Fort Frances v. Boise Cascade Canada Ltd.

Fort Frances v. Boise Cascade Canada Ltd.
Collection
Supreme Court Judgments
Date
1983-02-08
Report
[1983] 1 SCR 171
Case number
16822, 16823, 16844
Judges
Laskin, Bora; Dickson, Robert George Brian; Beetz, Jean; Estey, Willard Zebedee; McIntyre, William Rogers; Chouinard, Julien; Lamer, Antonio
On appeal from
Ontario
Subjects
Contract
Notes
SCC Case Information: 16823, 16844, 16822
Decision Content
Supreme Court of Canada
Fort Frances v. Boise Cascade Canada Ltd., [1983] 1 S.C.R. 171
Date: 1983-02-08
The Corporation of the Town of Fort Frances Appellant;
and
Boise Cascade Canada Ltd. and Her Majesty The Queen in right of Ontario Respondents;
and between
Boise Cascade Canada Ltd. Appellant;
and
Her Majesty The Queen in right of Ontario and The Corporation of the Town of Fort Frances Respondents;
and
The Attorney General of Canada Intervener;
and between
Her Majesty The Queen in right of Ontario Appellant;
and
Boise Cascade Canada Ltd. and The Corporation of the Town of Fort Frances Respondents.
File Nos.: 16822, 16823 and 16844.
1982: December 13 and 14; 1983: February 8.
ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO.
Present: Laskin C.J. and Dickson, Beetz, Estey, McIntyre, Chouinard and Lamer JJ.
Contracts—Interpretation—Power to be supplied to town at fixed price—Determination of price and quantity of electricity to be supplied—An Act respecting the Ontario and Minnesota Power Company (Limited), 1905 (Can.), c. 139, s. 2—An Act respecting “The Ontario and Minnesota Power Company, Limited”, 1906 (Ont.), c. 132, ss. 1, 3—An Act respecting the Ontario and Minnesota Power Company, Limited, 1911 (Ont.), c.7.
The Province of Ontario and the predecessor in title of Boise Cascade Canada entered an agreement in 1905; Fort Frances was not a party to it. In return for a grant of land, water‑power rights and development privileges, the company agreed to supply power to the Canadian side of the Rainy River, and in particular agreed to supply Fort Frances with electrical power at a rate not exceeding $14 per horsepower per year. The agreement created a reserve of 4,000 horsepower for use on the Canadian side, and any power not in permanent use could be “leased” for use on the Canadian side. Fort Frances was given no pre-emptive right to either the reserve or the unused power exceeding the reserve. The Town’s energy consumption eventually exceeded 4,000 horsepower reserve and the company’s energy requirements greatly exceeded the excess energy produced. Although the agreement made some provision for arbitration of disputes arising under the contract, the issue here—whether, and to what extent Boise Cascade Canada was obligated to provide Fort Frances with electricity at $14 per horsepower per annum—was referred to the Courts.
Held: The appeals of the Corporation of the Town of Fort Frances and Her Majesty The Queen in right of Ontario, are dismissed, and the appeal of the Boise Cascade Canada Ltd. is allowed.
The issues stood to be settled entirely on the 1905 agreement. The company, pursuant to that agreement, was to provide Fort Frances with electrical power from its generating facilities on the Rainy River at Fort Frances, to the extent of 4,000 horsepower per annum, at the contract price of $14 per horsepower per annum. This energy was to be used for the Town’s purposes, including ordinary municipal distribution and delivery to commercial premises, but excluding large, self-contained industrial establishments. The balance of the output from the Canadian side was to be made available to users on this side of the border to the extent that that balance had not been committed. Neither party had the right to unilaterally terminate the contract by notice, and, as the company had specified the extent of its obligation to the Town, the agreement continued to be binding in the circumstances that later developed.
