r v. York, 2012 ONSC 3759

Georgian Windpower Corporation et al. v. Stelco Inc. [Indexed as: Georgian Windpower Corp. v. Stelco Inc.] 113 O.R. (3d) 81 2012 ONSC 3759 Ontario Superior Court of Justice, Patillo J.

December 19, 2012 Contracts -- Enforceability -- Parties entering into memorandum of understanding ("MOU") which confirmed general principlespertaining to ongoing discussions with respect to development of wind energy project on defendant's land -- Parties subsequentlyentering into Agreement to Establish Land Lease Easement Agreement ("AELLEA") -- Both documents agreements to agree and notenforceable -- Documents nevertheless imposing certain binding obligations on parties -- Defendant liable for breaching terminationclause in MOU and for failing to permit plaintiff to assess winds on defendant's land contrary to AELLEA.

Contracts -- Negotiation -- Agreement to use best efforts to negotiate not enforceable. The parties entered into a memorandum of understanding (the "MOU") which confirmed the general principles pertaining to ongoingdiscussions with respect to the development of a wind energy project on the defendant's land. The MOU contained a termination clausewhich required the party seeking to terminate the agreement to give at least 60 days' notice. The parties subsequently entered into anAgreement to Establish a Land Lease Easement Agreement (the "AELLEA"). The defendant terminated both agreements.

The plaintiffbrought an action for damages for breach of contract, breach of fiduciary duty, breach of confidence and unjust enrichment. Held, the action should be allowed in part. The MOU and the AELLEA were both agreements to agree, and were therefore unenforceable. However, both documents imposedcertain binding obligations on the parties. The defendant breached the termination clause in the MOU and its obligation under theAELLEA to permit the plaintiff access to its land to assess the wind. The plaintiff was entitled to damages in the amount of $1,000 forbreach of the MOU and $74,000 for breach of the AELLEA.

Agreements in the MOU and the AELLEA to use best efforts to negotiate were unenforceable. There is no free-standing duty to negotiatein good faith in Canadian contract law. The use of the terms "good faith" and "best efforts" in the MOU and the AELLEA related tofuture negotiations between the parties and did not create any independent legal duty or obligation. The parties were at all times dealing with each other at arm's length in a commercial context, and were equal in their bargaining power.The defendant did not owe the plaintiff a fiduciary duty.

There was no evidence that the relationship between the parties was apartnership. Rather, the evidence was to the contrary. There was no evidence that the defendant ever used any confidential informationprovided to it by the plaintiff. Finally, there was no evidence that the defendant was enriched in any way during the course of itsrelationship with the plaintiff. ACTION for damages for breach of contract, breach of fiduciary duty, breach of confidence and unjust enrichment. Cases referred toBruce v. Region of Waterloo Swim Club (1990), (ON SC), 73 O.R. (2d) 709, [1990] O.J.

No. 1191,31 C.C.E.L. 321, 21 A.C.W.S. (3d) 1145 (H.C.J.), distd [page82 ] Other cases referred to Agribrands Purina Canada Inc. v. Kasamekas(2011), 106 O.R. (3d) 427, [2011] O.J. No. 2786, 2011 ONCA 460, 334 D.L.R. (4th) 714, 203 A.C.W.S. (3d) 753, 86 C.C.L.T. (3d) 179,87 B.L.R. (4th) 1; Bawitko Investments Ltd. v. Kernels Popcorn Ltd., (ON CA), [1991] O.J. No. 495, 79 D.L.R. (4th)97, 53 O.A.C. 314, 26 A.C.W.S. (3d) 350 (C.A.); Cadbury Schweppes Inc. v. FBI Foods Ltd., (SCC), [1999] 1 S.C.R.142, [1999] S.C.J.

No. 6, 167 D.L.R. (4th) 577, 235 N.R. 30, [1999] 5 W.W.R. 751, J.E. 99-317, 117 B.C.A.C. 161, 59 B.C.L.R. (3d) 1,42 B.L.R. (2d) 159, 83 C.P.R. (3d) 289, 85 A.C.W.S. (3d) 166; Cedar Group Inc. v. Stelco Inc., [1996] O.J. No. 3974, 66 A.C.W.S. (3d)867 (C.A.), affg [1995] O.J. No. 3998, 59 A.C.W.S. (3d) 1096 (Gen. Div.); Consolidated-Bathurst Export Ltd. v. Mutual Boiler &Machinery Insurance Co., (SCC), [1980] 1 S.C.R. 888, [1979] S.C.J. No. 133, 112 D.L.R. (3d) 49, 32 N.R. 488, [1980]I.L.R. Â1-1176 at 595, 1 A.C.W.S. (2d) 169; Consulate Ventures Inc. v. Amico Contracting & Engineering

(1992) Inc., [2007] O.J. No.1663, 2007 ONCA 324, 282 D.L.R. (4th) 697, 223 O.A.C. 330, 157 A.C.W.S. (3d) 103; Dumbrell v. Regional Group of Companies Inc.(2007), 85 O.R. (3d) 616, [2007] O.J. No. 298, 2007 ONCA 59, 279 D.L.R. (4th) 201, 220 O.A.C. 64, 25 B.L.R. (4th) 171, 55 C.C.E.L.(3d) 155, 154 A.C.W.S. (3d) 1097; EdperBrascan Corp. v. 117373 Canada Ltd. (2000), (ON SC), 50 O.R. (3d) 425,[2000] O.J. No. 4012, [2000] O.T.C. 722, 9 B.L.R. (3d) 234, 37 R.P.R. (3d) 188, 100 A.C.W.S. (3d) 571 (S.C.J.); Eli Lilly & Co. v.Novopharm Ltd., (SCC), [1998] 2 S.C.R. 129, [1998] S.C.J.

No. 59, 161 D.L.R. (4th) 1, 227 N.R. 201, J.E. 98-1562,80 C.P.R. (3d) 321, 80 A.C.W.S. (3d) 871; Folland v. Reardon (2005), (ON CA), 74 O.R. (3d) 688, [2005] O.J. No.216, 249 D.L.R. (4th) 167, 194 O.A.C. 201, 28 C.C.L.T. (3d) 1, 136 A.C.W.S. (3d) 638 (C.A.); Frame v. Smith, (SCC),[1987] 2 S.C.R. 99, [1987] S.C.J. No. 49, 42 D.L.R. (4th) 81, 78 N.R. 40, 23 O.A.C. 84, 42 C.C.L.T. 1, [1988] 1 C.N.L.R. 152, 9 R.F.L.(3d) 225, 6 A.C.W.S. (3d) 263; Galambos v. Perez, [2009] 3 S.C.R. 247, [2009] S.C.J.

No. 48, 2009 SCC 48, 276 B.C.A.C. 272, 312D.L.R. (4th) 220, [2009] 12 W.W.R. 193, EYB 2009-165240, J.E. 2009-1938, 394 N.R. 209, 70 C.C.L.T. (3d) 167; Hamilton v. OpenWindow Bakery Ltd., [2004] 1 S.C.R. 303, 2004 SCC 9, 235 D.L.R. (4th) 193, 316 N.R. 265, J.E. 2004-470, 184 O.A.C. 209, 40 B.L.R.(3d) 1, [2004] CLLC Â210-025, 128 A.C.W.S. (3d) 1111; Hodginkson v. Simms, (SCC), [1994] 3 S.C.R. 377, [1994]S.C.J.

No. 84, 117 D.L.R. (4th) 161, 171 N.R. 245, [1994] 9 W.W.R. 609, J.E. 94-1560, 49 B.C.A.C. 1, 97 B.C.L.R. (2d) 1, 16 B.L.R.(2d) 1, 6 C.C.L.S. 1, 22 C.C.L.T. (2d) 1, 57 C.P.R. (3d) 1, 95 D.T.C. 5135, 5 E.T.R. (2d) 1, 50 A.C.W.S. (3d) 469; Jaffer v. YorkUniversity, [2010] O.J. No. 4252, 2010 ONCA 654, 268 O.A.C. 338, 326 D.L.R. (4th) 148; Lac Minerals Ltd. v. International CoronaResources Ltd., (SCC), [1989] 2 S.C.R. 574, [1989] S.C.J. No. 83, 61 D.L.R. (4th) 14, 101 N.R. 239, J.E. 89-1204, 36O.A.C. 57, 44 B.L.R. 1, 26 C.P.R. (3d) 97, 35 E.T.R. 1, 6 R.P.R. (2d) 1, 16 A.C.W.S. (3d) 345; Lysko v. Braley (2006), 2006

11846 (ON CA), 79 O.R. (3d) 721, [2006] O.J. No. 1137, 212 O.A.C. 159, 146 A.C.W.S. (3d) 925 (C.A.); Mannpar Enterprises Ltd. v.Canada, [1999] B.C.J. No. 850, 1999 BCCA 239, 173 D.L.R. (4th) 243, 121 B.C.A.C. 275, 67 B.C.L.R. (3d) 64, 87 A.C.W.S. (3d) 673;Transamerica Life Canada Inc. v. ING Canada Inc. (2003), (ON CA), 68 O.R. (3d) 457, [2003] O.J. No. 4656, 234D.L.R. (4th) 367, 41 B.L.R. (3d) 1, [2004] I.L.R. I-4258, 127 A.C.W.S. (3d) 235 (C.A.); United Gulf Developments Ltd. v. Iskandar,[2008] N.S.J. No. 317, 2008 NSCA 71, 69 R.P.R. (4th) 176, 168 A.C.W.S. (3d) 309, 267 N.S.R. (2d) 318; Walford v.

