



COURT OF APPEAL FOR ONTARIO

CITATION: Grasshopper Solar Corporation v.
    Independent Electricity System Operator, 2020 ONCA 499

DATE: 20200807

DOCKET: C67794 and C67795

Feldman, Lauwers and Huscroft
    JJ.A.

DOCKET: C67794

BETWEEN

Grasshopper
    Solar Corporation,

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

Egerton
    Polar Power LP, and MPI GM Solar 1 LP

Applicants (Appellants)

and

Independent
    Electricity System Operator

Respondent (Respondent)

DOCKET: C67795

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)

and

Independent Electricity System
    Operator

Respondent
    (Respondent)

Sarit E. Batner and Brandon Kain, for
    the appellants

Alan Mark and Melanie Ouanounou, for
    the respondent

Heard: May 20, 2020 by video conference

On appeal from the orders of Justice Glenn
    A. Hainey of the Superior Court of Justice, dated November 15, 2019, with
    reasons reported at 2019 ONSC 6397 and 2019 ONSC 6501.

Huscroft J.A.:

Overview

[1]

These companion appeals concern the respondent Independent
    Electricity System Operators decision to terminate contracts with the
    appellants, renewable energy companies, as a result of their failure to achieve
    commercial operation of solar power facilities they were building by the
    Milestone Date for Commercial Operation set out in their contracts. The
    failure of the appellants to achieve commercial operation by the Milestone date
    is not in dispute. What is in dispute is whether the respondent had the right
    to terminate the contracts as a result, without paying damages.

[2]

Two questions arise. First, did the application
    judge err in concluding that the contracts could be terminated by the
    respondent if the appellants failed to achieve commercial operation by the
    Milestone Date? Second, if the contracts permitted the respondent to terminate
    on this basis, did the application judge err in finding that the respondent was
    not estopped from doing so?

[3]

I conclude that the application judge did not
    err in finding that the respondent had the right to terminate the contracts
    without paying damages. Although I agree that the respondent was not estopped
    from terminating the contracts, I reach this conclusion for reasons slightly
    different from those of the application judge.

[4]

I would dismiss the appeal.

BACKGROUND

The FIT Contracts

[5]

In August or September 2016, the appellants
    entered into Feed in Tariff (FIT) Contracts with the respondent Independent
    Electricity System Operator (IESO) for the construction of solar facilities that
    would provide energy to the Ontario electricity grid. The FIT Contracts were made
    pursuant to the Ontario governments Green Energy plan then in force.

[6]

The contracts required the appellants (referred
    to in the contracts as the Supplier) to achieve commercial operation for the
    facilities they were building by the specified Milestone Date for Commercial
    Operation (MCOD), which was in August or September 2019, and included the following
    provisions:

2.5 (a) The Supplier acknowledges that
time
    is of the essence
to the Sponsor with respect to attaining Commercial Operation
    of the Facility by the Milestone Date for Commercial Operation set out in
    Exhibit A.
The Parties agree that Commercial Operation shall be achieved in
    a timely manner and by the Milestone Date for Commercial Operation
.

(b) The Supplier acknowledges that even if the
    Facility has not achieved Commercial Operation by the Milestone Date for
    Commercial Operation
and this Agreement is not terminated in accordance with
    section 9.2 as a result of such failure,
the term shall nevertheless expire
    on the day before the twentieth or fortieth anniversary (as applicable) of the
    Milestone Date for Commercial Operation, pursuant to Section 8.1. [Emphasis
    added.]

[7]

Termination and Default are addressed in Article
    9 of the contracts, which provides:

9.1 Each of the following will constitute an
    Event of Default by the Supplier (each, a Supplier Event of Default):



(b) The Supplier fails to perform any material
    covenant or obligation set forth in this Agreement (except to the extent
    constituting a separate Supplier Event of Default) if such failure is not
    remedied within 15 Business Days after written notice of such failure from the
    Sponsor, provided that such cure period shall be extended by a further 15
    Business Days if the Supplier is diligently remedying such failure and such
    failure is capable of being cured during such extended cure period.



(j) The Commercial Operation Date has not
    occurred on or before the date which is 18 months after the Milestone Date for
    Commercial Operation, or otherwise as may be set out in Exhibit A.



9.2 (a) If any Supplier Event of Default
    (other than a Supplier Event of Default relating to the Supplier referred to in
    Sections 9.1(e), 9.1(g) and 9.1(h)) occurs and is continuing, upon written
    notice to the Supplier, the Sponsor may terminate this Agreement.

Termination
    pursuant to a Supplier Event of Default under s. 9.2 is significant in that it
    does not require the respondent to pay damages. Although termination is also
    possible regardless of a Supplier Default, termination on this basis (pursuant to
    s. 9.6) requires the respondent to pay the supplier an Optional Termination Sum
    that compensates the supplier for construction costs.

The 2013 bulletin

[8]

The Ontario Power Authority (OPA) was the body
    responsible for power system planning and procurement of new power generation
    until 2015, when it amalgamated with the IESO and continued operations under
    that name. The OPA published the following bulletin on its website in June 2013,
    prior to the appellants entry into FIT Contracts with the respondent:

June
    17, 2013: Approach to project delays and potential Events of Default

In response to a number
    of questions the OPA has received regarding project delays and potential
    Supplier Events of Default, the OPA has developed the following approach to
    such delays. Please note that the information provided here is meant for
    informational purposes only and shall not be relied on by Suppliers.

Suppliers will be sent a letter should they
    fail to meet their Notice to Proceed (NTP) Request date and/or their Milestone
    Date for Commercial Operation (MCOD). The letter will advise that the OPA will
    not act upon its termination rights arising under Sections 9.2(a) of the FIT
    Contract for those Suppliers that have not provided the OPA with a completed
    NTP Request in compliance with Section 2.4(c) of the FIT Contract and/or have
    not attained Commercial Operation of the Contract Facility on or before the
    MCOD pursuant to Section 2.5 (or Schedule 2 Special Terms and Conditions
    (Launch Applications)) of the FIT Contract.

