



COURT OF APPEAL FOR ONTARIO

CITATION: Hybridyne Power Generation Corp. v. SAS Company
    Global Investments Inc., 2015 ONCA 496

DATE: 20150706

DOCKET: C60536

Laskin, Pardu and Brown JJ.A.

BETWEEN

Hybridyne Power Generation Corp.

Plaintiff
(Respondent)

and

SAS Company Global Investments Inc.

Defendant
(Appellant)

Romesh Hettiarachchi, for the appellant

Gregory Roberts, for the respondent

Heard: June 25, 2015

On appeal from the judgment of Justice Laura A. Bird of
    the Superior Court of Justice, dated May 15, 2015, with reasons reported at 2015
    ONSC 3153.

Brown J.A.:

I.

Overview

[1]

The appellant, SAS Company Global Investments Inc. (SAS), appeals from
    the judgment of Bird J. dated May 15, 2015 (the Judgment), granting summary
    judgment in favour of the respondent, Hybridyne Power Generation Corp.
    (Hybridyne). The dispute between the parties concerns their interests in a
    proposed solar power generating facility in Clarington, Ontario (the
    Project). Because of the imminent expiration of regulatory approvals for the
    Project, the appeal was expedited. At the hearing, the appeal was dismissed,
    with reasons to follow. These are those reasons.


II.

Background facts

[2]

On October 27, 2010, the parties entered into a Master Agreement and
    three related agreements for the development of the Project: a Share Purchase
    Agreement, a Fixed Price Services Agreement, and a Buy/Sell Agreement.

[3]

The Project is owned by Hybridyne Power Generation Site A Inc. (Site
    A), at the time a wholly-owned subsidiary of Hybridyne. Under the Share
    Purchase Agreement, SAS acquired 75% of the issued and outstanding shares in
    the capital of Site A, and the agreement entitled it to buy a further 22.5% of
    the shares at a later date.

[4]

Under the Fixed Price Services Agreement (FPSA), SAS retained
    Hybridyne to perform all services necessary to enable Site A to obtain a Notice
    to Proceed (NTP) for the Project under its Feed-In Tariff Contract (FIT Contract)
    with the Ontario Power Authority. The FPSA specified the amounts and the timing
    of payments by SAS for the development services performed by Hybridyne. There
    is no dispute that Hybridyne performed all of the services necessary to obtain
    the NTP, which was issued on December 6, 2012.

[5]

After securing the NTP, Hybridyne took the position that SAS had failed
    to make all of the required payments under the FPSA. Section 8 of the FPSA
    provided that in the event SAS failed to pay any amount due under the agreement
    and failed to cure its default within 30 days of receipt of notice from
    Hybridyne, the latter could terminate the FPSA provided that Hybridyne had
    never defaulted on any of its own obligations under the FPSA and related
    agreements.

[6]

On January 15, 2013, Hybridyne gave SAS notice that it had defaulted on
    the final payment due under the FPSA. The notice stated that if SAS did not
    cure the breach within 30 days, Hybridyne would initiate the process to take
    back ownership of the Project in accordance with the terms of the agreements
    between the parties.

[7]

Subsequent negotiations between the parties failed to resolve the
    dispute. On June 18, 2013, Hybridyne gave SAS notice that it was terminating
    its relationship with SAS pursuant to FPSA s. 8 and that Hybridyne would
    purchase the shares of Site A held by SAS (the Shares) in accordance with the
    terms of the FPSA.

[8]

Section 9 of the FPSA provided that upon termination of the agreement as
    a result of an event of default, SAS would be relieved of the obligation to pay
    any amounts it owed under the FPSA and Hybridyne was to pay a termination fee
    to SAS equal to half of the funds that SAS had advanced. At its option,
    Hybridyne could repay the termination fee in three equal annual instalments. As
    well, section 9(c) of the FPSA stated:

The shares of [Site A] owned by [SAS] shall be sold as
    contemplated by Article 7 of the Buy/Sell Agreement dated October 7, 2010 made
    between the parties upon payment in full of the termination fee described in
    Section 8(b).

[9]

Article 7 of the Buy/Sell Agreement states that upon the occurrence of
    an event of default, SAS shall sell to Hybridyne all of the Shares for $1.00
    per Share provided Hybridyne has paid in full all amounts due to [SAS] as a
    result of the termination of the Fixed Price Services Agreement as required
    therein.

