had to stand behind its offer but was not required to back it up from a valuation perspective.
[96] Cogan was examined by Bluearth as a non-party witness. Cogan worked for Fengate, a fund manager with $20B in assets. Fengate had been working with Greta since 2016 and provided modeling for the Veresen sale transaction. At question 400 of his examination on September 15, 2021, Cogan indicates that Fengate was satisfied with the purchase price of GV2 based on its modeling.
Q. 400 And then go to 9, just to confirm, and you see in 9 that while we had the satisfaction with the purchase price in the GV1 term sheet, we don't have it in GV2, right?
A. We don't have it in GV2, that's correct.
Q. 401 And again, I would just suggest to you that is because at this point you are satisfied with the purchase price so you don't need it, right?
A. That's right.
[97] Fengate’s modeling proposed that it would step into Veresen’s shoes as 75% owner of GV2. However, the Fengate investment committee rejected the GV1 pricing. Fengate used Bluearth’s proposed pricing as the basis of its financial analysis, and in the end, Greta exercised the ROFR for GV2 at the price offered by Bluearth. Cogan is experienced in such acquisitions and Fengate is a large-scale equity firm which did extensive modeling for the Veresen sale. One can infer that Fengate would never have recommended the exercise of the ROFR if GV2 had been priced at a level which Fengate did not support.
[98] The Plaintiffs submit that Fengate did not change its arrangement with Greta from a 50% acquisition to a 75% acquisition of GV2 until after it learned of the higher price allocation to GV2 by Bluearth. It was satisfied with the pricing because it meant it would acquire a larger share in the GV2 asset. However, this argument fails to take into account the fact that Fengate would not finance the deal related to the GV1 acquisition and that the GV1 ROFR was not exercised. That is, if Fengate had truly taken the position that the GV2 pricing was too inflated, it would have turned down the deal as it did with GV1.
[99] The Plaintiffs further submit that Bluearth cannot effectively cloak their actions in allegedly legitimate reasons for the reallocation such as tax implications and financing risks. There were tax implications related to the sale of all of the assets which were well known to Bluearth in advance of the reallocation. Further, Bluearth sought to justify moving $6.4M away from the price of SCELP because SCELP had no debt. Bluearth did not point out that both Clowhom and Dasque Middle also had no debt. Bluearth does not explain why the bid was not adjusted for those assets.
[100] The issues raised by the Plaintiffs ignore the risk associated with the closing of SCELP with respect to the Menendez right to unreasonably refuse to consent to a sale. The Clowhom and Dasque Middle assets were not subject to such an unpredictable outcome. While it is true that the presentation to the Bluearth Board did not mention this factor and focused on “bid strategy” in relation to the reallocation, there is nothing nefarious about having a bid strategy which could discourage the exercise of a ROFR so long as such a strategy was not unreasonable. As indicated above, the facts of this case are not aligned with GATX on that point. That is, having a “bid strategy” on its own is insufficient to prove that Bluearth intended to or caused Veresen to breach its ROFR agreement with the Plaintiffs.
[101] The Ontario Court of Appeal summarized the elements of the tort of inducing breach of contract in Correia v. Canac Kitchens, 2008 ONCA 506, 91 O.R. (3d) 353, at para. 99, by reference to OBG Ltd. v. Allan, [2007] UKHL 21, as follows:
The Lords defined the elements of the tort of inducing breach of contract as follows:
(1) the defendant had knowledge of the contract between the plaintiff and the third party; (2) the defendant's conduct was intended to cause the third party to breach the contract; (3) the defendant's conduct caused the third party to breach the contract; (4) the plaintiff suffered damage as a result of the breach (see OBG, at paras. 39-44 (Hoffman L.)). The Lords confined the tort to cases where the defendant actually knew that its conduct would cause the third party to breach (it is not enough that the defendant ought reasonably to have known that its conduct would cause the third party to breach); the defendant must have intended the breach (it is not enough that a breach was merely a foreseeable consequence of the defendant's conduct); and there must be an actual breach (it is not enough for the conduct to merely hinder full performance of the contract).
