Executive Summary: Key Legal and Evidentiary Issues

• Threshold for leave under s. 17(7) of the Crown Liability and Proceedings Act, 2019 (CLPA), including whether there was a “reasonable possibility” that tort claims based on bad faith and misfeasance in public office could succeed against Ontario (MOE).
• Characterization of the Caretaker Convention and related Cabinet policy memoranda as purely political, non-justiciable conventions incapable of grounding “unlawful” conduct for misfeasance or other bad-faith torts.
• Interpretation of the FIT Program contractual framework, especially the IESO’s express discretion under s. 2.4(g) to issue NTP Deferral Notices and the absence of contractual limits on the timing or purpose of such deferrals.
• Evaluation of evidentiary inferences from transition-period meetings with the incoming PC government’s transition team and whether any credible evidence supported an unlawful direction to issue blanket NTP Deferral Notices.
• Challenge to the legality of the Order-in-Council terminating the FIT Program, and whether the presumption of validity and the purposes of the Electricity Act, 1998 could be overcome on the record.
• Viability of related claims against Ontario (MOE) for inducing breach of contract and conspiracy, given the need to prove unlawful conduct, bad faith, or predominant intent to harm, and the vicarious-only nature of Crown tort liability under the CLPA.

Background and parties
The dispute arose out of Ontario’s Feed-in-Tariff (FIT) renewable energy program, created under amendments to the Electricity Act, 1998, following the Green Energy Act, 2009. The Independent Electricity System Operator (IESO), a non-Crown, not-for-profit corporation, administered the program and entered standardized FIT Contracts with renewable energy suppliers to procure electricity from qualifying projects. The plaintiffs were a group of project companies that had entered into such FIT Contracts (the “Claimed Contracts”) and were at or approaching the Notice to Proceed (NTP) stage when the events in issue unfolded. Ontario’s Ministry of Energy, Northern Development and Mines (Ontario (MOE)) was not a party to the contracts but was responsible for the policy framework under which the IESO operated. The plaintiffs sued Ontario (MOE) for misfeasance in public office, inducing breach of contract, and conspiracy, and also advanced separate claims against the IESO (including for breach of contract and misfeasance), which were not decided on this particular motion. The motion before Callaghan J. concerned only whether the plaintiffs should be granted leave under s. 17 of the Crown Liability and Proceedings Act, 2019 (CLPA) to proceed with their tort claims against Ontario (MOE).

The FIT program and key contractual terms
The FIT Program was designed to procure renewable energy capacity through standardized contracts that incorporated detailed “FIT Rules” and a pricing schedule. Those FIT Rules were expressly incorporated into the FIT Contracts and governed in the event of any inconsistency with the contractual wording. Importantly, the FIT Rules conferred on the IESO a broad discretion to “cancel all or part of the FIT Program at any time and for any reason or to suspend the FIT Program in whole or in part… without any obligation or any reimbursement,” underscoring the policy-driven, non-guaranteed nature of the program. Within the contractual lifecycle, suppliers undertook pre-construction development and, once they had satisfied the prerequisites, could submit an NTP Request under s. 2.4(g) of the FIT Contracts. On receiving a completed NTP Request, the IESO had 20 business days to: (1) grant NTP; (2) terminate the contract; (3) request particulars for a deficient request; or (4) issue an NTP Deferral Notice that extended the response deadline by 365 days and preserved the status quo. The contracts contained no limitation on when or for what purpose an NTP Deferral Notice could be issued. The compensation regime was materially different depending on whether NTP had been granted. Termination before NTP limited recovery to capped pre-construction development costs plus a modest deferral-related payment, whereas termination after NTP significantly increased the amounts payable to suppliers. The FIT Contracts also included an “entire agreement” clause, confirming that no representations or warranties beyond the written terms were relied upon, and a “no amendment” clause prohibiting changes unless in writing signed by both parties. Pre-contractual guidance documents, including IESO Q&As that discussed the “possibility” of deferral where transmission capacity or connection costs were off-plan, were expressly identified as non-amendatory and therefore could not modify or restrict the IESO’s written contractual discretion.

