Transalta Generation Partnership v Capital Power PPA Management Inc, 2015 ABQB 793

Court of Queen ’ s Bench of Alberta Citation: Transalta Generation Partnership v Capital Power PPA Management Inc, 2015 ABQB 793 Date: 20151214 Docket: 1501 04791 Registry: Calgary Between: Transalta Generation Partnership Applicant - and - Capital Power PPA Management Inc.

Respondent _______________________________________________________ Reasons for Judgment of the Honourable Chief Justice Neil Wittmann _______________________________________________________ Background [ 1 ] The Applicant, Transalta Generation Partnership (“Transalta”) and the Respondent, Capital Power PPA Management Inc. (“Capital Power”) are parties to the Sundance C Power Purchase Arrangement (“the Sundance PPA”), which is a regulation promulgated

as part of the Power Purchase Arrangements Determinations Regulation , AR 167/2003 , under the Electric Utilities Act , SA 2003 c E- 5.1. [ 2 ] Transalta and Capital Power are engaged in arbitration (“the Current Arbitration”) under the terms of the Sundance PPA in respect of the application of certain Statistics Canada indices to the calculation of certain costs payable by Capital Power to Transalta. In 2013, Statistics Canada updated its Industrial Product Price Index (“IPPI”), linking new data to its historical series. Transalta applied this updated IPPI to its 2014 billing of Capital Power.

Capital Power disputed the application of the updated IPPI. The relevant provisions of the Sundance PPA provide: 4.2(

b) If any index referred to in any

Schedule is changed or modified in any way. including a change in the reference base used in the compilation of such index, the Parties shall use such changed modified index if the changes or modifications to such index are consistent with or produce results which are consistent with the intent of use of the original index; otherwise, use of such index shall be modified so that calculations based on such index shall produce as nearly as possible the same results as are consistent with the intent of use of the original index. ... 4.2(

f) A changed or modified index or a substituted index shall be used for all calculations required to be made pursuant to this Arrangement from and after the time that the use of such changed, or modified or substituted index has been agreed upon by the Parties. Such changed, modified or substituted index shall be linked to the previously used index so as to avoid retrospective adjustments and shall be used to measure inflation in a variable from the level of the variable at the time the previously used index was modified, changed or substituted. [ 3 ]

Article 19 of the Sundance PPA sets out a dispute resolution procedure: 19.3 Litigation Either party may commence litigation with respect to any question of law or the recovery of any liquidated damages arising in relation to this Arrangement, within the limitation periods set out in the Limitation of Actions Act (Alberta) and any successor or replacement legislation. 19.4 Submission to Arbitration Subject to

Section 19.3, all disputes with respect to this Arrangement shall, after the provisions of

Section 19.2, have been followed, be forwarded to and resolved by binding arbitration in accordance with the Arbitration Act, S.A. 1991, c.A-43.1 (the “Arbitration Act”) by a board of arbitrators in accordance with the following provisions: ... (

f) except as expressly provided in this Arrangement, any majority decision by the board of arbitrators shall be final, binding and non- appealable. Any such decision may be filed in any court of competent jurisdiction and may be enforced by either Party as a final judgment in such court. There shall be no grounds for appeal of any arbitration award hereunder; ... (

i) either Party may refer a question of law to a court of competent jurisdiction for final and binding determination notwithstanding that it may be part of a dispute before the board of arbitrators. [ 4 ] Transalta and Capital Power were previously parties to an arbitration (“the Prior Arbitration”) in respect of the application of a different Statistics Canada index, the Survey of Employment and Payroll Hours (“SEPH”). In the Prior Arbitration, Capital Power argued that the indices based on SEPH had been changed by Statistics Canada and so under

Article 4.2(

f) of the PPA, they must be linked to previous indices. In 2011, an arbitral panel issued an award (“the 2011 Award”), finding that Statistics Canada had already linked the new SEPH data to the historical series and that no further linking was required, holding: In the circumstances, the panel finds that

section 4.2(

f) does require linking and the linking methodology developed by StatsCan in its published Historical Revisions meets that requirement. This methodology has no retrospective effect.

The selection of this form of linking has no adverse consequences for the parties in that it does not impact the calculation of billings going forward... [ 5 ] In the Current Arbitration, Transalta took the position that the 2011 Award is binding on the parties and, because of the application of the doctrines of res judicata and issue estoppel, Capital Power should be estopped or barred from taking positions that are inconsistent with the determinations made in the Prior Arbitration.

In response, Capital Power pointed to the decision of this Court in Enmax Energy Corporation v Transalta Generation Partnership , 2015 ABQB 185 (appeal allowed: 2015 ABCA 383 ), wherein the Chambers Judge concluded, in essentially identical circumstances, concerning the very same Statistics Canada indices, that res judicata does not apply to private arbitrations and that Enmax Energy Corporation was not estopped from taking positions in a later arbitration as a result of decisions made in the earlier one. That decision was under appeal by Transalta at the time of the hearing in this matter.

