Creston Moly v. Sattva Capital (2014), 461 N.R. 335 (SCC)
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[French language version follows English language version]
[La version française vient à la suite de la version anglaise]
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Temp. Cite: [2014] N.R. TBEd. JL.020
Sattva Capital Corporation (formerly Sattva Capital Inc.) (appellant) v. Creston Moly Corporation (formerly Georgia Ventures Inc.) (respondent) and Attorney General of British Columbia and BCICAC Foundation (interveners)
(35026; 2014 SCC 53; 2014 CSC 53)
Indexed As: Creston Moly Corp. v. Sattva Capital Corp.
Supreme Court of Canada
McLachlin, C.J.C., LeBel, Abella, Rothstein, Moldaver, Karakatsanis and Wagner, JJ.
August 1, 2014.
Summary:
The parties entered into an Agreement that required Creston to pay Sattva a finder’s fee of US$1.5 million, in relation to the acquisition of a mining property. Sattva was entitled to be paid the fee in shares of Creston. The parties disagreed on the date to be used to price the shares, and therefore the number of shares to which Sattva was entitled. Sattva argued that the share price was dictated by the Market Price definition in the Agreement ($0.15 per share). On that interpretation, Sattva would receive some 11,460,000 shares. Creston claimed that the Agreement’s “maximum amount” proviso meant that Sattva could not receive shares valued at more than US$1.5 million on the date the fee was payable ($0.70 per share). On that interpretation, Sattva would receive some nine million fewer shares than if the shares were priced at $0.15 per share. The parties entered into arbitration. The arbitrator found in favour of Sattva, and assessed damages at $4.14 million. Creston sought leave to appeal on a question of law, pursuant to s. 31 of the Commercial Arbitration Act (B.C.).
The British Columbia Supreme Court, in a decision reported at [2009] B.C.T.C. Uned. 1079 (“SC Leave Court”), denied leave to appeal. Creston appealed.
The British Columbia Court of Appeal, in a decision reported at [2010] B.C.A.C. Uned. 34 (“CA Leave Court”), granted Creston leave to appeal the arbitrator’s decision.
The British Columbia Supreme Court, in a decision reported at [2011] B.C.T.C. Uned. 597 (“SC Appeal Court”), upheld the arbitrator’s award. Creston appealed.
The British Columbia Court of Appeal, in a decision reported at (2012), 326 B.C.A.C. 114; 554 W.A.C. 114 (“CA Appeal Court”), overturned the SC Appeal Court and found in favour of Creston. Sattva appealed the decisions of the CA Leave Court and CA Appeal Court.
The Supreme Court of Canada allowed the appeal. The CA Leave Court erred in granting leave to appeal. In any event, the arbitrator’s decision was reasonable. The arbitrator’s award was reinstated. (1) The issue of whether the CA Leave Court erred in finding a question of law was properly before the Court; (2) The CA Leave Court erred in granting leave where the question under appeal was not a question of law; (3) The application also failed the miscarriage of justice and residual discretion stages of the leave analysis in s. 31(2)(a) of the Act; (4) The relevant portions of the Dunsmuir analysis pointed to a standard of review of reasonableness in this case; (5) The arbitrator reasonably construed the agreement as a whole; and (6) The CA Appeal Court erred in holding that the CA Leave Court’s comments on the merits of the appeal were binding on it and on the SC Appeal Court.
Arbitration – Topic 7803
Judicial review (incl. appeals) – General principles – Nature of review proceeding (incl. standard of review) – [See ninth
Arbitration – Topic 8701
].
Arbitration – Topic 7902
Judicial review – Jurisdiction of the courts – Discretionary powers – [See third, eleventh, twelfth and thirteenth
Arbitration – Topic 8701
].
Arbitration – Topic 8301.1
Judicial review (incl. appeals) – Grounds – General – Questions of law – [See third, fifth, sixth, seventh and eighth
Arbitration – Topic 8701
].
Arbitration – Topic 8302
Judicial review (incl. appeals) – Grounds – General – Mixed questions of fact and law – [See fifth, sixth and eighth
Arbitration – Topic 8701
].
Arbitration – Topic 8701
Judicial review (incl. appeals) – Practice – Appeals – Leave to appeal or right to appeal – The British Columbia Court of Appeal (the CA Leave Court) granted Creston leave to appeal from the arbitrator’s decision under s. 31(2) of the Commercial Arbitration Act – Sattva appealed from both the CA Leave Court decision and the CA Appeal Court decision in favor of Creston – In its view, the CA Leave Court did not identify a question of law, a requirement to obtain leave – Creston argued that the issue was not properly before this Court as it was not set out in the application for leave to appeal to the Court – The Supreme Court of Canada rejected the argument – “Unless this Court places restrictions in the order granting leave, the order granting leave is ‘at large’. Accordingly, appellants may raise issues on appeal that were not set out in the leave application. However, the Court may exercise its discretion to refuse to deal with issues that were not addressed in the courts below, if there is prejudice to the respondent, or if for any other reason the Court considers it appropriate not to deal with a question. Here, this Court’s order granting leave to appeal from both the CA Leave Court decision and the CA Appeal Court decision contained no restrictions … . The issue – whether the proposed appeal was on a question of law – was expressly argued before, and was dealt with in the judgments of, the SC Leave Court and the CA Leave Court.” – See paragraphs 32 to 34.
