Canada Bay Lumber Company Limited v. Business Investment Corporation

Date: 20100217 Docket: 09/98 Citation: 2010 NLCA 10 IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR COURT OF APPEAL BETWEEN: CANADA BAY LUMBER COMPANY LIMITED APPELLANT AND: WOOD PRODUCTS INDUSTRIES LTD. SECOND APPELLANT AND: CHIMNEY BAY LUMBER CO. LTD. THIRD APPELLANT AND: BUSINESS INVESTMENT CORPORATION RESPONDENT Coram: Cameron, Roberts and Mercer, JJ.A. Court Appealed From: Supreme Court of Newfoundland and Labrador Trial Division, 200701T3580 Appeal Heard: January 15, 2010 Judgment Rendered: February 17, 2010 Reasons for Judgment by Roberts, J.A. Concurred in by Cameron and Mercer, JJ.A. Counsel for the Appellants: Robert R. Regular and Keri-Lynn Power Counsel for the Respondent: Anna Cook and William Cahill Page: 2 Roberts, J.A.: [1] The appellants (all related companies) appeal a decision (2008 NLTD 101) restraining them from interfering with the operations of the Receiver appointed by the respondent, Business Investment Corporation (BIC), pursuant to outstanding security arrangements. They contend that the applications judge erred either in fact or in law in rejecting their claim that the appointment of the Receiver was a nullity because of the bad faith of BIC and the provincial Minister of Natural Resources (the Government) in not renewing a timber cutting permit to the second appellant, Wood Products Industries (WPI). The appellants also contend that the applications judge erred in law in not permitting them to call certain witnesses or to carry out examinations for discovery. BACKGROUND AND RELEVANT FACTS [2] The essence of the relationship between the appellants and BIC was distilled by the applications judge in the first paragraphs of his decision: 1 Business Investment Corporation ("BIC") is a body corporate incorporated under the Business Investment Corporation Act S.N.L. 1998 c. B-13. It is the successor to Enterprise Newfoundland and Labrador Corporation, which was incorporated under the Enterprise Newfoundland and Labrador Corporation Act, a statute which is now repealed. 2 BIC made available to Canada Bay Lumber Company Limited ("Canada Bay") various loans, the outstanding balance of which, as of May 26, 2006, was $2,608,344.04 (the "Canada Bay Loan"). Security for these loans was granted by Canada Bay to BIC (the "Canada Bay Security") over real property at Roddickton, Newfoundland and Labrador and all the personal property of Canada Bay (the "Canada Bay Property"). 3 Additionally, BIC made available to Wood Products Industries Ltd. ("WPI") various loans, the total outstanding amount of which was $1,065,689.07 as of the 16th of May, 2006 (the "WPI Loan"). WPI granted security to BIC (the "WPI Security") over real property at Roddickton, Newfoundland and Labrador, as well as personal property of WPI (the "WPI Property"). 4 Both Canada Bay and WPI defaulted in the repayment of the loans made to them by BIC, with the result that BIC took the necessary steps to enforce its security, including the commencement of Power of Sale proceedings and the issuance of the Demands for Payment, Notices of Intention to Enforce Security and Notices of Intention to Dispose of Collateral. Subsequent to BIC's demands and enforcement proceedings, Canada Bay, WPI, Chimney Bay Lumber Co. Ltd. Page: 3 ("Chimney Bay"), Monika Sauermoser and Julien Eiter commenced legal action in this Court, as against BIC and eight (8) other defendants named in that action (the "Litigation"). In addition, the Plaintiffs in the Litigation filed an Interlocutory Application seeking to enjoin BIC from proceeding with the power of sale process against the Canada Bay Property and the WPI Property. 5 On January 10, 2007, the parties to this present application [the same parties as on this appeal], together with Monika Sauermoser and Julien Eiter, entered into a Forbearance Agreement (the "Forbearance Agreement"), the main purpose of which was for BIC to forbear on its entitlement to enforce its security against the Canada Bay Property and the WPI Property in order to give the Respondents [the appellants] in this present application time to secure additional financing from an outside lender or investor. The Forbearance Agreement provided that the Respondents herein, together with Monika Sauermoser and Julien Eiter, acknowledge that the Canada Bay Loan and the WPI Loan were valid and outstanding and in default and that the security granted in relation to those loans was valid and existing and formed a first security against the Canada Bay Property and the WPI Property. It was agreed that any buildings, structures or residences on the Canada Bay site in Roddickton [were] covered by the Canada Bay Security, including the residence of Monika Sauermoser and Julien Eiter. The validity of all of the Demands for Payment, Notices of Intention to Enforce Security and Notices of Intention to Dispose of Collateral was confirmed by the Respondents, and Monika Sauermoser and Julien Eiter. Subject to compliance with the terms of the Forbearance Agreement, BIC agreed that it would standstill with respect to enforcing its security until the 11th of May, 2007 ("the Extension Date") or until some earlier date resulting from a breach of the Forbearance Agreement by the Respondents to this present application. 