COURT OF APPEAL FOR ONTARIO
CITATION: 2195002 Ont. Inc. v. Tribute Resources Inc., 2013 ONCA 576
DATE:
20130926
DOCKET: C56232
Doherty, Simmons and Pepall JJ.A.
BETWEEN
2195002 Ontario Inc.
Applicant (Respondent in Appeal)
and
Tribute Resources Inc.
Respondent (Appellant in Appeal)
Christopher A. Lewis, for the appellant
William Mitches, for the respondent
Heard: June 11, 2013
On appeal from the judgment of Justice Helen A. Rady of the Superior Court of Justice, dated October 18, 2012, with reasons reported at 2012 ONSC 5412, 113 O.R. (3d) 67.
By the Court:
[1]
This
appeal involves a dispute over the interpretation of various oil and gas
agreements and whether they confer a right to inject and store gas into and
under certain lands now owned by McKinley Farms Limited (the “McKinley Lands”).
Both the appellant, Tribute Resources Inc. (“Tribute”), and the respondent,
2195002 Ontario Inc. (“219 Ontario”), claim the right to inject and store gas
into and under the McKinley Lands under agreements made with the
landowner.
[2]
The
application judge held that 219 Ontario was entitled to the disputed rights by
virtue of a Gas Storage Lease made in March 2009 (the “219 Ontario Gas Storage
Lease”). She rejected Tribute’s
claim to those rights under an Oil and Gas Lease dated October 12, 1977 (the
“1977 Oil and Gas Lease”) as amended by a Unit Operation Agreement dated
November 30, 1984 (the “1984 Unit Operation Agreement”).
[3]
Although
the application judge accepted that the 1977 Oil and Gas Lease and the 1984 Unit
Operation Agreement conveyed certain gas storage rights that were in turn
subsequently assigned to Tribute, she found that those rights were replaced by
the terms of a Gas Storage Lease entered into by Tribute and McKinley Farms
Limited
on September 24, 1998 (the “1998 Tribute Gas Storage
Lease”).
[4] Previous litigation that reached this court determined that the 1998 Tribute Gas Storage Lease terminated in September 2008: see Tribute Resources Inc. v. McKinley Farms Ltd., 2010 ONCA 392, 263 O.A.C. 214. The application judge concluded that the termination of the 1998 Tribute Gas Storage Lease left Tribute without any right to store gas on the McKinley Lands. Any of Tribute’s gas storage rights with respect to the land had been replaced by the terms of the now terminated 1998 Tribute Gas Storage Lease. The 219 Ontario Gas Storage Lease was, therefore, the only agreement permitting gas storage rights on the McKinley Lands.
[5]
On
appeal, Tribute argues that the 1977 Oil and Gas Lease and the 1984 Unit
Operation Agreement do contain gas storage rights and that those rights continue
to exist despite the termination of the 1998 Tribute Gas Storage
Lease. Tribute’s argument turns primarily on
the interaction of the relevant provisions of these three documents and, in
essence, involves an issue of contractual interpretation.
[6]
219
Ontario submits that the application judge properly interpreted the relevant
documents. However, 219 Ontario also raises a preliminary argument that this
court’s jurisdiction to hear this appeal has been ousted because of an order
made by the Ontario Energy Board (the “OEB”) after the application judge’s
decision.
[7]
For the reasons that follow, we reject 219 Ontario’s preliminary
argument and, in addition, we dismiss Tribute’s appeal.
[8]
As a preliminary argument, 219 Ontario submits that although the
application judge had jurisdiction to determine the contractual rights of the
parties under the various agreements, this court has no jurisdiction to
entertain an appeal from the application judge’s decision because of an order
made by the OEB four months after the application judge’s decision in respect of
the McKinley Lands.
[9]
On
December 21, 2012, at the request of Tribute, the OEB made an order under s.
36.1 of Ontario
Energy Board Act, 1998,
S.O. 1998, c. 15, Sched. B (the “Energy Act”)
designating the McKinley Lands as a gas storage area and a further order under
s. 38 of the Energy Act authorizing Tribute to inject, store and remove gas from
those lands. In addition, the OEB stayed the pending compensation application in
relation to those lands pending conclusion of “all related court proceedings …
including any appeal of [the application judge’s decision].” Presumably, 219
Ontario’s contractual rights in the lands, if any, would be relevant to any
compensation order made by the OEB.
