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TERMS - Express terms - Term and termination

Wednesday, August 12, 2020 @ 6:00 AM  


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Appeal by the plaintiff from the dismissal of its action for breach of contract and negligence. The appellant purchased some of Greenview Power’s secured debt and assumed its effective control. Greenview Power entered into a Renewable Energy Standard Offer Program Contract with the respondent to build a biomass renewable energy facility to generate and supply electricity to the respondent. Greenview Power could not meet the commercial operation deadline. The appellant then took over Greenview Power to save the project. Greenview Power went bankrupt and the Contract terminated. Instead of reviving the Contract by paying curing the defaults, the appellant tried to assign its rights under the Contract to Truestar. The parties had previously negotiated a Waiver and Amending Agreement that provided a 30-day cure period for certain breaches. The appellant relied on the Amending Agreement arguing that the automatic termination provision in the Contract did not apply. The trial judge found that the Contract clearly stated that it would terminate on bankruptcy, that the appellant’s efforts to assign the Contract to Truestar failed, and that the appellant failed to prove that it was entitled to damages for breach of contract or negligence.

HELD: Appeal dismissed. The Contract specifically provided that when a generator filed a proposal under the Bankruptcy and Insolvency Act or made an assignment in bankruptcy, then the Contract terminated automatically without the need for the respondent to provide notice. The trial judge did not err in concluding that the Amending Agreement did not supersede the automatic termination provisions of the Contract and that the termination was effective when Greenview Power went bankrupt. The automatic termination in Contract did not violate the automatic stay imposed by s. 69.3 of the Bankruptcy and Insolvency Act or the common law anti-deprivation rule. The respondent received no financial benefit from the automatic termination of the Contract and removed no value from the breach of Greenview Power’s creditors to its benefit. The appellant had the right to revive the terminated agreement within 90 days of the bankruptcy if it paid outstanding amounts owing to the respondent and cured existing defaults. Had the appellant availed itself of the revival right, it could have exercised its rights as a secured creditor against the Greenview assets. There was no basis for the appellant’s argument that the respondent breached any duty of good faith contractual performance or the common law duty to act honestly in the performance of its contractual obligations.

Hutchingame Growth Capital Corp. v. Independent Electricity System Operator, [2020] O.J. No. 2912, Ontario Court of Appeal, P.D. Lauwers, C.W. Hourigan and J.A. Thorburn JJ.A., July 2, 2020. Digest No. TLD-August102020005