Arbitration – Topic 8701
Judicial review (incl. appeals) – Practice – Appeals – Leave to appeal or right to appeal – The British Columbia Court of Appeal (the CA Leave Court) granted Creston leave to appeal from the arbitrator’s decision under s. 31(2) of the Commercial Arbitration Act – Sattva appealed from both the CA Leave Court decision and the Appeal Court decision in favor of Creston – In its view, the CA Leave Court did not identify a question of law, a requirement to obtain leave – Creston argued that the issue was not properly before this Court because Sattva did not argue that the question on appeal was one of mixed fact and law before the lower courts – The Supreme Court of Canada rejected the argument – “While this Court may decline to grant leave where an issue sought to be argued before it was not argued in the courts appealed from, that is not this case. Here, whether leave from the arbitrator’s decision had been sought by Creston on a question of law or a question of mixed fact and law had been argued in the lower leave courts. Accordingly, the issue of whether the CA Leave Court erred in finding a question of law for the purposes of granting leave to appeal is properly before this Court.” – See paragraphs 35 to 37.
Arbitration – Topic 8701
Judicial review (incl. appeals) – Practice – Appeals – Leave to appeal or right to appeal – The Supreme Court of Canada set out the considerations relevant to granting or denying leave to appeal under British Columbia’s Commercial Arbitration Act (AA) – “Appeals from commercial arbitration decisions are narrowly circumscribed under the AA. Under s. 31(1), appeals are limited to either questions of law where the parties consent to the appeal or to questions of law where the parties do not consent but where leave to appeal is granted. Section 31(2) of the AA … sets out the requirements for leave: ‘… the court may grant leave if it determines that (a) the importance of the result of the arbitration to the parties justifies the intervention of the court and the determination of the point of law may prevent a miscarriage of justice, (b) the point of law is of importance to some class or body of persons of which the applicant is a member, or (c) the point of law is of general or public importance. …’ The B.C. courts have found that the words ‘may grant leave’ in s. 31(2) of the AA give the courts judicial discretion to deny leave even where the statutory requirements have been met … . Appellate review of an arbitrator’s award will only occur where the requirements of s. 31(2) are met and where the leave court does not exercise its residual discretion to nonetheless deny leave.” – In this appeal, the Court’s analysis focussed on s. 31(2)(a) – See paragraphs 38 to 40.
Arbitration – Topic 8701
Judicial review (incl. appeals) – Practice – Appeals – Leave to appeal or right to appeal – The Supreme Court of Canada addressed a requirement of s. 31(2)(a) of British Columbia’s Commercial Arbitration Act; namely, whether the importance of the result of the arbitration to the parties justified the intervention of the court – “Justice Saunders explained this criterion in BCIT [British Columbia Institute of Technology (Student Assn.) v. British Columbia Institute of Technology, 2000 BCCA] as requiring that the result of the arbitration be ‘sufficiently important’, in terms of principle or money, to the parties to justify the expense and time of court proceedings … . The parties in this case have agreed that the result of the arbitration is of importance to each of them. In view of the relatively large monetary amount in dispute and in light of the fact that the parties have agreed that the result is important to them, I accept that the importance of the result of the arbitration to the parties justifies the intervention of the court. This requirement of s. 31(2)(a) is satisfied.” – See paragraph 41.
Arbitration – Topic 8701
Judicial review (incl. appeals) – Practice – Appeals – Leave to appeal or right to appeal – The British Columbia Court of Appeal (the CA Leave Court) granted Creston leave to appeal from the arbitrator’s decision under s. 31(2) of the Commercial Arbitration Act – Sattva appealed from both the CA Leave Court decision and the Appeal Court decision in favor of Creston – In its view, the CA Leave Court did not identify a question of law, a requirement to obtain leave – The Supreme Court of Canada stated that “For the purpose of identifying the appropriate standard of review or, as is the case here, determining whether the requirements for leave to appeal are met, reviewing courts are regularly required to determine whether an issue decided at first instance is a question of law, fact, or mixed fact and law. Historically, determining the legal rights and obligations of the parties under a written contract was considered a question of law … .This rule originated in England at a time when there were frequent civil jury trials and widespread illiteracy. … [O]nly the judge could be assured to be literate and therefore capable of reading the contract … .This historical rationale no longer applies. … In Canada, there remains some support for the historical approach. … However, some Canadian courts have abandoned the historical approach and now treat the interpretation of written contracts as an exercise involving either a question of law or a question of mixed fact and law.” – See paragraphs 42 to 45.
