



COURT OF APPEAL FOR ONTARIO

CITATION: Grasshopper Solar Corporation v. Independent
    Electricity System Operator, 2020 ONCA 769

DATE: 20201202

DOCKET: M51845 (C67794 & C67795)

Trotter J.A. (Motion
    Judge)

BETWEEN

Grasshopper Solar Corporation,

GSC Solar Fund I Inc., One Point Twenty One Gigawatts Inc.,

Egerton Solar Power LP, and MPI GM Solar 1 LP

Applicants (Appellants/Moving Parties)

and

Independent Electricity
    System Operator

Respondent (Respondent/Responding Party)

AND BETWEEN

KL Solar Projects LP, Highlands Solar Projects LP,

Madawaska Solar Projects LP, McNab Solar Projects LP,

PB Solar Projects LP, Ramara Solar Projects LP,

Sudbury Community Solar Projects LP and

Sustainable Ottawa Projects LP

Applicants (Appellants/Moving Parties)

and

Independent Electricity
    System Operator

Respondent (Respondent/Responding Party)

Sarit E. Batner and Brandon Kain,
    for the moving parties

Alan H. Mark and Melanie Ouanounou, for the responding
    party

Heard: November 27, 2020 by videoconference

REASONS FOR DECISION

[1]

This is a motion to stay two orders of this court pending an application
    for leave to appeal to the Supreme Court of Canada and, if leave is granted,
    pending the final disposition of that appeal. For the reasons that follow, I
    would grant a stay
of this courts orders pending the
    applications for leave to appeal.

Background

[2]

This case involves the decision of the respondent, the Independent
    Electricity System Operator (IESO), to terminate 36 standard-form contracts
    with the applicants, renewable energy companies who construct and operate solar
    power facilities. Under these contracts, called Feed-in Tariff Contracts (FIT
    Contracts), the applicants were to construct solar facilities and provide
    clean energy to Ontarios electricity grid for a typical term of 20 years, at
    enhanced rates (i.e., above market rates). The contracts required the
    applicants to achieve commercial operation of their facilities by a certain
    date  the Milestone Date for Commercial Operation (MDCO)  failing which,
    the IESO may be able to terminate the contracts without paying damages. The
    applicants failed to meet the applicable MDCO. The respondent eventually gave
    notice that it would terminate their contracts. The termination of these
    agreements would mean that any energy that the applicants supply to the IESO
    will be at the lower market rates.

[3]

The applicants applied for declarations that their failure to achieve
    commercial operation by the MDCO did not constitute a default of the contracts.
    Hainey J. of the Superior Court of Justice dismissed their applications:
Grasshopper
    Solar Corporation v. Independent Electricity System Operator
, 2019 ONSC
    6397; and
KL Solar Projects LP v. Independent Electricity System Operator
,
    2019 ONSC 6501.


[4]

A panel of this court dismissed the applicants appeal:
Grasshopper
    Solar Corporation v. Independent Electricity System Operator
, 2020 ONCA
    499. Writing for the court, Huscroft J.A. confirmed the application judges
    conclusion that the respondent was entitled to terminate the contracts: see
    paras. 36-44. Further, at paras. 53-78, he rejected the applicants submission
    that the respondent was estopped from terminating the contracts, either on the
    basis of estoppel by convention or promissory estoppel.

[5]

The applicants seek leave to appeal that decision to the Supreme Court
    of Canada on various strands of contractual interpretation, using
Sattva
    Capital Corp. v. Creston Moly Corp
.
, 2014 SCC 53, [2014] 2 S.C.R.
    663 as their starting point. In their Memoranda of Argument, all applicants
    raise the following questions:

(1)

Does
    reading a contract as a whole require giving effect to all of its terms?

(2)

How
    do surrounding circumstances that are not specific to the parties affect the
    interpretation of standard form contracts?

(3)

Can
    courts imply terms to cure commercially unreasonable interpretations of
    contracts?

The KL Solar applicants also seek leave to appeal on
    further issues concerning estoppel and waiver.

[6]

Under the Rules of the Supreme Court of Canada, the respondents
    materials are not yet due.

[7]

In the course of the litigation leading up to the determination of the
    appeal in this court, the respondents agreed not to terminate the contracts.
    They have continued to make FIT payments. This arrangement is reflected in a
    Forbearance Agreement between the parties, entered into in July of 2019. Hainey
    J. incorporated the terms agreed upon into two interlocutory orders. The issue
    was also addressed in a Security Agreement entered into on April 1, 2020.

[8]

The applicants take the position that, in both instances, the parties
    contemplated that these arrangements would remain in place until matters are
    finally determined in the Supreme Court of Canada. They submit that the
    respondents should be held to their word and that this application should be
    treated as an extension of a pre-existing stay. The respondent contends that the
    previous agreements were intended to expire upon the conclusion of proceedings
    in this court.

