Law Times

Law Times • augusT 18, 2014 Page 3 www.lawtimesnews.com SCC issues 'big change' to contract law By Julius Melnitzer For Law Times rbitrators and trial judg- es should have the last word in most cases that turn on the interpre- tation of contracts, the Supreme Court of Canada has found. at's the clear message from the top court's recent landmark decision in Sattva Capital Corp. v. Creston Moly Corp. or it's at least what many people will get from the ruling. For lawyers, it's a bit more tech- nical. In rejecting the traditional view that contractual interpreta- tion involves pure questions of law, the court ruled the exercise engaged questions of mixed fact and law. At the core of the decision is the court's reaffirmation of a mod- ern and contextual approach to contract interpretation, one that involves a consideration of the "surrounding circumstances" in giving meaning to an agreement. "e idea that contract inter- pretation is more a factual than a legal exercise is a big change, es- pecially in Ontario," says David Quayat, an associate at Toronto's Lenczner Slaght Royce Smith Griffin LLP. "It sends the message that ap- peal courts need to give more deference to arbitrators and trial judges as to what parties meant to achieve in their commercial dealings." According to Mary Paterson of Osler Hoskin & Harcourt LLP's Toronto office, treating contractual interpretation as a matter of mixed fact and law is "more intellectually honest" than regarding the exercise as a pure question of law. "e pure question of law ap- proach assumes that all words mean the same thing to everyone and that a judge — even one un- familiar with the industry or the context involved — can tell you what the parties meant," she says. "At the very least, the SCC's approach acknowledges that interpreting a contract can be a complicated thing and that we all come to agreements from dif- ferent perspectives and with dif- ferent objectives." In other words, the top court's approach accords with commer- cial reality and the way the courts have been approaching contrac- tual interpretation in recent years. "ese days, courts are always asking what parties are trying to do," says Paterson. Sattva turned on the meaning of a finder's fee agreement. e parties disagreed on the valua- tion date for the shares on which the fee was based. Sattva Capi- tal's interpretation, which the arbitrator ultimately accepted, entitled the company to some 11.4 million shares. at was almost five times as many as the interpretation sought by Cres- ton Moly would have yielded. Creston Moly sought leave to appeal under the B.C. Arbitra- tion Act that allows leave only on questions of law. e B.C. Supreme Court denied leave, holding that there was no such question. On further appeal, the Court of Appeal reversed that decision. It ruled the court should have granted leave. It then fell back to the Su- preme Court to hear the appeal on the merits. It dismissed the appeal and upheld the arbitrator's decision. Creston Moly appealed again and was successful. e Court of Appeal, which reviewed the arbitrator's decision on a stan- dard of correctness, ruled the ini- tial decision was wrong. e Supreme Court granted leave on both the Court of Ap- peal's leave-to-appeal and merits rulings. Ultimately, the top court ruled that reasonableness, not correctness, was the appropriate standard for a review of an arbi- trator's decision on contractual interpretation (except on consti- tutional questions or matters of general importance to the legal system.) According to Paterson, the same standard should ap- ply to a review of a trial judge's decisions regarding contractual interpretation. "It wouldn't make sense to give arbitrators more deference [by reviewing on the basis of reasonableness rather than cor- rectness] than first-level judges," says Paterson. "But what this means is that even when leave is not required, the threshold for success on an ap- peal from a trial judgment involv- ing contractual interpretation is higher than it was before." To be sure, the top court didn't go so far as to state that contractual interpretation could never be a pure question of law. "at occurs when the is- sue engages what's called an inextricable principle of law," says Quayat. "But that approach can make the scope of pure matters of law very narrow." In terms of access to justice, Sattva does lend itself to more certainty and finality in the sense that parties can have great- er confidence in first-instance judgments. "e window for success on appeal has become smaller in- deed," says Quayat. LT NEWS WE OFFER: A thriving and well respected firm Highly skilled and experienced support staff Attractive cost of living Less stressful lifestyle A safe and clean environment in which to raise a family Competitive compensation package For further particulars, please contact: Terry Graves at tgraves@smithlawteam.com Smith McBride Ducharme 22 Paget Street P.O. Box 1210, New Liskeard ON P0J 1P0 Telephone: 705-647-7307 Visit our website: www.smithlawteam.com The Firm of Smith McBride Ducharme seeks a commercial litigator with 5 to 8 years experience to join our team in a practice that covers Central and Northeastern Ontario. If you are a self-starter who values a balanced combina- tion of professionalism and family life in beautiful sur- roundings, you might be the right candidate. SmithMcBride_LT_Aug18_14.indd 1 14-08-12 1:37 PM LIVE EVENTS DESIGNED FOR CORPORATIONS AND LAW FIRMS Thomson Reuters Legal Executive Institute is the leading provider of CLE events for the legal industry. Below you'll find upcoming live conferences that might be of interest to you and your team. You can register for yourself and any members of your department. Registration can be applied to anyone in your company – a different person could attend each event. Drafting Clearer Contracts September 11 – Boston, MA October 9 – Minneapolis, MN October 30– Washington DC November 6 – New York , NY Decmeber 11 – San Francisco, CA $895 Cloud Computing: A Practical Approach September 17 – New York, NY $795 DISCOUNTS AVAILABLE Individual Discount – Receive 15% off any individual program. Use promo code 15CORPORATE at checkout. Group Discounts – We have great group discounts available for you and your colleagues. Call 1-800-308-1700 for more information or to register. The more events you purchase, the more you save: ȕ1VSDIBTFSFHJTUSBUJPOTHFUPGG ȕ1VSDIBTFSFHJTUSBUJPOTHFUPGG 2014 Corporate Whistleblowing Forum September 30 - New York $595 The 2014 Thomson Reuters Supply Chain Sustainability Summit October 15 – New York , NY $795 2 WAYS TO REGISTER westlegaledcenter.com 2 1.800.308.1700 1 Untitled-5 1 14-08-12 8:33 AM A

• Cover