[10]
219 Ontario’s preliminary argument is premised on various provisions
of the Energy
Act that deal with the
OEB’s authority to regulate gas storage areas and on this court’s decision in
Snopko v. Union Gas
Ltd., 2010 ONCA 248100 (O.R.) (3d) 161, interpreting those provisions.
[11]
As described in Snopko, at para. 22:
[u]nder the [Energy] Act, the [OEB] has broad jurisdiction to
regulate the storage of natural gas, to designate an area as a gas storage area,
to authorize the injection of gas into that area, and to order the person so
authorized to pay just and equitable compensation to the owners of the property
overlaying the storage area.
[12]
Under s. 36.1(a) of the Energy Act, the OEB may “designate an area as
a gas storage area for the purposes of the Act.”
[13]
Section 37 prohibits the injection of gas for storage into a
geological formation:
“unless the geological formation is within a
designated gas storage area” and, in relation to gas storage areas designated
after January 31, 1962, “unless … authorization has been obtained”..
[14]
Under s. 38(1) of the Energy Act, the OEB may authorize the
injection, storage and removal of gas from a designated gas storage
area.
[15]
Subject to any agreement, s. 38(2) requires a person authorized to
inject, store and remove gas from a designated gas storage area to make “just
and equitable compensation” to the owners of such rights with respect to those
rights and for any damage resulting from their exercise.
[16]
Notably, s. 38(3) of the Energy Act gives the OEB exclusive
jurisdiction to deal with compensation issues relating to authorized injection
and storage rights and prohibits civil proceedings with respect to such
issues:
38.
(3) No action or other proceeding lies in respect of compensation payable under
this section and, failing agreement, the amount shall be determined by the
Board.
[17]
Further, s. 19 of the Energy Act gives the OEB the authority to hear
and determine all questions of fact and law falling within its jurisdiction
together with exclusive jurisdiction in respect of all matters in which
jurisdiction is conferred on it by the Energy Act:
19. (1)
The Board has in all matters within its jurisdiction authority to hear and
determine all questions of law and fact.
…
(6) The
Board has exclusive jurisdiction in all cases and in respect of all matters in
which jurisdiction is conferred on it by this or any other
Act.
[18]
In
Snopko,
this court upheld a decision dismissing for want of jurisdiction an action
brought by land owners against a company authorized to inject and store gas on
their lands where the action was commenced after a s. 38 compensation order had
been made.
[19]
In
Snopko,
the landowners’ action was framed in misrepresentation, breach of contract,
unjust enrichment, nuisance and negligence. This court held that in determining
whether an action or proceeding falls within the prohibition contained in s.
38(3), it is the substance and not the form of the claim that governs. On the
facts of that case, this court found that despite their legal labels, in
substance, the landowners’ claims fell within the scope of “just and equitable
compensation” as described in s. 38(2) of the Energy Act.
[20]
Relying
on Snopko
and on the various provision of the Energy Act
to which we have referred, 219 Ontario contends that the orders designating the
McKinley Lands as a gas storage area under the Energy Act
and authorizing Tribute to inject, store and remove gas into and from those
lands had the effect of ousting the court’s jurisdiction to further adjudicate
the issues of contractual interpretation in dispute on this appeal.
[21]
We
do not accept 219 Ontario’s submissions. The issue of jurisdiction was raised in
the Superior Court. It is now undisputed that the application judge had
jurisdiction to make her decision. In our view, nothing in s. 38(3) of the
Energy Act ousts the jurisdiction of this court to entertain an appeal on the
merits from a final order of a Superior Court judge made within its
jurisdiction.
[22]
Tribute
brought a preliminary application in the Superior Court objecting to that
court’s jurisdiction to entertain the application because of its pending
application to the OEB for orders under ss. 36.1 and 38 of the Act. In an
endorsement dated January 6, 2012, Bryant J. dismissed Tribute’s objection: see
Tribute
Resources Inc. v. 2195002 Ontario Inc., 2012
ONSC 25.