It was not necessary to answer the constitutional question of whether or not the Ontario and federal statutes relating to the Ontario and Minnesota Power Company Limited were in conflict because neither statute had a direct bearing on the issues on appeal. The issue of res judicata, too, did not require in depth consideration because the $14 per horsepower per annum was concluded to be the rate firmly established by the agreement. The facts did not give rise to the doctrine of promisory estoppel. British Movietonews Ld. v. London and District Cinemas Ld., [1952] A.C. 166; Town of Fort Frances v. Fort Frances Pulp and Paper Co. (1925), 28 O.W.N. 402; Grasett v. Carter (1884), 10 S.C.R. 105; Conwest Exploration Company Limited v. Letain, [1964] S.C.R. 20; Hughes v. Metropolitan Railway Co. (1877), 2 App. Cas. 439; John Burrows Ltd. v. Subsurface Surveys Ltd. and Whitcomb, [1968] S.C.R. 607; Canadian National Railway Co. v. Beatty (1981), 34 O.R. (2d) 385, 128 D.L.R. (3d) 236; Pentagon Construction (1969) Co. Ltd. v. United States Fidelity and Guaranty Co. (1977), 77 D.L.R. (3d) 189, referred to; Staffordshire Area Health Authority v. South Staffordshire Waterworks Co., [1978] 3 All E.R. 769, distinguished.
APPEALS from a judgment of the Ontario Court of Appeal (1981), 126 D.L.R. (3d) 649, 34 O.R. (2d) 18, allowing an appeal from a judgment of Saunders J. Appeals of the Corporation of the Town of Fort Frances and of Her Majesty The Queen in right of Ontario dismissed and appeal of Boise Cascade Canada Ltd. allowed.
Royce Frith, Q.C., B.A. Crane, Q.C., and Henry S. Brown, for the appellant the Corporation of the Town of Fort Frances.
T.H. Wickett, Q.C., for the appellant Her Majesty The Queen in right of Ontario.
P.C.B. Pepper, Q.C., and D.J.T. Mungovan, for the respondent Boise Cascade Canada Ltd.
E.A. Bowie, Q.C., and Peter Doody, for the intervener the Attorney General of Canada.
The judgment of the Court was delivered by
ESTEY J.—The issue in this appeal is:
Whether, and to what extent, the respondent Boise Cascade Canada Ltd. is obligated under the terms of the 1905 agreement to provide the appellant Town of Fort Frances with its requirements for power at a price of $14.00 per horsepower per annum.
Central to the disposition of this appeal, in my view, is the interpretation of the agreement entered into between the predecessor in title of the respondent Boise Cascade Canada Ltd. and His Majesty the King in right of the Province of Ontario on January 9, 1905, relating to the estab- lishment on the Rainy River of an electrical generating facility. Apart from some light which may be shed on certain specific terms in the agreement, the long and somewhat complex history of the relationship between the parties is not of much assistance.
The appellant Corporation of the Town of Fort Frances (for convenience hereinafter referred to as the “Town”) is not a party to the agreement, but it is one of the prime beneficiaries of the works which were established under the agreement by the predecessors in title of the respondent Boise Cascade Canada Ltd. (hereinafter referred to as the “Company”).
The purpose or object of the agreement was the establishment on the Rainy River, along which runs the international boundary which separates the Province of Ontario and the State of Minnesota, of an electrical power-generating facility whose output, according to the preamble to the agreement:
might be utilized for Municipal purposes and for manufacturing and milling in the said Municipalities, thereby assisting in the development of the said Municipalities and of the surrounding District.
The installation consists of a dam from bank to bank and a power generating station on each end of the dam, one in Ontario and the other in Minnesota. Originally the power take-off equipment at the Minnesota end provided direct mechanical power rather than electrical power. The Company had undertaken this works with a view to establishing one or more paper mills in Fort Frances and International Falls, the settlement on the Minnesota end of the dam. In 1905 when the agreement took form and was executed, the Town of Fort Frances on the Ontario side of the river was a very small settlement, and there was no settlement on the American side of the boundary at that point. Later, the community of International Falls was established on the United States side.