Arbitration – Topic 8701
Judicial review (incl. appeals) – Practice – Appeals – Leave to appeal or right to appeal – The parties (Creston and Sattva) entered into arbitration pursuant to British Columbia’s Commercial Arbitration Act (AA) – The arbitrator interpreted the parties’ commercial contract and decided in favour of Sattva – Under s. 31 of the AA, the issue upon which leave was sought was required to be a question of law – The Supreme Court of Canada stated that “Contractual interpretation involves issues of mixed fact and law”, and that the historical approach to contractual interpretation, as being a question of law, “should be abandoned” – see paragraphs 43 to 50 – “Nonetheless, it may be possible to identify an extricable question of law from within what was initially characterized as a question of mixed fact and law … . However, courts should be cautious in identifying extricable questions of law in disputes over contractual interpretation. Given the statutory requirement to identify a question of law in a leave application pursuant to s. 31(2) of the AA, the applicant for leave and its counsel will seek to frame any alleged errors as questions of law. The legislature has sought to restrict such appeals, however, and courts must be careful to ensure that the proposed ground of appeal has been properly characterized.” – See paragraphs 53 and 54.
Arbitration – Topic 8701
Judicial review (incl. appeals) – Practice – Appeals – Leave to appeal or right to appeal – This was an appeal from an arbitrator’s interpretation of a commercial contract – Under s. 31 of British Columbia’s Commercial Arbitration Act (AA), the issue upon which leave was sought was required to be a question of law – The Supreme Court of Canada stated 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’ … . 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. … [T]he goal of contractual interpretation, to ascertain the objective intentions of the parties, in inherently fact specific. … In the absence of a legal error of the type described above, no appeal lies under the AA from an arbitrator’s interpretation of a contract.” – See paragraphs 53 and 55.
Arbitration – Topic 8701
Judicial review (incl. appeals) – Practice – Appeals – Leave to appeal or right to appeal – In this case, the British Columbia Court of Appeal (CA Leave Court) granted leave on the following issue: “Whether the Arbitrator erred in law in failing to construe the whole of the Finder’s Fee Agreement …” – The Court of Appeal allowed the appeal – The Supreme Court of Canada held that the CA Leave Court erred in finding that the construction of the “maximum amount” proviso (s. 3.1) of the Agreement constituted a question of law – While the requirement to construe a contract as a whole was a question of law that could, if extricable, satisfy the threshold requirement under s. 31 of the Commercial Arbitration Act (AA), that question was not properly extricated in this case – Construing and taking account of the proviso required relying on the relevant surrounding circumstances – Such an exercise raised a question of mixed fact and law – The conclusion that the application for leave to appeal raised no question of law was sufficient to dispose of this appeal – “However, as this Court rarely has the opportunity to address appeals of arbitral awards, it is, in my view, useful to explain that, even had the CA Leave Court been correct in finding that construction of s. 3.1 of the Agreement constituted a question of law, it should have nonetheless denied leave to appeal as the application also failed the miscarriage of justice and residual discretion stages of the leave analysis set out in s. 31(2)(a) of the AA.” – See paragraphs 62 to 67.
Arbitration – Topic 8701
Judicial review (incl. appeals) – Practice – Appeals – Leave to appeal or right to appeal – The Supreme Court of Canada discussed the miscarriage of justice requirement for the purposes of s. 31(2)(a) of British Columbia’s Commercial Arbitration Act (AA) – In order to establish that the intervention of the court and the determination of the point of law might prevent a miscarriage of justice, “an alleged legal error must pertain to a material issue in the dispute which, if decided differently, would affect the result of the case. According to this standard, a determination of a point of law ‘may prevent a miscarriage of justice’ only where the appeal itself has some possibility of succeeding. … At the leave stage, it is not appropriate to consider the full merits of a case … . However, some preliminary consideration of the question of law is necessary … . [T]he appropriate threshold for assessing the legal question at issue under s. 31(2) is whether it has arguable merit. … This requires a preliminary assessment of the applicable standard of review. … [R]easonableness will almost always apply to commercial arbitrations conducted pursuant to the AA … . Therefore, the leave inquiry will ordinarily ask whether there is any arguable merit to the position that the arbitrator’s decision on the question at issue is unreasonable … [T]he leave court’s assessment of the standard of review is only preliminary and does not bind the court which considers the merits of the appeal. As such, this should not be taken as an invitation to engage in extensive arguments or analysis about the standard of review at the leave stage.” – See paragraphs 68 to 79.
