The Corporation of Hamilton will have to cover the cost of moving power lines underground in the city, the Court of Appeal has ruled.

The municipality launched legal action against Belco after the energy company said it would charge the corporation $26,000 to move power lines in Union Street underground as part of improvements to the area.

The corporation argued that a 2012 agreement between the two required Belco to cover the costs to “relocate apparatus”.

However, appeal judge Maurice Kay said in a written judgment that the replacement of overhead lines with underground ones was not “relocation”.

He said: “In this case, that which would end up underground would be necessarily different from that which had been overhead at the time of the notice.”

Mark Diel, lawyer for the corporation, told the Court of Appeal that it was “crystal clear” that the movement of equipment underground would be covered in the agreement.

Mr Diel also said that under the agreement Belco had to pay the corporation a “pittance” of $30,000 per year for their housing of the city’s energy infrastructure.

However, Mr Justice Kay said: “The question would remain. Is it consistent with business commonsense that the parties intended such an outcome? Mr Diel submits that it is, mainly because Belco could then pass on the costs to its customers.

“I do not accept this submission. Belco is a monopoly supplier whose prices are controlled by a regulator.

“It cannot be assumed, in the absence of evidence, that it would be permitted to increase its prices in order to subsidise a project desired by the corporation, however munificent.”

The appeal court judge added: “It is also submitted on behalf of the corporation that it is unthinkable that it would have contracted on a basis that exposes it to the ultimate cost of a project such as the one in this case in return for an annual fee as low as $30,000.

“As this case demonstrates, one local project can easily account for a year’s fee income.

“However, it is for the corporation to choose, on a cost/benefit analysis, what it wants to do, no doubt taking into account its limited recourse against Belco.”

Chief Justice Narinder Hargun found last year in Supreme Court that the request to move power cables underground would “fundamentally alter the nature of the power supply to Union Street” and was not covered by the agreement.

He also ruled that if the agreement was read the way the corporation had hoped, it would leave Belco open to having to cover the cost of moving all power lines in the city underground.

Mr Justice Hargun wrote: “This would be a wholly unexpected and uncommercial result and is a strong indicator that this could not be the intention of the parties.”

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