[23]
In
his endorsement, Bryant J. concluded that this court’s decision in the previous
litigation between the parties, Tribute Resources Inc. v. McKinley
Farms,
resolved the jurisdiction issue.
[24]
At
the time of the appeal hearing in the previous litigation, Tribute had a prior
application pending before the OEB for an order designating the McKinley Lands
as a gas storage area and for injection and storage rights.
[25]
At
paras. 18 and 19 of this court’s previous decision,
Juriansz J.A. held that s. 38(3) of the Energy Act did
not affect the court’s jurisdiction:
The parties are agreed that the recent decision of this court in Snopko v. Union Gas Ltd. (citations omitted), does not apply to this case. In Snopko, this court examined the scope of the privative clause set out in s. 38(3) of the [Energy Act] …
Section 38(1) provides that the OEB may make a designation order authorizing a person to “inject gas into, store gas in and remove gas from a designated gas storage area and, and to enter into and upon the land in the area and use the land for that purpose” and such an authorized person is required under s. 38(2) to make “just and equitable compensation” for the right to store gas or for any damage resulting from the authority to do so. The substances of the claims in this case do not fall within the language of s. 38(2) as no designation order has been made by the OEB in relation to these lands. The court’s jurisdiction to determine the questions on appeal is not at issue. [Emphasis added.]
[26]
At
paras. 23 and 24 of his endorsement, Bryant J. adopted
this reasoning. He held that the interpretation of the leases was not within the
OEB’s exclusive jurisdiction because the OEB had not yet made an order
designating the proposed storage areas under the Energy Act.
The pending application filed by 219 [Ontario], dated September 1, 2011, requests a judge of the Superior Court to interpret the Tribute Oil and Gas Lease and the 219 Ontario Gas Storage Lease. The Board has not “designated a gas storage area” or “authorized a person to inject gas into, store gas in and remove gas from a designated gas storage area and to enter into and upon the land in the area and use the land for that purpose” or made a compensation order under s. 36.1, s. 38(1), s. 38(2) or s. 38(3) of the [Energy Act].…
In my view, the substance of the claims made by 219 Ontario in its application to the Superior Court for the interpretation of leases does not fall within the language of s. 36.1, s. 38(1) or s. 38(2) of the [Energy Act]. I find that judges of the Superior Court regularly interpret leases and other contracts and have the jurisdiction to interpret the contacts at issue and to grant the relief sought by 219 Ontario. I further find that the interpretation of the leases is not within the exclusive jurisdiction of the Board because the Board has not made an order designating the proposed storage areas under s. 36.1 or 38 of the Act [Energy Act]. [Footnotes omitted.](Tribute v. McKinley, supra, at paras. 18 and 19).
[27]
Bryant
J.’s decision was not appealed.
[28] The jurisdiction of this court to entertain this appeal derives from s. 6 of the Courts of Justice Act, R.S.O. 1990, c. C. 43 (the “CJA”). Under s. 6(1)(b) of the CJA, this court has jurisdiction to entertain an appeal from the application judge’s decision because it is a final order of a Superior Court judge.
[29]
The
parties agree that the application judge had jurisdiction to render her judgment
interpreting the relevant contractual documents. Her judgment is a final order
and nothing in s. 38(3) of the Energy Act ousts this court’s jurisdiction to entertain an
appeal under s. 6(1)(b) of the CJA. Neither the
decision of the application judge, nor this decision, address compensation under
the Energy Act. The
order of the OEB made some four months after the decision of the application
judge cannot turn what was an order interpreting contractual rights into an
order for compensation under the Energy Act.
[30]
The
questions of what, if any, effect this court’s decision will have on the OEB’s
determination of the compensation issues now outstanding under the Energy Act
and whether this appeal may now be moot are different issues than the
jurisdictional issue raised by 219 Ontario.
[31]
The
fact that this court has jurisdiction to entertain an appeal from the
application judge’s decision does not determine the question of the effect, if
any, of this court’s decision on the compensation issues under the Energy Act.