Arbitration – Topic 8701
Judicial review (incl. appeals) – Practice – Appeals – Leave to appeal or right to appeal – The arbitrator found in favour of Sattva, holding that it was entitled to receive its US$1.5 million finder’s fee in shares priced at $0.15 per share – He based his decision on the Market Price definition in the Finder’s Fee Agreement – He awarded $4.14 million in damages on the basis that there was an 85% chance the TSX Venture Exchange would approve a finder’s fee paid in $0.15 shares – If the $0.15 share price was foreclosed by the “maximum amount” proviso, damages would be reduced to US$1.5 million – The British Columbia Court of Appeal (CA Leave Court) found that the arbitrator might have erred in law by not interpreting the Agreement as a whole, specifically in ignoring the “maximum amount” proviso – The Supreme Court of Canada stated that even had the CA Leave Court properly identified a question of law, leave to appeal should have been denied – The requirement that there be arguable merit that the arbitrator’s decision was unreasonable was not met and the miscarriage of justice threshold was not satisfied – It was apparent on a preliminary examination of the question that the arbitrator did in fact consider the “maximum amount” proviso – The arbitrator referred to the proviso at two points in his decision – Although the arbitrator provided no express indication that he considered how the “maximum amount” proviso interacted with the Market Price definition, such consideration was implicit in his decision – See paragraphs 80 to 84.
Arbitration – Topic 8701
Judicial review (incl. appeals) – Practice – Appeals – Leave to appeal or right to appeal – The Supreme Court of Canada discussed the considerations in exercising residual discretion in a leave application under s. 31(2)(a) of British Columbia’s Commercial Arbitration Act (AA) – “In sum, a non-exhaustive list of discretionary factors to consider in a leave application under s. 31(2)(a) of the AA would include: conduct of the parties; existence of alternative remedies; undue delay; and the urgent need for a final answer. These considerations could, where applicable, be a sound basis for declining leave to appeal an arbitral award even where the statutory criteria of s. 31(2)(a) have been met. However, courts should exercise such discretion with caution. Having found an error of law and, at least with respect to s. 31(2)(a), a potential miscarriage of justice, these discretionary factors must be weighed carefully before an otherwise eligible appeal is rejected on discretionary grounds.” – See paragraphs 85 to 92.
Arbitration – Topic 8701
Judicial review (incl. appeals) – Practice – Appeals – Leave to appeal or right to appeal – The Supreme Court of Canada discussed the considerations in exercising residual discretion in a leave application under s. 31(2)(a) of British Columbia’s Commercial Arbitration Act (AA) – “[F]ostering and preserving the integrity of the arbitral system should not be a discrete discretionary consideration under s. 31(2)(a). While the scheme of s. 31(2) recognizes this objective, the exercise of discretion must pertain to the facts and circumstances of a particular case. This general objective is not a discretionary matter for the purposes of denying leave. However, conduct of the parties is a valid consideration in the exercise of the court’s residual discretion under s. 31(2)(a). A discretionary decision to deny leave is to be reviewed with deference by an appellate court.” – See paragraph 94.
Arbitration – Topic 8701
Judicial review (incl. appeals) – Practice – Appeals – Leave to appeal or right to appeal – Creston agreed to pay a finder’s fee to Sattva – The arbitrator found that Sattva was entitled to receive its US$1.5 million finder’s fee in shares of Creston priced at $0.15 per share – He awarded $4.14 million in damages on the basis that there was an 85% chance the TSX Venture Exchange (TSXV) would approve a finder’s fee paid in $0.15 shares – The arbitrator found as a fact that Creston misled the TSXV and Sattva regarding “the nature of the obligation it had undertaken to Sattva by representing that the finder’s fee was payable in cash” – The British Columbia Supreme Court (SC Leave Court) stated that it would have exercised its residual discretion to deny leave to appeal because of Creston’s misconduct – The Court of Appeal (CA Leave Court) overturned the decision on the grounds that the conduct was “not directly relevant to the question of law” advanced on appeal – The Supreme Court of Canada stated that “I see nothing in s. 31(2) of the AA [Commercial Arbitration Act] that would limit a leave judge’s exercise of discretion in the manner suggested by the CA Leave Court. My reading of the jurisprudence does not support the view that misconduct must be directly relevant to the question to be decided by the court.” – While Creston’s conduct was not tied to the question of law found by the CA Leave Court, it was tied to the arbitration proceeding convened to determine which share price should be used to pay Sattva’s finder’s fee – The SC Leave Court was entitled to rely upon such conduct as a basis for denying leave pursuant to its residual discretion – See paragraphs 96 to 100.