The hydro-electric facility was complete and operating by 1911. The paper mill on the Canadian side did not commence operations until 1914. The electrical consumption of the Town was, for many years, very small. From 1910 until the end of World War II its consumption never exceeded 765 horsepower, and indeed, for the first ten years did not exceed 100 horsepower. I should say, to put this in perspective, that the installed capacity of the Canadian generating plant was 14,000 horsepower, as was the installed capacity of the facility on the American side of the river. The record does not reveal when the electrical generating facilities were built on the United States side, but this fact is not important in these proceedings. The actual average output from the generating facilities on the Canadian side is, for all practical purposes, 9,000 horsepower. Unfortunately, energy was expressed in terms of horsepower when the agreement was drawn and the works installed. In later years, the industry came to refer to electrical capacity in terms of kilowatts and kilowatt hours. For convenience I will refer throughout to energy as expressed in horsepower. By the end of the 1920’s the total output of GS1 was being absorbed. In 1924 the Town consumed 450 horsepower, 3,500 horsepower was being exported, and the Company’s Canadian mill used the remainder. By 1971 the average energy consumption of the Town had exceeded the 9,000 horsepower produced by the generators on the Canadian side, which are designated as GS1. In 1925, in order to make sufficient power available to allow the mill to be expanded, generating stations were constructed on the Seine River (which is in the same locality), and the electricity produced was transmitted to the mill in Fort Frances. In 1958, the distribution system of Ontario Hydro reached the Company’s facilities, and power has been supplied by Ontario Hydro to the Company since that time. In the same year, the Town’s consumption reached 4,000 horsepower. The mill’s power requirements in 1958 greatly exceeded the amount of the excess production of GS1 after supplying the Town. The facilities of the power utility in the State of Minnesota did not reach the community of International Falls on the American side until 1980.
The history of this power development must, for the purposes of this appeal, include a reference to certain special statutes enacted by the Parliament of Canada and the Legislature of Ontario. These statutes, all of which are entitled, An Act respecting the Ontario and Minnesota Power Company, Limited, are as follows:
(a) Statutes of Canada 1905, c. 139;
(b) Statutes of Ontario 1906, c. 132;
(c) Statutes of Ontario 1911, c. 7.
(a) The 1905 federal statute authorized the development of the water power of the Rainy River at Fort Frances and directed, in s. 2, that the Company provide electrical power:
for use on the Canadian side… concurrently as it provides power or electrical energy for use in the United States, so that… there shall not be less of the said power or electrical energy available for use on the Canadian side of the international boundary line than on the American side…
It was also provided that the generators, etc. required for the development of power for use on the Canadian side of the boundary should be built in Canada, and that no part of the power to be provided under the Act for use on the Canadian side should be diverted to or used in the United States without an order of the then Board of Railway Commissioners.
Section 2 of the Act continues from the passage set out above with a curious provision:
…and, subject to the provisions of this Act, such power or electrical energy shall be delivered on the Canadian side as and when demanded.
There is no other provision in the Act which refers to the use of power on the Canadian side of the boundary. It may be that the statute intended to cover power generation on both sides of the boundary as a single entity, and to direct that the power generated in Canada should equal that generated in the United States. The statute does not go on to provide how or by whom a demand for the Canadian generated power is to be made.
Finally, the statute includes an arbitration clause which refers, to the aforementioned Board of Railway Commissioners on the application of any user of power, the Company or the Town, any dispute as to the price for power, methods of distribution of power, or the time within or the conditions upon which power should be delivered. There is no reference to a referral of a dispute concerning the amount of electrical energy to be delivered to the Town or any other consumer.
It is to be noted that while the statute was enacted some seven months after the agreement was executed, there is no reference in the Act to the agreement between Ontario and the Company.