Miles, [1992] 2A.C. 128, [1992] 1 All E.R. 453, [1992] 2 W.L.R. 174, 64 P. & C.R. 166, [1992] 11 E.G. 115, [1992] 1 E.G.L.R. 207 (H.L.) Statutesreferred to Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36 [as am.] Partnerships Act, R.S.O. 1990, c. P.5, ss. 2, 3 [as am.][page83 ] Authorities referred to La Forest, Anne Warner, Anger and Honsberger Law of Real Property, 3rd ed., vol. 2 (Toronto: CanadaLaw Book, 2010) William V. Sasso and Jacqueline A. Horvat, for plaintiffs. Bryan Finlay, Q.C., Marie-Andree Vermette and Richard Ogden, for defendant.

PATTILLO J.: -- Introduction [1] In 2004, the plaintiff Georgian Windpower Corporation ("GWC") and the defendant Stelco Inc. ("Stelco"), executed two documentsconcerning the development of a multi-part wind energy project. [2] The first document, dated June 25, 2004, is entitled memorandum of understanding (the "MOU") and confirms the general principlespertaining to the ongoing discussions between GWC and Stelco with respect to the development of what is referred to in the MOU as the"Industrial Biotricity Strategy".

The second document, dated October 20, 2004, is entitled an Agreement to Establish a Land LeaseEasement Agreement for 80 MW Wind Energy Generation and Grid Interconnect Stelco Lake Erie Site (the "AELLEA") and deals withthe proposed development of an 80 megawatt (MW) wind power generation facility on lands owned by Stelco (the "80 MW Wind PowerProject"). [3] On April 14, 2005, Stelco terminated both the MOU and the AELLEA without notice. [4] The plaintiffs' submit that both the MOU and the AELLEA are enforceable agreements entitling them to construct and operate the 80MW Wind Project and claim damages against Stelco for breach of contract arising from the termination.

The plaintiffs also assert claimsfor breach of fiduciary duty, breach of confidence and unjust enrichment. They seek damages on account of the lost profit which theysubmit would have resulted from the 80 MW Wind Power Project had it proceeded as agreed. [5] In response, Stelco submits that neither the MOU nor the AELLEA is an enforceable agreement. In the alternative, Stelco submitsthat it validly terminated both the MOU and the AELLEA in accordance with their terms. In the further alternative, Stelco submits thatthe plaintiffs have failed to prove any damages. [page84 ] Background Facts The Parties (

a) GWC [6] In the fall of 2002, Michael Monette ("Monette") was approached by Paul Boreham ("Boreham") to see if he was interested inbecoming involved in the start-up of a wind energy company. Boreham is a businessman by background and had diverse investments. Atthe time, he was also engaged in consulting to private industry and government. Also involved with Boreham were Werner (Jake) Wink("Wink") and Bill Hishon. [7] Monette is an engineer and has an MBA degree. From 1985 until his introduction to Boreham, he had primarily been engaged in theprinting and copying business.

Although he had some prior experience with energy products, he had no experience in the wind energybusiness. Monette agreed to become involved in the proposed company. [8] GWC was incorporated in March 2003. Monette became the president and CEO. Wink became the CFO and Boreham the vice-president, government and supplier relations. All three were the directors. (

b) Nanticoke 80WP Inc. [9] The plaintiff Nanticoke 80WP Inc. ("Nanticoke 80") was incorporated by GWC to carry out the development of the 80 MW WindProject referred to in the AELLEA. It was GWC's intention that Nanticoke 80 would receive all the revenue and incur all the costs inrelation to the development and operation of the 80 MW Wind Project. (

c) Stelco [10] In 2003, Stelco was a major steelmaker in Canada with its head office in Hamilton, Ontario. In addition to its steel mill facilities inHamilton, it also operated a steel mill and related operations on lands owned by it and located on the north shore of Lake Erie inHaldimand County in southwest Ontario (the "Stelco Lands"). [11] On January 29, 2004, Stelco initiated a court-supervised restructuring under the Companies' Creditors Arrangement Act, R.S.C.1985, c. C-36 ("CCAA") in the Ontario Superior Court of Justice.

Stelco's CCAA restructuring process ended on March 31, 2006. [12] At all material times relevant to this action, Stelco's CEO was Courtney Pratt ("Pratt"). Colin Osborne ("Osbourne") was [page85]its vice-president and chief operating officer and Tim Huxley ("Huxley"), a lawyer by training, was the vice- president of corporateaffairs. The Stelco Lands [13] The Stelco Lands are situated on the north shore of Lake Erie and comprise in total approximately 6,600 acres, made up of threedifferent segments.

The main segment, which is approximately 2,000 acres, is the steelmaking site where the steel mill and its associated

operations are located (the "Mill Site"). The steel mill was built in 1981 and has four modules: a hot strip mill; a blast furnace; coke ovens; and a steel shop. It is bordered by other Stelco land to the west and the north. To the south of the Mill Site is Lake Erie and a number of dwellings which are located along the shore of Lake Erie. The Mill Site includes a large deep- water dock which extends some distance out into Lake Erie. [ 14 ] To the west of the Mill Site is approximately 2,200 acres of mostly vacant farm land (the "West Lands").

The West Lands, which boarder on Lake Erie to the south, are primarily zoned for heavy industrial use. The third and final segment, which is also approximately 2,200 acres, is located primarily to the north of the Mill Site and contains an industrial park (the "Industrial Park Lands"). [ 15 ] The Stelco Lands are located approximately five kilometres to the west of the Ontario Power Authority's ("OPA") Nanticoke generating station ("Nanticoke"), which is also on the shores of Lake Erie.

Nanticoke supplied electrical power to the Ontario Power Grid (the "Grid"). [ 16 ] Stelco receives electricity for its steelmaking from the Grid through a 230 KV switch station which is located on the Mill Site. Renewable energy in Ontario [ 17 ] Ontario's Ministry of Energy's ("MOE") first competitive procurement process for renewable energy began in June 2004 with a request for proposals for approximately 300 MW of power from renewable energy ("RES I RFP").

In November of 2004, the MOE announced that ten renewable energy projects accounting for 395 MW of power had been selected to enter into 20-year power purchase agreements with the OPA. Of the ten projects selected, five were wind projects accounting for 90 per cent of the total power output. [ 18 ] The second competitive procurement process for renewable energy was initiated by MOE on April 22, 2005 when it [page86 ]issued a draft request for proposals for up to 1,000 MW of renewable energy supply with a contract capacity of between 20 MW and 200 MW.

The final version of the request for proposals was issued on June 17, 2005 ("RES II RFP"). The proposals were initially to be submitted by August 15, 2005, but the date was postponed to August 31, 2005. In total, nine renewable energy projects were selected pursuant to the RES II RFP. Eight were wind projects accounting for 955.35 MW of the 975.35 MW (or 98 per cent) of the power purchase contracts awarded. [ 19 ] After the RES II procurement, OPA proceeded with an invitation for additional renewable energy supply from larger generation projects.

RES III RFP bids were submitted and contracts were awarded in the fourth quarter of 2008. The development of a wind energy project [ 20 ] Wind energy is converted to electricity using turbines situated on top of large tubular steel towers that are operated by large blades that turn in the wind. The location of the turbine at the top of the tower is called the "hub". The wind towers are located in proximity and are referred to collectively as a wind farm.

The electrical output generated by each turbine is in turn stepped up by transformers and then fed to a substation where it is connected to the Grid. [ 21 ] The wind energy experts who testified all confirmed that the development of a wind energy project is both a complicated and time- consuming endeavor. Of primary importance are a sufficient wind resource and a suitable site. Ian Shepanik testified for the plaintiffs. Mr. Shepanik is an engineer with AMEC Americas Limited ("AMEC"), a large international engineering and project management consulting firm. Mr.

Shepanik has significant experience in the development and construction of wind energy projects. He testified that in general, the development phase of a wind energy project takes two years and the construction takes a further year. [ 22 ] The development phase involves locating the site, assessing the wind resource on the land, obtaining financing, designing the wind farm and obtaining necessary approvals, including OPA interconnection, community and environmental approvals. [ 23 ] The ideal site for a wind energy project is in an area of known wind strength and duration.

