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Ontario court dismisses billion dollar damages claim relating to moratorium on offshore wind farms 

Credit:  by Osler, Hoskin & Harcourt LLP on 10/17/2012 | www.jdsupra.com ~~

On October 5, 2012, the Ontario Superior Court of Justice struck out an action brought by Trillium Power Wind Corporation (Trillium) against the Ontario government seeking $2.5 billion in damages occasioned by Ontario’s February 2011 moratorium on offshore wind farms.

In Trillium Power Wind Corporation v. Ontario (Natural Resources), on a motion to strike out the action, brought by Ontario, the court ruled that Trillium’s statement of claim (which alleged breach of contract, unjust enrichment, expropriation, negligent misrepresentation, negligence, misfeasance in public office, and intentional infliction of economic harm) failed to disclose a reasonable cause of action and should be struck out, without leave to amend.

Brief Background

The facts pleaded in the Statement of Claim were accepted by the court as true for the purposes of the motion.1 To encourage the development of wind power, the Ontario Ministry of Natural Resources (MNR) announced a two-stage process that would allow prospective wind energy developers to identify, and eventually use, Crown land for wind power generation.  This wind-power policy was announced in January 2004. 

Trillium found a potential location for an offshore wind farm near Main Duck Island on Lake Ontario. In May 2004, Trillium applied to lease the Crown land, specifically the bedrock off of Main Duck Island, under the wind-power policy. MNR acknowledged Trillium’s application, but explicitly noted in its correspondence that there was no further obligation to entertain the application.

In October 2004, Trillium paid fees related to its application.  The MNR’s letter of receipt for this payment also explicitly stated that the fees paid conferred no guarantee of approval.  In December 2005, the MNR notified Trillium that it was the Applicant of Record for Main Duck Island.

In November 2006, Ontario announced the first moratorium on offshore wind power development, pending further environmental and social studies.  This moratorium was lifted in January 2008. Trillium re-applied for, and in December 2008 was granted, Applicant of Record status for Main Duck Island. MNR informed Trillium that the Applicant of Record status consisted of two phases: (1) a three-year test phase allowing Trillium to conduct wind-power testing; and, (2) an approvals phase where Trillium would be given the opportunity to conduct an environmental assessment and obtain other necessary approvals.  MNR’s correspondence again explicitly noted that no rights or tenure accrued with Applicant of Record status, and that approval of the application was not guaranteed, nor was there any right to alter or improve Crown land.

In February 2011, Ontario announced that offshore wind power development would be subject to a second moratorium, citing the need for further scientific studies.  By then, Trillium had expended over $5,000,000.00 in testing and development. 

In September 2011, Trillium brought a civil action against the Ontario government seeking $2.25 billion in damages based on allegations of breach of contract, unjust enrichment, expropriation, negligent misrepresentation, negligence, misfeasance in public office, and intentional infliction of economic harm. The statement of claim further alleged that Ontario acted unlawfully in that it breached a variety of statutes, including the Green Energy Act, the Electricity Act, and the Ontario Water Resources Act. Ontario moved to strike, arguing that the statement of claim disclosed no reasonable cause of action.

The Superior Court Dismisses Trillium’s Arguments

Ministerial Discretion Existed Throughout the Regulatory Scheme

The court first made a legal determination that only three statutes govern offshore wind power development: the Electricity Act, the Environmental Protection Act, and the Public Lands Act. The Green Energy Act and the Ontario Water Resources Act were ruled to be legally irrelevant. Moreover, the three relevant statutes all confer broad ministerial discretion to set or alter government policy with regard to the development of wind power. They also confer broad statutory discretions to issue a variety of project approvals, including a Renewable Energy Approval under the EPA, all of which must be obtained by a proponent before a proposed offshore wind farm project may proceed.  The court held that the Ontario government’s actions of altering offshore wind farm policy (the moratorium) were not illegal because they were made in accordance with the discretion conferred by the statutes.  Further, the court held that Trillium had not obtained the requisite approvals for constructing and operating a wind farm at the time of the moratorium.  Rather, Trillium had just begun the approvals process.

No Breach of Contract

Although Trillium argued that its status as Applicant of Record demonstrated a contractual relationship with Ontario, based upon documents expressly referenced in the Statement of Claim, the court ruled that there was clearly no contract in place.

                …Applicant of Record Status confers no rights, obligations, tenure, or approval. At most, Applicant of Record status granted Trillium the right to continue with the regulatory process to the next level of approvals.      

The court stated that this was a “complex regulatory process that might have led to approvals”, but they were by no means guaranteed.

In short, Trillium was attempting to obtain compensation for the exercise of regulatory authority while incorrectly characterizing it as a breach of contract.  Because there was no contract in place, no reasonable cause of action for breach of contract could be sustained.

No Unjust Enrichment

Trillium alleged in its claim that it had been deprived of the opportunity to construct a wind farm. Although the court had difficulty in accepting that Trillium had been deprived of anything, it disposed of this cause of action by reasoning that Ontario had in no way been correspondingly enriched.