(b) The 1906 Ontario statute, after referring to the enactment of the Canadian statute, recited:
…and whereas notwithstanding the provisions in the said Statute contained, it is contended that the company are not bound thereby, but are entitled to deal with the said water power freed from the restrictions in respect thereof imposed by the said Act…
There is another somewhat surprising recital:
…and whereas it is claimed the said agreement [of 1905] was entered into without the consent of the Corporation of the Town of Fort Frances and without any notice to them although the same interferes most seriously with the rights of the said town…
Unlike the federal statute, the Ontario Act makes specific reference to the 1905 agreement, and indeed says in s. 1:
1. Notwithstanding the provisions to the contrary (if any) contained in the said agreement… the company shall from the water power now or hereafter existing on the Rainy River… provide power… for use on the Canadian side of the international boundary line concurrently as it provides power…for use in the United States; so that from time to time, except as provided for by order of the Lieutenant-Governor in Council, there shall not be less of the said power or electrical energy available for use on the Canadian side of the international boundary line than on the American side, and subject to the provisions of this Act such power or electrical energy shall be delivered on the Canadian side as and when demanded.
The other provisions of the Ontario statute, apart from the requirements that the permission of the Lieutenant-Governor in Council, as opposed to the Board of Railway Commissioners, be obtained before power to be provided for use on the Canadian side can be exported, are similar to those contained in the federal Act. One significant difference, however, is found in s. 3, the arbitration provision, which provides as follows:
3. In case of any dispute as to the price for power or electrical energy in use or to be provided for use upon the Canadian side of the said international boundary line or the methods of distribution thereof or the time within which or the conditions on which the same shall be furnished for use, such dispute shall be settled by the Lieutenant‑Governor in Council on the application of any applicant for power or of the company or of the Town of Fort Frances.
It will be observed that the authority settling disputes thereunder is the Lieutenant-Governor in Council rather than the federal Commission, but the specified matters for referral when in dispute are the same in both Acts, namely, the price for power, distribution methods and the conditions upon which it is provided. In neither statute is there any mention of arbitration as to the quantity of power to be made available to any particular purchaser. There are provisions in the Ontario legislation relating to the transfer of lands to the Company and the retention of certain lands in the Crown for industrial and other development, but no issue arises in these proceedings to which they are relevant. As in the case of the federal Act, there is no precise mention of the establishment by the Company of a pulp or paper mill on the Canadian side of the boundary.
(c) The 1911 Ontario statute confirmed an agreement entered into between the Company and the Province of Ontario in June 1910. The purpose of this agreement is revealed in its first recital where it is stated that:
…there was not a reasonable prospect of the utilization within a reasonable time of power or electrical energy unemployed, though actually available for use on the Canadian side of the Rainy River…
Hence, the Company applied for and was given the right to export such amounts of power as might from time to time be authorized by the Lieutenant-Governor in Council. The evidence reveals that, in fact, permits authorized the diversion to the United States of 3,500 horsepower. An anomaly appears in this agreement in an unnumbered paragraph midway through the agreement:
It is further agreed that the price for power or electrical energy supplied or to be supplied to applicants for or users of power, or to prospective applicants or users by the Company on the Canadian side and the time within which, and the conditions on which the same shall be furnished for use and the methods of distribution thereof shall from time to time be fixed by the Hydro-Electric Power Commission of Ontario upon the application of any such user, applicant, prospective user or applicant, of the Town of Fort Frances, of the Township of Mclrving, or on the application of any municipality, person, firm or corporation interested; and the price, time, terms, conditions and methods may be so fixed by the said Commission at any time either before or after a request or demand for power or electrical energy has been made upon the Company by any person, firm, corporation or municipality.
Again the authority to establish conditions with reference to the power generated by GS1 refers to the price for power but not to quantity. The picture is further complicated by the appointment of the Hydro-Electric Power Commission of Ontario, commonly referred to as Ontario Hydro, as the agency authorized to establish the price for power.