[32]
We
make no comment on that subject, which will be a matter for the OEB to
determine.
[33] To the extent that 219 Ontario may be arguing that this court should not entertain this appeal because the OEB is entitled to make its own determination of the issues decided by the application judge thus making this appeal moot, we would not give effect to that argument in the circumstances of this case. Although 219 Ontario submits that this court should not hear this appeal, it also submits that the OEB is bound by the application judge’s decision. We reject that position. 219 Ontario cannot have it both ways. If the OEB decides it is bound by the application judge’s decision, the issues before this court are not moot.
[34] In any event, as we have said, in its December 21, 2012, decision, the OEB stayed the compensation application in relation to the McKinley Lands pending the conclusion “of all related Court proceedings … including any appeal of Superior Court File No. 5041/2011.” The terms of this order indicate that from the perspective of the OEB, the outcome of this appeal has potential relevance to the terms of any compensation order to be made by the OEB. Accordingly, even if this appeal is now technically moot because the OEB is entitled to make its own determination of the issues determined by the application judge, we would exercise our discretion to decide it: see Borowski v. Canada (Attorney General), [1989] 1 S.C.R. 342, at p. 353.
[35]
The application judge gave several reasons for holding that the 1998
Tribute Gas Storage Lease replaced the gas storage rights conveyed under the
1977 Oil and Gas Lease as amended by the 1984 Unit Operation Agreement. Tribute
raises multiple grounds of appeal relating to those reasons. In our view, it is
unnecessary that we address all of Tribute’s arguments because an examination of
the agreements at issue demonstrates that the application judge’s conclusion is
correct.
[36]
In
her reasons, the application judge briefly reviewed the agreements at issue. In
doing so, she reproduced relevant provisions of the 1977 Oil and Gas Lease that
refer to storage rights:
That the Land Owner … does hereby grant, demise, and lease to Operator for the term of ten years and so long thereafter as oil or gas are produced in paying quantities, or storage operations are being conducted,… and Land Owner also leases to Operator the exclusive right to drill for, produce, store, treat, transport and remove by any method all oil and gas found in or under the said lands, to store in any gas sands on the premises and withdraw their from gas originally produced from other lands …
If, at any time prior to the termination of this lease, the Operator should decide to utilize any underlying productive gas sand as a storage reservoir for the gas originally produced from other lands, Operator agrees to notify Land Owner of such utilization, and thenceforth to pay Land Owner double the herein specified acreage rental amount as full compensation for the storage rates hearing granted and in lieu of all delay rental … [Emphasis added by application judge.]
[37]
The
application judge noted that gas was discovered on the McKinley Lands by
Tribute’s predecessor in 1982 and 1983.Following that discovery, the 1977 Oil
and Gas Lease was amended by the 1984 Unit Operation Agreement, which included
detailed provisions relating to production royalties and which replaced the
royalty provisions in the 1977 Oil and Gas Lease. Once again, the application
judge reproduced relevant portions of the 1984 Unit Operation Agreement that
refer to storage rights:
AND WHEREAS it is believed that the Salina and Guelph-Lockport formation underlying those certain lands listed and described in Schedule “B” hereunto annexed and a part hereof, (and which include all or part of the said lands) contain a gas as or gas and oil reservoir or pool known as the Stanley 4-7-XI Pool as hereinafter defined;
AND WHEREAS for the purpose of protecting the Stanley 4-7-XI Pool … and for the protection of their correlative rights … the parties hereto desire to amend the said lease and to unite and combine that portion of the said lands which is included in Schedule “B” … with all of the other lands in the said schedule, into a single operative unit
…
12. If, at any time prior to the termination of this Agreement,
the Lessee should decide to utilize the underlying productive gas sand
as a storage reservoir for gas originally produced from other lands,
the Lessee agrees to notify the Lessor of such utilization, and thenceforth to
pay Lessor double the herein specified acreage rental amount as full
compensation for the storage rights herein granted and in lieu of all delay
rental in event there is a productive well or wells on these lands at the date
of said notification the Lessee shall not commence utilization of the
lands as a storage reservoir without first entering into an agreement with the
Lessor to settle the value of the Lessor’s
royalty
…
16. Excepting as herein hereby expressly modified or amended, the said lease shall continue in all respects in full force and effect for so long as therein provided, and the same as so amended or modified is ratified and confirmed … [Emphasis added by application judge.]