[10]

In
    September, 2013, Hybridyne commenced this action seeking a declaration
    confirming its termination of the FPSA, a declaration of the amount of the
    termination fee it owed to SAS, and a declaration that all of the Shares
    belong to or vest in the name of the plaintiff upon the payment of the
    termination fee. In defending the action, SAS pleaded that it had made all
    payments to Hybridyne required by the FPSA and it denied that Hybridyne was
    entitled to purchase the Shares.

[11]

In
    April, 2014, Hybridyne brought a motion for summary judgment seeking the relief
    pleaded in its statement of claim. Although originally returnable in May 2014,
    Hybridynes motion was adjourned several times because SAS changed lawyers who,
    in turn, sought adjournments. After a years worth of adjournments, the motion
    finally was heard by the motion judge on May 15, 2015.

III.

Motion for Fresh Evidence

[12]

SAS
    moves for leave to file fresh evidence on this appeal; Hybridyne opposes the
    motion. SAS seeks leave to introduce evidence on the following three points:


(i)

the lawyer who acted for SAS on the summary judgment motion failed to
    make relevant inquiries of the directors and officers of SAS before the hearing
    of the motion;


(ii)

the evidence of Mr. Thomas Cleland, the principal of Hybridyne, filed on
    the motion to expedite the appeal demonstrates that Hybridyne was not in a
    position to pay any monies to SAS for the Shares; and,

(iii)

SAS has invested significant sums into the Project that would be lost in
    the event its appeal was dismissed.

[13]

SAS
    has not satisfied the requirements to adduce fresh evidence on the appeal:
R.
    v. Palmer
, [1980] 1 S.C.R. 759. The proffered evidence about the former
    counsel for SAS would not be conclusive of any issue on the appeal. Although
    the counsel for SAS who appeared on the summary judgment motion had filed a
    motion to be removed as lawyer of record, the transcript of the motion hearing
    disclosed that counsel met with his client the day before the hearing and, in
    fulfillment of his duties as counsel of record, filed a factum and book of
    authorities, and made oral submissions on the motion. Although SAS alleged that
    its former counsel had failed to provide effective representation because he did
    not make relevant inquiries of the officers and directors of the company, SAS
    offered no particulars to support this bald allegation.

[14]

As
    to the evidence of Mr. Cleland that Hybridyne lacked the funds to acquire the
    Shares, that evidence is not relevant to the issues SAS raised on this appeal. The
    FPSA does not require Hybridyne to use its own corporate funds to purchase the
    Shares, and Mr. Clelands evidence disclosed that Hybridyne intends to rely on
    third-party financing to acquire the Shares.

[15]

Finally,
    the evidence about investments made by SAS into the project concerned the
    drawdown by Hydro One Networks Inc. in April, 2013 of a standby letter of
    credit SAS had posted. That evidence could have been obtained by the exercise
    of reasonable diligence prior to the summary judgment motion, and SAS provided
    no explanation about why it had failed to adduce that evidence in its response
    to the motion.

[16]

For
    those reasons, I would dismiss the motion by SAS for leave to file fresh
    evidence.

IV.

Issues on appeal

[17]

SAS
    advances the following main arguments on appeal:


(i)

FPSA s. 8 provides that Hybridyne can only exercise its right to
    terminate the agreement if it is not in default of its own obligations under
    the FPSA and related agreements. The motion judge failed to consider the
    allegations made by SAS in its pleading that Hybridyne was in default of its
    obligations at the time it gave notice terminating the FPSA and therefore was not
    entitled to terminate the agreement;


(ii)

The motion judge erred in finding that SAS must transfer the Shares to
    Hybridyne upon payment of the termination fee, without taking into account the need
    to finalize the precise amount of the termination fee and the obligation of
    Hybridyne under the Buy/Sell Agreement to pay SAS the Share purchase price;
    and,

(iii)

The motion judge erred in concluding that Hybridyne was entitled to the
    Shares notwithstanding its pleading that SAS had repudiated the FPSA.

SAS acknowledges that these arguments were not raised before
    the motion judge.


V.

Standard of review

[18]

In
Hryniak v. Mauldin
, 2014 SCC 7, [2014] 1 S.C.R. 87, the Supreme Court
    of Canada held that absent an error of law, the exercise of powers by a motion
    judge under Rule 20 of the
Rules of Civil Procedure
attracts
    deference. Whether a genuine issue requiring a trial exists is a question of
    mixed fact and law. Where there is no extricable error in principle, findings
    of mixed fact and law should not be overturned, absent palpable and overriding
    error.

[19]

The
    interpretation of a contract involves an issue of mixed fact and law on which
    an appellate court should defer to the motion judge, except in cases of a
    palpable and overriding error or where it is possible to identify an extricable
    error of law:
Sattva Capital Corp. v. Creston Moly Corp.
, 2014 SCC 53,
    [2014] 2 S.C.R. 633, at paras. 50-55.

