Case information

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Contracts – Commercial contracts – Interpretation – Implied term – Judgments and orders – Reasons – New issue – What is the test for determining when a judge at first instance has impermissibly decided a matter on the basis of a “new issue” – What are the procedural consequences of such a decision – Whether the rules respecting the implication of contractual terms are consistent with the general principles of contractual interpretation If not, how the rules respecting the implication of contractual terms, the general principles of contractual interpretation and, if appropriate, the new approach to the implication of terms in other jurisdictions, are to be made consistent.

This application arises out of six cases concerning six long-term contracts for the purchase of electricity generated by the respondent power corporations and distributed by the Ontario Electricity Financial Corporation (“OEFC”) to customers in Ontario. In the late 1980s, Ontario Hydro looked to the private sector to assist in the construction of new power generation facilities needed to service Ontario’s increasing power demands. The respondent power corporations, among others, agreed to build power generation facilities and entered into contracts with lengthy terms. The power corporations alleged that unilateral changes made to the calculation of their payments between the late 1990s and 2010, were inconsistent with the terms of the contracts and resulted in significantly lower payments to the power corporations.

The application judge declared that the power corporations were entitled to a declaration that the new calculations did not comply with those agreements from January 1, 2011, onward. The power producers were entitled to an order requiring the OEFC to recalculate payments made from January 1, 2011, onward as they had been calculated prior to that date. OEFC was also to pay the power producers an amount sufficient to compensate them for the difference between the amount they would have been paid using the earlier calculation and the amount they were paid using the improper calculation, plus interest. The Court of Appeal dismissed the appeals and dismissed the cross-appeals as moot.