



COURT OF APPEAL FOR ONTARIO

CITATION: Nissa Corporation v. Enviro Park Solar Ltd., 2019
    ONCA 563

DATE: 20190704

DOCKET: C66040

van Rensburg, Hourigan and Huscroft JJ.A.

BETWEEN

Nissa Corporation

Respondent

(Appellant in Appeal)

and

Enviro Park Solar Ltd.

Applicant

(Respondent in Appeal)

Peter R. Jervis and Golnaz Nayerahmadi for the
    appellant, Nissa Corporation

Jeffrey Levine and Nicole Rozario for the respondent,
    Enviro Park Solar Ltd.

Heard: March 26, 2019

On appeal from the
    order of Justice Jill M. Copeland of the Superior Court of Justice, dated
    October 1, 2018, with reasons reported at 2018 ONSC 5750.

Huscroft J.A.:

OVERVIEW

[1]

The appellant, Nissa Corporation (Nissa), inherited a lease between
    the respondent, Enviro Park Solar Ltd., (the Tenant) and 1809765 Ontario Limited
    (180 Ontario), the original landlord, when it purchased two properties in
    Napanee, 61A and 60A Enviro Park Lane (61A and 60A) from the B
usiness Development Bank of Canada
,
    the mortgagee in possession of the property.

[2]

The lease governed the rooftop and certain rights of way at 61A for the
    purpose of operating a solar power generation project. The Tenant and 180
    Ontario were both controlled by Karl Hollett when the lease was entered into.

[3]

Nissa disputed the validity of the lease and the Tenant brought an
    application seeking declarations that: (i) the lease was effective and binding
    on the parties to the lease and their successors; (ii) the Tenant was the owner
    of certain equipment on the premises; and (iii) Nissa had wrongly prevented the
    Tenant from accessing the property. Nissa took the position that the roof lease
    had been terminated prior to its purchase of the property, or in any event,
    after the expiry of the cure period.

[4]

On November 14, 2017, Myers J. granted all three declarations, and in
    addition awarded damages caused by Nissas failure to allow the Tenant to
    access the property and resulting loss of solar power production.

[5]

Subsequently, Nissa took the position that the manner in which the solar
    generation system had been installed did not comply with the terms of the lease
    and that additional rent was therefore owing. This led to a second application
    and the decision that is the subject of this appeal.

[6]

On the second application, the application judge ordered that Nissa was
    required to maintain the Tenants connection to the local electrical utility system
    via the transformer in the building across the street, at 60A Enviro Park Lane
     a building not mentioned in any part of the lease  and that it was not
    entitled to receive any additional rents for that connection. The application
    judge ordered, further, that the Tenant had the right to install inverters in
    the electrical room of the building at 61A.

[7]

Nissa argues that the application judge erred by reading a positive
    covenant into the lease, requiring it to provide the Tenant with access to the
    transformer at 60A Enviro Park Lane. She erred, further, in interpreting the
    lease as permitting the Tenant to install and operate inverters inside the
    building at 61A, in essence allowing conduct of the former landlord to
    overwhelm the express terms of the lease.

[8]

In my view, the application judge erred in law by reading the lease as
    requiring that a connection to the transformer at 60A be maintained. However,
    her interpretation of the lease as permitting the Tenant to install inverters
    inside the building at 61A reveals no error and is entitled to deference.

[9]

I would allow the appeal in part for the reasons that follow.

BACKGROUND

[10]

The
    application judge was required to decide only two questions. First, is the
    Tenant entitled under the terms of the lease to connect to the local electrical
    utility system via the transformer located on the property at 60A Enviro Park
    Lane? Second, is the Tenant entitled under the terms of the lease to have
    inverters, which are part of the solar power generating system, located in the
    electrical room of the building at 61A Enviro Park Lane rather than on the
    roof?

[11]

The
    relevant provisions of the lease are set out in the appendix to these reasons.