This information does not constitute a waiver
    of any actual or potential default, nor does it amend the FIT Contract. The FIT
    Contract remains in full force and effect. For clarity, it shall remain a
    Supplier Event of Default (and the OPA maintains its right to terminate the
    Suppliers FIT Contract) if the Commercial Operation Date has not occurred on
    or before the following:

·

For solar rooftop facilities, the date which is six
    months after the Milestone Date for Commercial Operation pursuant to section 1.3
    of Exhibit A of the FIT Contract.

·

For solar ground-mounted projects, the date
    which is 18 months after the Milestone Date for Commercial Operation pursuant
    to section 1.3 of Exhibit A of the FIT Contract, as amended by the OPAs letter
    to Suppliers of August 2011.

·

For all other FIT facilities, the date which is
    18 months after the Milestone Date for Commercial Operation pursuant to 9.1(j)
    of the FIT Contract.

Questions about this approach to delays and
    potential Events of Default should be directed to your contract analyst.

The 2019 warning letter

[9]

On March 29, 2019, the respondent sent the
    following letter to the Suppliers with whom it had contracted, including the
    appellants:

This notice is to remind you that the
    Milestone Date for Commercial Operation for the FIT Contract is September 8, 2019.
    As of the date of this letter, the Facility has not yet attained Commercial
    Operation. As you are aware, the failure to attain Commercial Operation by the
    Milestone Date for Commercial Operation (the MCOD), as required by Section
    2.5 of the FIT Contract, is a breach of, and constitutes a Supplier Event of
    Default under, Section 9.1(b) of the Fit Contract.

PLEASE NOTE
that except as expressly provided in the FIT Contract, the MCOD will not be
    extended. Failure to attain Commercial Operation by this date will constitute a
    Supplier Event of Default, for which the IESO will terminate the FIT Contract
    pursuant to s. 9.2(a).

It is the IESOs intent to strictly enforce
    its rights and remedies under the FIT Contract and the Supplier may not rely on
    any of the IESOs past practices, waivers, statements or any actual or
    perceived indulgences regarding the achievement of the MCOD, whether with
    respect to this or any other contract, as a waiver of any of the IESOs rights
    or remedies under the FIT Contract. For greater certainty, the IESO hereby
    specifically revokes its communication date June 17, 2013 referencing a
    previous approach to project delays and potential Events of Default, and
    retracts any past waivers of its right to terminate contracts for failure to
    achieve Commercial Operation by the MCOD.

The risk of whether or not the Facility
    achieves Commercial Operation by the MCOD rests solely with the Supplier and
    the IESO accepts no risk or liability in this regard. The receipt, review or
    discussion by the IESO of any project schedule, update or any other information
    or documentation provided by the Supplier to the IESO does not, and shall not
    be considered to, constitute an acknowledgment or warranty, express or implied,
    with respect to the accuracy, completeness or feasibility of such project
    schedule, update or other information or documentation, nor shall it constitute
    a waiver by the IESO of its right to insist upon strict compliance with the
    MCOD or of any other provision under the FIT Contract.

The IESO reserves all rights and remedies
    under the FIT Contract and at law, including the right to exercise any rights
    and remedies at any time and from time to time including its right to terminate
    the FIT Contact under Section 9.2(a).

This letter is being provided pursuant to the
    FIT Contract only and shall not be deemed to be an acknowledgement or
    notification by the IESO under the IESO Market Rules  [Emphasis in original.]

The application

[10]

In July 2019, the appellants brought a notice of
    application for a determination of their contractual rights under the FIT
    Contracts.

The application judges decisions

1.

The respondent had the right to terminate the
    contracts

[11]

The application judge began with s. 2.5(a) of
    the FIT Contract, which states that time is of the essence with respect to
    achieving commercial operation. He noted that time is of the essence clauses
    require strict compliance and that the failure to meet a timeline in a contract
    with such a clause entitles the other party to terminate the contract, citing
    this courts decision in
Di Millo v. 2099232 Ontario Inc.
, 2018 ONCA
    1051, 430 D.L.R. (4th) 296, at para. 31, leave to appeal refused, [2019]
    S.C.C.A. No. 55. The application judge noted, further, that s. 2.5(b)
    specifically refers to the respondents right to terminate the contract in
    accordance with s. 9.2 for failure to achieve commercial operation by the MCOD,
    and that the definition of MCOD in Appendix I of the contracts defines the MCOD
    as the date by which the facility is required to attain Commercial Operation.
    The application judge concluded that the obligation to achieve commercial
    operation by the MCOD was a material covenant or obligation to which s.
    9.1(b) applies.

[12]

The application judge rejected the appellants
    submission that the failure to achieve commercial operation by the MCOD was not
    an Event of Default because it was not specifically listed in s. 9.1. He noted
    that the appellants interpretation of s. 9 rendered the time is of the essence
    provision irrelevant, as it ignored both the qualifying language in s. 2.5(b)
    and the definition of MCOD. The appellants interpretation meant that no default
    would rise to the level of a Supplier Event of Default under s. 9.1 unless it
    were specifically so stated, but this rendered s. 9.1(b) ineffective because it
    refers to breach of a material covenant or obligation rather than any
    specific type of default. The application judge noted, further, that the
    appellants interpretation would render the
force majeure

provision
    irrelevant. That provision, which provides relief from a failure to achieve
    commercial operation by the MCOD, is only necessary if such an obligation
    otherwise exists.

[13]

The application judge acknowledged that s.
    9.1(j) refers to a termination 18 months following the MCOD, but he interpreted
    this provision as a long-stop termination right  a hard stop deadline with
    no cure period that applied if the respondent waived its right to terminate the
    contract under s. 9.1(b) for failing to meet the MCOD. Thus, s. 9.1(b) was not
    inconsistent with s. 9.1(j). Likewise, s. 8.1, which shortens the
    guaranteed revenue period under the FIT Contracts in the event of a failure to
    reach commercial operation by MCOD, was not inconsistent with the right to
    terminate under s. 9.1(b) because it applied only if the respondent waived its
    right to terminate.