Political change, caretaker period and the deluge of NTP requests
In 2018, the Progressive Conservative (PC) Party campaigned on ending the FIT Program. The writ of election issued on May 9, 2018, the election was held on June 7, 2018, and the new Premier and Cabinet were sworn in on June 29, 2018. During this interval, the incumbent Liberal government operated under the “Caretaker Convention,” which, as reflected in memoranda from the Secretary of Cabinet to Deputy Ministers, urged restraint: government activity should be limited to what was routine, non-controversial, urgent in the public interest, reversible without undue cost, or agreed to by opposition parties. Although the caretaker guidelines constrained political judgment, the incumbent Cabinet retained full legal authority until the new government was sworn in. The plaintiffs were fully aware that the PC Party intended to cancel FIT and that cancellation would have different financial consequences depending on whether their projects had reached NTP. Their contracting history showed only nine NTP Requests in the three years before May 2018. After the writ dropped, however, they submitted 111 NTP Requests in the short window between May 18, 2018 and the cancellation of the program, a dramatic escalation motivated by the prospect of enhanced termination compensation if NTPs could be secured in time. Internal emails showed a conscious decision to “keep filing NTP” and to keep a “foot still on the gas” in the hope that NTP Requests would be processed up to the anticipated shutdown announcement.

Transition meetings and the issuance of NTP deferral notices
Following the election but before the new Cabinet was sworn in, there was at least one transition meeting involving the IESO, the Deputy Minister and Assistant Deputy Minister of Energy, and members of the incoming PC transition team. A presentation was made about the FIT Program, including the province’s potential financial exposure if the program were cancelled after issuing NTPs. After that meeting, no further NTPs were granted. Instead, before and after the swearing-in, the IESO issued NTP Deferral Notices—approximately 18 before the new government took office, and 59 in total. A draft letter (never sent) contemplated explaining deferrals as pending completion of the transition and receipt of the new government’s energy policy priorities; the final letters simply invoked the IESO’s contractual entitlement to issue deferrals. The plaintiffs inferred from the presence of PC transition representatives at the meeting and the ensuing pattern of deferrals that Ontario (MOE) had, at the behest of the unsworn incoming government, directed the IESO to issue “blanket” Deferral Notices to avoid the higher termination payouts associated with NTP. However, there was no direct evidence of any such instruction or of the outgoing Liberal government ceding its governing authority to the PC transition team. On July 5, 2018, just days after the swearing-in, the new government issued an Order-in-Council (OIC) directing the IESO to take all steps necessary to wind down all FIT Contracts. Even after the OIC and program cancellation, the plaintiffs continued to file NTP Requests, trying to maximize compensation in case any NTPs were processed.

The pleaded claims against Ontario (MOE)
Because Ontario (MOE) was not a party to the FIT Contracts, the plaintiffs did not bring a direct breach of contract claim against the Crown. Instead, they framed their causes of action as: (1) misfeasance in public office; (2) inducing the IESO’s breach of contract; and (3) conspiracy. All three rested on a common factual theory: that Ontario (MOE), through officials acting in the caretaker period, unlawfully took instructions from the unsworn PC transition team to cause the IESO to defer NTP decisions on the Claimed Contracts, thereby minimizing termination compensation once the program was cancelled. For misfeasance, they alleged deliberate unlawful conduct in public office, including breach of statutory and legal obligations, acting in bad faith, and unlawfully implementing the PC campaign platform during the caretaker period. For inducing breach, they asserted that Ontario (MOE) caused the IESO to breach the FIT Contracts by directing “improper blanket” NTP Deferral Notices and by issuing an OIC that was supposedly unauthorized by the Electricity Act. For conspiracy, they alleged that Ontario (MOE), the IESO, and unknown PC transition members agreed on a common plan to delay or deny NTP, terminate the contracts, and limit liability by acting unlawfully, in bad faith and with predominant intent to harm the plaintiffs. The plaintiffs quantified their claim at roughly $240 million in lost profits plus $17.8 million in development costs.

