Court File and Parties

COURT FILE NO.: CV-20-00636651-00CL DATE: 20240514 SUPERIOR COURT OF JUSTICE – ONTARIO (COMMERCIAL LIST)

RE: IN THE MATTER OF THE COMPANIES’ CREDITORS ARRANGEMENT ACT, R.S.C. 1985, c. C-36, AS AMENDED AND IN THE MATTER OF SENVION GMBH APPLICATION OF SENVION GMBH UNDER SECTION 46 OF THE COMPANIES’ CREDITORS ARRANGEMENT ACT, RSC 1985, C. C-36, AS AMENDED

BEFORE: Conway J.

COUNSEL: Geoff R. Hall and Trevor Curtis, for the Moving Parties Mesgi’g Ugju’s’n (MU) Wind Farm L.P, Mesgi’g Ugju’s’n (MU) Wind Farm Inc. and Innergex Renewable Energy Inc. David Z. Seifer, Jeff Rosekat and Lisa S. Corne, for Senvion GMBH

HEARD: May 2, 2024

Reasons for Decision

[1] Mesgi’g Ugju’s’n (MU) Wind Farm L.P, Mesgi’g Ugju’s’n (MU) Wind Farm Inc., and Innergex Renewable Energy Inc. (the “Moving Parties”) bring this jurisdiction motion with respect to Ontario proceedings brought by Senvion GMBH (“Senvion”).

Senvion Insolvency Proceedings

[2] Senvion is a Hamburg-based German company. It was a manufacturer, seller and servicer of wind turbine generators and related technology, software, and services. [1]

[3] In July 2019, Senvion obtained an order for debtor-in-possession proceedings in Germany. In February 2020, this court granted an initial recognition order and a supplemental first day order under Part IV of the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36 (“CCAA”). The initial recognition order recognizes the German proceeding as the foreign main proceeding. The supplemental recognition order contains a stay of proceedings against Senvion, a stay of rights and remedies against or in respect of Senvion or affecting its business or property, and a stay of any set-off claims (the “Stay”). Fuller Landau Group Inc. was appointed information officer for Senvion. It was subsequently discharged in February 2022 in light of the limited number of creditor inquiries in Canada. The CCAA recognition proceedings remain in effect. Similar recognition orders were obtained in Australia and the United States.

The Wind Farm and Dispute Between the Parties

[4] The Mesgi’g Ugju’s’n wind farm is a 47-turbine wind power facility located in eastern Quebec (the “Wind Farm”). It is owned by Mesgi’g Ugju’s’n (MU) Wind Farm L.P. (“MU LP”), which is a 50-50 partnership between Innergex Renewable Energy Inc. (“Innergex”) and three Mi’gmaq communities in Quebec.

[5] In September 2014, the parties entered into a series of agreements with respect to the installation and servicing by Senvion of the turbines at the Wind Farm. Those contracts consist of (i) a Turbine Supply Contract for the manufacture and delivery by Senvion of the Turbines; (ii) a Long Term Service Contract for Senvion’s service of the Turbines; and (iii) a Guarantee Agreement in which Innergex guaranteed the obligations of the MU LP under the Supply Contract.

[6] Senvion gave a performance guarantee pursuant to the Turbine Supply Contract, which took the form of a letter of credit (the “LC”), issued by the Royal Bank of Canada in Toronto, that reduced over time and remained in place until final completion of the project. Senvion was required to renew the LC for successive periods of up to one year prior to its expiry until the Wind Farm reached final completion.

[7] Various disputes arose between Senvion and MU LP with respect to the project. In November 2017, the parties entered into a Settlement Agreement with respect to those claims.

[8] The Supply Contract, Service Contract, Guarantee Agreement and Settlement Agreement contain choice of law clauses providing they are governed by the laws of Quebec. They contain choice of forum clauses providing the Superior Court of Quebec with jurisdiction over any disputes.