6 In the Forbearance Agreement the Respondents in this present action, plus Monika Sauermoser and Julien Eiter, agreed to withdraw their then current application seeking to enjoin BIC from enforcing its security, discontinue the Litigation and undertook not to undertake any new proceedings to enjoin BIC from proceeding with its Power of Sale against the Canada Bay Property and the WPI Property, in the event of the early termination of the Forbearance Agreement, resulting from a breach by them in complying with the terms thereof. In addition, Canada Bay and WPI agreed to consent to judgment for the full balances of the Canada Bay Loan and WPI Loan. 7 In the Forbearance Agreement the Respondents agreed to provide written and joint updates from a corporation known as CorPA Trauhand AG or some other bona fide arms length lender outlining the status of the re-financing, including various financing documents stipulated therein. This requirement was to be met in varying stages by March 16, 2007, and April 16, 2007. In addition to these updates, the Respondents herein were to provide BIC with construction plans and quotations for the construction of a sawmill to be rebuilt in the former location of a sawmill on the property of Canada Bay at Roddickton. Those plans were to be Page: 4 provided by the 15th of April, 2007. As well, similar financing information was to be provided with respect to construction plans attributable to completing and opening a particleboard mill in the current WPI location in Roddickton, again no later than April 15, 2007. [3] Her Majesty in Right of the Province of Newfoundland and Labrador, represented by the Minister of Natural Resources, was a party to the Forbearance Agreement for reasons set out in clause 4 thereof (the Minister of Innovation, Trade and Rural Development was named for other reasons): 4. OBLIGATIONS OF THE PROVINCE DURING STANDSTILL PERIOD a) Her Majesty in Right of the Province of Newfoundland and Labrador Represented by the Minister of Natural Resources shall: i) Negotiate pursuant to the Forestry Act, R.S.N.L. 1990 c. F- 23 with Chimney Bay Lumber Co. Ltd. (“Chimney Bay”) a 5 Year Timber Sale Agreement (the “TSA”) with a view to provide Chimney Bay with a minimum annual timber allocation of 17,799 m3 class 1 timber and 3,312 m3 class 3 timber which agreement shall at all times be conditional upon Chimney Bay commencing reconstruction of the saw mill by no later than 15 May 2007 and reopening a saw mill in a manner consistent with the updated Business Plan provided to BIC under cover letter of solicitor John Bruce, dated 17 October 2006 on or before 15 September 2007 at the current Canada Bay site in Roddickton, NL and continuing saw mill operations during the entire term of the TSA in addition to other conditions set out in the TSA, a copy of the TSA is attached hereto at Schedule “E”. The parties acknowledge the aforesaid allocations are subject to the allowable annual cut as is determined by the Minister of Natural Resources from time to time. The parties further acknowledge timber allocations which may be included in the TSA [are] a replacement of and [are] not additional to fiber received from WPI’s annual cutting permit currently held (“the WPI Permit”). ii) The Minister of Natural Resources shall exercise her discretion to issue Chimney Bay a Saw Mill Licence pursuant to the authorizing legislation and policies of the department of Natural Resources to be operated by Chimney Bay at the current Canada Bay site in Roddickton, NL in compliance with all lawful obligations applicable to a reasonable operator subject to the condition that reconstruction of the saw mill has commenced by no later Page: 5 than 15 May 2007, the saw mill is operational on or before 15 September 2007 and maintains operation for the entire term of the Saw Mill Licence. [Emphasis added.] [4] Clause 4 of the Forbearance Agreement is where the issues between the appellants and BIC were eventually joined and gave rise to BIC’s Originating Application filed on August 23, 2007. [5] The 5 year Timber Sales Agreement (TSA) referred to in Clause 4 was between the Minister of Natural Resources and Chimney Bay Lumber. The TSA, signed on February 23, 2007, contained the following particularly relevant provisions: 2. Condition Precedent: 2.1.1 The entitlements to the Company [Chimney Bay Lumber], including but not limited to timber allocations under this Agreement, shall not come into effect unless and until the Company reopens a sawmill in a manner consistent with the updated Business Plan provided to the Business Investment Corporation under cover of a letter from solicitor John Bruce, dated 17 October 2006, which letter is attached as Schedule “B”, on or before 15 September 