It should also be sufficiently large to be able to accommodate the wind towers. Ideally, it should be flat with low surface roughness and few obstacles in the direction of the prevailing wind. It should also be close to access roads, electrical transmission and the Grid. It should also have few environmental constraints. [page87 ] [ 24 ] Once the site has been identified, it is necessary to ensure that the wind at the site is of sufficient strength and duration to make the project economically viable.

A comprehensive wind monitoring campaign at the proposed site is necessary to properly quantify the wind resource over a significant period of time. Clint Johnson from GL Garrad Hassan ("Hassan"), a wind energy consultant who testified for the plaintiffs, said that a developer will initially put up one or two metrological towers to measure wind on the site, generally at a height equal to three-quarters of the proposed hub height.

After a year or two, if the results indicate that the wind resource is viable, several more wind-measuring towers are added to get a better understanding of how the wind will vary over different areas of the site. [ 25 ] Marion Hill, a wind energy expert with Helimax Energy Inc. ("Helimax"), who testified for Stelco, was of the view that at least a year of wind monitoring at the proposed site was required. [ 26 ] The design of the wind farm utilizes the wind data obtained. The design centres around the placement of the wind towers on the site.

The wind towers must be placed sufficiently far apart from each other in order to minimize the effect of turbulence between towers created by the wake from the towers ("array losses"). Applicable setbacks for roads and residences and environmental concerns such as noise must also be taken into account when siting the wind towers.

The siting of the wind towers is usually done by expert wind energy consultants such as Hassan or Helimax utilizing computer programs. [ 27 ] In addition to the siting of the wind towers, the design encompasses infrastructure items such as the foundations for the wind towers, transformers at the base of each wind tower, an electrical collector system (cables, substations and grid connection) and a road system, both temporary for the construction and permanent to allow access to each wind tower. The infrastructure is designed by an engineering firm such as AMEC.

[ 28 ] The size and manufacture of the turbine to be used on the wind towers is based on wind characteristics at the site. The larger the turbine's generating capacity (i.e., the more power it can generate), the fewer towers that are required. At the same time, a larger turbine size requires a larger wind tower, resulting in increased capital costs. In 2005, there were a number of established turbine manufacturers, including General Electric, Gamesa and Enercon.

Because of the manufacturer warranties on the turbines, turbine manufacturers become directly involved in the design of the location of the wind towers. [page88 ] Development of GWC's industrial biotricity strategy [ 29 ] After Monette accepted Boreham's offer to become involved in a wind power project, he proceeded to study the wind industry in detail. In 2002/2003, the wind energy business in Ontario and in all of Canada was still very much in its infancy. Governments had just started to subsidize alternative energy projects.

Monette quickly learned that a successful wind energy development required first and foremost a strong and reliable source of wind. Also important is a close proximity to the Grid to enable cost effective transmission of the power generated.

Monette also understood from studying both existing and proposed wind projects that community backlash and environmental issues were important factors to consider and avoid if possible. [ 30 ] During the latter half of 2002 and early 2003, Boreham, Wink and Monette further developed their vision beyond just a wind power project to the establishment of a consortium of companies that would ultimately provide 2,200 MW of wind energy in Ontario along with ongoing technical expertise and the manufacturing capability to design and build alternative energy projects, not only in Ontario and Canada but around the world.

They called their vision the "Industrial Biotricity Strategy" (the "Strategy"). [ 31 ] Monette began drafting a consortium agreement from precedents he obtained from a corporate law firm. [ 32 ] In due course, Monette's research lead him to the Stelco Lands. In his opinion, the Stelco Lands met all the criteria he had established as necessary for a successful wind energy project. They were located on the north shore of Lake Erie which, from his review of wind atlas maps obtained from Natural Resources Canada, had a strong reliable source of wind.

The Stelco Lands were close to the Grid, which was fed by the Nanticoke generating station. They were extensive in area and essentially vacant except for the area where the steel mill was. And they were in a rural area which would minimize the likelihood of significant negative community opposition.

In addition and also important to the Strategy that GWC was developing, the Stelco Lands also had an established industrial park available to house the envisaged renewable energy manufacturing and design facilities. [ 33 ] Monette was also of the view that the use of the Stelco Lands for GWC's Strategy would provide multiple benefits to Stelco. It was a green energy project which had the potential to supply power to Stelco for its use at its Lake Erie site. It would [page89 ]expand Stelco's industrial park.

And, last but not least, it would provide Stelco with the potential to supply the high tensile steel required for the construction of wind towers, not only on the Stelco Lands but for other wind projects in Ontario, throughout the rest of Canada and beyond. [ 34 ] Monette prepared a briefing package which contained a description of GWC and its business, a profile of wind energy in Canada and a brief overview of the wind power industry. GWC's key management personnel were listed as himself, Wink and Boreham.

Boreham began discussions with representatives of both the federal and Ontario governments about the development of renewable wind energy farms. Monette began speaking to design and construction firms as well as manufacturing firms all in the wind power business. [ 35 ] Throughout the entire period, although GWC had an address at a Toronto law firm, it was, in effect, operating out of Monette's house in Ottawa.

The introduction to Stelco [ 36 ] Towards the latter part of 2003 or early 2004, Boreham arranged a meeting at Stelco to discuss GWC's idea of developing a wind energy project including manufacturing on the Stelco Lands. Boreham and Wink initially met with Bill Missen, a vice-president of Stelco in charge of the Lake Erie steel mill. Following the meeting, Stelco advised Boreham it was interested in pursuing discussions. The parties signed a confidentiality agreement. Subsequent meetings occurred.

Huxley, who had been given responsibility for expanding the industrial park on the Stelco Lands, got involved in the discussions for Stelco. [ 37 ] On February 23 2004, Boreham and Monette met with Pratt and Huxley at the Stelco tower in Hamilton. Monette gave an overview of the wind industry in Canada generally and in Ontario specifically and GWC's vision as it related to the Stelco Lands. GWC advised Pratt and Huxley that it was engaged in meetings with the Governments of Canada and Ontario and with potential members of the consortium to attract them to the project.

GWC asked for a letter of interest from Stelco which it could show to the governments and potential consortium members. [ 38 ] On February 24, 2004, Stelco provided a letter addressed to Boreham at GWC which was signed by Pratt. The letter, which was initially drafted by Monette and revised by Huxley, set forth an expression of Stelco's interest in GWC's proposed wind power and industrial development in and around the Stelco Lands.

It referred at the outset to Stelco's understanding [page90 ]that GWC was about to meet with senior members of the federal and provincial governments as well as proposed senior consortia partners concerning GWC's Strategy. It expressed Stelco's interest in supporting GWC's initiative to bring "critical energy infrastructure" to Ontario and to pursue further discussions with GWC in respect of a number of things.

The letter referred to Stelco's interest in, among other things, manufacturing the steel required for the wind towers, the use of its industrial park to house the facilities necessary, the potential to have a wind farm located next to the Mill Site on the Stelco Lands and pursuing further discussions with GWC and other interested parties of the consortium about the idea of locating a biomass energy creation facility in the Industrial Park.

It concluded with Stelco stating it looked forward to further dialogue in respect of the next steps to bring the project and Stelco's interest in being involved to fruition. [ 39 ] Following the meeting and based on Stelco's expressed interest in pursuing discussions, GWC retained Heilmax, a wind power consultant based in Montreal, to carry out a pre- feasibility study of the winds in the vicinity of the Stelco Lands and provide an opinion on the viability of the development of a 80 MW wind power facility at the Stelco Lands.

In June 2004, Helimax issued a pre-feasibility report concerning the wind strength at the Stelco Lands relying on existing meteorological data. It concluded that the average wind speed at the Stelco Lands was expected to be in the 6-7 m per second range, which was sufficient to support the planned 80 MW Wind

Project. Helimax recommended that a one-year meteorological site assessment be carried out. [ 40 ] At the same time that GWC was talking to Stelco, it was also talking with other potential members of the consortium concerning their involvement in the Strategy. Among others, it held discussions with Upper Lakes Shipping (shipping of products); Comstock (construction); GE Windpower (turbines), and both the federal and provincial governments.

The MOU [ 41 ] In the spring of 2004, Monette and Huxley began exchanging drafts of a memorandum of understanding to be entered into by GWC and Stelco relating to GWC's plan to develop a large wind-power facility and supporting manufacturing infrastructure in and around the Stelco Lands. The initial draft was provided by Huxley from a prior document Stelco had entered into. Huxley stated that he was comfortable with the wording and form of the document given that it had previously [page91 ]been through Stelco's approval process, which at the time included Stelco's legal department.