[38]
As
for the 1998 Tribute Gas Storage Lease, the application judge noted that it
included, among others, the following terms:
The Lessor doth hereby demise and lease unto the Lessee … the said lands save and except the surface rights thereto … to be held by the Lessee subject to the oil and gas lease, as tenant for a term of Ten (10) years from the date hereof, subject to renewal as hereinafter provided, for the purpose of injecting, storing and withdrawing gas, natural and/or artificial, … within or from the devised lands
…
16. Subject to its rights, if any, under the oil and gas lease, the Lessee shall not inject gas into the demised lands under the provisions hereof unless
…
21. This Agreement expresses and constitutes the entire agreement between the Parties, no implied covenant or liability of any kind is created or shall arise by reason of these present or anything herein contained. [Emphasis added by application judge.]
[39]
In
addition, the application judge referred to the following terms contained in
Schedule B to the 1998 Tribute Gas Storage Lease:
·
a
termination provision;
·
the
1998 compensation rates for crop damage and the mechanism for their calculation
in ensuing years; and
·
a
term stating, “all provisions in this schedule shall be additional and shall be
paramount with any of the terms contained in the original
agreement.”
[40]
After
reviewing the agreements at issue and the legal principles relevant to the
interpretation of commercial contracts, the application judge turned to her
analysis. She concluded that the 1998 Tribute Gas Storage Lease was intended to
replace gas storage rights contained in the 1977 Oil and Gas Lease and in the
1984 Unit Operation Agreement for several reasons.
[41]
First,
the 1998 Tribute Gas Storage Lease contained an entire agreement clause. The
application judge said, “[t]his must mean that all matters pertaining to storage
are contained in that lease.”
[42]
Second,
Schedule B to the 1998 Tribute Gas Storage Lease stated “all provisions in this
schedule shall be additional and shall be paramount with any of the terms
contained in the original agreement.” The application judge concluded that this
was a “clear expression of the parties’ intention that the [1998 Tribute Gas Storage
Lease] was
to prevail [over the earlier agreements], at least in respect of those matters
dealt with in the schedule.”
[43]
Third,
in the application judge’s view, the 1984 Unit Operation Agreement supported her
conclusion. The 1984 Unit Operation Agreement contemplated that a further
agreement would be entered into prior to the lessee beginning to use the lands
as a gas storage reservoir. Further, while the 1984 Unit Operation Agreement
specifically provided that except as modified by it, the 1977 Oil and Gas Lease
remained in full force and effect, the 1998 Tribute Gas Storage
Lease contained
no such language.
[44]
Fourth,
the 1998
Tribute Gas Storage Lease
contained broader storage rights and more detailed provisions relating to
storage rights than the earlier agreements. In the application judge’s
view:
[t]he parties’ subsequent conduct in
executing a specific storage lease support[ed] the
common sense conclusion that they considered that the earlier lease dealt
primarily with drilling and extraction rights and did not adequately provide for
storage.
In her view, it was “disingenuous” for Tribute to assert that the 1998 Tribute Gas Storage Lease was created to “supplement” the earlier agreements. The broader rights and privileges included in the 1998 Tribute Gas Storage Lease were:
strong objective evidence that the parties intended the storage lease to provide for all of the contractual rights and obligations governing storage and that it was to replace rather than supplement the earlier agreement.
[45]
Tribute
submits that the application judge made multiple errors in her interpretation of
the 1998
Tribute Gas Storage Lease:
·
she
failed to consider and give meaning to the four references in the 1998 Tribute Gas Storage
Lease
to that agreement being “subject to the oil and gas
lease”;
·
she
erred in relying on the entire agreement clause in the 1998 Tribute Gas Storage
Lease
as supporting her interpretation that the 1998 Tribute Gas Storage
Lease
replaces the earlier agreements;
·
she
erred in failing to accept the uncontradicted evidence
of Tribute’s representative that the 1998 Tribute Gas Storage
Lease
was intended to supplement the earlier agreements and to provide Tribute with a
modern form of gas lease to submit to the OEB;
·
she
erred in concluding that the words “original agreement” in Schedule B to the
1998 Tribute
Gas Storage Lease
referred to the 1977 Oil and Gas Lease as opposed to the pre-printed section of
the 1998
Tribute Gas Storage Lease;
and
·
she
erred in concluding that the language of the 1984 Unit Operation Agreement
supported her interpretation.