VI.

Analysis

A.

The issues argued before the motion judge

[20]

At
    para. 11 of her reasons, the motion judge clearly described the issue the
    parties were asking her to decide on the summary judgment motion:

The parties agreed that the precise dollar amounts are not
    important and should not be resolved by me on this motion. The issue is whether
    I am satisfied that there has been a breach of the contract. In other words,
    did the defendant pay the full amount owing under the FPSA, or some lesser
    amount. A payment of anything other than the full amount owing would put the
    defendant in breach of the contract, thereby triggering the plaintiffs right
    to terminate the agreement in accordance with the terms set out in paragraph
    nine of the FPSA.

[21]

On
    the motion, SAS filed an expert affidavit from Mr. Tom Strezos addressing whether
    SAS had paid all amounts it owed under the FPSA. At para. 13 of her reasons the
    motion judge stated:

The plaintiff claims that several amounts in Mr. Strezos chart
    were not paid, as alleged by the defendant pursuant to the FPSA. Mr. Strezos
    acknowledged under cross-examination that his opinion that the defendant had
    fulfilled his financial obligations was dependent on all of the amounts in the
    Difference column having been paid. If the defendant did not pay any one of
    those amounts, it did not comply with the terms of the FPSA.

[22]

The
    motion judge found that SAS had not paid all amounts shown in the Difference
    column, specifically a personal cheque in the amount of $50,000 allegedly paid
    on January 8, 2008, as well as HST on a $150,000 deposit. The motion judge also
    found that a January 4, 2013 payment in the amount of $50,000 was not a payment
    made by SAS for services Hybridyne had provided under the FPSA. Based on those
    findings of fact, the motion judge concluded that SAS had breached the terms of
    the FPSA and Hybridyne was entitled to terminate the agreement in accordance
    with s. 8 of the FPSA.

[23]

On
    this appeal, SAS does not challenge those findings of fact by the motion judge.
    As a result, there is no reason to interfere with her finding that SAS failed
    to pay Hybridyne the amounts it was obligated to pay under the FPSA and
    therefore was in breach of the FPSA.

B.

The new issues raised by SAS on appeal

[24]

SAS
    raises three issues which it did not argue before the motion judge. In
Kaiman
    v. Graham
, 2009 ONCA 77, 245 O.A.C. 130, this court stated, at para. 18,
    that:

The general rule is that appellate courts will not entertain
    entirely new issues on appeal The burden is on the appellant to persuade the
    appellate court that all the facts necessary to address the point are before
    the court as fully as if the issue had been raised at trial In the end,
    however, the decision of whether to grant leave to allow a new argument is a
    discretionary decision to be guided by the balancing of the interests of
    justice as they affect all parties

[25]

The
    new issues raised by SAS on this appeal essentially involve either the
    interpretation of the Master Agreement, FPSA, and Buy/Sell Agreement, or the state
    of the evidentiary record on the motion in respect of the SAS counterclaim. Accordingly,
    all the facts necessary to address the new issues are before the court.

First new issue: Hybridyne did not establish its claim as
    pleaded

[26]

SAS
    submits that the motion judge erred in granting summary judgment because
    Hybridyne failed to prove its claim as pleaded. SAS argues that in its
    statement of claim Hybridyne had framed its action as one based on its
    acceptance of SAS repudiation of the FPSA, not as one in which it sought to
    enforce its termination rights and remedies under FPSA ss. 8 and 9.

[27]

I
    do not accept this argument. A pleading must be read as a whole. In paras. 15
    through 17 of its Amended Statement of Claim, Hybridyne specifically pleaded
    its rights under FPSA ss. 8 and 9, including its right to purchase the Shares
    in the event of a default by SAS. Hybridynes right to purchase the Shares
    obviously survived the termination of the FPSA.  By its terms, the FPSA made
    that remedy available to Hybridyne in the event the agreement terminated by
    reason of SAS default.

Second new issue:  The motion judge ignored Hybridynes
    obligation to pay the Share purchase price and the need to finalize the amount
    of the termination fee

[28]

SAS
    submits that the motion judge erred by ignoring the effect of s. 7.5 of the
    Buy/Sell Agreement which provides that if Hybridyne is entitled to purchase the
    Shares because of an event of default by SAS under the FPSA, the closing of the
    Share purchase transaction shall take place 30 days after the date of the
    Event of Default is deemed to have occurred. SAS contends that because
    Hybridyne took the position that an event of default had occurred on January
    14, 2013, Hybridyne was obliged under the Buy/Sell Agreement to purchase the Shares
    within 30 days. Since it did not, SAS argues that Hybridyne was not entitled
    under the agreements to purchase the Shares thereafter.