[9] In August 2019, MU LP filed a claim in the Main Proceeding for amounts owed by Senvion under the Supply Contract and the Service Contract. The claim was for EUR 5,863,683.27 plus interest of EUR 220,699.70, less a set-off of EUR 1,515,006.04 in favour of Senvion. MU LP, in filing the proof of claim, stated that it did not acknowledge the jurisdiction of the German courts or the application of German law to the relationship between MU LP and Senvion.

[10] Senvion claims that it is owed $9,593,461.70 in invoices rendered to MU LP in 2019 and 2020 for services provided under the Supply Contract and Service Contract.

[11] The LC expired on April 30, 2021. On April 21, 2021, MU LP drew down the full amount of the LC, $19,641,526.39. Senvion alleges that this draw was in violation of the Stay contained in the recognition orders.

Senvion Brings Proceedings Against the Moving Parties

[12] On March 17, 2023, Senvion issued a statement of claim in Ontario seeking recovery of the $19,641,526.39 drawn on the LC and recovery of the $9,593,461.70 on its outstanding invoices. In the statement of claim, Senvion stated that it intended to pursue the matter in the CCAA proceedings but had issued the claim to ensure that it was preserved in the face of an expiring limitation period.

[13] On November 23, 2023, Senvion brought a motion in the CCAA proceedings. That motion claims that MU LP and its general partner breached the Stay and are required to return to Senvion the $19,641,526.39 drawn on the LC. Senvion also claims $9,593,461.70 on its outstanding invoices. The motion seeks an order that all claims are to be determined in the CCAA recognition proceedings.

[14] On February 9, 2024, the Moving Parties brought this jurisdiction motion under Rule 21.01(3) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, and s. 106 of the Courts of Justice Act, R.S.O. 1990, c. C. 43, seeking to dismiss or stay Senvion’s action and motion in Ontario for lack of jurisdiction. Alternatively, it asks the Ontario court to decline jurisdiction in favour of the Quebec Superior Court as the more convenient and appropriate forum for the Senvion proceedings.

[15] The Moving Parties submit that the Ontario court does not have jurisdiction simpliciter under the test from Club Resorts Ltd. v. Van Breda, 2012 SCC 17, [2012] 1 S.C.R. 572. They argue that they are domiciled and resident in Quebec; the contracts were made in Quebec; and the Moving Parties do not carry on business in Ontario. Further, they argue that even if the Ontario court has jurisdiction, the forum non conveniens analysis favours Quebec given that the agreements are governed by Quebec law, the choice of forum is Quebec, and all witnesses are located in Quebec.

[16] The Moving Parties submit that the issue of whether the draw down on the LC violated the Stay can be determined by the Superior Court of Quebec judge that hears the action. They add that since there has been little activity in the Ontario recognition proceedings, there is no reason for the Stay issue to be adjudicated in Ontario.

[17] Senvion submits that this court has the jurisdiction to determine whether the draw on the LC violated the Stay. Senvion argues that since this court issued the recognition orders that contain the Stay, this court should determine whether the draw on the LC violated the Stay. Senvion notes that the Moving Parties are not strangers to the insolvency as they have already filed a claim in the German proceeding. Senvion submits that by drawing down on the LC, MU LP was effectively seeking indemnification for the damages it had claimed in its proof of claim in the Main Proceeding.

[18] Both sides take an all or nothing approach. They each say that all of the issues in the litigation should be decided in the Quebec court (Moving Parties) or the Ontario court (Senvion). However, Senvion’s counsel in oral submissions acknowledged that it may be appropriate to consider transferring the litigation at a later date once the Stay issue has been decided.

Analysis

[19] At the outset, I wish to make one thing clear. I make no determination on the merits of any part of this case. In particular, I make no determination of whether the draw down on the LC violated the Stay. In its factum, Senvion makes numerous statements that the Moving Parties resorted to a self-help remedy in the face of the Stay. That is not an issue to be decided on this motion. The only issue is which court should adjudicate the allegations made by Senvion in the litigation.

