Rarotonga, 2010

simonshields@isthatlegal.ca

Online Lawyer

Most Popular
Contracts / Torts / Evidence / Limitations / Tenant Plus / welfare (ontario works) / odsp / human rights / employment / consumer / COVID Litigation
ADMINISTRATIVE LAW | SPPA / SMALL CLAIMS / SUPERIOR COURT / APPEALS / JUDICIAL REVIEW

home / about / Little Friends Lefkada (Greece) / testimonials / E-Colleagues / Conditions of Use

Civil and
Administrative
Litigation
Intake

Affiliates
Canadian Animal Law

Interpretation - Standard of Review

. Meridian C C Intl Inc. v. 2745206 Ontario Inc.

In Meridian C C Intl Inc. v. 2745206 Ontario Inc. (Ont CA, 2021) the Court of Appeal considered the appellate standard of review applicable to a contract dispute:
[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.
. Hemlow Estate v. Co-operators General Insurance Company

In Hemlow Estate v. Co-operators General Insurance Company (Ont CA, 2021) the Court of Appeal considered the appellate standard of review for contract interpretation:
[13] The law on the standard of review for contract interpretation is well-established. Questions of mixed fact and law are entitled to deference unless the trial judge made a palpable and overriding error. Extricable questions of law are subject to a correctness standard of review: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, at para. 53. Sattva, at para. 54, specifies that courts should be cautious in identifying questions of law in disputes involving contractual interpretation.

[14] For a particular category of contract – namely, standard form contracts – the standard of review is correctness: Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37. This is because there is no meaningful factual matrix specific to the particular parties to assist in the interpretation process: see Ledcor, at para. 4.
. OMJ Mortgage Capital Inc. v. King Square Limited

In OMJ Mortgage Capital Inc. v. King Square Limited (Ont CA, 2021) the Court of Appeal considered the appellate standard of review applicable to customized contracts:
[11] KSL’s grounds of appeal face a major obstacle in the standard of review now applicable to issues of contract interpretation. In Corner Brook (City) v. Bailey, 2021 SCC 29, 460 D.L.R. (4th) 169, the Supreme Court of Canada repeated the deferential standard of review applicable to most issues of contract interpretation stating, at para. 44:
In Sattva, this Court also explained that contractual interpretation is a fact specific exercise, and should be treated as a mixed question of fact and law for the purpose of appellate review, unless there is an “extricable question of law”. The exception is standard form contracts, which is not relevant here: see Ledcor Construction. Extricable questions of law in the context 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”: Sattva, at para. 53, quoting King v. Operating Engineers Training Institute of Manitoba Inc., 2011 MBCA 80, 270 Man. R. (2d) 63, at para. 21. The circumstances in which a question of law can be extracted will be uncommon. Whether something was or should have been within the common knowledge of the parties at the time the contract was entered into is a question of fact: Sattva, at paras. 49-55 and 58.
. Ontario First Nations (2008) Limited Partnership v. Ontario Lottery and Gaming Corporation

In Ontario First Nations (2008) Limited Partnership v. Ontario Lottery and Gaming Corporation (Ont CA, 2021) the Court of Appeal considered the standard of review that applied to a matter of contractual interpretation that involved mixed fact and law:
[41] In Corner Brook (City) v. Bailey, 2021 SCC 29, 17 B.L.R. (6th) 1, per Rowe J., the Supreme Court affirmed the direction from Sattva that a deferential standard of review applies to questions of mixed fact and law involving the interpretation of a contract. The court in Corner Brook underscored that “contractual interpretation is a fact specific exercise, and should be treated as a mixed question of fact and law for the purpose of appellate review, unless there is an ‘extricable question of law’”: at para. 44. As the court explained, “[e]xtricable questions of law in the context 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’”: at para. 44 (citations omitted). The court also cautioned that “[t]he circumstances in which a question of law can be extracted will be uncommon. Whether something was or should have been within the common knowledge of the parties at the time the contract was entered into is a question of fact”: at para. 44 (citations omitted); see, to the same effect, Sattva, at paras. 50, 55; Teal Cedar, at paras. 47, 57.

....

(b) Applicable principles of contractual interpretation

[46] The parties agree that the appeal judge correctly stated the applicable principles of contractual interpretation. Those principles were discussed in the Supreme Court’s unanimous decisions in Sattva, per Rothstein J., and more recently in Corner Brook, per Rowe J. They may be summarized as follows:
1. Courts should take “a practical, common-sense approach not dominated by technical rules of construction. The overriding concern is to determine ‘the intent of the parties and the scope of their understanding’”: Sattva, at para. 47 (citations omitted).

2. Courts must “read the contract as a whole, giving the words used their ordinary grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract”: Sattva, at para. 47; Corner Brook, at para. 20.

3. The surrounding circumstances should be considered in contractual interpretation. “[A]scertaining contractual intention can be difficult when looking at words on their own, because words do not have an immutable or absolute meaning”: Sattva, at para. 47. The meaning of words in a contract often derives from contextual factors, such as the purpose of the agreement and the nature of the relationship it creates: Sattva, at para. 48. A contract is not made in a vacuum and must be placed in its proper setting. Interpreting a commercial contract requires knowledge of the commercial purpose of the contract, based on “the genesis of the transaction, the background, the context, the market in which the parties are operating”: Sattva, at para. 47, citing Reardon Smith Line Ltd. v. Hansen-Tangen; Hansen-Tangen v. Sanko Steamship Co., [1976] 3 All E.R. 570 (U.K. H.L.), at p. 574, per Lord Wilberforce.