2007 at the current Canada Bay site in Roddickton, Newfoundland and Labrador, provided that construction on the sawmill begins on or before 15 May 2007. For greater certainty a failure to begin construction on or before 15 May 2007 or to reopen the sawmill on or before 15 September 2007 will result in entitlements to the Company under this Agreement not coming into effect. … 2.2 Should the Company not fulfill its obligations to rebuild and reopen the sawmill by the dates described under 2.1.1, the Company acknowledges and agrees that the Minister shall not be obligated to grant an annual cutting permit to the Company when the Company becomes eligible for one and that the Company shall not be entitled to any compensation arising from the Minister’s failure to issue a cutting permit. If the Company does not fulfill its obligations to rebuild and reopen the sawmill by the dates described under 2.1.1 or 2.1.2 if applicable while it is in possession of the annual cutting permit, it acknowledges and agrees that the Minister may cancel it without compensation of any kind. Provided however, if the Company does not fulfill its obligation under paragraph 2.1.1 for reasons described at paragraph 2.1.2, the Page: 6 Minister shall not cancel the permit until the reasonable extension in time contemplated at paragraph 2.1.2 has expired. … 5.5 The Parties acknowledge that timber volumes provided to the Company under this Agreement is a replacement of and is not additional to fiber which had been received from the Company’s annual cutting permit. For greater certainty, when this Agreement enters into full force and effect, the Company shall not seek, nor shall it be eligible for its annual cutting permit. If the Company is in receipt of its annual cutting permit when this Agreement comes into full force and effect, the Company agrees that the Minister shall at that time cancel its cutting permit. [Emphasis added.] [6] Shortly after the signing of the TSA, WPI went looking for a “renewal” of ‘its’ annual cutting permit, which was initially refused, and which began a series of exchanges, mostly between the parties’ respective counsel as to whether the Forbearance Agreement and the TSA superceded previous arrangements. These exchanges were begun on March 15, 2007 by an email from Julian Eiter, a principal of all three appellant companies, to his counsel Robert Regular which read, in part: …I also have to inform you that Forestry [has] refused today to renew the Cutting Permit in Julian Eiter/Wood Product’s Name unless it is changed to Chimney Bay’s name. This is impossible under current agreements and will definitively delay the current financing program. [7] On the following day, Greg Connors, solicitor for BCI, emailed Mr. Regular inviting discussions on the subject. He followed up on March 22 with a further email to Mr. Regular with a copy to Paul Scott, solicitor for the Minister: Friday last week we discussed your client’s wish to have its 2007 permit issued to WPI as [o]pposed to its [earlier] request to Forestry that the same permit be issued to Chimney Bay. As I discussed with you, Forestry has no problem issuing the permit to WPI or Chimney Bay provided the agreements between the parties are upheld. To that end, I drafted and provided you with alternate acknowledgements for your client’s execution. I understand your client refused to sign and that a primary reason for failing to so is that more than one permit exists. Specifically, you suggested your clients have three permits (one to each of Julian Eiter, WPI and Chimney Bay). I have consulted with Forestry who has confirmed this is not the case. I have left you a number of unreturned messages and would like to discuss at your earliest convenience. Page: 7 [8] Neither of the alternate draft acknowledgments was satisfactory to Mr. Eiter and his counsel and on April 17, Mr. Connors emailed this follow-up: This is further to our telephone conversation Monday afternoon. I understood your concern with the prior draft Acknowledgment was essentially “what happens at the conclusion of 5 years”. You wanted the Acknowledgement to contemplate your client being treated in a manner similar to other permit holders at the conclusion of 5 years. We have incorporated this language and attach for your comment and review. I understand your client is anxious to proceed with having the permits issued and your soonest reply is therefore appreciated. Also, can you advise of the name of the newly incorporated company who I understand will be leasing the assets (and any others controlled by your client)? We require those companies to also be included as a party to the Acknowledgment. Further, and as previously indicated, our client has forwarded for your review a fax to BIC dated 15 March 2007 where your client updates BIC with developments under clause 3 of the Forbearance Agreement. Upon review, we advised it was our view the update was non-compliant with the agreement. Particularly, Clause 3(a)(i) contemplated your clients providing