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Contracts - Interpretation - Basics (2). ABDOU v. Governing Council of UOT
In ABDOU v. Governing Council of UOT (Div Court, 2023) the Divisional Court considered basic contractual interpretation law:[31] In Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 SCR 633, the Supreme Court of Canada stated that an appeal involving the interpretation of a contract is a question of mixed fact and law subject to deferential review on appeal. This was later clarified though, in Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, [2016] 2 SCR 23, at paras. 4, 24, where the court held that if the contract to be reviewed is a standard form contract, this interpretation is better characterized as a question of law subject to correctness review.
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[41] When reviewing the alleged errors of the Deputy Judge, the efforts Mr. Abdou made afterwards to obtain a refund are not relevant to the issue of general damages. I am bound by the rules of contract interpretation which have recently been summarized as follows:a) Contractual interpretation is an exercise in discovering the objective intentions of the parties as expressed in the words of the contract;
b) The court is required to read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract;
c) When a contract is read as a whole, it should be interpreted 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;
d) The exercise of interpretation should also reflect the factual matrix underlying the contract and accord with sound commercial principles and good business sense, while avoiding commercially absurd interpretations; and
e) If ambiguity in contract terms still remains after the above principles are applied, the rule of contra proferentem can be applied. See Jakab v. Clean Harbors Canada Inc., 2023 ONCA 377, at paras. 11-12 (citations omitted).
[42] As can be seen, evidence of what happened afterwards cannot inform my interpretation of the Calendar and the Refund Policy. Indeed, the factual matrix is less relevant in a standard form contract because the parties do not negotiate terms and the contract is put to the receiving party as a take it or leave it proposition: Ledcor at para. 28; Trillium Mutual Insurance Company v. Emond, 2023 ONCA 729, at para. 38.
[43] The following can constitute a legal error in contract interpretation that justifies appellant intervention:a) A failure to consider the contract as a whole, by focussing on one provision without giving proper consideration to other relevant provisions; and
b) A failure to apply the appropriate principles of contractual interpretation, especially when it results in an interpretation inconsistent with the wording of the relevant provisions.
See Fuller v Aphira Inc., 2020 ONCA 403, at paras. 49-50. . Grasshopper Solar Corporation v. Palmer
In Grasshopper Solar Corporation v. Palmer (Ont CA, 2023) the Court of Appeal considered a novel commercial tenancy arrangement whereby the respondent tenant rented residential rooftops for the purpose of generating solar energy and feeding it back into the electrical grid for profit.
In this quote the court considered issues of contractual interpretation (here, a lease):[20] The motion judge’s interpretation of the lease is entitled to deference: Deslaurier Custom Cabinets Inc. v. 1728106 Ontario Inc., 2017 ONCA 293, 135 O.R. (3d) 241, at para. 49, leave to appeal to S.C.C. refused, 37039 (October 19, 2017); and Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at paras. 50, 52.
[21] The motion judge committed no error in turning first to the written terms of the agreement and applying them to the circumstances of this case: Lloyds Syndicate 1221 (Millennium Syndicate) v. Coventree Inc., 2012 ONCA 341, 291 O.A.C. 178, at para. 16, leave to appeal refused, [2012] S.C.C.A. No. 276. Moreover, while it is true that the lease was offered on a take-it-or-leave-it basis, this neither changes our understanding of the decision below nor rises to the level of an impermissible power imbalance between the parties.
[22] Accordingly, this argument cannot prevail. . Jakab v. Clean Harbors Canada, Inc.
In Jakab v. Clean Harbors Canada, Inc. (Ont CA, 2023) the Court of Appeal considered principles of contractual interpretation, including the interaction between 'ambiguity' and 'contra proferentum':C. THE RELEVANT LEGAL PRINCIPLES
[11] Contractual interpretation is an exercise in discovering the “objective intentions of the parties as expressed in the words of the contract”: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, a para. 57. This “fact-specific goal” requires a trial court to “read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract”: Sattva, at para. 47; Ledcor, at para. 27. When a contract is read as a whole, it should be interpreted “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”: 2249778 Ontario Inc. v. Smith (Fratburger), 2014 ONCA 788, at para. 19; Meridian C C Intl Inc. v. 2745206 Ontario Inc., 2022 ONCA 12, at para. 7. The exercise of interpretation should also reflect the factual matrix underlying the contract and accord with sound commercial principles and good business sense, while avoiding commercially absurd interpretations: 2249778 Ontario Inc., at para. 19. However, “the [surrounding circumstances] should never be allowed to overwhelm the words of [the] agreement”: Sattva, at para. 57.
[12] If ambiguity in contract terms still remains after the above principles are applied, the rule of contra proferentem can be applied: Ledcor, at para. 51. Its role is to give effect to an ambiguous clause by preferring the reasonable interpretation that favours the party that did not have control over its drafting: Manulife Bank of Canada v. Conlin, 1996 CanLII 182 (SCC), [1996] 3 S.C.R. 415, at para. 9; 2249778 Ontario Inc., at para. 22.