[29]

I
    do not accept this argument. When Hybridyne gave notice terminating the FPSA on
    the basis that SAS had failed to pay all amounts owing, SAS took the position
    that it had made all required payments, so therefore Hybridyne was not entitled
    to terminate the agreement or acquire the Shares. As a result of SAS position,
    Hybridyne was not able to proceed with the Share purchase until the disposition
    of this lawsuit. SAS cannot rely on the delay caused by the legal position it
    took to deprive Hybridyne of its right to purchase the Shares.

[30]

In
    light of this conclusion, no practical consequence flows from the apparent
    conflict between the 30-day closing language contained in section 7.5 of the
    Buy/Sell Agreement and FPSA s. 9(b) which affords Hybridyne the option to repay
    the termination fee over three years.    As stated, SAS cannot rely on its own
    delay to defeat Hybridynes right to purchase the Shares, and Hybridyne sought
    and obtained a Judgment that allows it to pay the termination fee into court in
    one lump-sum. As a related argument, SAS submits that it was not open to the
    motion judge to direct a reference to determine the amount Hybridyne must pay
    as the termination fee under FPSA s. 9(b), but then order SAS to deliver up the
    Shares simply upon Hybridynes payment of $600,000 into court, before the
    reference had been conducted. SAS makes two points: first, until the precise amount
    of the termination payment is known and paid, Hybridyne is not entitled to
    purchase the Shares under FPSA s. 9(c); and, second, the motion judge ignored
    Hybridynes obligation under the Buy/Sell Agreement to pay SAS a Share purchase
    price in order to acquire the Shares.

[31]

I
    do not accept these arguments. As was clear from the transcript of the motion
    hearing, the matter was an urgent one, requiring a timely adjudication of the
    parties dispute in order to preserve the viability of the Project given the
    regulatory deadlines it faces. During the submissions on the motion,
    Hybridynes counsel informed the motion judge that he had discussed with
    opposing counsel referring the determination of the precise amount of the
    termination fee to a master, and requiring Hybridyne to pay into court an
    amount which likely would cover Hybridynes net obligation in respect of the
    termination fee. This amount was estimated by taking $772,000 (the amount of
    the termination fee calculated by Hybridynes expert),  and subtracting
    $100,000 for the judgment obtained by Sustainable Power Capital Inc. against
    Site A, as well as the costs due from SAS to Hybridyne on the motion, which the
    motion judge fixed at $68,617.45.

[32]

The
    motion judges resulting order that Hybridyne pay into court $600,000 before
    SAS was required to sell the Shares was a reasonable exercise of her remedial
    discretion under rule 20 of the
Rules of Civil Procedure
because it
    was consistent with the Share purchase terms contained in the FPSA and Share
    Purchase Agreement and afforded SAS adequate security for the payment of the
    termination fee due to it. There is no reviewable error in the remedy granted
    by the motion judge.

[33]

In
    order to acquire the Shares, Hybridyne must pay not only the termination fee,
    but also the purchase price of $1.00 per Share stipulated in Article 7 of the
    Buy/Sell Agreement. Although the motion judge did not address that issue  no
    doubt because it was not in dispute  Hybridyne expressly acknowledges, in
    para. 52 of its factum, that it is required to pay that purchase price to SAS
    on the closing of the Share purchase.

Third new issue: Hybridyne had defaulted on its obligations
    under the FPSA

[34]

SAS
    further argues that when Hybridyne purported to terminate the FPSA, Hybridyne
    had not met the condition in FPSA s. 8(b) that it is not then and has not been
    in default of any of its obligations hereunder, under the Master Agreement or
    under any other agreement referred to in the Master Agreement. In para. 18 of
    its statement of defence, SAS pleaded that Hybridyne had breached the FPSA,
    Master Agreement, and Share Purchase Agreement by (i) failing to perform
    services that would enable Site A to construct and operate the Project in a
    cost-effective manner, (ii) failing to perform services in a proper and
    workmanlike manner, and (iii) withholding from SAS facts material to Site A. SAS
    did not provide any particulars of those allegations in its statement of
    defence.

