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Contract - Appeals - SOR - Exceptions - Extricable Legal Questions. James Bay Resources Limited v. Mak Mera Nigeria Limited
In James Bay Resources Limited v. Mak Mera Nigeria Limited (Ont CA, 2025) the Ontario Court of Appeal allowed an appeal - here from orders that "Mak Mera to pay James Bay the amount of US$405,000, which she characterized as “advances”" and "damages for defamation in the amount of $200,000".
Here the court considered what are extricable errors of law:[40] Extricable errors of law in the course of contractual interpretation include “the application of an incorrect principle, the failure to consider a required element of a legal test, or the failure to consider a relevant fact”: Sattva, at para. 53, citing King v. Operating Engineers Training Institute of Manitoba Inc., 2011 MBCA 80, 270 Man. R. (2d) 63, at para. 21. . Intercap Equity Inc. v. Bellman
In Intercap Equity Inc. v. Bellman (Ont CA, 2021) the Court of Appeal set out principles of contractual interpretation:[36] Contractual interpretation is a question of mixed fact and law and subject to a deferential standard of review, absent extricable questions of law such as “the application of an incorrect principle, the failure to consider a required element of a legal test, or the failure to consider a relevant factor”: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at para. 53, citing King v. Operating Engineers Training Institute of Manitoba Inc., 2011 MBCA 80, 280 Man. R. (2d) 63, at para. 21. As noted by the Supreme Court in Sattva, at para. 55, “[T]he goal of contractual interpretation, to ascertain the objective intentions of the parties, is inherently fact specific. The close relationship between the selection and application of principles of contractual interpretation and the construction ultimately given to the instrument means that the circumstances in which a question of law can be extricated from the interpretation process will be rare.”
[37] In this case, there are no extricable questions of law. The questions on this appeal involve the interpretation of provisions of negotiated agreements. As such, the standard of review is the deferential standard of palpable and overriding error: Sattva, at paras. 52-55; Heritage Capital Corp. v. Equitable Trust Co., 2016 SCC 19, [2016] 1 S.C.R. 306, at paras. 21-24. . Lozon v. Lozon
In Lozon v. Lozon (Ont CA, 2023) the Court of Appeal considered contractual interpretation, here with the focus being on the Sattva 'extricable question' standard of review exception:[14] While deference is generally owed to decision makers on points of contractual interpretation, extricable questions of law will be reviewed on a correctness standard: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at paras. 52-53. As the Supreme Court identified in Sattva, at para. 53, citing Housen v. Nikolaisen, 2002 SCC 33, [2002] S.C.R. 235; King v. Operating Engineers Training Institute of Manitoba Inc., 2011 MBCA 80, 270 Man. R. (2d) 63:[I]t may be possible to identify an extricable question of law from within what was initially characterized as a question of mixed fact and law (Housen, at paras. 31 and 34-35). Legal errors made in the course of contractual interpretation include “the application of an incorrect principle, the failure to consider a required element of a legal test, or the failure to consider a relevant factor” (King, at para. 21). Moreover, there is no question that many other issues in contract law do engage substantive rules of law: the requirements for the formation of the contract, the capacity of the parties, the requirement that certain contracts be evidenced in writing, and so on. ....
[17] In short, the law on contractual interpretation requires the court to read the contract as a whole, giving the words their ordinary and grammatical meaning consistent with the surrounding circumstances at the time the contract was formed. The court is not to consider the subjective intentions of the parties. The interpretive process should consist only of objective evidence of the background facts at the time of the execution of the contract: Sattva, at paras. 57-59. . Spot Coffee Park Place Inc. v. Concord Adex Investments Limited
In Spot Coffee Park Place Inc. v. Concord Adex Investments Limited (Ont CA, 2023) the Court of Appeal considered Sattva for the standard of review on issues of contractual interpretation:(a) Standard of Review
[27] In Sattva, at para. 50, Rothstein J. reasoned that contractual interpretation involves issues of mixed fact and law as it is an exercise in which the principles of contractual interpretation are applied to the words of the written contract, considered in light of the factual matrix. He went on to note, at para. 51, that:One central purpose of drawing a distinction between questions of law and those of mixed fact and law is to limit the intervention of appellate courts to cases where the results can be expected to have an impact beyond the parties to the particular dispute. [28] As he observed at para. 52, legal obligations arising from a contract are, in most cases, limited to the interests of the particular parties. Deference to first instance decision-makers on points of contractual interpretation promotes the goal of limiting the cost of appeals and the autonomy and integrity of trial proceedings. In Corner Brook (City) v. Bailey, 2021 SCC 29, 460 D.L.R. (4th) 169, Rowe J. affirmed this deferential standard of review in the face of a question of mixed fact and law involving the interpretation of a contract.