[14]

The application judge concluded that this
    interpretation of the respondents termination right was commercially
    reasonable, adding that there was no ambiguity to which the
contra
    proferentem
principle could be applied and that its application was
    specifically foreclosed by s. 1.12 of the contracts in any event.

2.

The respondent was not estopped from terminating
    the contracts

[15]

The related application, brought by KL Solar
    Projects LP and others, raised the additional question whether the respondent
    was estopped from terminating the contracts, assuming that it was otherwise
    entitled to do so. The appellants argued there had long been a shared
    assumption that the respondent would not terminate the contracts unless
    commercial operation was not achieved within 18 months of the MCOD, and that
    this assumption triggered the application of estoppel by convention.

[16]

The application judge applied the estoppel by
    convention doctrine as outlined by the Supreme Court in
Ryan v. Moore
,
    2005 SCC 38, [2005] 2 S.C.R. 53, at para. 59. In that case, Bastarache J.
    reviewed the law and distilled the following criteria:

1.

The parties dealings must have been based on a shared assumption of
    fact or law:  estoppel requires manifest representation by statement or
    conduct creating a mutual assumption. Nevertheless, estoppel can arise out of
silence
(impliedly).

2.

A party must have conducted itself, i.e. acted, in reliance on such
    shared assumption, its actions resulting in a change of its legal position.

3.

It must also be unjust or unfair to allow one of the parties to
    resile or depart from the common assumption. The party seeking to establish
    estoppel therefore has to prove that detriment will be suffered if the other
    party is allowed to resile from the assumption since there has been a change
    from the presumed position. [Emphasis in original.]

[17]

The application judge found that there was no
    shared assumption that the respondent would not terminate the FIT Contracts for
    failure to achieve commercial operation by the MCOD. The respondent never
    advised either the appellants or any other suppliers that it did not have a
    valid right to terminate the contracts on this basis, or that it had waived its
    termination right for all future contracts. The application judge noted that
    the June 2013 bulletin stated specifically: 1) that the respondents had the
    right to terminate under s. 9.2(a) for failure to reach commercial operation by
    the MCOD; 2) that the bulletin was for informational purposes only and shall
    not be relied upon by suppliers; and 3) that the information provided in the
    bulletin does not constitute a waiver of any actual or potential default, nor
    does it amend the FIT Contracts. The FIT Contracts remain in full force and
    effect.

[18]

The application judge found that the bulletin
    was not evidence of a shared assumption of fact or law but was, instead, simply
    an announcement of the respondents approach to project delays  how it
    intended, at the time, to approach breaches of the FIT Contracts with respect
    to the requirement to achieve commercial operation by the MCOD. The
    application judge stated that the respondent was free to change its approach
    provided that it gave reasonable notice of its intention to do so, and that the
    warning letter, giving six months notice prior to the MCOD, provided
    reasonable notice.

[19]

The application judge acknowledged that the
    appellants may have believed the respondent would not terminate their FIT
    Contracts and that the respondent may have been aware of their belief. However,
    this was insufficient to establish a shared assumption in the absence of a
    manifest representation, orally or in writing, from the respondent confirming
    that it shared the appellants belief. Although the appellants appeared to rely
    on the respondents practice of not terminating FIT Contracts for failure to
    achieve commercial operation by the MCOD when they entered the FIT Contracts, detrimental
    reliance could not be established in the absence of a shared assumption.

[20]

The application judge stated that the respondents
    departure from its past practice of not terminating FIT Contracts does seem unfair
    to me, given the millions that the appellants and others would lose as a
    result, and that if he had concluded that the first two parts of the test were
    met he would have concluded that the third criterion of unfairness was also met.
    He added that there was no reason to deny the appellants an equitable remedy if
    it were otherwise available to them.

[21]

Finally, the application judge concluded that
    the entire agreement clause (s. 1.9) precluded the June 2013 bulletin and
    the respondents past practice from amending the terms of the FIT Contracts,
    while the waiver provision (s. 1.10), which requires waiver of contractual
    terms to be executed in writing, prevented the appellants from relying on
    estoppel by convention arising out of previous waivers by the respondent.

DISCUSSION

Did the application judge err in interpreting
    the contract?

Standard of review

[22]

The parties disagree on the appropriate standard
    of review concerning the application judges interpretation of the contract.
    The appellants submit that the FIT Contracts are standard form contracts that
    should be reviewed on a correctness standard, relying on the decision of the
    Supreme Court of Canada in
Ledcor Construction Ltd. v. Northbridge
    Indemnity Insurance Co.
, 2016 SCC 37, [2016] 2 S.C.R. 23. The respondent
    acknowledges that the contracts are standard form in nature but contends that
    the correctness standard does not apply because the contracts have no
    precedential value, given the cancellation of the FIT program and the
    inapplicability of the result in this case beyond the appellants. Accordingly,
    the respondent submits that the applicable standard is palpable and overriding
    error:
Sattva Capital Corp. v. Creston Moly Corp.
, 2014 SCC
    53, [2014] 2 S.C.R. 633.

[23]

The FIT Contracts share some of the
    characteristics that led the court to create the exception for standard form
    contracts in
Ledcor
. Significantly, the application judge found that
    they were standard contracts with standard pricing over a fixed term, typically
    20 years. They were offered pursuant to a standard procurement process rather
    than negotiated separately. They were, he found, identical for the purpose of
    this application.

[24]

The respondent acknowledges that the FIT
    Contracts are standard form contracts but contends that their interpretation
    has little precedential value and will be of little interest to judges and
    lawyers in the future. I do not agree. The cancellation of the FIT program does
    not render the interpretation of the terminated contracts irrelevant beyond
    this case. On the contrary, the precedent established by the interpretation of
    the termination provisions may be important to suppliers in the same or similar
    position as the appellants, regardless of whether they have commenced or intend
    to commence proceedings.

[25]

Accordingly, the standard of correctness applies
    to the application judges interpretation of the FIT Contracts.

