In the Supreme Court of Canada, leave to appeal was denied and, accordingly, an arbitrator’s decision terminating a perpetual renewal provision was upheld.
The Respondent, Brascan Energy Marketing Inc., was the assignee of a series of contracts entered into between its predecessor, the Great Lakes Power Company Limited (“GLP”) and the Applicant, PUC Distribution Inc. (“PUC”). (GLP was a supplier of electricity to PUC for distribution in the City of Sault Ste. Marie.)
Pursuant to the original contract in 1928, GLP agreed to supply PUC with blocks of power, including a 5000 hp block of electricity at a preferential rate. This contract had a term of 10 years and was renewable for three additional 10-year terms. It also provided that the 5000 hp block was renewable for successive 10-year terms in perpetuity, provided that PUC gave written notice to GLP six months before the end of each term.
The parties entered into successive 10-year agreements regarding the provision of the 5000 hp block, but in 1987, PUC failed to deliver a timely notice of renewal.
In 1989, the parties entered into a new 10-year agreement under which GLP agreed to provide electricity to meet all of PUC’s needs, including supply of the 5000 hp block at the rates specified in the 1928 agreement, but there was no provision for any right of renewal.
Subsequently, they entered into another agreement in 1998 that amended and extended the 1989 agreement for two further potential five-year terms, but was dependant on the parties’ agreement as to rates. This agreement also did not provide for a right of renewal with respect to the 5000 hp block.
In 2003, the 1989 agreement, as amended by the 1998 agreement, came to an end when the parties could not agree on rates going forward.
PUC’s position was that the 1928 agreement continued to exist and that the obligation to supply the 5000 hp block at the 1928 rates continued in perpetuity, subject to the required renewal notice every 10 years. GLP argued the 5000 hp block component of the 1928 agreement, including the perpetual renewal provision expired in accordance with its terms in 1987, and that the 1989 and 1998 agreements did not provide for further renewals.
An arbitrator decided that the perpetual renewal provision in the original contract was terminated. The Ontario Superior Court of Justice allowed the appeal from the arbitrator’s decision, but the Court of Appeal restored the decision of the arbitrator and leave to the Supreme Court was denied.