Arbitration – Topic 8701
Judicial review (incl. appeals) – Practice – Appeals – Leave to appeal or right to appeal – The British Columbia Court of Appeal (CA Appeal Court) held that the CA Leave Court’s comments on the merits of the appeal were binding on it and on the Supreme Court (SC Appeal Court) – It found that the SC Appeal Court erred in law by ignoring the findings of the CA Leave Court regarding the merits of the appeal – The Supreme Court of Canada stated that appeal courts were not bound by comments on the merits of the appeal made by leave courts – “A court considering whether leave should be granted is not adjudicating the merits of the case … . A leave court decides only whether the matter warrants granting leave, not whether the appeal will be successful … . This is true even where the determination of whether to grant leave involves, as in this case, a preliminary consideration of the question of law at issue. A grant of leave cannot bind or limit the powers of the court hearing the actual appeal … . The fact that the CA Appeal Court provided its own reasoning as to why it came to the same conclusion as the CA Leave Court does not vitiate the error. Once the CA Appeal Court treated the CA Leave Court’s reasons on the merits as binding, it could hardly have come to any other decision. … [T]reating the leave decision as binding would render an appeal futile.” – See paragraphs 120 to 124.
Arbitration – Topic 8705
Judicial review (incl. appeals) – Practice – Appeals – Standard of review – The Supreme Court of Canada discussed the appropriate standard of review to be applied to commercial arbitral decisions made under British Columbia’s Arbitration Act, if leave to appeal were properly granted – “Appellate review of commercial arbitration awards takes place under a tightly defined regime specifically tailored to the objectives of commercial arbitrations and is different from judicial review of a decision of a statutory tribunal. …[A]spects of the Dunsmuir framework are helpful in determining the appropriate standard of review to apply in the case of commercial arbitration awards. … In the context of commercial arbitration, where appeals are restricted to questions of law, the standard of review will be reasonableness unless the question is one that would attract the correctness standard … . The relevant portions of the Dunsmuir analysis point to a standard of review of reasonableness in this case.” – See paragraphs 102 to 106.
Arbitration – Topic 8705
Judicial review (incl. appeals) – Practice – Appeals – Standard of review – Creston agreed to pay a finder’s fee to Sattva in shares of Creston based on Market Price – The question that the arbitrator had to decide was which date should be used to determine the price of the shares used to pay the finder’s fee: the date specified in the Market Price definition in the Agreement or the date the finder’s fee was to be paid – The Market Price definition acted to fix the date at which one medium of payment (US$) was transferred into another (shares) – The “maximum amount” proviso limited the amount of the finder’s fee to a maximum of US$1.5 million – The arbitrator found in favor of Sattva – The price determined by the Market Price definition prevailed, i.e. $0.15 per share – He assessed damages at $4.14 million – The question on which the British Columbia Court of Appeal (CA Leave Court) granted leave was whether the arbitrator construed the finder’s fee provision in light of the Agreement as a whole, particularly having regard for the “maximum amount” proviso – The Supreme Court of Canada held that the CA Leave Court erred in granting leave to appeal where the question under appeal was not a question of law – In any event, the arbitrator’s decision was reasonable – There was an inherent risk in accepting a fee paid in shares, and the sophisticated business parties would have been aware of that risk – The arbitrator’s decision gave effect to both the Market Price definition and the “maximum amount” proviso – The arbitrator’s interpretation reconciled the Market Price definition and the “maximum amount” proviso in a manner that could not be said to be unreasonable – See paragraphs 107 to 119.
Contracts – Topic 7400
Interpretation – General principles – General – The Supreme Court of Canada, in the context of an appeal of an arbitral award, stated that “Historically, determining the legal rights and obligations of the parties under a written contract was considered a question of law. … The shift away from the historical approach in Canada appears to be based on two developments. The first is the adoption of an approach to contractual interpretation which directs courts to have regard for the surrounding circumstances of the contract – often referred to as the factual matrix – when interpreting a written contract … . [T]he interpretation of contracts has evolved towards 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’ … . To do so, a decision-maker 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. Consideration of the surrounding circumstances recognizes that ascertaining contractual intention can be difficult when looking at words on their own, because words alone do not have an immutable or absolute meaning … The meaning of words is often derived from a number of contextual factors, including the purpose of the agreement and the nature of the relationship created by the agreement” – See paragraphs 46 to 48.
Contracts – Topic 7400
Interpretation – General principles – General – In this case, leave to appeal was granted on the following issue: “Whether the Arbitrator erred in law in failing to construe the whole of the Finder’s Fee Agreement” – The Supreme Court of Canada stated that “Historically, determining the legal rights and obligations of the parties under a written contract was considered a question of law. … The shift away from the historical approach in Canada appears to be based on two developments. … As to the second development, the historical approach to contractual interpretation does not fit well with the definition of a pure question of law identified in Housen and Southam. Questions of law ‘are questions about what the correct legal test is’ … . Yet in contractual interpretation, the goal of the exercise is to ascertain the objective intent of the parties – a fact-specific goal – through the application of legal principles of interpretation. This appears closer to a question of mixed fact and law … . I am of the opinion that the historical approach should be abandoned. 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.” – See paragraphs 49 and 50.