After several redrafts, the MOU was signed by GWC and Stelco on June 25, 2004. [ 42 ] The MOU sets out the general principles of a multi-part wind power project to be developed on and adjacent to the Stelco Lands which the parties called the "Industrial Biotricty Strategy". The Strategy, which the parties acknowledged was at the conceptual stage, involved the development of 2,200 MW of wind energy on and around the Stelco Lands in stages together with an industrial infrastructure. The Strategy was to be undertaken by a public and private partnership including GWC and Stelco. [ 43 ]

Article 1 of the MOU sets out its purpose.

It begins: This Memorandum of Understanding ("MOU") is intended to confirm the general principles pertaining to the ongoing discussions between GWC and Stelco with respect to the development of a multi part wind energy project including . . . [.] It then lists the various components of the Strategy, including the design and construction of 2,200 MW of wind energy in Ontario beginning with a 80 MW land-based wind turbine facility on the Stelco Lands; the design and construction of a 120 MW wind energy project offshore in Lake Erie in the general region of Nanticoke; the development and creation of wind power manufacturing facilities in the Industrial Park on the Stelco Lands; and the construction of additional businesses, including a large-scale non-combustion biomass processing facility. [ 44 ]

Article 2, entitled "Description of Project", sets forth some of the goals of the Strategy, including maximizing environmental and community benefits while providing energy and building new industrial infrastructure in Canada. It notes that "[a]s the project will be staged, consideration will be given to initially provide for an 80 MW wind power energy facility on Stelco lands in Haldimand County and the creation of a number of supporting industrial operations on industrial lots located in Stelco's Industrial Park located adjacent to Stelco's facilities in Haldimand County". The last paragraph refers to the project as a "Triple Bottom Line project". [ 45 ]

Article 3, entitled "Scope of the Project", provides that the Strategy "will involve a number of Made in Canada and more particularly Made in Ontario facilities". It states that it is expected that all 2,200 MW of wind power would be installed and operational within ten years. It further states that the project will be structured as a public-private partnership involving GWC, Stelco, a number of other companies in the areas of research, design, construction, sea engineering, electrical [page92 ]generation and connection, and both the federal and provincial levels of government. [ 46 ]

Article 4 is entitled "General Issues" and contains four subsections.

Article 4.1 speaks to the intent of the Strategy generally. It states that the Strategy is designed to respond to and expand upon both levels of government stated desire and intent to promote wind energy in Canada. It further refers to the creation of a "Made in Canada and Ontario" industrial infrastructure to support wind power expansion in Canada and North America. [ 47 ]

Article 4.2 provides that Stelco will not align itself with another potential wind power supplier on the Stelco Land which might "seriously impede the economic or technical viability" of the Strategy. The last paragraph of art. 4.2 provides: The parties agree to negotiate in good faith, terms and conditions necessary to conclude an agreement to be a participant in the Industrial Biotricity Strategy together with other consortium members to be determined. GWC acknowledges that execution of a definitive agreement by Stelco during the period it is under court protection may ultimately require the approval by additional parties including the Court and the Court appointed monitor. [ 48 ]

Article 4.3, which is headed "Exclusivity", provides the parties will not pursue other interests related to the endeavour without written permission from the other party or the termination of the MOU in accordance with its terms.

Article 4.4 deals with the sharing of emissions credits by all parties to the Strategy. [ 49 ]

Article 5 states that the Strategy is at the conceptual stage and sets out the items that are to be included in the Strategy which it notes are subject to change.

Article 5.1 refers to a wind power facility of approximately 80 MW of capacity on the Stelco Lands.

Article 5.2 refers to wind power facilities located offshore in the Great Lakes generating "significant" portions of the 2,200 MW, and specifically referring to 120 MW located in the general region of Nanticoke in Lake Erie.

Article 5.3 speaks of "potential" access to Stelco's dock and shoreline and its rail connections at the Stelco Lands to support the Strategy, compatible with Stelco's existing use.

Article 5.4 refers to the use of Stelco's industrial park for the manufacturing facilities to support the Strategy.

Article 5.5 refers to the potential of using the Stelco Lands and existing electrical systems for the interconnection of power for both the wind power and biomass facilities. It also refers to the potential of Stelco purchasing power "through a yet to be determined power purchase agreement". [ 50 ]

Article 6 sets out the production capability to be established by the consortium members, including manufacturing [page93 ]structures for wind turbine components, research and development, development of transmission infrastructure and a non-combustion- based wet organic waste processing facility. The terms and conditions of such a relationship were to be negotiated between GWC and Stelco together with the other consortium members. [ 51 ]

Article 7, headed "Termination", provides as follows: Specifics of the terms and conditions around termination would form part of the negotiations on any formal agreement entered into as

part of the Industrial Biotricity Strategy. This document is assumed to remain in force until (

i) either party provides notice of their intention to terminate the agreement or (ii) an agreement between Stelco and GWC is signed covering Stelco and GWC's relationship in respect to the Industrial Biotricity Strategy. To terminate the agreement, either party will be required to provide a notice period of at least sixty (60) days. In the event of termination, each party will be responsible for all costs incurred by them with respect to the development of this Industrial Biotricity Strategy, up to and including the date of termination. [ 52 ]

Article 8 provides that no party will make a public announcement with respect to the MOU without the prior approval of the other, except in respect of securities and stock exchange laws and then after consultation with the other party.

Article 9 sets out how notice is to be given and provides the addresses and contact people for each of GWC and Stelco. After the MOU [ 53 ] Subsequent to the MOU being signed, GWC continued to solicit members of the proposed consortium. It also began to focus on the "startup" of the 2,200 MW of wind energy, an 80 MW land-based wind turbine facility on the Stelco Lands as referred to in art. 1 of the MOU.

In that regard, it entered into agreements with both AMEC (engineering and development of wind power facilities) and Black & MacDonald (electrical construction) to provide consulting services to GWC concerning the general technical requirements for the project and on the electrical interconnection.

Both AMEC and Black & MacDonald provided their services without charge to GWC with the agreement that they would be involved in the design and construction of the 80 MW Wind Project. [ 54 ] Utilizing commercial software, Monette began to estimate the costs that would be incurred in order to design and construct the 80 MW Wind Project on the Stelco Lands. Monette estimated it would cost $97 million to design and construct a wind turbine system modelled on 22 3.6 MW General Electric turbines. In addition, a switching station estimated at $12 million was also required.

The balance of the costs was made up of up-front [page94 ]feasibility work, administration costs, salaries and government costs. For GWC, a major issue was how to raise the money. [ 55 ] As a newly formed company, GWC was short on capital. The principals provided their time and talents on the understanding they would be compensated when GWC received sufficient financing in the way of either debt, equity infusion or both. [ 56 ] Initially, GWC raised capital through the sale of shares of Nanticoke 80 with entitlement to flow-through expense provisions as approved by Revenue Canada.

As at April 14, 2005, the date of the termination, Nanticoke 80 had raised $100,000 from the sale of flow-through shares. Nanticoke 80 also raised additional moneys from the sale of flow-through shares after the termination. In total, Nanticoke 80 has raised $236,549 through the sale of Class A FTS shares.

The money was used in part for the initial feasibility study conducted by Helimax, the purchase of the wind measuring equipment and the erection of wind measuring towers on the Stelco Lands. [ 57 ] In addition, Boreham, Wink and Monette spent a good deal of their time contacting various government agencies, banks and other financing entities to try and raise funds and obtain consortium partners, not only for the 80 MW Wind Project but also for the larger Strategy. [ 58 ] In July 2004, GWC was introduced to Algonquin Power Income Fund, which, together with its related Algonquin Power Venture Fund, invests in renewable energy projects.

On July 30, 2004, GWC and Algonquin Power Venture Fund Inc. entered into a non- disclosure agreement concerning the 80 MW Wind Project. [ 59 ] On July 26, 2004, Monette contacted Haldimand County to obtain its assistance in obtaining some funding from the Federation of Canadian Municipalities Green Municipal Industry Funds. [ 60 ] On September 10, 2004, Monette and representatives of AMEC and Black & MacDonald visited the Stelco Lands to review Stelco's existing electrical substations and switch areas as well as look at the site for possible wind tower locations.

On the same day, Monette sent Stelco (Huxley) an e-mail outlining the steps necessary to proceed with the 80 MW Wind Project, including a detailed wind assessment on the Stelco Lands and an electrical interconnection study. Monette proposed that they complete a land use agreement following which GMC would hire AMEC to erect two meteorological towers to measure the wind on Stelco Lands. The final number of wind towers and their placement on the Stelco Lands would be determined based on the detailed wind assessment.