ours with written updates from the companies and the lender by 15 March 2007. Mr. Eiter confirms the financing was signed 22 February 2007 but his fax contains no bank documents, which logically have to be in existence (given documents were signed 22 February 2007), the production of which is a requirement under the Forbearance Agreement. Can I have your reply to this also? … [9] The draft Acknowledgment sent by Mr. Connors with the email of April 18 read, in its entirety: 1. In accordance with a Forbearance Agreement dated 10 January 2007 (“Forbearance Agreement”) and a Timber Sales Agreement dated 23 February 2007 (“TSA”), HER MAJESTY in Right of the Province of Newfoundland and Labrador (“the Province”) agreed to provide Chimney Bay Lumber Co. Ltd. (“Chimney Bay”) with a five year timber sale agreement whereby certain minimum annual timber fiber allocations were to be provided to Chimney Bay, which allocations were to replace timber fiber allocations otherwise available pursuant to any and all cutting permits then or ever previously issued to Wood Products Industries Ltd. (“WPI”) and/or Monika Sauermoser and/or Julien Eiter and/or Canada Bay Lumber Company Limited (“Canada Bay”) and/or Chimney Bay, including but not limited to the permit attached hereto at Schedule “A” (hereinafter defined as the “Permit”). 2. The parties had previously acknowledged and agreed that the Permit would be issued during the year 2007 to Chimney Bay and remain valid until the sooner of either Chimney Bay became entitled to timber fiber allocations pursuant to the TSA or upon Chimney Bay’s failure to meet its Page: 8 obligations pursuant to the TSA. Upon the occurrence of either event, the Permit would be retired and cancelled without compensation of any kind to Monika Sauermoser, Julien Eiter, Canada Bay, WPI and Chimney Bay. 3. Monika Sauermoser, Julien Eiter, Canada Bay, WPI and Chimney Bay have since requested and the Province has agreed to issue the Permit during 2007 to WPI rather than Chimney Bay until the sooner of either Chimney Bay became entitled to timber fiber allocations pursuant to the TSA or upon Chimney Bay’s failure to meet any of its obligations pursuant to section 2 of the TSA. Failure to begin construction of the sawmill on or before 15 May 2007 or to reopen the sawmill on or before 15 September 2007 in the manner described in the TSA results in the Permit being cancelled without compensation of any kind to Monika Sauermoser, Julien Eiter, Canada Bay, WPI and Chimney Bay. Monika Sauermoser, Julien Eiter, Canada Bay, WPI and Chimney Bay RELEASE HER MAJESTY IN RIGHT OF NEWFOUNDLAND AND LABRADOR and Business Investment Corporation against any claim, all actions, suits, causes of action, debts, dues, accounts, bonds, covenants, costs, claims and demands, including all claims for compensation, loss of use, loss of time, loss of income and/or rentals, expenses, and any aggravation, foreseen or unforeseen, claims for any reasons arising out the Permit cancellation under this paragraph. 4. Notwithstanding the forgoing and should Chimney Bay comply with its obligations pursuant to the TSA for the entire term of the TSA, HER MAJESTY IN RIGHT OF NEWFOUNDLAND AND LABRADOR, as represented by the Honourable Minister of Natural Resources (the “Minister”) may consider extending or renegotiating the TSA upon the expiry of the TSA on terms agreeable between the parties. Should the Minister not wish to extend or renegotiate the TSA, or if no agreement can be reached between the parties resulting in the extension or renegotiation of the TSA, the Minister shall consider issuing an annual cutting permit to Chimney Bay in a manner consistent with and as though Chimney Bay had held a cutting permit similar to the Permit during the year immediately prior to the expiry of the TSA. [Emphasis added.] [10] On April 24, Mr. Regular emailed to Mr. Connors attaching the following draft acknowledgment which he said his clients were prepared to sign: (1) In January 2007, Julian Eiter and Monika Sauermoser, for themselves and on behalf of Canada Bay Lumber Company Limited, Chimney Bay Co. Ltd. And Wood Products Industries Ltd. (hereinafter collectively called the “Group”) negotiated an Agreement with the Government of Newfoundland and Labrador (The “Government”) pertaining to the quantities of timber the Group would be entitled to harvest annually from Page: 9 certain designated timber cutting Areas on the Northern Peninsula over the next five (5) years. The Agreement is hereinafter called the Timber Sales Agreement (“TSA”). (2) The TSA was negotiated by the Group with the Government to enable the Group to satisfy the financiers of a new sawmill, they have agreed with the Government to build and have in operation at Roddickton on or before September 15, 2007, that the Group has guaranteed access to a sufficient quantity of wood fibre to justify the construction of the new sawmill. The cutting permits the Group had been receiving from the Government have been issued annually and provided only