4. The nature of the evidence that may be considered as part of the surrounding circumstances will vary from case to case, but should include 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”. That determination is inherently fact specific: Sattva, at paras. 55, 58 (citation omitted); Corner Brook, at para. 20.

5. The surrounding circumstances should never be allowed to overwhelm the words of the agreement. The surrounding circumstances are considered in order “to deepen a decision-maker’s understanding of the mutual and objective intentions of the parties as expressed in the words of the contract. The interpretation of a written contractual provision must always be grounded in the text and read in light of the entire contract”. Courts cannot use the surrounding circumstances to deviate from the text of the contract to the point that the court “effectively creates a new agreement”: Sattva, at para. 57; Corner Brook, at para. 20.
. Conseil Scolaire Catholique Franco-Nord v. Nipissing

In Conseil Scolaire Catholique Franco-Nord v. Nipissing (Ont CA, 2021) the Court of Appeal set out the standards of review for contractual interpretation:
[23] The interpretation of a contract that is not a standard form contract or contract of adhesion involves questions of mixed fact and law. An appellate court will only intervene if the decision below is tainted by palpable and overriding error: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at paras. 4, 55-56, and 69-71.

[24] As this court explained in Thunder Bay, at para. 30, “the overriding principle is that the meaning of an agreement and the intent of the parties in entering into it must be derived from the words the parties used and the context in which they used those words”.
. Corner Brook (City) v. Bailey

In Corner Brook (City) v. Bailey (SCC, 2021) the Supreme Court of Canada considered the standard of appellate review that applies generally to contract issues:
[44] In Sattva, this Court also explained that contractual interpretation is a fact specific exercise, and should be treated as a mixed question of fact and law for the purpose of appellate review, unless there is an “extricable question of law”. The exception is standard form contracts, which is not relevant here: see Ledcor Construction. Extricable questions of law in the context 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”: Sattva, at para. 53, quoting King v. Operating Engineers Training Institute of Manitoba Inc., 2011 MBCA 80, 270 Man. R. (2d) 63, at para. 21. The circumstances in which a question of law can be extracted will be uncommon. Whether something was or should have been within the common knowledge of the parties at the time the contract was entered into is a question of fact: Sattva, at paras. 49-55 and 58.

[46] I disagree that any of these constitutes an error warranting appellate intervention. While this first point may describe an error as to an extricable question of law, it is not an error that the application judge made. The application judge did consider what was objectively contemplated or intended by the City, but it is clear that he did not consider this to be determinative of mutual intent. The application judge explicitly considers what was in the contemplation of both parties beginning at para. 29. He explains that the Baileys could have negotiated the terms of the release, but that they chose not to, and he concludes that “what was in the contemplation of the parties was that Mrs. Bailey could no longer bring any claim or demand whatsoever against the City relating to the Accident”: para. 43; see also paras. 41-42 and 44. With respect, the Court of Appeal mischaracterized what the application judge did.

[47] The second and third points are not extricable questions of law. This Court held in Sattva that whether something was or reasonably should have been within the common knowledge of both parties at the time a contract was entered into is a question of fact. The Court of Appeal treated the question of how the surrounding circumstances inform the words of a contract as an “extricable question of law”. This undermines the deferential approach to appellate review of contractual interpretation urged by this Court in Sattva. The Court of Appeal simply disagreed with the application judge’s interpretation of the surrounding circumstances, characterized it as a question of law, and then substituted its own factual conclusions. This does not accord with Sattva.
. Zhang v. Shenglin Financial Group Inc.

In Zhang v. Shenglin Financial Group Inc. (Ont CA, 2020) the Court of Appeal considered the standard of review that applied to issues of contractual interpretation:
[6] The exercise of interpreting a contract is one of mixed fact and law. The standard of review is consequently one of palpable and overriding error: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633. On this point, we reject the appellant’s argument that this is a standard form contract of the type that would attract a standard of review of correctness under the principles set out in Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, [2016] 2 S.C.R. 23.
. ING Bank N.V. v. Canpotex Shipping Services Limited

In ING Bank N.V. v. Canpotex Shipping Services Limited (Fed CA, 2020) the Federal Court of Appeal commented on when the standard of review for interpretation of a contract will be one of correctness:
[27] In Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633 at para. 50 [Sattva], the Supreme Court of Canada held that generally, the interpretation of a contract is a question of mixed fact and law subject to the standard of the palpable and overriding error. A few years later, in Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, [2016] 2 S.C.R. 23 at para. 39 [Ledcor], the Supreme Court of Canada noted that there was an exception to this general principle. Contractual interpretation may still be reviewed as a pure question of law if the required interpretation involved a standard form contract, the interpretation at issue had precedential value and there was no meaningful factual matrix specific to the parties to help the interpretative process (Ledcor at para. 46).


CC0

The author has waived all copyright and related or neighboring rights to this Isthatlegal.ca webpage.