Monette estimated that the direct [page95 ]and indirect expenses for carrying out a detailed wind assessment would be approximately $250,000. [ 61 ] On September 15, 2004, Monette asked legal counsel who had been introduced by Boreham for a precedent for a "land rental/lease agreement" to enable him to work out the final details of land usage with Stelco. Monette requested the assistance on the basis that GWC would pay for the service when it obtained its funding. Monette also sourced precedents from the Internet.

The AELLEA [ 62 ] On September 30, 2004, Monette sent his first draft of GWC's proposed land lease/rental agreement to Huxley at Stelco. [ 63 ] The AELLEA was finalized and executed on behalf of GWC and Stelco on October 20, 2004.

The entire document, including bolding, is set forth below without the signature lines and Attachment "A", which contained a brief legal description of the Stelco Lands involved: Agreement to Establish a Land Lease Easement Agreement Stelco Lake Erie Site OCTOBER 20, 2004 Agreement to Establish a Land Lease Easement Agreement for 80 MW Wind Energy Generation and Grid Interconnect Stelco Lake Erie Site Between Georgian Windpower Corporation hereinafter referred to as "GWC" And STELCO Inc. hereinafter referred to as "Stelco" This agreement ("Agreement") is to confirm the terms and conditions between Georgian Windpower Corporation ("GWC") on the one hand and Stelco Inc. ("Stelco") on the other hand as follows: 1.

GWC and Stelco agree to establish a land lease easement agreement to realize the effective deployment of up to 80 MW of windpower productive capacity at its Lake Erie (Nanticoke) integrated steelmaking site. The wind project shall be located on the approximate 2,000 acre Lake Erie integrated steelmaking site and on suitable adjacent shoreline land along the Lake Erie shoreline in locations suitable for

wind energy generation and compatible with other uses of such lands. GWC and Stelco also agree to consider the placement of wind power turbines on the lands to the west of the Lake Erie integrated steelmaking site owned by Stelco subject to Stelco in its sole discretion always having the right to refuse to enter into a land lease easement agreement for the placing of wind power generation facilities on such lands.

GWC recognizes that the said lands while presently undeveloped, are capable of being used for heavy industrial applications and as such may in Stelco's opinion not be suited for wind power applications. [page96 ] 2. Siting of wind turbines will be done in a way that maximizes wind energy capture while preserving the value of industrial land for activities and structures that may coexist with the wind power generation facilities and result in minimal adverse impact for these uses when they are competing. 3.

GWC and Stelco shall each use best efforts in respect to establishing a land easement agreement for the siting and commissioning of the 80 MW approximate wind power generation facility which agreement shall be satisfactory to each of them acting reasonably. 4. Stelco shall provide GWC access to its land for the erection and operation of one or two wind measurement meteorological towers for the purposes of establishing the nature and characteristics of the wind resource and as a precursor to siting of wind power turbines mounted on steel fabricated towers and supporting foundations.

GWC shall establish a detailed wind measurement program evidenced by the placement of wind measuring equipment and one or two wind measurement towers on the land within 3 months of the signing of this agreement. 5.

Stelco shall use its best efforts to accommodate connection of the wind power generation facility to the Ontario Power Grid at the nominal 230 KV level via Stelco's existing on site 230 KV switch station in a manner that protects the Stelco site and its existing receipt of electricity from the Ontario Power Grid while at the same time assisting GWC to achieve the lowest cost connection to the Ontario Power Grid.

Stelco and GWC agree that this may also entail the use by GWC of the existing 230 KV line from the Ontario Power Grid to Stelco and if that is not possible because of security of supply issues to Stelco or for other reasons such as system interconnection study results, then Stelco will use its best efforts to assist GWC in the siting of a second interconnection line to the Ontario Power Grid. Actual costs of any interconnections will be to the account of GWC. 6.

The land lease easement agreement shall contain necessary headings and fair and reasonable terms per common practice in the Province of Ontario with respect to payment of incremental land taxes, indemnifications, liens, restrictions on use of hazardous materials, land rights for easement holder and landlord, cooperation to obtain required permits, adherence to Municipal, Provincial and Federal regulations as may be applicable and other standard terms customary in land easement agreements in keeping with the principles of this Agreement which Agreement shall be satisfactory to each of them acting reasonably. 7.

GWC, its affiliate Georgian Windpower Corporation -- Nanticoke 80 Inc., and Stelco agree that the land lease easement agreement shall include in its terms the following specific terms, and shall be completed on a timely basis once sufficient detailed wind assessment data is received (typically 6 months of data shall be required to a maximum of 12 months of data). 7.1. Land Area 7.1.1.

Stelco shall work in good faith with GWC for the placement and commissioning of up to 80MW of wind power generation capacity located on mutually agreed upon areas of its 2,000 acre Lake Erie integrated steel making site and adjacent shoreline on Lake Erie, with specific intentions to locate wind turbines along the waterfront areas and Western edges of the property. [page97 ] 7.1.2. Description of Land Area 7.1.2.1.

The land area comprises that portion of about 2,000 acres of Stelco's Lake Erie integrated steel making site known as those lands more particularly descried in attachment A to this agreement required for the actual 80MW wind power generation system. 7.2. Payment Terms 7.2.1. Stelco shall provide the land easement for an annual fee of $4,000 per tower. 7.3. GHG Credit Treatment 7.3.1. Stelco shall be granted 50% of any generated GHG or other environmental Credits from the 80MW project. 7.4 Commitment to Development 7.4.1.

GWC shall share with Stelco the findings of the wind assessments and commence construction of the wind power project within six months of the completion of twelve (12) months of detailed wind measurements. Initial construction shall consist of between one and seven turbines for wind resource exploration and confirmation purposes followed by construction, after a 120-day test period, of the remaining wind power turbines on the allocated land areas. 7.5. Transferral of Easement Rights 7.5.1.

Stelco shall ensure that GWC shall be named as an easement holder and such rights shall be named with the Land Registry of Ontario such that the easement rights remain in effect through the sale or re-assignment of the properties to a third party subject to compliance with the Planning Act of Ontario . 7.6. Term 7.6.1. The easement shall be in force for a period of 25 years recognizing that the standard operational period for such a wind project is 20 years from the date of first power delivery.

7.7. Renewal Terms 7.7.1 GWC shall have the option to renew the easement terms for two subsequent periods of 25 years each, provided that the wind power facility is maintained in an operational and power generating capacity adhering to good power generation practices. The actual time of renewal will be calculated as 20 years from the date of first power delivery from the last turbine constructed in the project, to a maximum of 25 years. If any land transfer tax is applicable, it will be to the account of GWC. 7.8 Completion of Project 7.8.1.

At the end of each 25 year period, recognizing that the actual date may be earlier based upon the completion of 20 years of power generation from all wind turbines in the project, GWC shall have the right to cease operations of the wind power project [page98 ]and may, subject to Stelco having the first right of refusal for the purchase of the energy project at fair market value: 7.8.1.1.

Effect the removal of the wind power turbines, towers and foundations and return the land to near original condition, thereafter having no further obligations to Stelco Corporation; 7.8.1.2. or, refit the site as may be appropriate and continue operation for a subsequent 25 year period. 8. Usage of Land 8.1.

GWC acknowledges that its wind energy facilities will be located on an operating integrated steel making site and as such that both GWC and Stelco will use the best efforts to ensure safe access to the GWC sites as well as establish working arrangements that result in safe practices in respect to activities that both parties need to engage in on the 2000 acre steel making site. Stelco and GWC will mutually determine standard operating procedures for GWC to access its equipment, wind turbines and other physical structures to the mutual safety and avoidance of interference in the affairs of each party.

Subject to the aforesaid and sections 9 and 10, Stelco agrees that GWC shall have the exclusive right to the use of agreed upon areas of the land for the following: 8.1.1. Right to construct, operate, maintain and as may be required retrofit a wind energy conversion facility. 8.1.2. Right to transmission of the energy generated by the wind energy conversion facility. 8.1.3. Right to conduct certain activities on the land prior to constructing any wind energy facilities. These activities may include the following: 8.1.3.1. Conduct detailed wind assessments per 4.0. 8.1.3.2. Taking soil samples. 8.1.4.

Construct on certain portions of the land the wind turbines on towers that will generate the energy and the related physical structures including those that will convert the energy into electricity. 8.1.5. Install power lines or cables over/under certain portions of the land that will carry the electricity to the power company subject to both GWC and Stelco working together to ensure compatible locations for such lines given that the GWC facilities will be installed on Stelco's operating integrated steel making site. 8.1.6.

Have access to Stelco private roads and as necessary temporary roads to be furnished by GWC as may be required, which connect to public or private roads, the rail drop off points or the Stelco dock, usage of the Stelco dock and usage of the rail line for the purpose of receiving wind power turbines, blades, towers and associated erection and site construction materials and machinery delivered by land, rail or sea for the purpose of constructing the wind power turbines and towers.