limited certainty of supply. (3) In exchange for the TSA, the Group agreed with Government that all timber cutting permits the Group has held individually over the years, particularly the 2007 cutting permits, will be suspended on the date that the TSA goes into effect and will remain suspended whilst the TSA and any renewal of the same, remains in effect. (4) The Group and the Government have further agreed that, upon the expiration or cessation of the TSA, the Group will be entitled to make application to the Government for timber cutting permits, and their application(s) will be treated and considered as though the Group had held the said timber cutting permits throughout the currency of the TSA. [Emphasis added.] [11] The continuing exchange of emails resolved nothing, and so it went until May 11, 2007 (the Extension Date) when the standstill period expired (para. 5 of the application judge’s decision in para. 2 above). There was no permit issued to WPI and no action taken by Chimney Bay concerning the proposed sawmill. Nor were any of the appellants’ undertakings in the Forbearance Agreement listed in para. 7 of the trial judge’s decision (para. 2 above) complied with. [12] Deloitte & Touche Inc., chartered accountants, were appointed Receiver on August 16, 2007. When, however, the representative of Deloitte & Touche attempted to take possession and control of properties pursuant to the security agreements, their representative was prevented from doing so. It was at this point, on August 23, 2007, that BIC issued its originating application seeking an order that the appellants be restrained from interfering with the operations of the Receiver and that they surrender possession of all of their assets described in the security documents to BIC. Page: 10 GROUNDS OF APPEAL [13] The appellants have grouped their grounds of appeal under three headings, those pertaining to procedure, those pertaining to the Forbearance Agreement and the Timber Sales Agreement and, lastly, those pertaining to the appointment of the Receiver. ANALYSIS The Procedural Grounds [14] Concerning the procedural grounds, the appellants contend that the trial judge erred in not recognizing the Government as a necessary party, in not allowing the calling of witnesses to give viva voce evidence during the proceeding nor permitting their examination for discovery, and otherwise interfering with the presentation of the appellants’ case. [15] This matter, as noted above, was begun by originating application by BIC for an order allowing it to gain access to property over which it had security pursuant to security documents in place between the parties. Early in the proceedings, which extended over several months, the appellants sought to convert the originating application to a statement of claim. The trial judge was of the opinion that the question of the Receiver’s right to gain access to the appellants’ property involved primarily an interpretation of the Forbearance Agreement and the Timber Sales Agreement and could, therefore, be properly dealt with by originating application. He wrote in his interim ruling filed on November 27, 2007 (2007 NLTD 206): 11. The Respondents contend that an originating application is not the appropriate procedure because there is a substantial dispute with respect to the facts surrounding this matter. With respect, I do not agree. The parties entered into the Forbearance Agreement. It dealt comprehensively with the rights of BIC under its security and acknowledged defaults appropriate to permitting BIC to enforce its security. The Respondents acknowledged proper notice of demands for payment and of intention to enforce or dispose of security. The earlier claims of the Respondents were released. The only issue in dispute relates to a question of whether Government has breached the Forbearance Agreement or the Timber Sales Agreement. I am not satisfied that this constitutes a substantial dispute of fact. The Respondents are alleging that Government entered into the Forbearance Agreement in bad faith with a view to subverting it from the beginning. I am satisfied that that issue can be dealt with on an originating application. Rule 29 gives me the authority to order that evidence be given orally in this matter. If the Forbearance Agreement has been breached, or not, then the parties are at liberty Page: 11 to lead evidence thereon and to argue the consequences of any breach proven. Until such time as it is determined by this Court that the Forbearance Agreement has been breached by BIC, it is premature and illogical to argue that the Forbearance Agreement is a nullity and that the parties should revert to their respective positions as they existed before the execution of the Forbearance Agreement, i.e. that all matters then outstanding between them can still be litigated notwithstanding the various agreements in relation thereto contained within the Forbearance Agreement. [16] The ruling of the applications judge was one he was entitled to make pursuant to Rule 