No Expropriation

Although Trillium did not explicitly plead expropriation, it did allege, using the language of expropriation, that its “property” and “asset” had been confiscated by government action. In its particulars, Trillium identified its property and asset as its Applicant of Record status.  The court dismissed this allegation, holding that the Applicant of Record status was not property, but was merely a right to enter into a regulatory process that might result in approval to construct a wind farm.  Moreover, Trillium could not establish that the government had taken the alleged “property” for its own use or for the purposes of destruction, an essential element of a compensable expropriation.

No Negligence or Negligent Misrepresentation

The court ruled that both the torts of negligence and negligent misrepresentation required, as a matter of law, the existence of a private law duty of care owed by Ontario to the plaintiff. To establish a private law duty of care, the plaintiff must establish a relationship of proximity.  Proximity can be established in one of two ways: it can either be created by the statutory scheme(s) or by a specific series of interactions between the plaintiff and government actors which give rise to a special relationship. 

Here, it was clear that the statutory schemes in question created no relationship of proximity and no private law duty of care.

                There is nothing that I can find in the regulatory scheme to suggest that there is a private law duty of care owed to Trillium by statute. Indeed, it is clear to me that the overall thrust of the regulatory scheme established by the various statutes, regulations and policies is the promotion of renewable energy in the public interest.    

The plaintiff also attempted to plead that a special relationship of proximity existed between the plaintiff and Ontario by reason of their interactions. The court accepted that “there is a scintilla or germ of fact pleaded that could give rise to a special relationship”. However, the court went on to rule under the second arm of the Anns test (which examines whether there are any policy reasons why the duty of care should not be recognized) that this prima facie duty of care must be negated. The moratorium was clearly a “core policy decision” of the government “based on public policy considerations, such as economic, social and political factors”, which is “exactly the type of policy decision that is protected from suit”.

No Misfeasance in Public Office

The court ruled that it is an essential element of the tort of misfeasance of public office that the public officer engaged in unlawful conduct. Since the moratorium was not unlawful, this was sufficient to dismiss this aspect of the claim. Although Trillium also pleaded “targeted malice” – an intent by public officials to injure Trillium – it failed to provide any particulars of this malice as required under the Rules of Civil Procedure, despite Ontario’s demand for same. As a result, the court ruled that these allegations of malice were effectively bald pleadings based on speculation and assumptions about the underlying motivations of government officials.  Therefore, it was plain and obvious this allegation had no chance of success.

No Intentional Infliction of Economic Harm

Because illegality and malicious intent are also essential elements of the tort of intentional infliction of economic harm, for the same reasons as previously given for misfeasance of public office, this alleged tort could not be sustained.

In sum, the court rejected all of Trillium’s alleged causes of action, as failing to disclose a reasonable cause of action, and dismissed the action without leave to amend.

Application of the Decision

This decision, especially in light of the Ontario Divisional Court’s decision in Skypower CL I LP v. Minister of Energy, makes it clear that proponents who choose to participate in discretionary government programs, such as Ontario’s renewable energy program, do so at their own risk.  Governments may alter the policies which underlie a program, and may even alter or cancel such programs, in a manner which may be fully lawful and immune from civil suit.  Much will depend upon the particular facts of a case.

Even if the plaintiff can plead a special relationship with government actors which arguably gave rise to a private law duty of care, the duty of care may be negated by the court for reasons of public policy.

Unless participation in the government program has resulted in a legally binding contract, the granting of legally binding approvals to proceed with the project, or clearly unlawful conduct on the part of government (i.e., violation of a statute, or clear malicious intent to harm the plaintiff), it appears unlikely that a program applicant can sue the government simply on the basis that money was spent attempting to meet program criteria.

Courts will recognize the legitimacy of ministerial discretion, including the discretion to impose a moratorium or change a program policy midway through the life of a program, provided the discretion is statutorily authorized and is exercised in good faith.  Despite Trillium’s allegation that the moratoria on offshore wind farm development in this case were made for “purely political” reasons, this decision emphasizes that political factors, such as strong public opposition, are legitimate public policy considerations. As here, the court may conclude that “the remedy for a political decision that a party does not agree with is found in ballot box, not the courtroom.”

1 The court also relied on documents expressly referenced in the Statement of Claim, and particulars provided by the plaintiff in response to a Demand for Particulars, as permitted under the Rules of Civil Procedure.

Source:  by Osler, Hoskin & Harcourt LLP on 10/17/2012 | www.jdsupra.com

This article is the work of the source indicated. Any opinions expressed in it are not necessarily those of National Wind Watch.

The copyright of this article resides with the author or publisher indicated. As part of its noncommercial educational effort to present the environmental, social, scientific, and economic issues of large-scale wind power development to a global audience seeking such information, National Wind Watch endeavors to observe “fair use” as provided for in section 107 of U.S. Copyright Law and similar “fair dealing” provisions of the copyright laws of other nations. Send requests to excerpt, general inquiries, and comments via e-mail.

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