The CLPA leave framework and the ‘tort based on bad faith’ concept
Section 17 of the CLPA, which came into force in 2020, introduced a mandatory leave requirement for proceedings against the Crown that include misfeasance in public office or any “tort based on bad faith” in the exercise of an officer’s powers. The plaintiff must file an affidavit setting out the material facts and an affidavit of documents, while the Crown may—but need not—file affidavit evidence and is expressly insulated from discovery for the purposes of the leave motion. The court may grant leave only if satisfied that: (a) the proceeding is brought in good faith; and (b) there is a reasonable possibility the misfeasance/bad-faith claim will be resolved in the plaintiff’s favour. The provision mirrors the leave test in Ontario securities legislation, which the Supreme Court has interpreted as a “relatively low merits-based threshold” but still a meaningful screen that requires both a plausible legal analysis and “some credible evidence” supporting a realistic, not merely theoretical, chance of success. Applying these securities-law authorities, Callaghan J. treated s. 17(7) CLPA as requiring a qualitative evaluation of whether, on the limited record and with some allowance for future evidence, the plaintiffs’ case had more than a mere possibility of success. The plaintiffs conceded that there is no freestanding tort of “bad faith”; bad faith is an element of misfeasance and certain other intentional wrongs. The court held that “tort based on bad faith” in s. 17(1) comfortably covered intentional torts where officials allegedly acted unlawfully or contrary to legal obligations for an improper purpose, which accurately described the plaintiffs’ misfeasance, inducing breach, and conspiracy theories. Leave was therefore required for all claims against Ontario (MOE). Ontario (MOE) did not dispute that the action was brought in good faith, so the motion turned on whether there was a reasonable possibility of success on the merits.

Caretaker Convention, Cabinet memoranda and alleged ‘unlawful’ conduct
A critical plank of the plaintiffs’ theory was that Ontario (MOE) acted unlawfully by breaching the Caretaker Convention during the election and transition period, particularly as “formalized” in memoranda from the Secretary of Cabinet to Deputy Ministers. Those memoranda stressed that during the caretaker period only routine, non-controversial, or urgent business should continue, and that new policy or program initiatives and non-essential appointments or announcements should be suspended unless clearly necessary or reversible. The plaintiffs argued that because NTP processing had previously been treated as routine, issuing NTP Deferral Notices rather than continuing to grant NTPs at the pre-election pace represented a prohibited departure from established, lawful policy, undertaken at the direction of an unsworn PC transition team that had “no right to govern.” The court rejected this as a source of unlawfulness. First, the Caretaker Convention is a constitutional convention, not law. Relying on leading constitutional scholarship and Supreme Court authority, the court emphasized that conventions are political rules observed for reasons of appropriateness and accountability, not legal commands enforceable by courts; their breach may be politically damaging but does not give rise to a legal cause of action or judicial sanction. Second, the Cabinet memoranda simply restated the convention in written form; their existence did not transform a political convention into a binding legal standard of care. Alleging breach of those memoranda was therefore indistinguishable from alleging breach of the convention itself, which could not sustain the “unlawful” conduct element required for misfeasance or other bad-faith torts. Third, even if the memoranda could, hypothetically, inform a standard of care, the factual record showed that the circumstances were not “routine” or “business as usual.” The plaintiffs had abruptly flooded the IESO with NTP Requests—111 in a matter of weeks—in an obvious effort to secure the higher compensation triggered by NTP before a publicly promised cancellation. Against that backdrop, pausing or deferring NTP decisions to preserve the status quo during a change in government, especially under a program the incoming administration had openly pledged to terminate, was entirely consistent with the caretaker rationale and not evidence of recklessness, abuse of power, or bad faith.

Inference of improper direction from the PC transition team
The plaintiffs also sought to rely on circumstantial evidence to infer that the PC transition team had effectively directed Ontario (MOE) and/or the IESO to issue blanket NTP Deferral Notices, thereby unlawfully implementing campaign promises before the new government formally took office. They pointed to the single transition meeting where financial exposure under the FIT Program was canvassed; the pattern of deferrals following that meeting; and the draft unsent letter suggesting that NTP decisions were being deferred pending completion of the transition and receipt of the new government’s policy priorities. Callaghan J. accepted that in a leave context some inferences may be drawn, particularly where the Crown’s evidence is limited. However, he held that inferring an actual direction or usurpation of power by the PC transition team would go beyond reasonable inference into speculation. The existing record showed only that the transition team was briefed on the program and that, thereafter, deferrals were issued and, once in office, the new government promptly cancelled the program via OIC. To conclude that the outgoing Liberal government had ceded its authority to the PC transition team—or that officials acted unlawfully by considering the policy preferences of the incoming government while preserving the province’s financial position through a contractually permitted deferral mechanism—would be a speculative assumption that missing evidence would favour the plaintiffs. On the securities-law-inspired leave test, courts are expressly cautioned not to grant leave on such speculation about future evidence, particularly where the conduct (issuing deferrals to preserve the status quo) is rational and consistent with the caretaker guidance itself.