5 of the Rules of the Supreme Court of Newfoundland and Labrador, 1986 and he properly exercised his discretion in so doing. Rule 5.02(1) states: A proceeding (a) in which the sole or principal question at issue is, or is likely to be a question of law, or one of construction of a statute, will, contract or other document; … shall be commenced by filing in the Registry … an originating application (inter partes) … . [17] The trial judge likewise properly exercised his discretion in denying the appellants’ subsequent request to examine a number of employees of the Minister of Natural Resources and the Minister herself. That request was made without any foundation other than a suggested conspiracy by one and all to deprive WPI of its annual permit. A review of the evidence before the trial judge shows no basis for such an allegation. The trial judge, with counsels’ involvement, adopted a procedure that he hoped would be expeditious and fair. [18] The overarching allegation of the appellants was that BIC should not be able to enforce its security because it and the Minister had acted in bad faith in not issuing a 2007 annual cutting permit to WPI. The applications judge made it clear throughout that if the appellants brought forth evidence of bad faith, and the onus was on them to do so, then he would permit the appellants to call further evidence and give BIC an opportunity to rebut. At the end of the day, he was not satisfied there was evidence of bad faith. Page: 12 [19] It must also be noted that at no time during the proceeding did the appellants request the applications judge to join the Government as a party, by way of third party notice, or otherwise. It, therefore, little behooves the appellants to complain that the Minister was not a party after the fact. [20] In brief, a review of the transcript satisfies me that the procedural orders made by the applications judge were within his discretion to make. He neither exceeded his jurisdiction nor failed to apply (nor misapplied) a relevant principle nor otherwise made a palpable and overriding error: see Langor v. Spurrell (1997), 157 Nfld. & P.E.I.R. 301 (NLCA), at para. 33. The Substantive Grounds [21] The appellants contend that the applications judge erred in fact or in fact and law in finding that the Foreclosure Agreement and the Timber Sales Agreement were not breached and that there was no bad faith by either BIC or the Minister of Natural Resources in not issuing an annual cutting permit to WPI in the spring of 2007. [22] I noted in para. 18 above that the Government was not a party to this action and that no application was ever made to join it. Nonetheless, counsel for the appellants sought to impugn the Minister of Natural Resources and employees of her department with bad faith in not issuing a 2007 timber permit in the manner they wished. [23] A court cannot rule for or against a person who is not a party. Rule 7.04 of the Rules of the Supreme Court of Newfoundland and Labrador, 1986 sets out this most basic of concepts: 7.04. (1) No proceeding shall be defeated by reason of the misjoinder or nonjoinder of any party or person, and the Court may determine any question or issue in dispute in a proceeding so far as it affects the rights and interests of any party, saving the rights of any person who is not a party. [Emphasis added.] [24] Even though in this case the applications judge found no evidence of bad faith on the part of BIC or the Minister, his finding as it pertains to the Minister and, therefore, the Government, is of no effect in the circumstances. [25] A review of the evidence before the applications judge shows no evidence of bad faith on the part of BIC or, indeed, that it had anything to do with whether the annual permit was to be issued in the name of WPI or Page: 13 Chimney Bay. The applicants contend that BCI was implicated because it was part of Government and “they were all in it together”. [26] While BIC is a crown corporation and works closely with the Minister of Innovation, Trade and Rural Development, it is, nevertheless, a separate entity and any suggestion that it must be “guilty by association” has to be dismissed. [27] By way of obiter comment and the reason for including the exchange of emails which I have included in the paragraphs above, it is clear from the emails that the Minister of Natural Resources was willing to accommodate the respondent’s request to issue the 2007 annual permit (which up until then had been issued to WPI) to WPI or to Chimney Bay or to both, provided the party or parties in whose name it was to be issued acknowledged what was already agreed to in the Forbearance Agreement and the TSA, i.e., that the five year allocation under the TSA was to be “a replacement of and … not additional to fiber received from WPI’s annual cutting permit currently held”. That was what clause 4 of the Forbearance Agreement said. The notion of suspension rather than replacement, as per clause 4 of the Forbearance Agreement, was introduced for the first time in