The parent instrument, from which all other documentation appears to have flowed, is the contract entered into between the Province of Ontario and the predecessor in title of the Company on January 9, 1905. It is clear from the record in this appeal that the power project formed part of a general development conceived by one Edward Wellington Backus, a Minneapolis lumber man. The objective of the plan was the exploitation of the timber resources of the areas straddling the international boundary in the vicinity of Fort Frances, Ontario. At the time of the agreement, this area was isolated from the rest of North America in that there were no roads, railroads, power distribution facilities, or any other transportation or communication connections on either side of the international boundary, except, of course, as afforded by navigation on the Rainy River itself. The agreement with the Province of Ontario followed the completion of arrangements made by Backus with authorities in the United States for the establishment of power generating facilities on the American side of the Rainy River. After reciting that the Town and its residents had earlier importuned the Government of Ontario to develop the water power in the Rainy River: “so that the same might be utilized for Municipal purposes and for manufacturing and milling in the said Municipalities, thereby assiting in the development of the said Municipalities and of the surrounding District”, the agreement went on to recite:
AND WHEREAS application has been made by the Purchasers [the Company] for a grant in fee simple of such lands adjacent to the said River, and of such lands covered by the said River, and of such privileges as are necessary to enable the Purchasers to develop the said water power and to render the same available for municipal, manufacturing and milling purposes:
AND WHEREAS the said water power can be more advantageously developed, and more power produced, by works embracing the entire width of the River and dealing with it as a whole, than by an independent development on the Canadian side of the International Boundary, and it is therefore in the public interest to adopt such plan of development;
AND WHEREAS the Purchasers are the owners in fee simple of the lands and water power on the Minnesota side of the International Boundary opposite the said Town of Fort Frances, and are desirous of obtaining from the Government of the Province of Ontario a grant in fee of the lands and power on the Canadian side of the International Boundary, for the purpose of developing the water power to the full capacity of the stream from side to side at high water mark, and of utilizing such storage facilities as may be available for maintaining the River at such high water mark, thereby rendering available a large amount of power on the Canadian side of the River, for municipal purposes and for the operation of pulp or paper mills, flour and grist mills and other manufacturing establishments;
...
AND WHEREAS the construction of the said dams and the maintenance of the waters of Rainy Lake at a higher level during the low water period will be of greater advantage to navigation;
AND WHEREAS it is expedient and desirable in the interests of the Town of Fort Frances, of the said Township of Mclrvine and of the public generally, that the said water power be speedily developed to its full capacity and that an Agreement be entered into to that end, upon the terms and subject to the conditions and stipulations herein contained;
Obviously the generation of power on the Rainy River required a dam spanning the width of the river from bank to bank, built on lands situated in both countries. Equally obvious is the impact such a dam would have on navigation and the sequential requirement of the installation of a by-pass canal for the continuance of transportation up and down the river. No doubt this was the essential reason for the involvement of the Government of Canada.
The operative paragraphs of the contract which are relevant to these proceedings are:
1. THE GOVERNMENT agrees to sell and the Purchasers [the Company] agree to buy the following lands and lands covered by water, being ALL AND SINGULAR those certain parcels or tracts of lands and premises situate, lying and being in the Town of Fort Frances and adjacent thereto, and being composed of the lands and lands covered by the waters of the Rainy River shown and set out in the Plan and description hereunto attached, bearing the signature of the Commissioner of Crown Lands for Ontario, which said plan and descriptions are hereby made part of this Agreement, the lands in question being colored red on the said Plan, together with the lands or lands covered by water heretofore conveyed by the Town of Fort Frances to His Majesty, The King, for the purposes of this Agreement, together with all water powers and privileges, and all rights, easements and appurtenances thereto belonging and appertaining, for and in consideration of the sum of five Thousand dollars ($5,000) of lawful money of Canada, payable in cash on the execution and delivery of this Agreement, and in further consideration of the covenants and requirements hereinafter contained and of the special agreement to supply power or electrical energy to the Town of Fort Frances and the Township of Mclrvine, as hereinafter set out, to such an extent as the said Town or Township may require;
...