The positions of the parties

The appellants

[26]

The appellants acknowledge their obligation to
    achieve commercial operation by the MCOD but say that if the respondent wanted
    to terminate the FIT Contracts on the basis of their failure to do so, it had
    to terminate pursuant to s. 9.6, which requires the respondent to
    compensate them for their construction costs. The appellants submit that the
    FIT Contracts do not permit termination on the basis of a Supplier Event of Default
    under s. 9.2(a)  that is, without compensation  until and unless more than 18
    months have passed since the MCOD. According to the appellants, the failure to
    achieve commercial operation by the MCOD is remedied by a reduction of the
    suppliers guaranteed revenue period by the amount of the delay in meeting the
    MCOD, a remedy the appellants say is reflected in numerous provisions of the
    contract and is consistent with commercial reality and the broader structure of
    the FIT Contracts.

[27]

The appellants acknowledge that s. 2.5(a)
    establishes that time is of the essence but insist that the remedy for breach
    is a shortening of the suppliers guaranteed revenue period. They contend that
    nothing in s. 9.1 makes a breach of s. 2.5(a) a Supplier Event of
    Default, nor does anything in s. 2.5(a) do so. On the contrary, the appellants
    say that the failure to achieve commercial operation by the MCOD is excluded
    from the basket clause of Supplier Events of Default under s. 9.1(b)
    because it constitutes a separate Supplier Event of Default under s. 9.1(j),
    but only after the failure extends beyond 18 months after the MCOD.

[28]

The appellants argue that the application
    judges interpretation renders s. 9.1(j) a nullity. Given that s. 9.1(b)
    includes a 15 to 30-day cure period if commercial operation is not reached by
    the MCOD, it makes no sense to establish a lengthier cure period of 18 months
    in s. 9.1(j) before termination can occur for the same breach. The appellants
    acknowledge the reference to termination in s. 2.5(b) but point out that this
    section refers to s. 9.2 rather than s. 9.1(b), and means that only if
    commercial operation is not achieved by the MCOD and the contract has not been
    terminated in accordance with s. 9.1(j), the contract expires 20 years after
    the MCOD, regardless of when commercial operation is achieved.

[29]

The appellants argue that the application
    judges interpretation is commercially unreasonable and renders the suppliers
    contractual rights uncertain, as it would permit termination not only following
    the 15 to 30-day cure period in s. 9.1(b) but also at any further point up
    to and including the end of the 18-month cure period so long as commercial
    operation were not achieved. That is so, they say, because s. 9.2(a) allows
    termination whenever a Supplier Event of Default is continuing.

[30]

The appellants argue, further, that the overall
    contractual structure and other provisions in the FIT Contracts support their
    interpretation. They note that there are several key thresholds under the FIT
    Contracts, one of which is when the respondent issues a Notice to Proceed
    (NTP). To receive an NTP, the supplier must achieve specific prerequisites
    listed in s. 2.4(d). The issuance of an NTP ends the period during which
    the respondent can terminate a FIT Contract in its sole and absolute
    discretion without paying damages. Following issuance of an NTP, the respondent
    can terminate the project in its sole and absolute discretion under s. 9.6 only
    by paying the supplier an Optional Termination Sum that compensates the
    supplier for construction costs, while s. 9.2 permits termination without
    paying the Optional Termination Sum only in the event of a Supplier Event of
    Default under s. 9.1.

[31]

The appellants note that s. 2.4(e) requires a
    supplier to deliver a completed NTP request no later than the [MCOD] and that
    s. 2.4(g) requires the respondent to respond to an NTP request by either the
    NTP Response Date or 20 business days following the receipt of a complete NTP
    request. Because an NTP request is due by the MCOD, a supplier may not even
    receive an NTP until after the MCOD. Thus, the appellants argue that the FIT
    Contracts clearly contemplate that the agreement will continue even if
    commercial operation is not achieved by the MCOD. Accordingly, they say, the
    more commercially sensible interpretation is that failure to achieve commercial
    operations by the MCOD does not give rise to a termination right under s. 9.2.

The respondent

[32]

The respondent emphasizes the importance of s.
    2.5(a), which makes time of the essence in achieving commercial operation by
    the MCOD  the only provision in the contract subject to this obligation. It is
    well established, the respondent says, that a failure to observe a timeline in
    a contract in which time is of the essence entitles the innocent party to
    terminate the contract regardless of the length of delay or the reasons for it,
    and regardless of the consequences for the other party. Although the concept of
    a material covenant or obligation is not defined in the contract, the
    respondent says it is clear that the obligation to achieve commercial operation
    by the MCOD is material. Section 9.1(b) must be read as enabling breaches of
    the FIT Contracts to rise to the level of Supplier Events of Default if the
    breach is of a material covenant or obligation that is not specified in the
    other subparagraphs of s. 9.1. If it were otherwise, then s. 9.1(b) would be
    superfluous.

[33]

The respondent contends that the exception to
    the application of s. 9.1(b)  that breach of a material covenant or obligation
    will be considered a Supplier Event of Default under s. 9.1(b) only if it does
    not constitute a separate Supplier Event of Default under a different provision
    of s. 9.1  does not apply. The failure to achieve commercial operation by the
    MCOD does not constitute a Supplier Event of Default under any other provision
    in s. 9.1, so the exception is not triggered. Sections 9.1(b) and 9.1(j) are
    not two termination rights for the same default, but rather two termination
    rights for separate defaults that occur at different times. The termination
    right under s. 9.1(j) arises only 18 months following a failure to achieve the
    MCOD; termination under s. 9.1(b) for failure to achieve the MCOD is a separate
    and distinct termination right. This interpretation comports with s. 2.5(b),
    which expressly contemplates termination under s. 9.2 for failure to achieve
    commercial operation by the MCOD.

[34]

The respondent argues that the application
    judges interpretation of the contract is commercially sensible, given its
    legitimate and reasonable interest in requiring suppliers to achieve commercial
    operation by the MCOD. The interpretation of s. 9.1(j) as establishing a hard
    stop allows the respondent to waive its termination right under s. 9.1(b)
    while permitting the right to terminate to be exercised at a later date,
    protecting the respondent from indefinite delay without prejudicing the
    supplier in the meantime. Once waived, the failure to meet MCOD is not a
    continuing breach under s. 9.2(a) and the respondent would no longer be able to
    terminate the contract under s. 9.1(b) for this breach. If it were, there would
    be no need for the hard stop termination right under s. 9.1(j).