[102] Bluearth was well aware of the ROFRs in this case as they were described in the CIM and copies were available in the virtual data room that was made available to Bluearth during the sale process.
[103] In Correia, at para. 98, the Court makes it clear that the tort must involve deliberate commercial wrongdoing. Mere negligence is not enough. With respect to the facts in this case, I am unable to conclude that Bluearth had an actual intention to cause Veresen to breach its contractual obligations to the Plaintiffs; there is no evidence of this. Bluearth participated in a sales process, performed its own due diligence, presented its findings to its Board, received approval and submitted a bid. There is no evidence that Bluearth told Veresen to ignore its obligations in relation to the ROFRs.
[104] In turning to the third aspect of the tort, there must be evidence that Bluearth’s conduct caused Veresen to breach its obligations to Greta in relation to the ROFRs. On this point, the Plaintiffs argue that Bluearth’s offer was not bona fide. The Plaintiffs raise several specific complaints including that the numbers in the offer were inconsistent with Bluearth’s modeling, the only reason for the price adjustment was to discourage the exercise of the ROFRs, the price offered was inconsistent with Board approval and the required IRR, and the discussions about the adjustments between Veresen and Bluearth were not disclosed to the Plaintiffs.
[105] With respect to the modeling issue, there was evidence that Bluearth produced over 70 financial models in reaching its conclusion as to what to present to its Board. I do not find that they can be held to any of these models as definitive pricing. The modeling was an internal process, the very basis of which was to adjust inputs and find the right balance. Such an internal process cannot be seen to be binding on Bluearth.
[106] In terms of the price offering being inconsistent with the Board approval or the required IRR, the Board approved $199M in equity along with certain financing parameters as outlined earlier in the judgment. Internal adjustments to pricing in the Final Pricing Allocation which still met the equity limit and overall IRR were not prohibited either by the Bluearth Board or the PSA.
[107] The Plaintiffs submit that this Court should prefer the 76 honest versions of the Bluearth model and not the 77^th^ version which was “torqued” to disadvantage the Plaintiffs. Bluearth’s main shareholder was the OTPP which required a 10% IRR for investments. The Plaintiffs suggest that the allocation to GV2 was not bona fide, because if Bluearth had been required to close only on GV2, it would not have met its major shareholder’s requirement for IRR.
[108] I disagree. Boyd’s evidence was that the change in the purchase price of GV2 and SCELP meant that Bluearth’s IRR on GV2 dropped from 10% to 9% and increased on SCELP to 12.7%. Boyd used Bluearth’s modeling to determine these changes and make an investment decision. In the end, Boyd had no issue with this change in the IRR due to the price reallocation and did not see it as inconsistent with the Board’s approval. Boyd’s evidence was that a 10% IRR was Bluearth’s goal, but not a prerequisite for acquiring any individual project. In any event, Boyd was confident that Bluearth would be able to generate a 10% IRR on GV2 even with the higher price because the assumptions in the Bluearth model were conservative.
[109] Discussions between Veresen and Bluearth about pricing were not required to be disclosed to the Plaintiffs so long as the pricing was an amount that Bluearth was prepared to pay and Veresen would accept. It is true that Bluearth was trying to price its assets in a way to discourage Greta from exercising the ROFRs. That alone is insufficient as an inducement to breach of contract. For there to be any tort that would attract damages, the pricing would have to have been deliberately manipulated (as in the GATX case) to ensure the ROFR would not be exercised. In this case the ROFR was exercised despite the Plaintiffs’ dissatisfaction with the price.
[110] The Plaintiffs complain that if Bluearth knew that its manipulation of the purchase price was entirely legitimate, why did it not reveal the price reallocation when requested by the Plaintiffs? As stated above, Bluearth was not compelled to do so either pursuant to the PSA or the ROFR notice. Since I have already found that the dealings between Veresen and Bluearth were not intended to “eviscerate” the Plaintiffs’ ROFR rights, the fact that they did not reveal the price reallocation is a completely neutral factor which does not support a finding of bad faith or conspiracy.