[29] In Sattva, Rothstein J. carved out extricable questions of law from this more limited standard of review stating that: “Legal errors made in the course of contractual interpretation include ‘the application of an incorrect principle, the failure to consider a required element of a legal test, or the failure to consider a relevant factor’” (para. 53). They are reviewable on a correctness standard. He went on to caution that courts should be cautious in identifying extricable questions of law in disputes over contractual interpretation. This necessary caution was underscored by Rowe J. in Corner Brook (City). See also: Ontario First Nations (2002) Limited Partnership v. Ontario Lottery Gaming Corporation, 2021 ONCA 592.
[30] That said, ignoring a specific and relevant provision of an agreement may amount to a failure to construe a contract as a whole and constitute an extricable question of law: Sattva, at para. 64. See also: Corner Brook (City), at para. 44. . Dunbar et al v. Ontario Gaming West GTA Limited Partnership
In Dunbar et al v. Ontario Gaming West GTA Limited Partnership (Div Ct, 2022) the Divisional Court quoted from Fuller v. Aphria Inc. for the applicable standard of review bearing on customized contracts:[22] However, the legal pathway for contractual interpretation does not end there. This is made clear from the Court of Appeal for Ontario in Fuller v. Aphria Inc., 2020 ONCA 403. The Court stated the following, commencing at para. 48:(a) The Standard of Review
[48] As the application judge correctly noted, the issue of whether the Options had expired at the time of their exercise is a question of contractual interpretation. The interpretation of a non-standard form contract by a judge at first instance is generally subject to a deferential standard of review on appeal, as it involves matters of mixed fact and law: Sattva, at paras. 50-52. It is “an exercise in which the principles of contractual interpretation are applied to the words of the written contract, considered in light of the factual matrix”: Sattva, at para. 50.
[49] However, where errors made in the course of contractual interpretation give rise to extricable questions of law, deference will not be owed. Such legal errors include the application of an incorrect principle, the failure to consider a required element of a legal test, or a failure to consider a relevant factor: Sattva, at para. 53. Appellate courts should be cautious before characterizing something as an extricable question of law in disputes over contractual interpretation: Sattva, at para. 54. Nevertheless, the failure to apply the appropriate principles of contractual interpretation, especially where it results in an interpretation inconsistent with the wording of the relevant provisions, can give rise to an extricable error of law and displace deference: MacDonald v. Chicago Title Insurance Company of Canada, 2015 ONCA 842, 127 O.R. (3d) 663, leave to appeal refused, [2016] S.C.C.A. No. 39, at paras. 64-66, 72. [bold emphasis added]
[50] In Resolute FP, the majority of the Supreme Court agreed with the dissenting reasons in this court of Laskin J.A. in concluding that there were reversible errors in the motion judge’s interpretation of the scope of a contractual indemnity: Resolute FP, at para. 26. Laskin J.A. found the following errors to justify appellate intervention: palpable and overriding errors of fact that affect the interpretation; a failure to properly, accurately, and fully consider the context in which a contract was made, which is an error of law; and a failure to consider the contract as a whole, by focussing on one provision without giving proper consideration to other relevant provisions, which is also an error of law: Weyerhaeuser, at para. 211 (Laskin J.A. dissenting reasons); Resolute FP, at paras. 26-27, 30 and 32-34. [23] Put another way, the Court of Appeal for Ontario stated in Deslaurier Custom Cabinets Inc. v. 1728106 Ontario Inc., 2017 ONCA 293, 135 O.R. (3d) 241 at para. 19:[19] First, Sattva holds, at para. 53, that in rare cases the correctness standard of review will apply to questions of contractual [page 247] interpretation where it is "possible to identify an extricable question of law from within what was initially characterized as a question of mixed fact and law" (citation omitted). Justice Rothstein, writing for the Supreme Court, explained in Sattva, at para. 53, that "extricable questions of law" include legal errors involving "the application of an incorrect principle, the failure to consider a required element of a legal test, or the failure to consider a relevant factor" (citation omitted). . Kinross Gold Corporation v. Cyanco Company