Contracts – Topic 7401
Interpretation – General principles – Intention of parties (incl. reasonable expectations of parties) – [See both
Contracts – Topic 7400
].
Contracts – Topic 7407
Interpretation – General principles – Whole contract to be considered – [See both
Contracts – Topic 7400
].
Contracts – Topic 7521
Interpretation – Surrounding circumstances – General – The Supreme Court of Canada discussed the role of the surrounding circumstances in contractual interpretation and the nature of the evidence that could be considered – The discussion was limited to the common law approach to contractual interpretation – “While the surrounding circumstances will be considered in interpreting the terms of a contract, they must never be allowed to overwhelm the words of that agreement … . The goal of examining such evidence is 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 … . While the surrounding circumstances are relied upon in the interpretive process, courts cannot use them to deviate from the text such that the court effectively creates a new agreement … .” – See paragraphs 56 and 57.
Contracts – Topic 7521
Interpretation – Surrounding circumstances – General – The Supreme Court of Canada stated that “The nature of the evidence that can be relied upon under the rubric of ‘surrounding circumstances’ will necessarily vary from case to case. It does, however, have its limits. It should consist only of 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. Subject to these requirements and the parol evidence rule … this includes … ‘absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man’ … . Whether something was or reasonably ought to have been within the common knowledge of the parties at the time of execution of the contract is a question of fact.” – See paragraph 58.
Contracts – Topic 7521
Interpretation – Surrounding circumstances – General – The Supreme Court of Canada discussed the surrounding circumstances and the parol evidence rule – “The parol evidence rule does not apply to preclude evidence of the surrounding circumstances. Such evidence is consistent with the objectives of finality and certainty because it is used as an interpretive aid for determining the meaning of the written words chosen by the parties, not to change or overrule the meaning of those words. The surrounding circumstances are facts known or facts that reasonably ought to have been known to both parties at or before the date of contracting; therefore, the concern of unreliability does not arise. Some authorities and commentators suggest that the parol evidence rule is an anachronism, or, at the very least, of limited application in view of the myriad of exceptions to it … . For the purposes of this appeal, it is sufficient to say that the parol evidence rule does not apply to preclude evidence of surrounding circumstances when interpreting the words of a written contract.” – See paragraphs 59 to 61.
Contracts – Topic 7526
Interpretation – Surrounding circumstances – Commercial setting – [See eighth
Arbitration – Topic 8701
].
Courts – Topic 2103
Jurisdiction – Appellate jurisdiction – Issues – [See first
Arbitration – Topic 8701
].
Evidence – Topic 6755
Parol evidence rule – Interpretation of a legal act – Evidence of surrounding circumstances – Setting in which agreement made – [See third
Contracts – Topic 7521
].
Practice – Topic 8874
Appeals – Leave to appeal – From question of law – [See third, fifth, sixth, seventh and eighth
Arbitration – Topic 8701
].
Practice – Topic 8877
Appeals – Leave to appeal – Grounds for refusal to grant leave – [See third
Arbitration – Topic 8701
].
Practice – Topic 8887
Appeals – Leave to appeal – Appeal from grant or denial of application for leave – [See fourteenth
Arbitration – Topic 8701
].
Practice – Topic 9013
Appeals – Restrictions on argument on appeal – Grounds limited by order granting leave to appeal – [See first
Arbitration – Topic 8701
].
Cases Noticed:
Student Association of the British Columbia Institute of Technology v. British Columbia Institute of Technology (2000), 142 B.C.A.C. 129; 233 W.A.C. 129; 192 D.L.R.(4th) 122; 2000 BCCA 496, refd to. [para. 39].
King v. Operating Engineers Training Institute of Manitoba Inc. (2011), 270 Man.R.(2d) 63; 524 W.A.C. 63; 2011 MBCA 80, refd to. [para. 43].
Thorner v. Majors et al., [2009] 3 All E.R. 945; 397 N.R. 150; [2009] UKHL 18, refd to. [para. 44].
Prenn v. Simmonds, [1971] 3 All E.R. 237 (H.L.), refd to. [para. 44].
Reardon Smith Line v. Hansen-Tangen, [1976] 3 All E.R. 570 (H.L.), refd to. [para. 44].
Jiro Enterprises Ltd. v. Spencer, [2008] A.R. Uned. 42; 2008 ABCA 87, refd to. [para. 45].
QK Investments Inc. v. Crocus Investment Fund et al. (2008), 225 Man.R.(2d) 176; 419 W.A.C. 176; 290 D.L.R.(4th) 84; 2008 MBCA 21, refd to. [para. 45].