[35]

The respondent refutes the appellants argument that
    it is commercially unreasonable to conclude that the contracts can be
    terminated without compensation for failing to achieve commercial operations by
    the MCOD because a supplier may not have received an NTP by the MCOD. First, it
    is entirely within the suppliers discretion when to submit a request for an
    NTP. Accordingly, suppliers bear any risk associated with submitting their NTP
    request shortly before the MCOD. Second, receipt of an NTP from the respondent
    is not a pre-condition for a supplier to commence construction. As a result, it
    is not inconsistent with the contractual framework for the receipt of an NTP
    and achieving commercial operation to be close in time or even concurrent.

The respondent was entitled to terminate the
    contracts

[36]

In my view, the application judge made no errors
    in interpreting the contract. His analysis is thorough and complete and there
    is little that can usefully be added. The respondent was entitled to terminate
    the FIT Contracts pursuant to s. 9.2 as a result of the appellants failure to
    achieve commercial operation by the MCOD.

[37]

The fatal flaw in the appellants interpretation
    of the contract lies in its failure to give effect to a key provision in the
    contract, s. 2.5, which I set out below for convenience:

2.5 (a) The Supplier acknowledges that time is
    of the essence to the Sponsor with respect to attaining Commercial Operation of
    the Facility by the Milestone Date for Commercial Operation set out in Exhibit
    A. The Parties agree that Commercial Operation shall be achieved in a timely
    manner and by the Milestone date for Commercial Operation.

[38]

This provision makes plain not only that the parties
    agreed that commercial operation was to be achieved in a timely manner, and in
    any event by the MCOD, but also that time was of the essence. Although the
    appellants acknowledge this provision, their position deprives it of any
    effect. Time is of the essence is a term with a clearly defined and well
    understood meaning. In short, and as the application judge noted, strict
    compliance with the MCOD was required. The failure of a supplier to establish
    commercial operation by the MCOD gave rise to the respondents right to
    terminate the contract.

[39]

The appellants say that s. 2.5(a) does not
    import the common law right of termination; the respondents, they say,
    contracted out of it in s. 9 by including notice and cure periods in s. 9.1(b)
    and an 18-month period in s. 9.1(j).

[40]

The application judge was right to reject this
    interpretation. Section 9.1 enumerates Events of Default by the Supplier and s.
    9.1(b) specifies that the failure to perform any material covenant or
    obligation is such an event. The time is of the essence provision in s. 2.5(a)
    is plainly a material covenant; it is by definition an important, if not
    essential, provision in the context of the contract as a whole. The
    establishment of brief notice and cure periods in s. 9.1(b) does not alter the
    essential character of the provision or the consequences of a breach. Breach of
    the time is of the essence provision constitutes a Supplier Event of Default
    under s. 9.1, the remedy for which is set out clearly in s. 9.2, which allows for
    termination on written notice.

[41]

The appellants argument depends on s. 9.1(j)
    being characterized as the
only
provision that addresses the failure to
    achieve commercial operation by the MCOD. But this interpretation is fundamentally
    at odds with the time is of the essence provision in s. 2.5(a), which
    specifically states that commercial operation shall be achieved in a timely
    manner and by the Milestone Date for Commercial Operation.

[42]

Section 9.1(j) must be understood not as
    addressing the failure to achieve commercial operation on the timely basis
    required by s. 2.5 but, instead, the failure to achieve commercial operation
    within 18 months of the MCOD. As the application judge concluded, s. 9.1(j)
    establishes a hard stop  a clearly defined deadline for completion of the
    project. Thus, s. 9.1(j) is relevant only if commercial operation has not
    been achieved by the MCOD
and
the respondent chooses not to terminate
    the contract on that account.

[43]

The breach in this case occurred when the
    appellants failed to achieve commercial operation by the MCOD. The respondent
    had the right to terminate the contract if the appellants failed to cure the
    breach in accordance with s. 9.1(b).
It cannot be said that this
    interpretation was not commercially reasonable. If the respondent chooses not
    to exercise its right to terminate following a suppliers failure to achieve
    commercial operation by the MCOD, the default
no longer constitutes a Supplier Event of Default that
    is occurring and continuing for purposes of s. 9.2(a), and delay in
    completion gives rise to a new right to terminate only 18 months after the
    MCOD.

If
    it were otherwise  if the respondent was entitled to terminate the FIT
    Contracts at

any time following the MCOD in the event a
    supplier had not yet achieved commercial operation on the basis that the breach
    was continuing  the long-stop termination right in s. 9.1(j) would be rendered
    superfluous.

[44]

The application judges interpretation is not inconsistent
    with other provisions of the FIT Contract. Although ss. 2.5(b) and 9.1(j)
    clearly contemplate a scenario in which the FIT Contract is not terminated in
    accordance with section 9.2 as a result of failure to achieve commercial
    operation by MCOD and ss. 2.4(e) and 2.4(g) demonstrate that a supplier might
    not receive an NTP until shortly before or even shortly after the MCOD, these
    provisions demonstrate only that the FIT Contract may continue following a
    failure to comply with some timelines. The contract provides various options.
    But these options do not undermine the respondents right to terminate the
    contract as a result of a suppliers breach of the time is of the essence
    clause.

Did the application judge err in concluding
    that the respondent was not estopped from terminating the contract?

Standard of review

[45]

The application of the estoppel doctrine is a
    mixed question of fact and law that is reviewed on a standard of palpable and
    overriding error, subject to any extricable legal errors that are reviewed on a
    correctness basis.

The positions of the parties

The appellants

[46]

The appellants argue that the application judge
    applied the wrong test for a shared assumption by requiring a manifest
    representation, either orally or in writing, from the respondent confirming
    that it shared the appellants beliefs. Estoppel by convention can arise by
    conduct and silence, and it was clear that the respondent communicated the
    shared assumption that it would not terminate the FIT Contracts for failure to
    achieve commercial operation by the MCOD without providing reasonable notice of
    its intention to do so.