4. THE PURCHASERS covenant and agree to commence the said dam and other works forthwith after the approval of the plans, drawings and specifications by the Lieutenant‑Governor in Council, and to fully complete the said dam and works in accordance with said plans, drawings and specifications, by the First day of January, 1907, and to develop and render available for the use on the Canadian side of the River, by the said date, the total amount of horse power to be capable of development,…
5. THE PURCHASERS covenant and agree that they will from and after the said First day of January, 1907, deliver power to the said Town of Fort Frances and to the Township of McIrvine, by the method A, B or C hereinafter described, at the election of such Municipalities or either of them for Municipal purposes and for public utilities, but not for commercial purposes, which said power shall be kept constantly in operation and available twenty-four hours each day (save and except such time as may be necessary to replace machinery or for repairs),… The Corporations shall be entitled to take such portion or portions of the said power as the Corporations may desire by any of the methods of delivery above mentioned, and for such purpose the Purchasers shall install all water wheels, electrical and other machinery, shafting, motors, connections and appliances, with other attachments necessary to deliver the said power as required by either or all of the methods above mentioned, excepting that the Corporation or the public users may be required to furnish the electrical motors for propelling the machinery on or within their own premises, and the said power shall be supplied to the said Municipal Corporations for the purposes aforesaid at a specially favorable rate, which shall not in any event exceed Twelve Dollars ($12.00) per Horse Power per annum, where the same is taken under method A, or Fourteen Dollars ($14.00) per Horse Power per annum, where the same is taken under method B… PROVIDED that the Purchasers shall not be required to deliver power to the said Municipalities in less quantities than Fifty Horse Power at any one time, or by any one of the above mentioned methods. PROVIDED FURTHER, and it is specially agreed, that should the Corporations at any time deem the price demanded by the Purchasers excessive, or more than sufficient to allow the Purchasers a fair profit, and in the event of the Corporations or either of them being unable to agree with the Purchasers as to such prices, or as to any other matter arising in respect of the carrying out of these presents, the same may be referred to the Lieutenant-Governor in Council, who may settle and determine the same, and his findings shall be final and binding upon the parties in the same manner and to the same extent as if it were included in and a part of the Agreement. PROVIDED, however, that such prices and conditions as may be determined or agreed upon from time to time shall remain in force for at least five years before being subject to readjustment. PROVIDED, also, that the Corporations shall in all cases give the Purchasers three months’ notice in writing of the amounts of power required and of the method of delivery by which it is desired the same shall be delivered;
6. THE PURCHASERS further covenant and agree that they will at all times sell or rent and distribute to any person, firm, Company or Corporation making application therefor, any power or energy reserved for use on the Canadian side of Rainy River and not already in use, at such prices and on such conditions as may be agreed upon between the parties, or in case of disagreement, at such prices and on such conditions as may be fixed by the Lieutenant-Governor in Council,…
7. IT IS FURTHER AGREED by and between the parties hereto that the fixing of the maximum price herein provided for delivery of power to the said Municipalities of Fort Frances and McIrvine forms a part of the consideration for this Agreement, and for the transfer of the said lands, power and privileges,…
8. IT IS FURTHER COVENANTED AND AGREED that they will at all times retain and reserve for use on the Canadian side of the International boundary line Four Thousand Horse Power and will render the same permanently available for use on the Canadian side: PROVIDED FURTHER that when and so soon as the said Four Thousand Horse Power so reserved shall be leased or in permanent use, the Purchasers will lease to any person, firm or Company on the Canadian side of the said boundary line any further power which may be required on the Canadian side and which may be unleased or not in permanent use:
...
13. IT IS FURTHER COVENANTED AND AGREED that any matters of dispute not herein especially provided for, between the Purchasers and the said Municipalities of Fort Frances and McIrvine, or between the Purchasers and Lessees or Purchasers from them of water power, shall be subject to the determination and direction of the Lieutenant-Governor in Council;
From the outset the agreement looked to the development of power at Fort Frances “for Municipal purposes and for manufacturing and milling…”; and since the antecedents of the Company were already the owners of the necessary “lands and water power” in Minnesota, application was made to the Government of Ontario for similar grants on the Canadian side of the river so as to allow the development of “the entire width of the River… dealing with it as a whole”. The recitals cite, as the quid pro quo for the Ontario grants to the Company of land and water power rights, the future availability of “a large amount of power on the Canadian side of the River, for municipal purposes and for the operation of pulp or paper mills, flour and grist mills and other manufacturing establishments”. This is the only mention of pulp or paper mills in the entire agreement, although that was apparently to be the principal industrial undertaking of the Company. There is also a statement in the recitals of the benefits of these works “to navigation”.