the draft Acknowledgment sent with Mr. Regular’s email of April 18 (para. 10 above). Clauses 3 and 4 thereof are not at all in accord with the Forbearance Agreement and the TSA. Rather than BIC and the Minister of Natural Resources attempting to change the Agreements, as is being alleged by the appellants, it was, in fact, the appellants who were doing so. [28] Further, clause 5.5 of the TSA, as was stated in clause 2 of the draft Acknowledgement sent by Mr. Connors to Mr. Regular with his email of April 18 (para. 9 above), contemplated that the 2007 annual permit would be to Chimney Bay. The last sentence of clause 5.5 clearly implied that such would be the case: … if the Company is in receipt of its annual cutting permit when this Agreement comes into full force and effect, the Company agrees that the Minister shall at that time cancel its cutting permit. [29] Chimney Bay had no annual cutting permit in the previous year that would lead it to think that it would get one for 2007. Whatever it would receive would be pursuant to the TSA and would be in replacement of the annual permit previously issued to WPI. That is why the Minister, through her officials, wanted WPI to acknowledge that if a 2007 permit was to be Page: 14 issued in its name pending the TSA taking effect, it would be bound by the same terms and conditions as those agreed to in the TSA by Chimney Bay. I refer to clause 2 of the TSA quoted in para. 5 above and would note in particular the underlined portion. [30] To reiterate, the applications judge was correct in finding that the evidence introduced by the appellants did not show bad faith, i.e., an abusive, arbitrary or dishonest exercise of power (Roncarelli v. Duplessis, [1959] S.C.R. 121) on the part of BIC, and although not necessary to say so, given that the Government was not a party to the action, that finding could reasonably and justifiably be extended to Minister of Natural Resources, the Government’s Agent. APPOINTMENT OF THE RECEIVER [31] That the Receiver was not properly appointed was not raised before the applications judge. Thus, the question is, can this new issue be properly raised on appeal? [32] The approach to hearing a new issue on appeal was recently commented on and confirmed in Quan v. Cusson, 2009 S.C.C. 62. McLachlin C.J.C., writing for the majority, stated: [36] The general rule, applied by the Court of Appeal, is that a new issue may not be raised on appeal. However, the authorities shed light on the circumstances in which appellate courts should make an exception to the rule. In Lamb v. Kincaid (1907), 38 S.C.R. 516, at p. 539, Duff J. (as he then was) observed: A court of appeal, I think, should not give effect to such a point taken for the first time in appeal, unless it be clear that, had the question been raised at the proper time, no further light could have been thrown upon it. See also: R. v. Warsing, [1998] 3 S.C.R. 579, at para. 16, per L’Heureux-Dubé J. (dissenting in part); Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd., 2002 SCC 19, [2002] 1 S.C.R. 678, at paras. 32-33, per Binnie J. [37] Further guidance as to the appropriate test is provided by Wasauksing First Nation v. Wasausink Lands Inc. (2004), 184 O.A.C. 84, relied on by Sharpe J.A. below. There, the Ontario Court of Appeal explained the circumstances in which an exception will be made to the rule: An appellate court may depart from this ordinary rule and entertain a new issue where the interests of justice require it and where the court has a sufficient evidentiary record and findings of fact to do so. [para. 102] Page: 15 [33] The evidence shows that Rita Malone, Assistant Deputy Minister of the Department of Innovation, Trade and Rural Development, appointed Deloitte & Touche Inc. as Receiver for BIC by letter dated August 16, 2007. A copy of that letter was attached as an exhibit to an affidavit of Kenneth R. Thompson, Manager of Business Analysis with BIC. Mr. Thompson in a supplemental affidavit filed in response to an affidavit of Julian Eiter, said: 3. As concerns paragraphs 12, 13 and 30 of the Eiter Affidavit, Rita Malone is the Assistant Deputy Minister for the Department of Innovation, Trade and Rural Development and is responsible for administering the directives of the BIC. She has no jurisdiction or say in the matters of the Department of Natural Resources (“Natural Resources”). The paragraphs 12, 13 and 30 had nothing to do with the appointment of the Receiver. [34] Mr. Thompson was cross examined at length by counsel for the appellants, but Ms. Malone’s authority to sign the letter appointing the Receiver was never raised. [35] This Court does not have a sufficient evidentiary record to deal with this ground of appeal and, therefore, declines to do so. DISPOSITION [36] For the above reasons, the appeal is dismissed with costs to the Respondent. ________________________________ D. M. Roberts, J.A. I Concur: _______________________________ M. A. Cameron, J.A. I Concur: _______________________________ K. J. Mercer, J.A.