[47]

The appellants contend that the application
    judge erred in not affording them a reasonable opportunity to resume their
    position after the respondent changed its position, citing
Ajayi v. R.T.
    Briscoe (Nig) Ltd.
, [1964] 1 W.L.R. 1326 (P.C. (Nigeria)) and
Rossi v.
    Canadian Imperial Bank of Commerce
, [1969] O.J. No. 180 (C.A.). The
    application judge wrongly relied on the appellants belief that they could meet
    the MCOD deadline without the additional 18 months and confused steps taken by
    the appellants in mitigation with the criteria for reasonable notice. The
    respondents conduct in sending the warning letter exacerbated the appellants
    difficulties in meeting the MCOD because it caused a fight among suppliers for
    the limited resources that were available to complete construction of the
    facilities.

[48]

The appellants say that the respondent has no
    legitimate contractual interest in terminating the FIT Contracts, on what they
    say is less than six-months notice, that is proportionate to the millions of
    dollars in construction costs the appellants will lose as a result of the termination.
    This is a case, they say, that cries out for an equitable remedy. The
    appellants cite a variety of cases in support of the proposition that it is not
    reasonable to prejudice a counterpartys legitimate interest in a manner that
    is disproportionate to any legitimate interest it seeks to advance, including
Loyola
    High School v. Quebec (A.G.)
, 2015 SCC 12, [2015] 1 S.C.R. 613, at para.
    38, and
Whiten v. Pilot Insurance Co.
, 2002 SCC 18, [2002] 1 S.C.R.
    595, at para. 111. According to the appellants, the law will not generally
    make a remedy available to a party, the adverse impact of which on the
    defaulter significantly exceeds any legitimate interest of the innocent party,
    citing
Cavendish Square Holdings BV v. Makdessi
, [2016] A.C. 1172 (U.K.S.C.),
    at para. 29.

[49]

The appellants argue, finally, that the test for
    waiver is met in this case even if the test for estoppel by convention is not.
    The application judge erred in limiting his analysis to finding that the
    bulletin and the respondents past practice could not amend the terms of the
    FIT Contracts. The respondent continued its practice of not terminating any
    suppliers for failing to achieve commercial operation by the MCOD for more than
    2.5 years after the appellants entered into their FIT Contracts and remained
    silent throughout this time, despite its knowledge that the appellants thought
    it had waived its termination right. Furthermore, the respondent remained
    silent for nine months after the new provincial government was elected on a
    platform hostile to the FIT program. Neither the entire agreement clause nor
    the waiver clause precludes the appellants from relying on shared assumptions
    because they are not the specific sorts of communications excluded by those
    clauses. The entire agreement clause does not preclude the appellants from
    relying on communications that occur subsequent to entry into the contract.

The respondent

[50]

The respondent says that the appellants have
    changed the position they advanced at trial. At trial, the appellants argued
    that there was a shared assumption that the respondent would not terminate the
    FIT Contracts for failure to meet the MCOD, whereas on appeal they argue that
    the assumption was that the respondent could not terminate the contracts
    without reasonable notice that it was changing its position. The respondent
    argues the appellants cannot change their position on appeal and that the
    application judges finding that the respondent provided reasonable notice is
    entitled to deference in any event.

[51]

The respondent rejects the appellants
    characterization of the application judges decision. According to the
    respondent, the application judge did not find that the respondents conduct
    was unfair; he said only that he would have found it unfair if he had found
    that the respondents represented that they would never terminate the contracts
    for failure to meet the MCOD. But the application judge found that the parties
    did not share the same assumption in any event. The respondent always
    understood that its June 2013 bulletin itself did not constitute a waiver of
    default of any provision of the FIT Contracts, nor did its subsequent practice
    in accordance with the bulletin constitute a waiver of its right to terminate.
    There was nothing to indicate that the respondent shared the appellants
    assumption that it did not have a right to terminate, even if it knew of the
    appellants belief.

[52]

Finally, the respondent says that even if the
    elements of estoppel by convention were met, the application would fail because
    the entire agreement clause and the non-waiver provision expressly prevent the
    appellants from relying on the respondents historical representations,
    conduct, or waivers. The appellants allegation of a shared assumption is based
    on their alleged reliance on the respondents representations and past practice
    of waiving its termination right, both of which fall within the scope of the
    waiver and entire agreement provisions in the FIT Contracts.

The respondent was not estopped from
    terminating the contract

[53]

In my view, the respondent was not estopped from
    terminating the contract under s. 9.2. As I will explain, neither estoppel by
    convention nor promissory estoppel applies.

Estoppel by convention

[54]

I begin by reiterating an important concern.
Although the doctrine of estoppel cannot vary the terms of a
    contract, it may operate to prevent a party from relying on the terms of the
    contract to the extent necessary to protect the reasonable reliance of the
    other party. Thus, the doctrine has the potential to undermine the certainty of
    contract and must be applied with care, especially in the context of commercial
    relationships between sophisticated parties represented by counsel. Estoppel is
    a fact-specific doctrine and the concern noted by Bastarache J. in
Moore

at para. 50 remains apposite: estoppels are to be received with caution
    and applied with care, citing
Harper v. Cameron

(1892), 2
    B.C.R. 365 (Div. Ct.) at p. 383.

[55]

Estoppel by convention is a relatively rare form
    of estoppel that may arise when both parties to a contract act based on a
    shared assumption concerning circumstances relevant to their contract. If it
    would be unfair to allow a party to resile from the assumption, the doctrine
    operates to provide a remedy for detrimental reliance on the assumption by the
    other party. In effect, the estoppel operates to circumscribe the factual
    context in which the contract exists, thus affecting the obligations that the
    contract contains: Bruce MacDougall,
Estoppel
, 2nd ed. (Toronto:
    LexisNexis Canada, 2019),

at s. 1.14.