Dow Chemical Canada Inc. v. Shell Chemicals Canada Ltd. et al. (2010), 477 A.R. 112; 483 W.A.C. 112; 25 Alta. L.R.(5th) 221; 2010 ABCA 126, refd to. [para. 45].
Minister of National Revenue v. Costco Wholesale Canada Ltd. (2012), 431 N.R. 78; 2012 FCA 160, refd to. [para. 45].
WCI Waste Conversion Inc. v. ADI International Inc. (2011), 309 Nfld. & P.E.I.R. 1; 962 A.P.R. 1; 2011 PECA 14, refd to. [para. 45].
269893 Alberta Ltd. v. Otter Bay Developments Ltd. et al. (2009), 266 B.C.A.C. 98; 449 W.A.C. 98; 2009 BCCA 37, refd to. [para. 45].
Hayes Forest Services Ltd. v. Weyerhaeuser Co. (2008), 250 B.C.A.C. 286; 416 W.A.C. 286; 289 D.L.R.(4th) 230; 2008 BCCA 31, refd to. [para. 45].
Plan Group et al. v. Bell Canada (2009), 252 O.A.C. 71; 96 O.R.(3d) 81; 2009 ONCA 548, refd to. [para. 45].
Director of Investigation and Research, Competition Act v. Southam Inc. et al., [1997] 1 S.C.R. 748; 209 N.R. 20, refd to. [para. 46].
Housen v. Nikolaisen et al., [2002] 2 S.C.R. 235; 286 N.R. 1; 219 Sask.R. 1; 272 W.A.C. 1; 2002 SCC 33, refd to. [para. 46].
Jesuit Fathers of Upper Canada v. Guardian Insurance Co. of Canada et al., [2006] 1 S.C.R. 744; 348 N.R. 307; 211 O.A.C. 363; 2006 SCC 21, refd to. [para. 47].
Tercon Contractors Ltd. v. British Columbia (Minister of Transportation and Highways), [2010] 1 S.C.R. 69; 397 N.R. 331; 281 B.C.A.C. 245; 457 W.A.C. 245; 2010 SCC 4, refd to. [para. 47].
Moore (Geoffrey L.) Realty Inc. v. Manitoba Motor League (2003), 173 Man.R.(2d) 300; 293 W.A.C. 300; 2003 MBCA 71, refd to. [para. 48].
Investors Compensation Scheme Ltd. v. West Bromwich Building Society, [1998] 1 All E.R. 98 (H.L.), refd to. [para. 48].
Glaswegian Enterprises Inc. v. BC Tel Mobility Cellular Inc. (1997), 101 B.C.A.C. 62; 164 W.A.C. 62 (C.A.), refd to. [para. 57].
Eli Lilly & Co. et al. v. Novopharm Ltd. et al., [1998] 2 S.C.R. 129; 227 N.R. 201, refd to. [para. 59].
United Brotherhood of Carpenters and Joiners of America, Local 579 v. Bradco Construction Ltd., [1993] 2 S.C.R. 316; 153 N.R. 81; 106 Nfld. & P.E.I.R. 140; 334 A.P.R. 140, refd to. [para. 59].
Gutierrez v. Tropic International Ltd. et al. (2002), 162 O.A.C. 247; 63 O.R.(3d) 63 (C.A.), refd to. [para. 61].
Domtar Inc. v. Belkin Inc. (1989), 39 B.C.L.R.(2d) 257 (C.A.), refd to. [para. 69].
Cusson v. Quan et al., [2009] 3 S.C.R. 712; 397 N.R. 94; 258 O.A.C. 378; 2009 SCC 62, refd to. [para. 69].
Quick Auto Lease Inc. v. Nordin (2014), 303 Man.R.(2d) 262; 600 W.A.C. 262; 2014 MBCA 32, refd to. [para. 74].
R. v. Fedossenko (S.), [2013] A.R. Uned. 114; 2013 ABCA 164, refd to. [para. 74].
Enns v. Hansey, [2013] Man.R.(2d) Uned. 11; 2013 MBCA 23, refd to. [para. 74].
R. v. Hubley (A.H.) (2009), 289 Nfld. & P.E.I.R. 174; 890 A.P.R. 174; 2009 PECA 21, refd to. [para. 74].
R. v. Will (J.B.E.) (2013), 405 Sask.R. 270; 563 W.A.C. 270; 2013 SKCA 4, refd to. [para. 74].
Newfoundland and Labrador Nurses’ Union v. Newfoundland and Labrador (Treasury Board) et al., [2011] 3 S.C.R. 708; 424 N.R. 220; 317 Nfld. & P.E.I.R. 340; 986 A.P.R. 340; 2011 SCC 62, refd to. [para. 75].
Immeubles Port Louis ltée v. Lafontaine (Village), [1991] 1 S.C.R. 326; 121 N.R. 323; 38 Q.A.C. 253, refd to. [para. 87].