Legality of the Order-in-Council and inducing breach allegations
On the inducing breach of contract claim, the plaintiffs alleged that Ontario (MOE) had caused the IESO to breach the FIT Contracts both by orchestrating improper NTP Deferral Notices and by issuing an OIC that was unlawful and not authorized by the Electricity Act. The court had already concluded that the deferrals themselves were neither unlawful nor evidence of bad faith. Regarding the OIC, Callaghan J. stressed that an OIC is a form of delegated legislation. As such, it enjoys a strong presumption of validity, and a court must undertake a robust but deferential reasonableness review, asking whether the regulation can be reconciled with the purposes and scheme of its enabling statute. Under Katz Group and subsequent Supreme Court authority, a regulation will only be found ultra vires if its objectives are “irrelevant,” “extraneous” or “completely unrelated” to the statutory purpose—an “egregious” case. The plaintiffs provided no substantive explanation, in evidence or argument, of how the OIC ran afoul of the Electricity Act. On the contrary, the Electricity Act’s stated purposes include protecting consumers with respect to price and the adequacy and reliability of electricity service, facilitating a financially viable electricity industry, and promoting cleaner energy in a manner consistent with government policy. Terminating a costly, politically controversial procurement program in line with the new government’s stated policy platform was readily reconcilable with these purposes. There was no credible basis to suggest that the OIC was unrelated to the statutory objectives or that its underlying policy rationale—managing financial exposure and reshaping energy policy—was an improper consideration. In the absence of evidence to rebut the presumption of validity or to show bad faith in issuing the OIC, the court concluded that there was no reasonable possibility the plaintiffs could ultimately establish that the OIC was ultra vires or that it constituted unlawful conduct for purposes of misfeasance or inducing breach.

Conspiracy and the structure of Crown liability
The conspiracy claim repackaged the same allegations of unlawful and bad-faith conduct into a theory that Ontario (MOE), the IESO, and PC transition members had formed a common design either to act unlawfully or to act with predominant intent to injure the plaintiffs. The analytical difficulty was that both branches of the civil conspiracy tort require either independently unlawful acts or acts done primarily to harm the plaintiff without lawful justification. Since the court had already found that the alleged building blocks—breach of the Caretaker Convention, improper consideration of the incoming government’s policies, issuance of NTP Deferral Notices, and the OIC itself—did not disclose a reasonable possibility of being proved unlawful or in bad faith on a proper evidentiary record, the conspiracy claim necessarily failed the leave test as well. Finally, the court noted that, under s. 8 of the CLPA and existing case law, the Crown’s liability in tort is vicarious only; Ontario cannot be directly liable in tort absent proof of tortious conduct by an identified officer, employee or agent. The plaintiffs’ pleading was framed as if Ontario (MOE) were directly liable, and would have required amendment even if leave had been granted.

Outcome and effect of the decision
Callaghan J. held that, while the proceeding had been commenced in good faith, the plaintiffs had not met the second branch of the s. 17(7) CLPA test. On the limited but plaintiff-driven evidentiary record, there was no reasonable or realistic possibility that the plaintiffs could succeed at trial on their misfeasance, inducing breach, or conspiracy claims against Ontario (MOE). The conduct complained of—engagement with the incoming government’s transition team, use of contractually authorized NTP Deferral Notices to preserve the status quo during a period of intense political change, and issuance of a policy-implementing OIC within the scope of the Electricity Act—was neither unlawful nor in bad faith and was, in the court’s view, consistent with responsible caretaker governance. The motion for leave under s. 17(2) CLPA was therefore dismissed. Under s. 17(8), each party bears its own costs on a leave motion, so there was no costs award in favour of any side. The net result is that Ontario (MOE), as defendant, was the successful party on this motion, and no damages, costs, or other monetary amounts were ordered or awarded in its favour; the total monetary recovery in this decision was effectively nil, and any precise quantum of costs or damages remains undetermined.