GWC recognizes that the Stelco dock is integral to the operation of the steelmaking facility and as such is required for the [page99 ]movement of materials to and from the facility. GWC acknowledges that Stelco's use of the dock for its steelmaking activities will have priority over other uses referred to herein. Subject to the aforesaid, Stelco agrees to use its best efforts to accommodate GWC's needs for use of the dock in respect to the timing of receipt of materials for the purpose of constructing the wind power turbines and towers.

GWC recognizes that Stelco piping exists over certain roadways and shall take all reasonable and necessary measures to avoid the transport of materials near critical piping. 8.1.7. Right to construct and install wind energy facilities and in connection with such activity construct and install the following: 8.1.7.1. Foundations, concrete pads and footings; 8.1.7.2. Wind turbine units ranging in size from 1.0MW to 5.5MW capacity each, selection subject to detailed wind assessment results and supplier costing and availability; 8.1.7.3.

Guy wires and anchors for the wind measurement towers as defined in 4.0; 8.1.7.4. Towers for the support of the wind turbine units, towers nominally 60m to 100m in height and constructed typically of simple tubular steel sections with diameters of approximately 4-5m in a freestanding form and attached by secure attachments to the foundations in accordance with sound engineering principles, and equipped as required by legislation with any necessary navigational warning lights or beacons; 8.1.7.5.

Buildings needed for maintenance of wind turbine units and maintenance and storage or related equipment, said buildings consisting of one local utility shed of approximately 400sf at each tower for the purposes of housing any step-up transformers and wind turbine monitoring and control equipment, a site support shed of approximately 1,000sf for storage of frequently used maintenance materials; 8.1.7.6. During the period of construction allowance for the temporary placement of construction workshop trailers and a ground area for

temporary parking of working vehicles such as front end loaders, backhoes, and concrete mixing and pouring equipment used to build the foundation, install cabling and one or two large and up to four medium size cranes to erect the towers and turbines (the rate of erection of the towers and turbines is approximately 1 tower per day and 1 tower per two (2) days for the initial 7 towers and turbines); 8.1.7.7.

Electrical transformers and energy storage facilities in the form of a research and development Hydrogen cell generation unit and Hydrogen Fuel Cell electrical generator, said equipment to be housed inside the tower and optionally in an adjacent enclosure expected to be no more than 1,000sf in size, and subject to future development storage batteries or other forms of energy storage located in the same enclosure or within the turbine tower; 8.1.7.8. Electric transformers, electric distribution and transmission towers per 5.0 and 8.1.5. [page100] 8.1.7.9.

Substations or switching facilities per 5.0. 8.1.8 Right to engage in all other activities reasonably determined to be necessary or useful to accomplish the general purpose of the easement in keeping with the Memorandum of Understanding (MOU) dated May 28, 2004 between GWC and Stelco, recognizing that the terms to the Land Lease Easement Agreement will take precedence. 9. GWC acknowledges that Stelco intends to recover natural gas that may be available to it on its Lake Erie (Nanticoke) integrated steelmaking site.

GWC and Stelco agree to use best efforts in respect to the terms of the land lease easement agreement to allow for the mutual deployment of wind towers as well as the recovery of natural gas on the site by Stelco. 10. GWC acknowledges that over the life of the land lease easement agreement Stelco may in its sole discretion add to, modify, reorganize, and change its physical assets on its Lake Erie integrated steelmaking site and as such may in the process change the wind properties of the site such as to affect the generation capabilities of some of the wind power turbines located on the site.

Stelco agrees to use its best efforts to minimize any adverse impacts such activities may have on the effectiveness of GWC's wind power turbines and the parties agree to consult with each other as may be required to minimize such adverse impacts if any. GWC and Stelco acknowledge that it may be necessary or advisable to move existing turbine towers over the life of the land lease easement agreement and in such case both parties agree to consult each other and agree to work together to resolve issues arising therefrom. 11.

Stelco acknowledges that GWC is a power generator and owner/operator and is entitled to all revenues from the sale and delivery of electric power, and any other valuable considerations with relation to its ownership of the wind power project, excepting the GHG and other environmental credit allocation as stipulated in clause 7.3.1. After the AELLEA (

a) Wind assessment [ 64 ] Following the signing of the AELLEA, GWC proceeded with the installation of wind measuring towers on the Stelco Lands. On December 29, 2004, it installed a 39-metre meteorological tower on the Stelco Lands. A second meteorological tower, 60 m in height, was installed on February 21, 2005. The work was done on GWC's behalf by a company owned by Monette. (

b) Financing [ 65 ] In addition, GWC continued to seek to obtain both public and private funds. Up until the end of October 2004, GWC's only source of revenue was from the sale of Nanticoke 80's flow- through shares. [ 66 ] Monette and Boreham continued to have numerous meetings and discussions with potential funders and consortium members in respect of both the larger Strategy and the 80 MW [page101] Wind Project. In conjunction with its discussion with Algonquin which were continuing, GWC also began speaking with Vertex Energy Limited ("Vertex") in early January 2005.

Vertex is located in western Canada and is also involved in resource sector financing.

Although it had no formal association with Algonquin, Vertex had some dealings with it and, as Monette described it, was a potential participant in providing GWC with working capital to enable it to carry out its feasibility studies, including the electrical interconnect study and the completion of the wind measurement. [ 67 ] After numerous discussions, GWC entered into a non- binding term sheet with Algonquin Power Income Fund, Algonquin Power Venture Fund and Vertex (collectively the "Partners") on February 17, 2005 relating to the financing of the 80 MW Wind Project (the "NBTS"). [ 68 ] The NBTS provided that the Partners would finance $400,000 of start-up capital and provide a bid bond to back GWC's RES II RFP bid to the province.

If the bid was successful, they would provide a further $1.1 million to the GWC principals in effect to reward their sweat equity. [ 69 ] Subject to other moneys being raised, the NBTS further provided that the Partners would also provide or arrange for $140 million in capital for the 80 MW Wind Project, made up of 50 per cent debt and 50 per cent equity. Of the $70 million of senior debt, the Partners would provide $20 million and $50 million would be provided by a bank.

The $70 million in equity was to be made up of $36 million from investors and $34 million from tax assisted CRCE flow-through financing. [ 70 ] The NBTS further provided the shares in the 80 MW Wind Project would be owned 47.5 per cent by the Partners and 47.5 per cent by GWC. The remaining 5 per cent would be available to GWC to sell for interim working capital. [ 71 ] Following the signing of the NBTS, Algonquin and Vertex began their due diligence in respect of the 80 MW Wind Project. As part of its due diligence, Vertex retained Phoenix, a wind consultant, to review the wind resource at the Stelco Lands. (

c) Electrical interconnection [ 72 ] In the late fall of 2004 and early 2005, preliminary discussions took place between GWC and Stelco concerning the electrical interconnection of the 80 MW Wind Project to the Grid. In addition to Monette, representatives from Black & MacDonald attended on behalf of GWC and they met with engineers from Stelco.

[ 73 ] The status of the electrical interconnection part of the 80 MW Wind Project as at March 14, 2005 is summed up in the [page102] executive

summary of an internal memorandum of Algonquin Power which was written as part of its due diligence. It states: GWC is in the early stages of conceptual development of the project. GWC has had only one brief meeting with Hydro One and IESO and has obtained limited advice from Amec on project and interconnection requirements. Black & MacDonald has provided pricing on equipment and installation but no preliminary engineering has been performed to date. GWC has been in negotiations with Stelco over the last year and has entered into some agreements for the potential use of their land.

No assessments have been made on the impact of the interconnection on the Stelco mill operations, other Hydro One Networks customers, or the IESO controlled electricity system. The cost of these assessments could be in the range of $150,000 and may take up to one year to perform. If any modifications are required to Hydro One, OPG or Stelco facilities to accommodate the project there would be additional costs not known at this time. (

d) Design of the wind farm [ 74 ] In early 2005, Monette began working on the siting of the wind towers and determining which turbine to use. The turbines Monette was considering at the time were a Vestas 1.8 MW turbine and a GE 1.5sle turbine (1.5 MW). Both were in use in Ontario in existing wind power projects. [ 75 ] In respect of the siting of the wind towers on the Mill Site, Monette used a commercially available software called WindPro. By early March 2005, Monette had loaded the computer model with information to determine proposed sitings for towers on the Mill Site.

Because there was not sufficient information available from GWC's wind measuring towers on the Stelco Lands, Monette used publically available wind data local to the area of the Mill Site. [ 76 ] On March 11, 2005, there was a meeting between GWC and Stelco personnel at the Mill Site.