[9]

I need not resolve this issue. These motions can be determined through
    the application of principles that govern the availability of stays pending
    appeal.

The Test for Granting a Stay

[10]

The
    applicants apply under s. 65.1 of the
Supreme Court Act
, R.S.C. 1985,
    c. S-26. That section empowers the Supreme Court, the court of appeal, or a
    judge of either court, to stay proceedings with respect to the judgment from which
    leave to appeal is sought on terms deemed appropriate. The power is broad. In
RJR-MacDonald Inc. v. Canada (Attorney General)
, [1994] 1 S.C.R. 311,
    Sopinka and Cory JJ. held, at p. 329:

We are of the view that the Court is empowered, pursuant to
    both
s. 65.1
and
r. 27
, not only to
    grant a stay of execution and of proceedings in the traditional sense, but also
    to make any order that preserves matters between the parties in a state that
    will prevent prejudice as far as possible pending resolution by the Court of
    the controversy, so as to enable the Court to render a meaningful and effective
    judgment.

[11]

In
Livent Inc. v. Deloitte & Touche
, 2016 ONCA 395, 131 O.R. (3d)
    784, at paras. 4-5, Strathy C.J.O. set out the test for a stay of proceedings
    pending an application for leave to the Supreme Court. In deciding this kind of
    motion, the court must consider the following factors: (1) whether there is a
    serious question to be determined on the proposed appeal; (2) whether the
    moving party will suffer irreparable harm if the stay is not granted; and (3)
    whether the balance of convenience favours a stay. These factors are not to be
    treated as silos; strength on one factor may compensate for weakness on
    another:
Livent Inc
.,
at

para. 5. The overriding
    question is whether the moving party has shown that it is in the interests of
    justice to grant a stay:
BTR Global Opportunity Trading Limited v. RBC
    Dexia Investor Services Trust
, 2011 ONCA 620, 283 O.A.C. 321, at para. 16.
    See also
Donovan v. Sherman Estate
, 2019 ONCA 465, at para. 8.

[12]

The
    respondent resists this motion on all three factors.

Application

[13]

Applying these factors, the interests
    of justice warrant granting a stay of this courts orders pending the
    applications for leave to appeal.

Serious Question to be Determined

[14]

Deciding whether there is a serious
    issue to be determined requires a preliminary assessment of the proposed merits
    of the appeal, as well as the proposed merits of the application for leave to
    appeal. The threshold at this stage is low:
Livent Inc
.
, at paras. 7-8;
Donovan
, at para. 9.

[15]

The applicants were unsuccessful before
    Hainey J., and a panel of this court unanimously dismissed the applicants
    appeals. The applicants submit that the decisions of both courts are wrong;
    whereas, the respondents claim that both decisions are undoubtedly correct,
    based in part on the judicial consensus to date.

[16]

I do not see it as my role to pass
    judgment on the correctness of my colleagues decision. Although I was greatly
    assisted by the submissions of counsel on this motion, I did not share in the
    benefit of the arguments on appeal, or the collegial deliberative process that
    culminated in the reasons of Huscroft J.A.

[17]

My focus is on whether there is
    arguable merit in the application for leave to appeal to the Supreme Court of
    Canada. While this task is somewhat different, it is no easier. It is
    challenging to predict how another court will react to the presentation of
    legal issues. This is especially the case in the broader framework set out
    under s. 40(1) of the
Supreme Court Act
,
which requires
    the proposed appeal to raise an issue of public or national importance. And as
    my colleague van Rensburg J.A. observed in
Donovan
, at para. 13, leave to appeal would appear to be granted
    sparingly in civil matters.

[18]

Nonetheless, the applicants have
    carefully developed a number of issues, as set out in para. 5, above. During
    oral argument on the motion, counsel for the respondent submitted that the
    applicants do not assert errors of law; instead, they raise questions about the
    application of settled law to the facts of this case. The respondent also
    submits that the applicants do not raise issues of national or public
    importance.

[19]

I have concluded that the applicants
    have met the low threshold required to satisfy the first part of the test.
    The applicants have raised issues that could go beyond the simple application
    of a known test to given facts and would transcend the facts of this particular
    case:
Donovan
, at para. 16. There
    may be merit in the respondents assertion that some of the issues pursued by
    the applicants do not appear to raise questions of law. But that will be for
    the Supreme Court of Canada to decide. And although this is a civil case, the
    foundation of this contractual dispute  between an energy regulator and clean
    energy suppliers  is atypical and may engage public interests.

[20]

In my view, the applicants have
    satisfied the low threshold required at this stage.