In Kinross Gold Corporation v. Cyanco Company (Ont CA, 2024) the Ontario Court of Appeal dismissed an appeal that focussed on the standard of review:The standard of review
[15] The Liquid Agreement is a non-standard contract. In Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at para. 50, the Supreme Court explained that appeals involving interpretations of contracts such as this most often raise questions of mixed fact and law, which are reviewable on the standard of palpable and overriding error. Where, however, a trial judge’s reasons reveal an extricable error of law, such errors are reviewable on a correctness standard. However, Sattva urged courts to be “cautious in identifying extricable questions of law in disputes over contractual interpretation” as “the goal of contractual interpretation, to ascertain the objective intentions of the parties, is inherently fact specific”: at paras. 54-55. Accordingly, “the circumstances in which a question of law can be extricated from the interpretation process will be rare”: Sattva, at para. 55. . Meridian C C Intl Inc. v. 2745206 Ontario Inc. [samples of extricable legal errors, from Sattva]
In Meridian C C Intl Inc. v. 2745206 Ontario Inc. (Ont CA, 2021) the Court of Appeal considered the general appellate standard of review applicable to a contract dispute, here the 'extricable legal errors' exception:[6] It is helpful to begin our analysis with the standard of review. The motion judge’s interpretation of the parties’ lease agreement, including its factual matrix, would ordinarily attract a deferential standard of appellate review: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at paras. 50-52. Absent an extricable question of law, which courts should be cautious in identifying, or palpable and overriding error, appellate intervention is not warranted: Sattva, at paras. 53-54.
[7] An extricable question of law includes a legal error made in the course of contractual interpretation such as the application of an incorrect principle, the failure to consider a required element of a legal test, or the failure to consider a relevant factor: Sattva, at para. 53. Moreover, a failure to consider the contract as a whole, by focussing on one provision without giving proper consideration to other relevant provisions, can also be an error of law: Fuller v. Aphria Inc., 2020 ONCA 403, 4 B.L.R. (6th) 161, at para. 50; Resolute FP Canada Inc. v. Ontario (Attorney General), 2019 SCC 60, 444 D.L.R. (4th) 77, at paras. 26-27, 30 and 32-34. Finally, in Ventas, Inc. v. Sunrise Senior Living Real Estate Investment Trust, 2007 ONCA 205, 85 O.R. (3d) 254, at para. 24, this court emphasized that a commercial contract should be interpreted “as a whole, in a manner that gives meaning to all of its terms and avoids an interpretation that would render one or more of its terms ineffective”. In our view, the motion judge made these errors of law in his analysis of the lease. . BNSF Railway Company v. Greater Vancouver Sewerage and Drainage District [extricable]
In BNSF Railway Company v. Greater Vancouver Sewerage and Drainage District (Fed CA, 2025) the Federal Court of Appeal dismissed an appeal [under the Canada Transportation Act, s.41(1)], here from a CTA decision that "found the proposed new sewage pipe to be a suitable utility crossing and authorized the District to construct and maintain it at the District’s cost".
Here the court considered the SOR applicable to an allegedly-applicable 1959 contract between a railway and a sewage authority where appeal jurisdiction only applied to "question of law or jurisdiction":[10] The District says contractual interpretation is a question of mixed fact and law and BNSF has not established an extricable question of law. In contrast, BNSF asserts the Agency made an extricable error of law because it did not apply the proper principles of contractual interpretation. The District says, regardless, the Agency’s decision is correct: the 1959 agreement does not authorize the proposed work.