MiningWatch Canada v. Canada (Minister of Fisheries and Oceans) et al., [2010] 1 S.C.R. 6; 397 N.R. 232; 2010 SCC 2, refd to. [para. 87].
R. v. Bellusci (R.), [2012] 2 S.C.R. 509; 433 N.R. 135; 2012 SCC 44, refd to. [para. 95].
R. v. Bjelland (J.C.), [2009] 2 S.C.R. 651; 391 N.R. 202; 460 A.R. 230; 462 W.A.C. 230; 2009 SCC 38, refd to. [para. 95].
R. v. Regan (G.A.), [2002] 1 S.C.R. 297; 282 N.R. 1; 201 N.S.R.(2d) 63; 629 A.P.R. 63; 2002 SCC 12, refd to. [para. 95].
Homex Realty and Development Co. v. Wyoming (Village), [1980] 2 S.C.R. 1011; 33 N.R. 475, refd to. [para. 98].
New Brunswick (Board of Management) v. Dunsmuir, [2008] 1 S.C.R. 190; 372 N.R. 1; 329 N.B.R.(2d) 1; 844 A.P.R. 1; 2008 SCC 9, refd to. [para. 104].
Alberta Teachers’ Association v. Information and Privacy Commissioner (Alta.) et al., [2011] 3 S.C.R. 654; 424 N.R. 70; 519 A.R. 1; 539 W.A.C. 1; 2011 SCC 61, refd to. [para. 106].
Canadian Western Bank et al. v. Alberta, [2007] 2 S.C.R. 3; 362 N.R. 111; 409 A.R. 207; 402 W.A.C. 207; 2007 SCC 22, refd to. [para. 122].
Pacifica Mortgage Investment Corp. v. Laus Holdings Ltd. et al. (2013), 333 B.C.A.C. 310; 571 W.A.C. 310; 2013 BCCA 95, leave to appeal refused [2013] 3 S.C.R. viii; 465 N.R. 400, refd to. [para. 122].
Tamil Co-operative Homes Inc. v. Arulappah (2000), 162 O.A.C. 356; 49 O.R.(3d) 566 (C.A.), refd to. [para. 122].
Statutes Noticed:
Commercial Arbitration Act, R.S.B.C. 1996, c. 55, sect. 31 [Appendix].
Arbitration Act, R.S.B.C. 1996, c. 55 – see Commercial Arbitration Act, R.S.B.C. 1996, c. 55.
Authors and Works Noticed:
Brown, Donald J.M., and Evans, John M., and Deacon, Christine E., Judicial Review of Administrative Action in Canada (1998) (2014 Looseleaf Update), pp. 3-67 to 3-76 [para. 90].
Dyzenhaus, David, The Politics of Deference: Judicial Review and Democracy, in Taggart, Michael, The Province of Administrative Law (1997), p. 304 [para. 110].
Hall, Geoff R., Canadian Contractual Interpretation Law (2nd Ed. 2012), pp. 13 [para. 46]; 15 [paras. 57, 64]; 21 to 25 [para. 46]; 22 [para. 48]; 30 [para. 57]; 30 to 32 [para. 57]; 53 [para. 59]; 53 to 64 [para. 61]; 64 to 65 [para. 59]; 125 to 126 [para. 43]; 127 [para. 46].
Lewison, Kim, The Interpretation of Contracts (5th Ed. 2011) (2013 Looseleaf Supp.), pp. 173 to 176 [para. 43]; 173 to 177 [para. 44].
McCamus, John D., The Law of Contracts (2nd Ed. 2012), pp. 749 to 750 [para. 48]; 749 to 751 [para. 46]; 761 to 762 [para. 64].
Taggart, Michael, The Province of Administrative Law (1997), p. 304 [para. 110].
Counsel:
Michael A. Feder and Tammy Shoranick, for the appellant;
Darrell W. Roberts, Q.C., and David Mitchell, for the respondent;
Jonathan Eades and Micah Weintraub, for the intervener, the Attorney General of British Columbia;
David Wotherspoon and Gavin R. Cameron, for the intervener, the BCICAC Foundation.
Solicitors of Record:
McCarthy Tétrault, Vancouver, British Columbia, for the appellant;
Miller Thomson, Vancouver, British Columbia, for the respondent;
Attorney General of British Columbia, Victoria, British Columbia, for the intervener, the Attorney General of British Columbia;
Fasken Martineau DuMoulin, Vancouver, British Columbia, for the intervener, the BCICAC Foundation.
This appeal was heard on December 12, 2013, before McLachlin, C.J.C., LeBel, Abella, Rothstein, Moldaver, Karakatsanis and Wagner, JJ., of the Supreme Court of Canada. The following judgment of the Court was delivered by Rothstein, J., on August 1, 2014.