Irreparable Harm

[21]

The applicants submit that, if the
    orders of this court are not stayed, they will suffer irreparable prejudice
    that cannot be compensated with damages. If this court does not grant a stay
    and the respondent is entitled to terminate the FIT Contracts, the applicants
    will be driven out of business, causing significant irreparable harm to third
    parties, since as many as 63 direct employees and hundreds of other individuals
    employed by contractors, subcontractors, and suppliers in Ontario will lose
    their livelihoods.

[22]

The respondent submits that any harm
    the applicants might suffer from being deprived of FIT payments during
    proceedings in the Supreme Court can be remediated by reimbursing withheld FIT
    payments if the applicants are ultimately successful in the Supreme Court.

[23]

To a large degree, this issue turns on
    the applicants credit arrangements. Both parties relied on extensive evidence
    concerning the corporate structure of the applicants, and their complex credit
    arrangements. Their arguments involved competing predictions of how the
    applicants main creditor will respond if FIT payments are terminated and the
    applicants are unable to service their debt. The applicants submit that their
    creditor will call their loan, which will trigger financial turmoil, resulting
    in the human consequences referred to in paragraph 21, above. The respondent
    submits that it would make no commercial sense for the applicants creditor to
    behave in such a fashion while the leave application is outstanding; the
    creditors only hope of recovering the considerable funds it has already
    advanced is dependent upon the applicants success in the Supreme Court of
    Canada.

[24]

Based on the evidence and submissions
    before me, I am satisfied that a failure to preserve the
status quo
could well result in the consequences the applicants
    envisage. Whether or not the subsequent payment of withheld FIT payments could
    repair the purely commercial repercussions the applicants fear, I am satisfied
    that the human cost would be irreparable.

[25]

The applicants have demonstrated
    irreparable harm.

The Balance of Convenience


[26]

In addressing this factor in
Livent
    Inc
.
,
    Strathy C.J.O. said, at para. 12: The balance of convenience is just that  a
    balancing of which party will suffer the greater harm from the stay being
    granted or refused.

[27]

In the previous section, I have
    outlined my findings about the impact on the applicants if the respondent were
    permitted to immediately enforce its contractual rights and terminate FIT
    payments. On the other side of the equation, the respondent submits that a stay
    of proceedings order that requires the respondent to continue making FIT
    payments risks exposing Ontario ratepayers/taxpayers to irremediable economic
    consequences.  The concern is that the respondent will be unable to recover the
    FIT payments it advances while the case is in the Supreme Court of Canada. The
    respondent asserts that the security it currently holds in the applicants
    assets is insufficient to cover this exposure. The applicants submit that their
    pledge of security is in the range of $13 million and adequately protects the respondents
    interests; the respondent submits that the pledged assets (i.e., solar power
    equipment) are worth far less. If a stay is granted, the respondent requests
    that the applicants be required to post additional security.

[28]

I accept the respondents submission
    that the evidence supporting the value of the applicants assets is rather
    thin, based on an undated internal memo on Grasshopper stationary, which is
    short on detail. On the other hand, during his cross-examination, the
    respondents affiant acknowledged that the applicants had greater expertise
    when it came to selling this specialized equipment.

[29]

On balance, I am satisfied that the
    security held by the respondent is sufficient to protect it against the risk of
    non-recovery of continued FIT payments, at least in the short run.

[30]

The balance of convenience favours the
    applicants.

Conclusion

[31]

Considering all three factors discussed
    above, I am satisfied that the interests of justice require that the orders of
    this court be stayed pending the applications for leave to appeal. However, I
    am not prepared to order a stay that potentially extends further into the
    future. That is, the stay extends to the point in time when the Supreme Court
    of Canada determines the applications for leave to appeal. If it dismisses the
    applications, that will end the matter. If the Supreme Court allows the
    applications, the applicants may apply for further orders, if so advised, in
    that Court.

Disposition

[32]

I allow the motion and order a stay of
    this courts orders until the applications for leave to appeal have been
    determined. For clarity, the contracts in dispute will be performed by both
    parties in accordance with their terms, including the continuation of FIT
    payments. In other words, and in the spirit of
RJR-MacDonald
, the
status quo
is preserved for the time-being.

[33]

At the conclusion of the hearing,
    counsel advised that, in all likelihood, they would be able to agree on the
    costs of this motion. If they are unable to do so, they may make submissions in
    writing. The applicants shall file written submissions of no more than three
    pages in length within 10 days of the release of these reasons. The respondent
    will have 10 days from the receipt of the applicants submissions to file its
    submissions of similar length. No reply is permitted. Both parties shall submit
    a Bill of Costs.

Gary Trotter
    J.A.


