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The BFF is Your BFF for Contractual Interpretation

2 minute read

In Prism Resources Inc. v. Detour Gold Corporation, the Court of Appeal for Ontario considered a motion judge’s approach to summary judgment about a royalty interest in mining claims and leases.  Justice Lauwers, writing for a unanimous Court of Appeal, did not purport to change the law, but his brief decision highlights and summarizes several principles of contract interpretation.

The plaintiff asserted that by having a 2004 contractual right to a “carried interest in the project’s net profits,” it had a royalty interest that was an enforceable interest in land. The plaintiff successfully moved for summary judgment; at that, before even discoveries had taken place.

Justice Lauwers found no fault with the motion judge’s substantive reasoning. The appellant/defendant complained that the motion judge relied inappropriately on the parties’ conduct and subsequent conduct to resolve a latent ambiguity in their contractual language.

Justice Lauwers returned to Shewchuk v. Blackmont Capital Inc, 2016 ONCA 912 to note that subsequent conduct is not part of the factual matrix at the time the contract was formed, but evidence of the parties’ conduct that may shed light on the meaning the parties gave to the words of the contract after its execution.

That evidence carries risks, and can be inherently unreliable – so the Court of Appeal instructs that a judge should carefully consider what weight to assign to it.  That exercise of weighing evidence is squarely within the purview of a summary motion judge making findings of fact or mixed fact and law.

Here, the motion judge appropriately started with the text of the agreement and its surrounding circumstances, found a potential ambiguity, and then proceeded to consider objective evidence of how the parties behaved after entering into the contract.  The Court of Appeal could find no fault in that methodology or any palpable and overriding error of fact – signalling appellate deference to judges interpreting contracts owed since Sattva Capital Corp v. Creston Moly Corp., 2014 SCC 53.

Justice Lauwers also noted the appellant’s disappointment that the matter proceeded to summary judgment before discoveries took place.  He observed that the facts, documents, and evidence were not as well-developed as they would have been if the motion had been brought after the discovery process.

Whatever the appellant’s criticism was as of the time of its appeal, which Justice Lauwers may have shared in principle, he found that the appellant could have put a more robust record before the motion judge if it had taken fuller advantage of its procedural rights under the Rules.  It is, after all, also a respondent’s obligation to put its best foot forward on a summary judgment motion.

Justice Lauwer’s hindsight observation is apt: “The too-frequent strategy of playing the onuses and burdens in a summary judgment motion often causes remorse.”

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