[56]

As Bastarache J. explained in
Moore
,
    estoppel by convention requires a manifest representation of a shared
    assumption, which may arise out of a statement or conduct but may also arise
    from silence. But regardless of how an assumption arises, it must be clear and
    it must be shared. There is no room for doubt about the nature of an assumption
    that gives rise to the estoppel. The parties must be of a like mind at the
    material time:
Moore
, at para. 61, and this will not be so if the
    nature of the assumption is in doubt. Thus, English authorities describe a
    requirement that the shared assumption be unambiguous and unequivocal: G.H. Treitel,
The Law of Contract
, 11th ed. (London UK: Sweet & Maxwell, 2003), at
    s. 3-094; see also H.G. Beale, ed.,

Chitty on Contracts
,
    31st ed. (London UK: Sweet & Maxwell, 2015) vol. 1, at 3-107. This
    requirement is reflected in the purpose of the doctrine. Estoppel exists to
    protect
reasonable
reliance: it must be reasonable to adopt a
    particular assumption and reasonable to act in reliance on it. See N. Seddon,
    R. Bigwood, & M. Ellinghaus,
Cheshire and Fifoot Law of Contract,
10th
    Australian ed. (Chatswood, Australia: LexisNexis Australia, 2012) at s. 2.14.

[57]

The appellants argue that two of the three
    elements of estoppel by convention are satisfied in this case and that the
    application judge found that only the remaining element was not. This
    submission puts the cart before the horse. A shared assumption is not simply a
    remaining element; it is the thing that gives rise to the need for equitable
    relief. Without a shared assumption there can be no reliance and no detriment,
    and hence no need for equitable relief. In the absence of a shared assumption,
    the argument for estoppel by convention collapses.

[58]

A shared assumption giving rise to estoppel by
    convention may concern fact or law, and may be based on a mistake. But whatever
    the assumption concerns, it typically involves existing as opposed to future
    circumstances. The assumption asserted by the appellants in this case is
    unusual in that it includes elements of both past practice as well as existing
    and future circumstances. Moreover, the assumption arises out of dealings not
    between the appellants and the respondent, but between the respondent and third
    parties. The appellants argued before the application judge that the parties
    assumed that the respondent would continue to follow its existing policy of not
    terminating FIT Contracts as a result of a suppliers failure to meet the MCOD.

[59]

The application judge found that this was not an
    assumption shared by the respondent. This was the judges call to make, and I
    see no basis to interfere with it on appeal.

[60]

The application judges conclusion is amply supported
    by the record. The June 2013 Bulletin said to give rise to the shared
    assumption is qualified by language that can only be understood as designed to
    preclude reliance on it. This is plain from the first line in the bulletin,
    which emphasized that it was for informational purposes only and shall not be
    relied on by Suppliers. In short, the respondents bulletin clearly informed
    suppliers
not
to make the very assumption the appellants made and seek
    to attribute to the respondent as well.

[61]

I accept that the bulletin contains information
    that appears to be contradictory. It states that a failure to achieve
    commercial operation by the MCOD would result in a letter advising that the
    respondent would not act on its termination right under s. 9.2(a), suggesting
    that the time is of the essence clause would not be enforced. This is the
    portion of the bulletin the appellants say demonstrates the shared assumption.
    However, it is qualified by the subsequent passage, which is categorical in
    reserving the respondents rights under the FIT Contracts:

This information does not constitute a waiver
    of any actual or potential default, nor does it amend the FIT Contract. The FIT
    Contract remains in full force and effect.

[62]

This passage makes plain that the respondent was
    neither waiving any defaults nor varying the terms of the FIT Contracts; the
    contracts remained in full force and effect.

[63]

Putting the appellants case at its highest, the
    bulletin stated that suppliers who failed to achieve commercial operation by
    the MCOD would be informed that the respondent would not act on its termination
    right under the FIT Contracts. If that were all the bulletin said, it might be some
    evidence of a shared assumption. But the bulletin says more  much more  and
    the additional information in the bulletin precludes a conclusion that there
    was a shared assumption  still less an assumption the appellants could
    reasonably rely on  for it makes plain that the respondent was maintaining its
    rights under the contract.

[64]

The appellants argue that the application judge
    erred in requiring a manifest representation either orally or in writing from
    the respondent demonstrating that the assumption was shared. The passage would
    be unobjectionable if the application judge had added the words such as, but
    in my view the argument comes to nothing. The application judge well understood
    the requirement from
Moore
that an assumption be shared. He found that
    the key feature of the 2013 bulletin was the respondents insistence on
    reserving its rights under the contract, regardless of its past or current
    practice. The parties simply could not be said to have shared an unambiguous
    and unequivocal assumption  the manifest representation necessary to
    establish an estoppel by convention.

[65]

This analysis is not affected by the different
    manner in which the appellants framed the alleged shared assumption on appeal 
    that the respondent would not terminate the contract for failure to meet the
    MCOD without first providing reasonable notice that it was changing its
    position. As I explain below, if the respondent would otherwise have been
    estopped from terminating the contract in accordance with s. 9.2, it could have
    brought an end to the estoppel with reasonable notice in any event.

[66]

In the absence of a shared assumption, the claim
    of estoppel by convention fails and neither the question of detrimental
    reliance on the bulletin nor any question of fairness arises. The same result
    follows if the appellants claim is analyzed under the promissory estoppel
    doctrine. Although this claim was not advanced at trial, it is appropriate to
    deal with it given that arguments concerning the June 13 bulletin apply equally
    to its characterization as an assumption or a promise.

Promissory estoppel

[67]

Promissory estoppel typically involves a promise
    by one party not to rely on its strict contractual rights. Where such a promise
    has been made with an intention that the other party will rely on it, and that
    party relies on the promise to his or her detriment, the party who made the
    promise is estopped from acting inconsistently with it. As with a shared
    assumption, although the promise does not vary the terms of the contract, the
    party who made the promise may be precluded from resiling from it to the extent
    necessary to protect the position of the party who has relied on the promise to
    his or her detriment.