The application judges decision

[12]

Concerning
    the first issue, the application judge noted that the lease was entered into when
    180 Ontario owned both 61A and 60A Enviro Park Lane. She concluded that
    although the lease did not refer specifically to 60A, read in context it
    supported the Tenants submission that it had the right to connect to the
    electrical utility system via the transformer that was located at 60A. The
    solar project was central to the lease, as demonstrated by the provision in s.
    5(a) that the Tenant satisfy itself of the ability to connect to the electrical
    utility system as a Tenants condition in the lease. Section 11(b) limited the
    landlords activities not only on the Roof or other parts of the Building or
    Property, but also on any lands adjacent to the Property, and the application
    judge found that 60A was properly considered adjacent for purposes of the
    lease.

[13]

On
    the second issue, the application judge agreed with the Tenant that s. 2 of the
    lease, which defines the right of way that is leased to the Tenant pursuant to
    s. 6(a), is clearly not limited to the Roof Area as it includes (i) such
    rights, interests, rights-of-way, easements and privileges in any way
    pertaining thereto and set forth in greater detail herein and (ii) such rights
    of ingress and egress to the Property as may be reasonably necessary for the
    Tenants use of the Roof Area in accordance with the terms hereof, to have and
    to hold for and during the Term.

[14]

The
    application judge concluded that, although the definition of Roof Equipment
    requires that it is to be located on the Roof Area and includes inverters,
    Connecting Equipment in s. 2(b)(i) is not limited to the rooftop location.
    Because the inverters are also included in the definition of Connecting
    Equipment, the lease does not limit their installation to the Roof Area. The
    application judge rejected Nissas argument that the Tenant had a right only to
    use or travel across the Property other than the Roof, because the lease
    necessarily contemplated the connection of some equipment/wires from the solar
    panels on the Roof and out of the Building in order to join the local electrical
    utility system, and this equipment would necessarily be installed permanently.
    The application judge also considered that the separate listing of rights to
    access to the Roof Area and the Connecting Rights of Way in s. 2(b)(ii)
    supported the argument that the rights in s. 2(b)(i) were more than just access
    rights.

[15]

The
    application judge therefore granted the Tenants application.

DISCUSSION

[16]

It
    is now well established, following the decision in
Sattva Capital Corp. v.
    Creston Moly Corp.
, 2014 SCC 53, [2014] 2 S.C.R. 633, that contractual
    interpretation of non-standard form contracts is properly characterized as a
    mixed question of fact and law and is subject to deferential review on appeal.
    The standard of review is palpable and overriding error, unless it is possible
    to identify an extricable question of law, in which case correctness review
    applies.

[17]

Sattva

emphasizes that questions of law are relatively rare, but the Supreme Court
    identified three examples of legal errors that may occur in the course of
    contractual interpretation: the application of an incorrect principle, the
    failure to consider a required element of a legal test, or the failure to
    consider a relevant factor:
Sattva
, at para. 53 (citing
King v.
    Operating Engineers Training Institute of Manitoba Inc.
, 2011 MBCA 80, 270
    Man. R. (2d) 63, at para. 21). Nissa does not argue that the application judge
    made a palpable and overriding error. Accordingly, the burden is on Nissa to
    establish an error on a question of law, as contemplated in
Sattva
.

(1)

The right to connect at 60A

[18]

Nissa
    argues that the lease is restricted to 61A Enviro Park Lane; that by its terms
    it does not and cannot grant access to or use of any other property; and that
    the application judge erred in law by implying a term into the lease
    essentially granting the Tenant a license to use the transformer at 60A Enviro
    Park Lane. Nissa describes s.11(b) as a negative covenant of non-interference
    that does not create positive obligations, and argues that the application
    judge erred in interpreting the word adjacent as including a building across
    the road from the leased premises.

[19]

I
    agree that the application judge erred in interpreting the lease as it relates
    to this issue.