In essence, Transalta, believing that the Chambers Judge’s decision in Enmax Energy was incorrect, and concerned that the arbitral panel would apply that decision before the Alberta Court of Appeal could issue its decision (and that the arbitral panel’s decision could not be appealed as a result of

Article 19.4(

f) of the Sundance PPA), brought this Application for the determination of a question of law under

Article 19.4(i). In this Application, Transalta seeks a Declaration that: (

a) the 2011 Award is binding on the parties in the current arbitration; (

b) as a matter of law, res judicata and issue estoppel apply to arbitration awards between the same parties under the same PPA;

(

c) Capital Power is estopped and barred by res judicata from taking positions in the current arbitration that are inconsistent with the determinations made in the Prior Arbitration; (

d) under

Article 19.4(

f) of the PPA, either Transalta or Capital Power may enforce the 2011 Award as a final judgment, and (

e) the doctrine of abuse of process is applicable to any attempt by Capital Power to re-arbitrate the substance of the 2011 Award. Analysis [ 6 ] The timing of this Application raises some issues. Because a final decision of the arbitral panel could not be appealed, it is understandable that Transalta would want resolution of what it perceives to be a crucial question of law in advance of the arbitration hearing.

Nevertheless, success for Transalta in this application, in advance of a decision from the Alberta Court of Appeal in Enmax Energy , would result in conflicting decisions of this Court, complicating the issues for the arbitral panel. This could perhaps have been avoided had the parties been prepared to agree to adjourn the arbitration until after the Court of Appeal rendered its reasons in Enmax Energy , but the parties were unable to come to an agreement to do so. [ 7 ] Fortunately, on December 9, 2015, the Court of Appeal released its judgment in Enmax Energy Corporation v.

Transalta Generation Partnership , 2015 ABCA 383 , which largely resolves the issues in this Application. At para.55, the Court of Appeal concluded that the Chambers Judge had erred in deciding that the doctrine of res judicata and issue estoppel could not apply in the subsequent arbitration. At paras.62-64, McDonald JA wrote: [62] The parties are both estopped from relitigating issues in the Current Arbitration that were decided in the Prior Arbitration Decision.

The estoppel does not, however, extend beyond issues that were actually decided in the Prior Arbitration Decision, or that were necessarily incidental to it... As such, it can be stated that the Discrete Finding (whatever it was) is binding on both parties in the Current Arbitration. [63] Not relitigating the Discrete Finding does not, however, necessarily resolve the dispute between the parties in the Current Arbitration. The Prior Arbitration Decision found that certain indices were appropriate for use during a certain period of time.

To the extent that the same issues arise in the Current Arbitration, an issue estoppel applies. However, it is not clear that the Prior Arbitration Decision decided whether the present indices, as reformulated by Statistics Canada, remain appropriate, or whether the decision on the SEPH index applies in the context of the Current Arbitration. The record is not clear enough for this Court to determine these issues. The scope of any issue estoppel will have to be referred to the arbitrators. [64] What is clear is that either party is entitled to plead res judicata or issue estoppel in the Current Arbitration.

The arbitrators can (and must) have reference to the Prior Arbitration Decision to determine what it decided, and specifically to determine the scope of the Discrete Finding.

With respect to other arbitral decisions on the same or similar topics, they would be “authorities” from which the present arbitrators might derive some assistance: it would not be accurate to describe them as “evidence”. [ 8 ] In its Brief, Transalta has made it clear that it is not asking the Court to decide whether the 2011 Award actually deals with the same issue as the Current Arbitration and actually does bar Capital Power’s claim, characterizing those as questions of mixed fact and law for the arbitral panel to decide.

In Enmax Energy , McDonald JA concluded, at para.61, that “Applying the doctrine of issue estoppel does not require fact finding or determining questions of mixed fact and law”. Nevertheless, because of the nature of the relief sought by Transalta and the record before the Court, it is appropriate, as in Enmax Energy , to refer the scope and application of any issue estoppel arising out of the 2011 Award to the arbitral panel. Conclusion [ 9 ] It is hereby declared: (

a) As a matter of law, res judicata and issue estoppel apply to arbitration awards between the same parties under the same PPA; (

b) Both Transalta and Capital Power are estopped or barred by res judicata from taking positions in the Current Arbitration that are inconsistent with the determinations made in the Previous Arbitration; (

c) The 2011 Award is binding on the parties in the Current Arbitration to the extent that the requisite elements of res judicata and issue estoppel are found by the arbitral panel to exist. [ 10 ] In the circumstances, it is not necessary to make declarations with respect to the doctrine of abuse of process or the enforceability of the 2011 Award under

Article 19.4(

f) of the Sundance PPA. [ 11 ] The parties may speak to costs if they cannot agree on a disposition. Heard on the 1 st day of September, 2015. Dated at the City of Calgary, Alberta this 14 th day of December, 2015.

Neil Wittmann C.J.C.Q.B.A. Appearances: M.J. Donaldson J.J.M. Taylor for the Applicant D.T. Madsen, Q.C. K. A. Salmon for the Respondent