[68]

The classic case is
Central London Property
    Trust v. High Trees House
, [1947] K.B. 130. In that case, in the context
    of a 99-year lease, a landlord agreed to accept reduced rent from a tenant for
    an indefinite period of time as a result of reduced demand during WWII. Lord
    Denning held that the landlords dispensation came to an end when full
    occupancy resumed but could also have been terminated at any time by notice.
    That is, the landlord could require the terms of the lease to govern future
    payments but was estopped from recovering past rent he had promised to
    discount.

[69]

In the absence of a shared assumption, is the
    respondent nevertheless estopped from relying on the strict terms of the FIT
    Contracts on the basis of promissory estoppel  that is, on the basis that the
    respondent promised that it would not enforce the contractual terms that
    permitted it to terminate the contracts? In my view, just as there is no shared
    assumption capable of supporting estoppel by convention, there is also no
    promise capable of supporting a claim of promissory estoppel.

[70]

On any objective analysis, it certainly cannot
    be said that the respondent intended the June bulletin to be relied on as though
    it were a promise; as I have noted, by its terms the bulletin counsels the
    opposite. At the very least, the bulletin is insufficiently clear as to
    constitute a promise. But even assuming that it could constitute a promise, it
    was not a promise made to the appellants: it was directed to suppliers holding
    FIT Contracts in 2013, prior to the appellants entering into their FIT
    Contracts. Nor can the respondents past practice with other suppliers be taken
    to be a promise made to the appellants. Thus, the claim fails whether it is
    styled as estoppel by convention or promissory estoppel.

[71]

In summary, the appellants may well have assumed
    that time limits they contracted to meet did not really matter. But the
    respondent did not share that assumption, nor did it promise that it would not
    enforce those time limits. In these circumstances, the problem of detrimental
    reliance does not arise, as there is neither a shared assumption nor a promise
    on which the appellants could have relied on to their detriment. The
    application judges statement that withdrawal of the bulletin and the
    respondents break with its past practice does seem unfair is inappropriate,
    in my view, for it is not the role of the judge to pronounce on the fairness of
    a contract or actions taken in accordance with it. In the absence of a finding
    that there was a shared assumption or a promise that was reasonably relied upon
    by the appellants, the question of fairness simply does not arise. The
    appellants chose to enter a contract with the respondent that made time of the
    essence. There is no basis for this court not to give effect to their choice
    and the consequence it entails: the respondents right to terminate the
    contracts under s. 9.2.

The irrelevance of notice

[72]

Conventional and promissory estoppel may operate
    to extinguish rights under a contract, but more commonly the doctrines operate
    to suspend them. Thus, a party is entitled to bring an estoppel to an end and
    so return to the terms of the contract, by providing reasonable notice either
    ending the assumption or withdrawing the relevant promise. Once this occurs,
    the estoppel no longer applies to future dealings under the contract, but the
    party who brings the estoppel to an end remains responsible for losses caused
    by reliance on the assumption or promise before it was withdrawn, and such
    losses may extend into the future.

[73]

The reasonableness of the notice required to
    bring an estoppel to an end reflects what is necessary to restore a party to
    its position under the contract. In this case, once the application judge
    concluded that the appellants could not establish a shared assumption that the
    respondent would not terminate the FIT Contracts, their claim of estoppel
    necessarily failed. As a result, there was no need to determine whether the
    respondent provided reasonable notice of its decision to withdraw the June 2013
    bulletin and to alter its practice, as there was no estoppel to bring to an end.
    Thus, the appellants arguments that the notice period was inadequate have no
    basis.

[74]

But given the argument of the parties, I would
    add this. Even assuming that there was a shared assumption or a promise capable
    of supporting an estoppel, the application judges conclusion that the
    respondent provided reasonable notice of its change of position was in my view
    reasonable and entitled to deference in this court. In other words, the respondent
    would have been entitled to return to the strict terms of the contract,
    pursuant to which time was of the essence, in any event.

Waiver

[75]

The appellants say that, despite the terms of
    the bulletin expressly stating that it was not a waiver of actual or potential
    default, it was understood as such by the respondent, the appellants, and the
    industry as a whole. For several years, until the bulletin was withdrawn by the
    March 2019 warning letter, the respondent followed the practice set out in its
    2013 bulletin, sending letters to suppliers who failed to achieve commercial
    operation by the MCOD and informing them that their contracts would not be
    terminated.

[76]

The short answer to these submissions is that either
    the entire agreement clause or the waiver clause in the FIT Contract would
    operate to prevent the appellants from relying on the respondents past
    practices.

[77]

In
Soboczynski v. Beauchamp
, 2015 ONCA
    282, 125 O.R. (3d) 241, at paras. 43-53, this court reviewed the purpose and
    effect of entire agreement clauses and noted that, in general, such clauses are
    retrospective rather than prospective in nature; they operate to exclude from
    the contract interpretation process statements made before the contract came
    into existence. Accordingly, the appellants cannot rely on either the 2013
    bulletin or the respondents practice of waiving breaches by other suppliers
    that occurred
before
the execution of the appellants FIT Contracts,
    as the terms of the entire agreement clause preclude reliance on such representations
    or conduct.

[78]

The appellants argument that a waiver was
    triggered by the respondents practice of waiving breaches by other suppliers in
    the 2.5-year period that occurred
after
the execution of the
    appellants FIT Contracts must also be rejected. There was never a clear
    representation to the appellants that the respondent waived its contractual
    rights, and the respondents actions toward third party suppliers cannot be
    construed as a waiver of a term in the appellants FIT Contracts. Moreover, if
    the time is of the essence provision in the appellants contracts was to be
    waived, it had to be waived in writing, in accordance with the requirements of
    s. 1.10. It was not.

CONCLUSION

[79]

I would dismiss the appeal. The parties informed
    the court that they had agreed on costs, regardless of the outcome of the
    appeal. Accordingly, I would make no order as to costs.

Released: August 7, 2020 (K.F.)

Grant
    Huscroft J.A.

I agree. K.
    Feldman J.A.

I agree. P.
    Lauwers J.A.