[20]

The
    application judge concluded that, read as a whole, the lease supported the
    Tenants right to connect to the electrical utility system via the transformer
    at 60A. She focused on s. 6(d), which
gives
    the Tenant a right to make necessary connections to the local electrical
    utility system, and s.
11(b), which
provides that the landlord covenants not to initiate or conduct or
    carry on maintenance or other activities that it knows or reasonably should
    know would adversely affect the solar energy project.

[21]

The
    application judge noted that when the lease was signed, both 60A and 61A were
    owned by 180 Ontario, and that both properties are now owned by Nissa.

[22]

The
    application judge treated ss. 6(d) and 11(b) as extending the leasehold
    interest to include 60A, but in doing so she failed to give effect to all of
    the relevant provisions in the lease, including the definitions of Property,
    Building, Roof, Roof Area and Project. These definitions operate to clearly
    limit the leasehold interest to 61A. Section 6(a) specifically provides that
    the Tenant leases the Roof Area and rights, interests, rights-of-way, easements
    and privileges and rights of ingress and egress to the Property, which is
    defined as lands municipally known as 61A Enviro Park Lane together with all easements,
    rights-of-way and other interests and appurtenances relating thereto.

[23]

In
    addition, the negative language in s. 11(b), which precludes the Landlord from
    engaging in activities that adversely affect the solar energy project, cannot
    be construed as creating an easement, right-of-way or other interest in land
    not subject to the lease. The application judge erred in relying on the
    language of this negative covenant to enlarge the description of the leasehold
    interest to include 60A, despite the definitions in the lease that clearly
    limit the leasehold interest to 61A.

(2)

The placement of the inverters

[24]

Nissa
    argues that the application judge erred in law by failing to apply the correct
    test for contractual interpretation. Specifically, Nissa says that, although
    the application judge correctly set out the principles in
Sattva
, she
    erred by excluding Mr. Holletts evidence, which should have been admitted as
    objective evidence of the circumstances surrounding the negotiations. The
    application judge erred, further, in failing to consider the practical
    consequences of her interpretation of the lease, which Nissa asserts undermines
    its use of the inside of the Building and its commercial interests, contrary to
    the principle of commercial reasonableness.

[25]

I
    would reject these arguments.

[26]

First,
    the application judge had concerns about the reliability of Mr. Holletts
    evidence, but ultimately rejected it on the basis of her finding that it went
    beyond what
Sattva
permitted. She made no error in doing so. Although
    in the unusual circumstances of this case the lease was entered into by related
    corporations, both of which were controlled by Mr. Hollett, his affidavit is
    evidence about the subjective intentions of the parties, and is impermissible
    on this account: see
Sattva
, at para. 59. It was also opinion evidence
    as to how the lease ought to be interpreted.

[27]

The
    application judge specifically instructed herself concerning the need to
    interpret the lease in accordance with sound commercial principles, as set out
    in the leading decisions of this court, at para. 30 of her decision. In
    essence, the Landlord is advancing on appeal the same argument that was rejected
    by the application judge  that s. 2(b) does not permit inverters to be
    installed anywhere other than the Roof.

[28]

The
    application judge provided cogent reasons in support of her conclusion
    rejecting this argument. By its terms, s. 2(b)(i) provided that Connecting
    Equipment, which included inverters, may be connected in places other than the
    Roof. The language of s. 2(b) was very broad and included provisions designed
    to facilitate the operation of a solar power system, which necessarily involved
    the connection of the solar panels on the Roof to equipment that exited the
    Building in order to connect to the electrical utility system. Thus, the
    application judge interpreted the right of way broadly rather than narrowly 
    as more than simply a right of access to the Roof.

[29]

In
    summary, the application judges interpretation of the lease with respect to
    the issue of inverters reveals no legal error and is reasonable. There is no
    basis for this court to intervene on appeal.

CONCLUSION

[30]

I
    would allow the appeal in part.

[31]

The
    Tenant is not entitled under the lease to connect to the electrical utility
    system via the transformer at 60A Enviro Park Lane. The Tenant is entitled to
    have inverters located in the building at 61A Enviro Park Lane.