Monette shared a site plan of the Mill Site he had prepared showing locations for between 40 and 53 towers, depending on the size of the turbine GWC would chose. [ 77 ] On April 7, 2005, Monette sent Stelco a "preliminary" sketch indicating the location of 40 towers with two MW turbines indicating that the placements were "possible layouts". Monette noted that it was a starting point for discussion. [ 78 ] GWC and Stelco met on April 11, 2005 to discuss, among other things, the siting of the towers. GWC provided a sketch showing the location of 40 towers on the Mill Site.

The minutes note that the Stelco representatives had a number of issues with the proposed locations of the wind towers. [page103] [ 79 ] The parties next met on April 14, 2005. Monette produced a revised location sketch again containing 40 wind towers situated on the Mill Site. [ 80 ] Although Monette indicated to Stelco at the time of the meetings that GWC's wind experts were running simulations to determine refined locations for the wind towers, the evidence establishes that was not the case.

The siting of the towers on the Mill Site was being done only by Monette, without any input or assistance from either wind energy experts or turbine manufacturers. The termination [ 81 ] On April 14, 2005, Stelco sent GWC a letter terminating the MOU effective immediately, "[p]ursuant to

Article 7" and the AELLEA " -- in accordance with its terms". The letter also gave notice of Stelco's desire "to terminate all other contracts, agreements or arrangements arising from any document in connection with the establishment of a land based wind turbine facility on Stelco's lands by, in conjunction with or in partnership with GWC".

It reminded GWC of its obligations of non-disclosure in art. 8 of the MOU and asked that it contact Huxley to arrange for the removal of its equipment from Stelco's property within a reasonable period of time. [ 82 ] The termination came as a complete surprise to GWC. [ 83 ] Unbeknownst to GWC, Stelco's termination of both the MOU and the AELLEA on April 14, 2005 had been in the works for some period of time. [ 84 ] In the middle of February 2005, the Toronto Star published a series of articles about the 80 MW Wind Project and GWC's wider Biotricity vision of the development of a wind manufacturing industry on the Stelco Lands.

When the articles came to Stelco's attention, both Pratt and Osborne became very concerned about them given that Stelco was still in CCAA . Pratt's concern was heightened by a comment Huxley made to him by which he understood GWC was on the verge of putting up wind turbines on the Stelco Lands. Pratt's understanding was that GWC was simply doing wind testing on the Stelco Lands to determine if the wind resource was viable. [ 85 ] Osborne became concerned about GWC when he learned that it had contacted Mitsubishi, who was an important customer of Stelco.

Osborne had worked with Mitsubishi on a number of projects and had strong ties with it. He was also concerned with what he felt was a lack of progress by GWC in moving forward with the 80 MW Wind Project. [page104] [ 86 ] Both Pratt and Osborne also started to have concerns about GWC's experience in the wind industry and its "ability to execute" as Osborne put it. They initiated some due diligence on GWC. Pratt contacted a business person he knew who had worked for the Trudeau government to obtain information on Boreham and GWC and the information he received raised his concerns.

He then arranged for Stelco to retain a government relations advisor at a major Toronto law firm to further look into GWC and its track record in the wind industry. Osborne contacted Stelco's legal counsel and a person he knew in the wind industry to inquire about GWC. [ 87 ] Stelco was subsequently advised that GWC was a relatively new player in the wind industry without a completed project. It was not known by the two key players in the wind industry contacted by the government relations advisor or to the person in the industry Osborne contacted. Nor was it a member of any industry associations.

Finally, although it had had some contact with government, it had nothing substantive to offer. Pratt sought legal advice, following which, in or around March 20, 2005, he reached the decision to terminate the relationship with GWC.

[ 88 ] On March 21, 2005, Pratt sent an e-mail to Huxley indicating that he felt the relationship with GWC should be terminated. Pratt said that he had consulted with Stelco's legal counsel about the termination. Huxley, who was in London, England at the time on business, responded to Pratt's e-mail on March 22. He indicated that while the MOU could be terminated on notice in accordance with its terms, he didn't think there were any grounds for terminating the AELLEA at that time.

He noted that, in his view, GWC was abiding with the terms of the AELLEA. [ 89 ] Pratt said that he did not understand that Huxley, who was not Stelco's corporate counsel, was giving him legal advice at the time. He considered Huxley's e-mail response but decided, based on legal advice, to terminate Stelco's relationship with GWC. When Huxley returned to Canada, he ended up agreeing in the decision. [ 90 ] The termination letter was sent on April 14, 2005. Post termination [ 91 ] Stelco began discussing the idea of utilizing co- generation at its Hamilton and Lake Erie mills in 1995.

At the Lake Erie mill, co- generation involved generating electricity utilizing the waste gasses from both the basic oxygen furnace and the coke oven on the Mill Site (the "Co-gen Project"). The Co-gen Project [page105] potentially represented very significant cost savings to Stelco's operations but required significant capital expenditure in order to implement. One of the obstacles to Stelco in proceeding with the Co-gen Project over the years was obtaining the necessary financial support in order to fund it. [ 92 ] By early 2005, Stelco had been working on the Co-gen Project for some time.

It had done some of the engineering and had procured some of the equipment for the first phase which Stelco estimated would cost between $22 and $30 million at the Lake Erie mill. In addition, it had also been actively seeking alternate sources of financing and in that regard had met with government representatives, banks, private lenders and the private equity market.

Stelco's work on the Co-gen Project was entirely separate from and did not involve GWC or the 80 MW Wind Project. [ 93 ] One of the ways Stelco considered financing the Co-gen Project was through the procurement of a long-term power purchase contract with the OPA. [ 94 ] In early March 2005, Stelco representatives met with the OPA to introduce the Co-gen Project and outline the benefits for Stelco, the steel industry and the province.

Following the meeting, Stelco and its advisors met with government representatives, including the OPA, to try and influence the inclusion of steel and off-gases as a renewable resource in the OPA's upcoming RFP. [ 95 ] Later in March 2005, Stelco's representatives met with Steven Probyn from the Probyn Group, the managers of the Clean Power Income Fund, about financing the Co-gen Project.

As part of the discussions, the idea was presented of integrating a wind power project with the Co-gen Project in order to be in a better position to obtain a power purchase contract from the OPA. [ 96 ] When the OPA released its draft RFP for the RES II on April 22, 2005, steel gasses were not included as a renewable energy source. Stelco representatives realized if that decision remained, it would not be successful in obtaining a power contract under RES II for the Co-gen Project. In an effort to change that decision, Stelco and its representatives met with representatives of the Ontario government and OPA.

When the final RFP was released by the OPA on June 17, 2005, steel gases were still excluded. [ 97 ] Stelco subsequently decided to proceed with developing a wind power project on the Stelco Lands in order to submit a bid in the RES II RFP in the hope of being able to then negotiate with the OPA to add in the Co-gen Project.

In order to be in a [page106] position to make a bid, Stelco hired Zephyz North, a wind consultant, to advise on wind; AMEC to advise on construction issues; Acres to deal with electrical issues; and Genpower, who was the consultant that Stelco had been using on the Co-gen Project. [ 98 ] On August 28, 2005, Jim Salmon from Zephyr North sent Stelco a wind farm design incorporating 33 wind towers located on both the Mill Site and the West Lands. In order to design the wind farm, Zephyr North utilized wind data from available local sources.

Zephyr North did not use any wind data or other information from GWC. [ 99 ] Although Stelco drafted a bid proposal for the RES II RFP, it decided not to submit it because it was non-compliant because of, among other things, the co-generation component. Instead, Stelco submitted a letter to the OPA stating that the Co-gen Project did not meet OPA's bid conditions but it wished to speak with it about the Project nevertheless. Stelco never received a formal response to its letter from the OPA. [ 100 ] After August 31, 2005, Stelco continued to work on the development of a wind power project on the Stelco Lands.

In early 2006, Stelco hired Zephyr North to carry out a wind resource assessment on the Stelco Lands. In that regard, in January/February 2006, Zephyr North erected a wind measurement tower on the Stelco Lands. Stelco also continued to work on the Co-gen Project. [ 101 ] On April 1, 2006, Stelco emerged from CCAA . In the absence of being able to convince its major lender to provide financing for a wind power project at the Stelco Lands, Stelco discontinued all work on it. Position of the parties (

a) GWC [ 102 ] GWC submits that both the MOU and the AELLEA created immediate binding obligations on the parties to act with best efforts or in good faith to make the 80 MW Wind Project a reality. By wrongfully terminating the agreements, GWC submits Stelco breached both its performance obligations and its best efforts and good faith obligations that arise from the agreements. [ 103 ] GWC further submits that in terminating its relationship with GWC in the manner and for the reasons it did, Stelco acted in bad faith. [ 104 ] In the alternative, and in the absence of contractual obligations, GWC submits that the relationship between GWC [page107] and

Stelco gave rise to a partnership and/or a fiduciary duty on Stelco's part, which it breached by terminating their relationship.