[111] There are two additional factors to consider. First, the amount of the differential ($6.4M) cannot be seen to be significant. It is approximately 4% higher than what the Plaintiffs contend was the project’s fair market value. Interestingly, in the Chase Manhattan case, the value of the asset subject to the ROFR was set at almost three times the highest fair market value asserted by the plaintiffs: Chase Manhattan (ABCA), at para. 31. The Court held in Chase Manhattan that a breach of the duty of good faith cannot be found simply because the ROFR holder presents a different value from that in the ROFR notice.
[112] Second, Fengate, Greta’s financial partner did not have any difficulty with the pricing of GV2 based on the evidence of Mr. Cogan. The Plaintiffs did not offer up Mr. Cogan’s evidence. It was only through a third-party examination that this evidence was obtained.
[113] In summary I do not find that there has been any inducement to a breach of contract by Bluearth as there was no independent duty on Bluearth to act in good faith towards the ROFR holder. Their actions were within the scope of the sale process and while they may have intended to discourage the exercise of the ROFRs, they certainly did not “eviscerate” the rights of the Plaintiffs to exercise the ROFRs
Issue 6: Are the Claims Related to an Ad Hoc Fiduciary Duty and Conspiracy Time-Barred?
[114] Veresen submits that if the Court does find it had an ad hoc fiduciary duty, this claim and the claim for conspiracy against both Veresen and Bluearth are time-barred under the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, s. 4, as they were not added until February 21, 2020, more than two years after the date on which the claims were discovered.
[115] The Plaintiffs brought their motion to amend the Statement of Claim in January 2020; however, the motion was not argued as the parties agreed that the amendments were made without prejudice to the Defendants’ right to raise the limitation period issue at trial or at the hearing of the summary judgment motions.
[116] The Plaintiffs submit that the new claims arise from the same factual matrix and are extensions of the original pleadings. In any event, the claims were not discoverable until the production of documents in this action in April 2019. Until the discovery process, the Plaintiffs were not aware that Bluearth had an obligation pursuant to Article 7.13(a) of the PSA to provide a bona fide allocation of value between the Wind Facilities and that Veresen had the right to reject Bluearth’s values and substitute different values if they believed Bluearth’s were unreasonable. The Plaintiffs were also not aware that Veresen was aware of the price allocation change as between GV2 and SCELP until the discovery process.
[117] I agree with the Plaintiffs that these additional claims arise from the same factual matrix as the original pleadings. However, having found that there was neither an ad hoc fiduciary duty nor a conspiracy, the claims will be dismissed even if not time-barred.
FINAL ORDERS
[118] The Plaintiffs’ motion for summary judgment is dismissed.
[119] The Defendants’ motions for summary judgment are granted.
[120] Given the above, the Plaintiffs are not entitled to any damages.
[121] The parties shall provide written costs submissions of no more than five pages, exclusive of any Bill of Costs or Offers to Settle. All case references must be hyperlinked. Costs submissions are due on a seven-day turnaround starting with the Defendants seven days from the date of release of this judgment. Costs submissions are to be sent as pdf attachments to my assistant therese.navrotski@ontario.ca. If no costs submissions are received within 35 days, costs will be deemed to be settled.
C. Gilmore, J.
Released: November 17, 2021
COURT FILE NO.: CV-19-617048-00CL
DATE: 20211117
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Greta Energy Inc. and Great Grand Valley 2 Limited Partnership
Plaintiffs
– and –
Pembina Pipeline Corporation and Bluearth Renewables Inc.
Defendants
JUDGMENT ON MOTIONS FOR SUMMARY JUDGMENT
C. Gilmore, J.
Released: November 17, 2021
[^1]: Examination of George Cholakis, December 10, 2019 at Q469.