[32]

In
    light of the divided success, I would order the parties to bear their own costs
    of the appeal. I would vacate the application judges costs order, and order the
    parties to each bear their own costs of the application.

Released: C.W.H. July 4, 2019

Grant Huscroft J.A.

I agree. K. van
    Rensburg J.A.

I agree. C.W. Hourigan
    J.A.


Appendix

1. DEFINITIONS

Access Right-of-Way has the
    meaning ascribed to it in Section 2 hereof.
...
Building means, collectively, the building or buildings located on the
    Property

...

Connecting Equipment has the
    meaning ascribed to it in Section 2 hereof.

Connecting Rights-of-Way has
    the meaning ascribed to it in Section 2 hereof.

...

FIT Contract means the
    agreement no. F-003012-SPV-508 dated July 23, 2013 entered into between 1809765
    Ontario Limited, and the OPA under the FIT Program with respect to the Roof
    Area and the Project, as such agreement may be amended, restated, replaced,
    renewed, assigned or otherwise amended from time to time.

FIT Program means the Renewable
    Energy Feed-In Tariff Program established by the OPA.

...

Project means the renewable
    energy generation project to be constructed on the Roof Area, and other areas
    defined in Section 6 hereof, and owned by the Tenant, for the purposes of solar
    power electricity generation and distribution pursuant to the FIT Program.

Property means the lands
    municipally known as 61A Enviro Park Lane, Napanee, Ontario and legally
    described in Schedule B attached hereto
[1]
,
    together with all easements, rights-of-way and other interests and
    appurtenances relating thereto.

...

Roof means the roof of the
    Building, including the roof membrane and roof structure.

Roof Area means the area on the
    Roof, as shown on the sketch attached hereto as Schedule A.
[2]

Roof Equipment means the solar
    power generating panels and other related equipment located on the Roof Area,
    including, but not limited to, one or more inverters, which is used for the
    generation, metering and distribution of electricity from the Project, and
    includes such equipment as is required to secure, support, maintain and protect
    the solar power generating panels.

...

Utility System means the
    electricity distribution system owned and operated by the local electricity
    distribution company that provides electricity supply service to the Building.

2. ROOF AREA

Subject to the terms and
    conditions contained herein, the Landlord hereby grants to the Tenant:

(a) an exclusive lease of the
    Roof Area; and

(b) one or more rights-of-way to
    be shared in common with the Landlord and others entitled thereto, in, over,
    under, across and through the Building, the Property and those portions of the
    Roof, if any, which are not included in the Roof Area, in the location or
    locations shown on the Plans, for the purposes of the Project, including,
    without limitation:

(i)
    installing, operating, inspecting, maintain, repairing, replacing and removing
    all equipment required to connect the Roof Equipment to a transformer and
    distribute the electricity generated by the Project to the Utility System (the
    Connecting Equipment) including access to electrical panels and conduits to
    interconnect or disconnect the Project, which Connecting Equipment shall
    include, without limitation, conduits, cables, electrical wiring, wire
    management systems, electric meters, power distribution boxes, connecting
    hardware and inverters (the Connecting Rights-of-Way); and

(ii)
     access to the Roof Area and the Connecting Rights-of-Way (the Access
    Right-of-Way).

...

5. TENANTS CONDITION

This Lease shall be conditional
    on the Tenant satisfying itself, in its sole and absolute discretion, that it
    has the ability to install and operate the Project on the Roof Area (the
    Tenants Condition), which ability shall include, without limitation:

(a) the Tenant having satisfied
    itself with respect to the title of the Property, the zoning and permitted uses
    for the Property, the environmental condition of the Property, the ability to
    connect the Project to the Utility System, and the suitability of the Roof for
    the Project. The Landlord agrees that from and after the Date of this Lease,
    the Tenant may have unfettered access to the Property, the Building and the
    Roof upon forty-eight (48) hours prior notice to the Landlord, to conduct such
    tests and inspections as the tenant may reasonably require in order to satisfy
    itself with respect to the foregoing; provided that, promptly following all
    such tests and inspections, the Tenant shall, at its sole cost and expense,
    restore the Property, the Building and the Roof to their respective conditions
    prior to the carrying out of any such tests and inspections, and repair any
    damage caused to the Property, the Building or the Roof by any such tests and
    inspections.