Theplaintiffs further submit Stelco breached an implied duty to refrain from unconscionable conduct. [105] GWC also submits Stelco was in breach of confidence by appropriating its confidential information in respect of the Strategy andthe 80 MW Wind Project. [106] GWC submits that as a result of Stelco's breach of contract, GWC has lost the chance to develop the 80 MW Wind Project andenjoy the monetary benefits which would be occasioned from it and is accordingly entitled to be compensated for its loss. [107] Finally, the plaintiffs submit that in terminating the MOU and the AELLEA, Stelco has been unjustly enriched by gaining access toGWC's plans and estimates giving it the opportunity to develop the 80 MW Wind Project as well as other aspects of the Strategy on itsown or with others. (

b) Stelco [108] Stelco submits that both the MOU and the AELLEA are unenforceable because they are no more than agreements to agree; GWCand Stelco did not intend to create binding agreements when they signed the MOU and the AELLEA; and GWC and Stelco did not reachagreement on all essential terms. [109] In the alternative, Stelco submits that it validly terminated the MOU and the AELLEA in accordance with their terms. [110] Stelco denies that it failed to perform any contractual obligation in good faith, either because of the absence of any bindingcontractual agreements or valid termination of the agreements. [111] Stelco denies that the relationship with GMC was a partnership or gave rise to any fiduciary obligations on its part or that itmisappropriated or misused any of GWC's confidential information. [112] Stelco submits that even if the court finds that it was in breach of the MOU and the AELLEA, GWC has failed to prove it hassuffered any damages.

The contingencies facing GWC's development of the 80 MW Wind Project, when taken together, lead to theinevitable conclusion that the plaintiffs would not have been able to develop the 80 MW Wind Project, let alone receive any profits fromit. [113] Finally, Stelco denies that it has been enriched in any way as a result of its relationship with GWC. [page108] The issues [114] The following are the issues raised by GWC and Stelco in this action:

(1) Do the MOU and the AELLEA create binding obligations between GWC and Stelco and, if so, did Stelco breach any of them? (2)Are there good faith/best efforts obligations arising from the agreements which Stelco breached?

(3) Did Stelco act in bad faith interminating the agreements?

(4) Did the relationship between GWC and Stelco give rise to a partnership or a fiduciary duty and, if so,was Stelco in breach thereof?

(5) Did Stelco commit a breach of confidence?

(6) Was Stelco unjustly enriched?

(7) If Stelco hasbreached any obligations to GWC, what damages is GWC entitled to? Law and analysis (

i) Do the MOU and the AELLEA create binding obligations? [115] The preliminary issue raised by the parties is whether the MOU and/or the AELLEA are binding agreements enabling GWC todevelop and operate the 80 MW Wind Project. GWC submits they are. [116] Stelco submits that both the MOU and the AELLEA are not binding contracts for three reasons: they are agreements to agree; therewas no intention to create legal obligations; and the parties did not agree on all essential terms of the agreement. [117] Before analyzing the MOU and AELLEA, I set out some general principles dealing with the

interpretation of contracts and thecontractual issues identified by the parties.

(1) Interpretation of a contract [118] A contract is to be interpreted in accordance with the intention of the parties at the time they entered into the agreement havingregard to the words the parties used and the provisions of the contract as a whole: see Consolidated- Bathurst Export Ltd. v. MutualBoiler & Machinery Insurance Co., (SCC), [1980] 1 S.C.R. 888, [1979] S.C.J. No. 133; Eli Lilly & Co. v. NovopharmLtd., (SCC), [1998] 2 S.C.R. 129, [1998] S.C.J.

No. 59. [page109] [119] Regardless of whether the words under consideration are clear and unambiguous on their face or contain some ambiguity, it ispermissible, as part of the interpretive exercise, to consider evidence of the circumstances surrounding the making of the agreement.Such extrinsic evidence has been referred to as the "factual matrix" and involves the origins of the agreement, its purpose and thecommercial context in which it was made: see Dumbrell v. Regional Group of Companies Inc. (2007), 2007 ONCA 59 85 O.R.(3d) 616, [2007] O.J.

No. 298 (C.A.), at paras. 53-55. [120] What is not admissible in interpreting a contract is the subjective intention of the parties.

(2) Agreements to agree or negotiate [121] It has long been held that agreements to agree or negotiate are not enforceable: Walford v. Miles, [1992] 2 A.C. 128, [1992] 1 AllE.R. 453 (H.L.); Cedar Group Inc. v. Stelco Inc., [1995] O.J. No. 3998, 59 A.C.W.S. (3d) 1096 (Gen. Div.), affd [1996] O.J. No. 3974,66 A.C.W.S. (3d) 867 (C.A.). As Lord Ackner stated in Walford, at p. 138 A.C., "The reason why an agreement to negotiate, like anagreement to agree, is unenforceable, is simply because it lacks necessary certainty."

(3) Essential terms

[122] In order for there to be a binding contract, the parties must agree on all of the essential terms of the agreement: see ConsulateVentures Inc. v. Amico Contracting & Engineering

(1992) Inc., [2007] O.J. No. 1663, 2007 ONCA 324, 223 O.A.C. 330 (C.A.), at para.81. The rationale is similar to that in respect of agreements to agree or negotiate. An agreement which lacks the essential terms is toouncertain to be enforceable. [123] Where the essential terms have not been settled or agreed upon or where the contract is too general or uncertain to be valid, theagreement is not valid.

Similarly, where the understanding or intention of the parties, even where there is no uncertainty as to the termsof the agreement, is that their legal obligations are to be deferred until a formal contract has been approved and executed, the initialagreement is not binding: see Bawitko Investments Ltd. v. Kernels Popcorn Ltd., (ON CA), [1991] O.J. No. 495, 53O.A.C. 314 (C.A.), at para. 21. [124] What constitutes the "essential terms" depends on the subject matter of the contract and what transpired at the time of the allegedagreement: see United Gulf Developments Ltd. v. Iskandar, [2008] N.S.J.

No. 317, 2008 NSCA 71, 69 R.P.R. (4th) 176. Cromwell J.A.(as he then was) stated, at para. 14:[page110] To have an enforceable contract, there must be agreement between the parties as to all essential terms. To use the language of a leadingcase, a contract ". . . settles everything that is necessary to be settled and leaves nothing to be settled by agreement between the parties":May & Butcher Ltd. v. R. [1934] 2 K.B. 17 (H.L.) at p. 21. Determining what terms are "essential" in a particular case is, however, moredifficult than stating the principle.

The sort of terms that are considered essential varies with the nature of the transaction and the contextin which the agreement is made: Mitsui & Co. v. Jones Power Co., 2000 NSCA 95, 189 N.S.R. (2d) 1 (C.A.), at para. 64. [125] Agreements providing for future agreement can be binding.

If the concept is sufficiently certain to enable agreement, the fact thatthe agreement provides for future mutual agreement does not result in it being too uncertain if there is a mechanism or formula set out.The issue is whether the provision for the future agreement is directory or mechanical as opposed to the substance of the provision: seeEdperBrascan Corp. v. 117373 Canada Ltd. (2000), (ON SC), 50 O.R. (3d) 425, [2000] O.J. No. 4012 (S.C.J.), atpara. 31. The MOU [126] In my view, when the MOU is read as a whole, the words are clear and unambiguous.

The MOU is primarily an agreement toagree on the development of a proposed large multi-part wind energy project, called the "Industrial Biotricity Strategy", which willinvolve not only GWC and Stelco but other parties as well. In that regard, it is, in my view, no more than an agreement to agree and isaccordingly unenforceable. [127] The MOU begins with the statement that it is "intended to confirm the general principles pertaining to the ongoing discussionsbetween GWC and Stelco with respect to the development of . . . the Industrial Biotricity Strategy". [128]

Article 4.2 provides: "The parties agree to negotiate in good faith, terms and conditions necessary to conclude an agreement to be aparticipant in the Industrial Biotricity Strategy together with other consortium members to be determined."

Article 4.4 provides thatdetails of the agreed upon sharing mechanism for emission credits for all parties are to be included in the "final agreements developedfor Industrial Biotricity Strategy".

Article 5, which sets out certain technical requirements of the Industrial Biotricity Strategyacknowledges that the Industrial Biotricity Strategy is still at the conceptual stage and that "both parties agree that technical requirementsoutlined below are subject to change". [129] Although the MOU is primarily an agreement to agree in respect of proceeding with the Strategy, it also contains specific[page111] obligations on the parties to facilitate their ongoing discussions. In that regard, art. 4.3 provides that neither party will pursue"other interests" related to the Strategy without the written permission of the other or the termination of the MOU.

Article 4.2 providesthat Stelco will not align itself with another potential wind power supplier on the Stelco Lands "that might seriously impede theeconomic or technical viability of the Industrial Biotricity Strategy".

Article 8 provides that apart from the requirements of securities law

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