In the operating clauses of the agreement itself, the grant of lands and of “all water power and privileges” was in consideration of “the special agreement to supply power or electrical energy to the Town… to such an extent as the said Town… may require”. All the power-generating facilities required to develop “the Canadian side of the River” were to be built on the Canadian side of the boundary. There is some ambiguity in the contract as to the source of the power to be made available by the Company on the Canadian side, but all the relevant terms of the agreement indicate that the parties were dealing in the agreement with the development and disposition of power developed by the Company on the Canadian side of the river only.
The right of the Town to call for the delivery of power is expressed as being “for Municipal purposes and for public utilities”. Neither term is defined but the agreement does go on to provide that the Town may not ask for power “for commercial purposes”. The matter is further complicated by the modes provided for the delivery of power requested by the Town. The Town may call for the “power” in either mechanical or electrical form at $12 or $14 per horsepower per annum, respectively. Since the plans called for the installation of electrical generators on the Canadian side and mechanical power-generating facilities on the United States side, the reference to the taking of power in either mode is somewhat confusing. In fact, however, all the power purchased by the Town from the Company was in electrical form generated on the Canadian side. Thus, the agreement has been performed in accordance with the clear intent of the parties that it deal only with power generated on the Canadian side. Under paragraph 5 of the agreement, supra, the Town is “entitled to take such portion… of the said power as the… [Town] may desire by any of the methods of delivery…” specified. These words must be read in the context of the power delivery provisions in which they are found and cannot be read as modifying, in any way, the term of the contract which grants to the Town the right to purchase power from the Company.
The scheme for the distribution of power within the community of Fort Frances is rather vaguely described in the contract. The use to which electricity will be put by the purchasers is also discussed in nebulous terms. It must be remembered, however, when one is attempting to ascertain the meaning of the expressions employed in the contract, that electricity in usable form had been developed only about twenty years before the agreement was drawn and executed. Niagara Falls had delivered electrical power to nearby communities a scant nine years prior to the signing of this agreement; Toronto received electrical power only a few years prior to the Town of Fort Frances. It is not, therefore, surprising to see a provision in the agreement for the “renting [of] power or energy”. The only thing certain about the generating and distributing arrangements specified in the agreement is that the parties thought that the price charged for the power was “specially favourable” to the Town.
Before examining the arbitration provisions contained in the agreement, a word should be said about the specified arrangements for the disposal of the electrical power generated by the Company in Canada. By paragraph 8, the Company agrees to “reserve for use on the Canadian side… Four Thousand Horse Power… the same permanently available for use on the Canadian side”. This clause does not give the Town any priority or pre-emptive right to the four thousand horsepower so reserved, or to any power in excess thereof. Indeed this clause goes on to state that when the four thousand horsepower “shall be leased or in permanent use” the Company “will lease to any person, firm or Company on the Canadian side… any further power which may be required on the Canadian side and which may be unleased or not in permanent use”. It is most extraordinary that this agreement, which the Company executed in order to launch a pulp and paper venture in northwestern Ontario, makes no mention of any use of the hydro-electric power in the mills of the Company on either side of the international boundary. The Company completed construction of the first stage of its Canadian pulp and paper mill in 1914. From that time on, until overtaken by the Town, the Company mills took the greater part of the output of the generators on both sides of the boundary.
Further provision for the use of electricity produced on the Canadian side is found in paragraph 6. By its terms the Company agrees to sell “to any person, firm, Company or Corporation making application therefor, any power or energy reserved for use on the Canadian side [and this must refer to paragraph 8]… not already in use”. Again no priority is given to the Town for the purchase of power. Any such right in the Town must be found in paragraphs 1, 5 and 7 of the agreement, and paragraphs 4, 6 and 8 must somehow be reconciled.