The Tenants Condition is for the
    sole benefit of the Tenant and may be waived by the Tenant in whole or in part
    in the Tenants sole discretion. The Tenant shall give Notice to the Landlord
    within thirty (30) days after the satisfaction of the Tenants Condition. In
    the event that neither a Notice of satisfaction of the Tenants Condition nor a
    Notice waiving the Tenants Condition has been delivered by the Tenant to the
    Landlord by 11:59 p.m. EST on the day which is the thirty-six (36) month
    anniversary of the date of this Lease, this Lease shall terminate and be of no
    further force and effect and neither Party shall have any further obligations
    or liability to the other, save and except for the Tenants obligations under
    Section 5(a) and Section 10(d) which shall survive the termination of this Lease.

6. USE AND ACCESS

(a)  The
    Landlord acknowledges, consents and agrees that the Tenant, its contractors,
    agents and employees may use the Roof Area throughout the Term and any
    extension for the purposes of solar power electricity generation and distribution
    under the FIT Contract and agrees that, with respect to the Property and the
    Building, this use shall be exclusive to the Tenant and its contractors, agents
    and employees. The Landlord agrees that, in furtherance of such permitted use,
    the Tenant may install, operate, inspect, maintain, repair, replace, enhance,
    upgrade, remove and alter the Roof Equipment and the Connecting Equipment in
    its sole discretion, at any time or times, subject to the terms of this Lease.
    The Tenant hereby takes and leases from the Landlord the Roof Area together
    with (i) such rights, interests, rights-of-way, easements and privileges in any
    way pertaining thereto and set forth in greater detail herein and (ii) such
    rights of ingress and egress to the Property as may be reasonably necessary for
    the Tenants use of the Roof Area in accordance with the terms hereof, to have
    any to hold for and during the Term.

(b) The Landlord agrees that the
    Tenant and its contractors, agents, employees and invitees (including, without
    limitation, the OPA) shall have unrestricted access to the Roof Area, the
    Connecting Right-of-Way and Access Right-of- Way at all times during the Term,
    on a 24 hours per day, 7 day per week basis, provided that, except in cases of
    emergency, the Tenant shall use commercially reasonable efforts to provide the
    Landlord with at least twenty-four (24) hours prior notice of the need to
    access such areas and shall use commercially reasonable efforts to minimize any
    interference with the business of the Landlord or other Building tenants.

...

(d) In connection with the
    Tenants use of the Roof Area, the Tenant shall have the right, subject to
    compliance with all Applicable Laws and obtaining the Landlords consent, which
    consent shall not be unreasonably withheld, to (i) trim, cut down and remove
    flora adjacent to the Project to provide reasonable solar access, (ii) make
    necessary connections to the local electrical utility system so long as such
    connection will not cause an overload to such system(s), and (iii) access to
    all such areas of the Property for the purposes of performing the foregoing
    actions. The Tenant covenants to use its best efforts to minimize any
    disruptions to business operations on the Property in exercising its rights
    under this Section 6.

...

11. LANDLORDS CONVENANTS

...

(b) The Landlord covenants and
    agrees to keep the Roof and the structural elements of the Building in good
    repair at all times during the Term, provided that the Landlord shall not
    initiate or conduct or carry on maintenance or other activities to, on or
    affecting the Roof or other parts of the Building or the Property, or on any
    lands adjacent to the Property, that it knows, or should reasonably know, may
    damage, impair or otherwise adversely affect the Project or its function (including
    activities that may adversely affect the Projects exposure to sunlight), or
    cause the Tenant to be in breach of its obligations under the FIT Contract.





[1]
No Schedule B was, in fact, attached to the lease.



[2]
No Schedule A was, in fact, attached to the lease.