[46]
In
addition, Tribute asserts that the application judge’s findings are procedurally
unfair because she referred in her reasons to six decisions not relied on by 219
Ontario and because her central conclusion that the 1998 Tribute Gas Storage
Lease
was intended to replace gas storage rights contained in earlier documents was
not anchored in the pleadings.
[47]
As
we have said, in our view, an examination of the agreements at issue
demonstrates that the 1998 Tribute Gas Storage
Lease
was intended to replace the earlier agreements insofar as they related to gas
storage rights. We note, first of all, that the 1998 Tribute Gas Storage Lease
is, on its face, a detailed document designed specifically to address gas
storage rights, whereas the 1977 Oil and Gas Lease as amended by the 1984 Unit
Operation Agreement addresses the issue of gas storage rights somewhat
peripherally.
[48]
Both
the title and terms of the 1998 Tribute Gas Storage Lease demonstrate that the
agreement was designed specifically to address gas storage rights. The document
is called, and registered on title as, a Gas Storage Lease Agreement. The
demising clause states that the lands (save and except the surface rights) are
leased “for the purpose of injecting, storing and withdrawing gas, natural
and/or artificial … within or from the demised lands”. The terms of the 1998
Tribute Gas Storage Lease are detailed and make more specific provision for
matters addressed in less detail in the earlier agreements.
[49]
For
example, Schedule B to the 1998
Tribute Gas Storage Lease makes specific provision for the
1998 compensation rates for crop damage for individual crops and the mechanism
for calculation of crop damage rates in ensuing years.
[50]
By
way of contrast, the 1977 Oil and Gas Lease as amended by the 1984 Unit
Operation Agreement deals primarily with oil production and royalties issues.
Although gas storage rights are provided for, they are not the main focus and
are not dealt with in the same level of detail as in the 1998 Tribute Gas
Storage Lease.
[51]
Perhaps
more importantly, the payment provisions of the 1998 Tribute Gas Storage Lease
are different than, and inconsistent with, the payment provisions of the 1977
Oil and Gas Lease as amended by the 1984 Unit Operation Agreement.
[52]
The
latter documents provide a per acreage charge for gas storage rates and require
that the parties enter into a further agreement to address residual royalties.
Clause 12 of the 1984 Unit Operation Agreement states:
12. If, at any time prior to the termination of this Agreement, the Lessee should decide to utilize the underlying productive gas sand as a storage reservoir for gas originally produced from other lands, the Lessee agrees to notify the Lessor of such utilization, and thenceforth to pay Lessor double the herein specified acreage rental amount as full compensation for the storage rights herein granted and in lieu of all delay rental in event there is a productive well or wells on these lands at the date of said notification the Lessee shall not commence utilization of the lands as a storage reservoir without first entering into an agreement with the Lessor to settle the value of the Lessor’s royalty.
[53]
In
contrast, the 1998 Tribute Gas Storage Lease provides that the lessee will serve
a notice of what it proposes to pay for gas storage rights and that if the
parties cannot agree, the issue will be determined by arbitration. Clauses 16-18
of the 1998 Tribute Gas Storage Lease read as follows:
16. Subject to its rights, if any, under the oil and gas lease, the Lessee shall not inject gas into the demised lands under the provisions hereof until it has offered to the Lessor the additional acreage rental to be paid to the Lessor in respect of its storage operations to be conducted hereunder in the manner hereinafter provided and until it has offered to purchase from the Lessor, as hereinafter provided, the Lessor’s interest in such of the gas and oil and related hydrocarbons (hereinafter called “the petroleum substances”) contained in the demised lands as are liable on the withdrawal of the gas so injected to be co-mingled indistinguishably therewith as to their respective volumes, or as are liable to be rendered commercially unrecoverable by reason of such injection or the storage operations to be conducted by the Lessee hereunder. Nothing herein shall prevent the Lessee from and it is hereby given the right at any time and from time to time to purchase the Lessor’s interest in any or all the other petroleum substances contained in the demised lands.