Paragraph 7 describes the price for electricity taken by the Town, presumably under paragraphs 1 and 5, as the “maximum price” and goes on to state that the fixing of such price “forms a part of the consideration for this Agreement, and for the transfer of the said lands, power and privileges…”
We come then to the arbitration provisions in the 1905 agreement. There are four clauses which make provision for what might be described as the arbitration of questions or differences arising under the agreement. Two of these provisions are clearly directd to disputes as to price between the Company and purchasers of power, while the other two are of more general application. Again it must be said that the agreement directly affects persons who are not parties to the agreement as its provisions, including the arbitration clauses, extend beyond actual parties and their conduct under the agreement. One unusual feature is that the arbitrator specified in these clauses is the Lieutenant-Governor in Council which, of course, is the Crown in right of the Province of Ontario, one of the two parties to this agreement.
We find these provisions for the settlement of disagreements in paragraphs 5, 6, 7 and 13. Paragraph 5 establishes the $14 per horsepower per annum rate without any mechanism for variation. The contract is without term, and as we have seen the power reserved under paragraph 8 must be “permanently available”. The price is referred to in paragraph 7 as the “maximum price” and by paragraph 5 the price “shall not in any event exceed… Fourteen Dollars ($14.00)”. By a proviso to paragraph 5, the Town, should it deem the price charged by the Company under paragraph 5 to be excessive “or more than sufficient to allow the [Company] a fair profit”, may, should it be unable to settle on a new price with the Company, refer the matter to the Lieutenant-Governor in Council. The rate determined by the Lieutenant-Governor in Council is binding upon the parties “to the same extent as if it were included in and a part of the Agreement”. Clearly, all this relates to a downward revision of the $14 rate if the Lieutenant-Governor in Council, at the request of the Town, determines such a revision to be appropriate. All this is included in a single sentence attached as a proviso to paragraph 5. That same sentence includes a right in the Town to refer to the Lieutenant‑Governor in Council in the same way “any other matter arising in respect of the carrying out of these presents”. Bearing in mind the setting in the agreement in which this provision occurs, as well as the presence of the more general arbitration procedure contained later in the agreement, it is not reasonable to give a wide interpretation to these added words, and certainly not a meaning which would authorize the Lieutenant-Governor in Council on the Town’s request to determine matters expressly covered in paragraph 8 of the agreement, for example, relating to the quantity of electricity to be reserved for specific uses or users. Nor should these general words, as they appear in the proviso to paragraph 5, be extended to apply to the extent of the Town’s rights to request power under paragraph 1. In short, I would read this proviso to paragraph 5 as relating only to matters specified in paragraph 5, that is the price payable for power properly requested by the Town and the manner of its delivery, subject always to the ceiling price expressly established by paragraph 5.
In paragraph 6, the Company agrees to sell to any person making application therefor, “any power or energy reserved for use on the Canadian side”, which presumably is a reference to the power reserved under paragraph 8. Paragraph 6 further limits the quantity of such power available to that “not already in use”. Such power is to be delivered at prices and on conditions as may be agreed upon between the parties, “or in case of disagreement, at such prices and on such conditions as may be fixed by the Lieutenant-Governor in Council”. With respect to price, paragraph 6 expressly relates only to differences arising as to the price to be recovered by the Company for the sale of power reserved for distribution on the Canadian side of the boundary. There is no priority given in the clause to the Town as against other persons applying for such power. While the provisions of paragraph 6 do not refer to the prices established under paragraph 5, there is certainly, no indication that the terms of that clause would not be binding upon the parties if the arbitration related to power to be delivered to the Town under a combination of paragraphs 5 and 8. Consequently, this arbitration provision is of no assistance in solving the problem raised in this appeal.
Similarly, the provision for the referral of disputes as to price in paragraph 7 is limited to arbitrations otherwise authorized under the agreement, and no doubt refers to arbitrations under the terms of paragraph 6, already discussed. Paragraph 7 provides for the determination by the Lieutenant-Governor in Council of the prices at which “power shall be sold to other consumers” wh