[11] While contractual interpretation is generally a question of mixed fact and law, the failure to apply the correct legal principles is an extricable error of law: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 at paras. 50, 53 [Sattva]; Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37 at para. 42 [Ledcor].
[12] I agree with BNSF that the Agency failed to consider and apply the proper principles when it interpreted the 1959 agreement. Thus, I am satisfied the appeal raises an extricable question of law.
....
VI. Analysis
[37] We have the benefit of the 1959 agreement and the parties’ submissions to the Agency in the record before us. Therefore, on this appeal, we are in the same position as the Agency and may interpret the 1959 agreement by applying the correct principles of contractual interpretation. . Cronos Group Inc. v. Assicurazioni Generali S.p.A. [extricable legal errors are rare]
In Cronos Group Inc. v. Assicurazioni Generali S.p.A. (Ont CA, 2022) the Court of Appeal considers whether the issue before it qualified as an "extricable question of law", and thus required an SOR of correctness:[35] I am not persuaded that the alleged errors in the interpretative process in play on this appeal fall within the class of “rare” circumstances in which a question of law can be extricated from the interpretation process: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at para. 55; Teal Cedar Products Ltd. v. British Columbia, 2017 SCC 32, [2017] 1 S.C.R. 688, at para. 63. True, Sattva identified certain questions that may arise in the contract interpretation exercise as constituting legal errors that attract a correctness standard.[3] However, Sattva went on to emphasize that the fundamental goal of contractual interpretation – to ascertain the objective intentions of the parties –remains an inherently fact-specific exercise. Accordingly, the close relationship between the selection and application of principles of contractual interpretation and the construction ultimately given to the contract means that the circumstances in which a question of law can be extricated from the interpretation process will be rare: Sattva, at para. 55. . Lindsay v. Verge Insurance Brokers Ltd. [SOR exception for extricable legal error issues]
In Lindsay v. Verge Insurance Brokers Ltd. (Ont CA, 2023) the Court of Appeal considered appellate standards of review that applies to contract issues:[16] The standard of review in most contractual interpretation cases is one of substantial deference: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, at paras. 50-52. A correctness standard can be applied only where there is an extricable question of law or where the contract in issue is a standard form contract: Corner Brook (City) v. Bailey, 2021 SCC 29, at para. 44. Neither of these exceptions exists in this appeal or in most contract case appeals. As explained recently by this court in Cronos Group Inc. v. Assicurazioni Generali S.p.A, 2022 ONCA 525, at para. 35:... Sattva identified certain questions that may arise in the contract interpretation exercise as constituting legal errors that attract a correctness standard. However, Sattva went on to emphasize that the fundamental goal of contractual interpretation – to ascertain the objective intentions of the parties – remains an inherently fact-specific exercise. Accordingly, the close relationship between the selection and application of principles of contractual interpretation and the construction ultimately given to the contract means that the circumstances in which a question of law can be extricated from the interpretation process will be rare: Sattva, at para. 55 . Niagara Falls Shopping Centre Inc. v. LAF Canada Company [samples of extricable legal errors, from Sattva]
In Niagara Falls Shopping Centre Inc. v. LAF Canada Company (Ont CA, 2023) the Court of Appeal considered the appellate SOR applicable to custom (non-standard) contract, and the exception for 'extricable legal errors':[24] The interpretation of a (non-standard form) contract is a question of mixed fact and law, and ordinarily attracts a deferential standard of appellate review: Sattva, at para. 52. Absent an extricable legal error – which courts should be cautious in identifying – or a palpable and overriding error, appellate intervention is not warranted: at paras. 53-54. Extricable legal errors made in the course of contractual interpretation include the application of an incorrect principle, the failure to consider a required element of a legal test, and the failure to consider a relevant factor: at para. 53. Failure to construe a contract as a whole and disregarding relevant provisions are also extricable errors of law: at paras. 63-64.
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