[35]

However,
    in its counter-claim SAS offered some details, alleging that Hybridyne had
    breached its obligations because (i) it had caused Site A to enter into an
    excessively costly grid connection agreement, (ii) it had failed to obtain an
    appropriate solar inverter for the Project which prevented SAS from securing
    financing for the project, and, (iii) it had made unspecified
    misrepresentations to SAS contrary to the requirements of the Share Purchase
    Agreement. SAS argued that because the motion judge had failed to deal with
    these allegations contained in its counter-claim, she was not in a position to
    find that Hybridyne had satisfied the conditions of FPSA s. 8(b) entitling it
    to terminate the agreement.

[36]

On
    the motion for summary judgment, it was clear Hybridyne was taking the position
    that it was entitled to terminate the FPSA under s. 8 of that agreement. Consequently,
    in order for SAS to demonstrate that a genuine issue requiring a trial existed
    on that claim, SAS was obliged to adduce evidence addressing its allegations
    that Hybridyne had breached its obligations under the agreements and,
    therefore, was not entitled to terminate under FPSA s. 8. SAS was not entitled
    to rely simply on the allegations in its pleading.

[37]

SAS
    failed to adduce such evidence. It filed evidence from only one fact witness,
    its Chief Operating Officer, Michael McKie. In his affidavit, McKie made no
    reference to the first allegation that Hybridyne had caused Site A to enter
    into an excessively costly grid connection agreement.

[38]

As
    to the second allegation, while McKie did adduce some evidence touching on the
    solar inverter, he did not depose that any obligation Hybridyne may have had
    regarding a solar inverter arose under the Master Agreement or under any other
    agreement referred to in the Master Agreement, a requirement of FPSA s. 8(b). Indeed,
    none of the Master Agreement, FPSA, Share Purchase Agreement or Buy/Sell
    Agreement make any reference to an obligation by Hybridyne regarding a solar inverter,
    with the result that McKies evidence about the solar inverter was irrelevant
    to the issue of whether Hybridyne was entitled to exercise its termination
    rights.

[39]

Finally,
    in his affidavit McKie suggested that Hybridyne failed to comply with a change
    of control provision in the FIT Contract with the Ontario Power Authority,
    thereby breaching a representation in the Share Purchase Agreement that the FIT
    Contract for the Project was in good standing. McKie failed to file the
    evidence necessary to support this allegation. He did not file the executed FIT
    Contract entered into for the Project, so it is not possible to assess who made
    what representation to the Ontario Power Authority. Moreover, there is an air
    of commercial unreality to this allegation. It flies in the face of the position
    advanced by SAS at the hearing of the appeal that it wanted to control the
    future construction of the Project and, to that end, was prepared to pay into
    court the financial arrears it owed under the FPSA. Commercial common sense
    would suggest that SAS is prepared to make such a payment because the FIT
    Contract remains in good standing and the Project continues to have value.

C.

Conclusion on the granting of summary judgment

[40]

In
    sum, I see no error in the motion judges conclusions that SAS had breached the
    FPSA and Hybridyne was entitled to purchase the Shares in accordance with the
    mechanism set out in the Judgment. Accordingly, I would dismiss the appeal.

VII.

Request for a stay of execution of the Judgment

[41]

SAS
    submits that this court should stay the Judgment pending the determination of
    its counter-claim. SAS did not ask the motion judge to grant a stay of
    execution pursuant to rule 20.08 of the
Rules of Civil Procedure
. Nor
    is there any just reason to grant a stay at this stage of the proceeding. As
    observed, SAS did not adduce evidence to substantiate the allegations made in
    its counter-claim. Further, the pending expiry of the Projects Renewable
    Energy Approval in late November, 2015 means that granting a stay probably
    would jeopardize the viability of the Project to the detriment of both parties.
    Finally, SAS proposes, as a condition of the stay, that it pay into court the
    amount of the final payment which it failed to make in late 2012, in return for
    Hybridyne releasing its interest in the Shares. Imposing such a condition would
    be most unjust: it would completely defeat Hybridynes claim and would re-write
    the bargain between the parties contained in s. 9 of the FPSA.

VIII.

Disposition

[42]

By
    way of summary, I would dismiss the motion by SAS for leave to file fresh
    evidence, dismiss its appeal, and dismiss the request of SAS for a stay of
    execution of the Judgment pending determination of its counter-claim. I would
    award Hybridyne its costs of the appeal and the motions heard on June 20, 2015,
    fixed in the amount of $40,000, inclusive of disbursements and HST, and would consequently
    vary para. 3 of the Judgment to read that Hybridyne pay into court the sum of
    $560,000.

Released: July 6, 2015 (J.L.)

David
    Brown J.A.

I
    agree John Laskin J.A.

I
    agree G. Pardu J.A.