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[20] Moreover, the rule of contra proferentem applies in cases where contractual clauses are ambiguous: 2249778 Ontario Inc., at para. 22. A determination of ambiguity cannot be arrived at until after the material clause has been interpreted in the context of the contract as a whole. No ambiguity exists unless, after the principles of construction have been applied, more than one reasonable construction remains. ... . Niagara Falls Shopping Centre Inc. v. LAF Canada Company
In Niagara Falls Shopping Centre Inc. v. LAF Canada Company (Ont CA, 2023) the Court of Appeal set out principles of contractual interpretation generally:[32] Before turning to those errors, it is useful to recall the Supreme Court’s guidance in Sattva for conducting contractual interpretation. A court’s overriding concern in contractual interpretation is “to determine ‘the intent of the parties and the scope of their understanding’”: at para. 47. Courts must “read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract”: at para. 47. Contractual interpretation must be grounded in the text of the agreement, which expresses the “mutual and objective intentions of the parties”: at para. 57. . 908593 Ontario Limited v. Atradius
In 908593 Ontario Limited v. Atradius (Ont CA, 2023) the Court of Appeal cited the obvious presumption that the contents of a signed contract are known to the parties:[8] .... As a general proposition, in cases involving signed contracts, knowledge of what the contract contained is presumed: see, for example, Apps v. Grouse Mountain Resorts Ltd., 2020 BCCA 78, 445 D.L.R. (4th) 615, at para. 79. .... . EPCOR Electricity Distribution Ontario Inc. v. Municipal Electric Association Reciprocal Insurance Exchange
In EPCOR Electricity Distribution Ontario Inc. v. Municipal Electric Association Reciprocal Insurance Exchange (Ont CA, 2022) the Court of Appeal considered basic contract interpretation principles:(b) Principles of interpretation
[56] The principles of interpretation applicable to insurance policies are not in dispute and can be briefly summarized.
[57] The first principle is that when the language of the policy is unambiguous, the court should give effect to the clear language, reading the insurance contract as a whole: Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, 2010 SCC 33, [2010] 2 S.C.R. 245, at para. 22, referring to Non-Marine Underwriters, Lloyd’s of London v. Scalera, 2000 SCC 24, [2000] 1 S.C.R. 551, at para. 71.
[58] The instruction that the contract must be read as a whole is frequently expressed but equally frequently ignored by both insurers and insureds as they focus on the coverage or exclusion at issue. Insurance policies, like the one at issue in this appeal, often contain multiple, sometimes overlapping coverages, exclusions, conditions, and endorsements. Reading the policy as a whole informs the exercise of ascertaining the intention of the parties. Reading the policy as a whole, and searching for harmony rather than discord, is often helpful in reconciling apparent ambiguities or inconsistencies.
[59] Where the language of the policy is ambiguous – where the meaning is not clear, and there are competing reasonable interpretations – the general rules of contract interpretation come into play. Courts can give preference to an interpretation that is consistent with the reasonable expectations of the parties, as long as that interpretation is supported by the language of the policy: Progressive Homes, at para. 23. Courts should avoid an interpretation that would give an unrealistic result or that would not have been in the contemplation of the parties when the contract was made: Progressive Homes, at para. 23; Ledcor, at para. 78.
[60] When these rules of construction fail to resolve the ambiguity, the court will construe the policy contra proferentem, against the insurer. This gives rise to the principle that coverage provisions are to be interpreted broadly and exclusions are to be construed narrowly: Progressive Homes, at para. 24; Scalera, at para. 70. . Prism Resources Inc. v. Detour Gold Corporation
In Prism Resources Inc. v. Detour Gold Corporation (Ont CA, 2022) the Court of Appeal considered basics of contractual interpretation:[15] The parties agree that the Supreme Court’s decision in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, sets out the governing principles of contractual interpretation. The relevant principles are also addressed in this court’s decisions in Weyerhauser Co. v. Ontario (Attorney General), 2017 ONCA 1007, 77 B.L.R. (5th) 175, at para. 65, per Brown J.A., rev’d on other grounds, Resolute FP Canada Inc. v. Ontario (Attorney General), 2019 SCC 60, 444 D.L.R. (4th) 77; Ontario First Nations (2008) Limited Partnership v. Ontario Lottery and Gaming Corp., 2021 ONCA 592, at para. 46, per Jamal J.A.; Ventas, Inc. v. Sunrise Senior Living Real Estate Investment Trust, 2007 ONCA 205, 85 O.R. (3d) 254, at para. 24, per Blair J.A.; and Dumbrell v. The Regional Group of Companies Inc., 2007 ONCA 59, 85 O.R. (3d) 616, at paras. 52-56, per Doherty J.A.
[16] These principles were conveniently summarized by Brown J.A. in Weyerhauser, at para. 65. A judge interpreting a contract should:i) determine the intention of the parties in accordance with the language they have used in the written document, based upon the “cardinal presumption” that they have intended what they have said;
ii) read the text of the written agreement as a whole, giving the words used their ordinary and grammatical meaning, 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;
iii) read the contract in the context of the surrounding circumstances known to the parties at the time of the formation of the contract. The surrounding circumstances, or factual matrix, include facts that were known or reasonably capable of being known by the parties when they entered into the written agreement, such as facts concerning the genesis of the agreement, its purpose, and the commercial context in which the agreement was made. However, the factual matrix cannot include evidence about the subjective intention of the parties; and
iv) read the text in a fashion that accords with sound commercial principles and good business sense, avoiding a commercially absurd result, objectively assessed. [17] Brown J.A. added several observations about the proper consideration of the “factual matrix” by a judge interpreting a contract, at paras. 66-68, to the effect that it comprises, as stated in Sattva at para. 58, only “objective evidence of the background facts at the time of the execution of the contract... that is, knowledge that was or reasonably ought to have been within the knowledge of both parties at or before the date of contracting”. The “surrounding circumstances”, Sattva noted, at para. 57, “must never be allowed to overwhelm the words of that agreement” and cannot be used “to deviate from the text such that the court effectively creates a new agreement”. . 2651171 Ontario Inc. v. Brey
In 2651171 Ontario Inc. v. Brey (Ont CA, 2022) the Court of Appeal considered 'as a whole' contractual interpretation:[16] The motion judge properly instructed herself that, as this court directed in Ventas, Inc. v. Sunrise Senior Living Real Estate Investment Trust, 2007 ONCA 205, 85 O.R. (3d) 254, at para. 24, 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”.
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