[20] Senvion has brought a motion in the recognition proceedings alleging that the draw down on the LC violated the Stay. That is a central allegation in the proceeding. Senvion alleges that over $19 million was drawn down in breach of the Stay. The relief Senvion seeks is to restore those funds to it to ensure fairness to all of its creditors in the insolvency proceedings.

[21] I agree with Senvion that the Stay issue should be decided by this court, for several reasons.

[22] First, this is the court that granted the Stay. There is no issue that the Ontario court had the jurisdiction to grant the recognition orders and that this court’s order had national effect (s. 16 of the CCAA). The Moving Parties do not argue otherwise.

[23] Second, since this is an order of the Ontario court, there can be no issue that this court has the jurisdiction to decide whether its order has been breached. In Nortel Networks Corporation (Re), 2010 ONSC 1304, 65 C.B.R. (5th) 231, it was the Ontario court that considered whether the conduct of the overseas pension regulator breached a stay ordered by the Ontario court. I see no reason why the Ontario court should send that determination to a court of another province. The fact that there is a contractual dispute between the parties should not, in my view, displace this court’s ability to determine whether its order was breached.

[24] Third, the issue of whether the Stay has been breached does not engage the forum non conveniens issues raised by the Moving Parties. The Stay issue is a discrete one. To decide that issue, the court will have to consider the terms of the recognition orders, the provisions of the letter of credit, and the applicable law relating to stay orders and letters of credit.

[25] Fourth, the Moving Parties argue that there has been little activity in these foreign recognition proceedings. In my view, this is irrelevant. The issue is not how much has occurred in the recognition proceedings; rather, it is whether there was a breach of the recognition orders.

[26] Fifth, I do not accept the Moving Parties’ argument that Senvion is trying to avoid the jurisdiction of the Quebec courts by bringing a contrived motion in the Ontario recognition proceedings. It is clear from the statement of claim that Senvion always intended to bring its claim in the insolvency proceedings but issued the claim to preserve the limitation period. The statement of claim alleges in numerous paragraphs that the draw down on the LC was a breach of the Stay. The motion in the Ontario recognition proceedings is consistent with those earlier allegations.

[27] Both sides refer to proceedings brought by Senvion in Quebec in July 2023 against another wind farm, the Viger-Denonville community wind farm (in which Innergex has an indirect interest). The Moving Parties submit that this demonstrates that Senvion knows the proper forum to litigate these claims is Quebec. Senvion submits that there is no alleged breach of a stay in that case and it is therefore distinguishable. I accept that the allegation of a stay violation in this case distinguishes it from another case that does not engage that issue. Further, the fact that Senvion brought the Viger-Denonville claim in Quebec reinforces Senvion’s position that is not bringing its motion in the Ontario recognition proceedings simply as a means of avoiding the Quebec court.

[28] Finally, the Ontario court granted the foreign recognition orders in support of the Main Proceeding. The Ontario court granted the Stay to facilitate and coordinate all claims against Senvion through the Main Proceeding in Germany. It is entirely appropriate for the Ontario court, having undertaken that role, to ensure that the terms of its order are complied with and to adjudicate any issues concerning the Stay in that order.

Decision

[29] The Moving Parties’ motion is dismissed. Senvion’s motion may proceed in this court for a determination of whether the draw down on the LC violated the Stay and, if so, what the remedy would be.

[30] Once that determination has been made, it remains open to the judge of this court to consider whether the remaining issues are more appropriately litigated in this court or in Quebec. My decision is without prejudice to any arguments the parties wish to make at that time.

[31] Senvion is the successful party on this motion as I have not dismissed or stayed its Ontario proceedings. In accordance with the agreement among the parties, the Moving Parties shall pay Senvion costs in the amount of $25,000, all inclusive.

Conway J. Date: May 14, 2024

[1] All facts referred to in this Endorsement are undisputed, unless otherwise noted.