17. The purchase price of any of the petroleum substances to be purchased by the Lessee under Clause 16 hereof shall be computed as follows:
…
18. In the event that the Lessee desires to purchase any of the petroleum substances as provided in Clauses 16 and 17 hereof, it shall give written notice to the Lessor of the quantity thereof to be purchased, the price therefor computed as provided in Clause 17(a) and the effective date of such purchase. The Lessee shall in addition state the additional acreage rental to be paid by the Lessee in respect of its storage operations to be conducted hereunder. The Lessor shall within Thirty (30) days from the receipt of the aforesaid notice advise the Lessee that it disputes either the purchase price or the additional acreage rental or both of them and in default of such notice of dispute the Lessor shall be deemed to have agreed thereto and the same shall become final and binding upon the Lessor and the Lessee. In the event that the Lessor gives such notice of dispute, such purchase price and additional acreage rental and any other compensation payable to the Lessor in respect of the Lessee’s storage rights hereunder shall be determined by a board of arbitration in the manner provided under the Energy Board Act of Ontario and the regulations thereunder or any act or regulations in amendment or substitution therefor.
[54]
In
our view, this difference in the payment provisions makes it clear that the
1998 Tribute
Gas Storage Lease
was intended to replace the earlier agreements and not merely to supplement
them. Because of the difference in the payment provisions, the two sets of
documents could not co-exist.
[55]
Equally
compelling evidence that the 1998 Tribute Gas Storage Lease was intended to
replace the earlier agreements is the fact that this agreement provides that it
would terminate if the issue of designation of the lands as a Gas Storage Area
had not been taken to the OEB within ten years.
[56]
The
1998 Tribute
Gas Storage Lease
had a term of ten years. Clause 3 of the main body of the agreement provides for
automatic renewal of the agreement upon the expiry of the ten year term unless
the lessee provided written notice of its desire not to renew the agreement.
[57]
However,
Schedule B to the 1998 Tribute Gas Storage
Lease
states:
This Gas Storage Lease Agreement shall terminate on the tenth anniversary date, if and only if, the Lessee or some other person has not applied to the Ontario Energy Board to have the said lands or any part thereof designated as a Gas Storage area on or before the tenth anniversary date hereof.
[58]
In
our view, when read in conjunction with clause 3 of the 1998 Tribute Gas
Storage Lease
providing for
the automatic renewal of that agreement, the termination provision in Schedule B
demonstrates that the parties intended Tribute’s gas storage rights to come to
an end if the issue of gas storage rights had not been taken to the OEB within
the ten year term. The automatic renewal provision ensured that Tribute’s gas
storage rights were to continue indefinitely and that they were to do so on the
terms set out in the 1998 Tribute Gas Storage Lease. However, they would only
continue indefinitely if the issue of gas storage rights had been taken to the
OEB during the initial term of the 1998 Tribute Gas Storage Lease. Otherwise,
gas storage rights would end.
[59]
Based
on our review of the relevant agreements, we are satisfied that the application
judge was correct in holding that the 1998 Tribute Gas Storage
Lease was intended to replace the earlier agreements.
[60] Further, we reject Tribute’s claim that it has suffered procedural unfairness. The issue before the application judge was the proper interpretation of the agreements at issue. Tribute has had a full opportunity to present and respond to arguments concerning that issue.
[61] Based on the foregoing reasons, we reject 219 Ontario’s preliminary argument that this court lacks jurisdiction to entertain this appeal and we dismiss Tribute’s appeal. Costs of the appeal are to 219 Ontario fixed in the amount of $26,150 inclusive of disbursements and applicable taxes as agreed upon by the parties.
Released: “DD” September 26, 2013
“D.H. Doherty J.A.”
“J.M. Simmons
J.A.”
“S.E. Pepall J.A.”