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Court of Appeal File No.: C62587
Commercial List File No. CV/15/11032/00CL
COURT OF APPEAL FOR ONTARIO
B E T W E E N:
WEYERHAEUSER COMPANY LIMITED
Plaintiff
(Respondent)
- and -
HER MAJESTY THE QUEEN AS REPRESENTED BY THE MINISTRY OF
THE ATTORNEY GENERAL
Defendant
(Appellant)
- and -
RESOLUTE FP CANADA INC.
Intervenor
(Respondent)
FACTUM OF THE RESPONDENT,
RESOLUTE FP CANADA INC.
February 28, 2017 Torys LLP
79 Wellington St. W., 30th Floor
Box 270, TD South Tower
Toronto, ON M5K 1N2
Fax: 416.865.7380
Crawford Smith (LSUC #42131S)
Tel: 416-865-8209
Jeremy Opolsky (LSUC #60813N) Tel: 416-865-8117
Lawyers for the Respondent, Resolute FP Canada
Inc.
2
TO: BORDEN LADNER GERVAIS LLP Barristers and Solicitors
22 Adelaide Street West
Suite 3400
Toronto, ON M5H 4E3
Christopher D. Bredt (LSUC #23627Q/3)
Tel: 416-367-6165
Fax: 416-361-7063
Email: [email protected]
Markus Kremer (LSUC #41893I)
Tel: 416-367-6658
Fax: 416-361-2702
Email: [email protected]
Lawyers for the Respondent,
Weyerhaeuser Company Limited
AND TO: ATTORNEY GENERAL FOR ONTARIO Crown Law Office - Civil
720 Bay Street, 8th Floor
Toronto, ON M7A 2S9
Fax: 416-326-4181
Leonard F. Marcello (LSUC #23795S)
Tel: 416-326-4939
Email: [email protected]
Tamara D. Barclay (LSUC #42795V)
Tel: 416-314-2080
Email: [email protected]
Nansy Ghobrial (LSUC #68740N)
Tel: 416-212.7134
Lawyers for the Appellant
TABLE OF CONTENTS
Page
PART I - OVERVIEW ................................................................................................................ 1
PART II - SUMMARY OF FACTS ........................................................................................... 2
Ontario offered the 1979 Indemnity to induce Great Lakes to invest in Dryden .............. 3
The Dryden Agreement...................................................................................................... 4
The 1985 Indemnity ........................................................................................................... 5
The Decision below: the 1985 Indemnity applies to the Director’s Order ........................ 6
PART III - POSITION ON ISSUES .......................................................................................... 7
Standard of review: Palpable and overriding error ............................................................ 8
Resolute holding the benefit of the 1985 Indemnity is not in dispute ............................... 8
The motions judge did not err in interpreting the 1985 Indemnity .................................... 9
The 1985 Indemnity applies to the Director’s Order ........................................... 10
The motions judge did not err in starting with the text of the 1985
Indemnity ................................................................................................. 12
The factual matrix supports the application of the 1985 Indemnity to the
Director’s Order ....................................................................................... 14
No palpable and overriding errors of fact ........................................................................ 16
Calling the Director’s Order a “Remediation Order” is irrelevant .................................. 17
The Ramsay Letter is not probative evidence .................................................................. 18
The Dryden Modernization: no confusion regarding its role in the 1985 Indemnity ...... 19
SCHEDULE “A”
LIST OF AUTHORITIES ............................................................................................. 21
SCHEDULE “B”
TEXT OF STATUTES, REGULATIONS & BY-LAWS ........................................... 22
SCHEDULE “C”
RELEVANT CONTRACTUAL PROVISIONS ......................................................... 23
1
PART I - OVERVIEW
1. In 1979, and again in 1985, the government of Ontario took the significant step of
granting a broad environmental indemnity to Great Lakes regarding a pulp and paper mill in
Dryden, Ontario.1 The mill at issue was critical to Dryden, a single-employer town, but the mill
was beset by environmental liabilities, including a mercury contaminated waste disposal site.
Ontario provided the indemnities expressly to induce Great Lakes to buy the mill, spend $200
million on upgrades, continue operating the mill and ultimately save the economy of Dryden.
The Province now refuses to honour the indemnity with respect to an order issued by the
Ministry of the Environment and related to the same mercury contamination that gave rise to the
indemnity more than 30 years ago.
2. Justice Hainey granted summary judgment against the Province, holding that the MOE
order was covered by the indemnity.
3. This is a straightforward case of contractual interpretation. The motions judge’s
interpretation must be given deference. Despite the range of issues now raised by the Province,
none nears showing the overriding error necessary to surmount the stringent standard of review.
4. The language of the indemnity clearly incorporates claims or proceedings initiated by
Ontario. The indemnity expressly incorporates “statutory” claims, actions or proceedings brought
by a “government (including … any province).” The Province now advances an interpretation—
that the indemnity does not cover claims or proceedings initiated by Ontario—that the text
simply cannot bear. It would mean that “any province” does not include Ontario and that
1 All capitalized terms in this Overview section are defined below.
2
regulatory action by the federal government was covered but not the same regulatory actions
taken by Great Lakes’ own provincial regulator (Ontario).
5. The surrounding circumstances underlying both indemnities support the conclusion that
regulatory action by Ontario was intended by the parties to be covered. Not doing so would – as
the motions judge held – be commercially absurd.
6. This factum was drafted to avoid unnecessary repetition with the argument of the other
respondent, Weyerhaueser Company Limited. Several issues are omitted that are fully addressed
by Weyerhaeuser. As such, the two factums should be read in conjunction.
PART II - SUMMARY OF FACTS
7. Resolute accepts the following facts from the appellant’s factum (“AF”) :
(a) Reed Ltd., through its subsidiaries operated a pulp and paper undertaking near
Dryden, Ontario, which produced mercury by-products (AF para. 6).
(b) The Ministry of the Environment (“MOE”) required Reed to create a waste
disposal site (the “WDS”) for the storage of existing mercury waste in 1971. The
MOE issued a control order against Reed in 1979 (the “Control Order”) that
required Reed to take steps to reduce and eliminate the creation of pollutants (AF
paras. 7-8).
(c) In 1979, Reed and Great Lakes entered into an asset purchase agreement (the
“Dryden Agreement”), after Ontario provided an indemnity (the “1979
Indemnity”) (AF para. 10, 11). In 1985, to settle certain litigation brought by two
First Nations communities, Great Lakes, Reed and Ontario, among others, entered
in a memorandum of agreement (the “1985 MOA”) (AF para. 17). In conjunction
with the MOA, Great Lakes released Ontario from the 1979 Indemnity and
Ontario granted new indemnities to Reed and Great Lakes (the “1985
Indemnity”) (AF para. 19).
(d) In 1998, Bowater Pulp and Paper Canada Inc. (“Bowater”), the corporate
successor to Great Lakes, sold the Dryden pulp and paper undertaking to
3
Weyerhaeuser (AF para. 20). Weyerhaueser leased the WDS site to Bowater until
the severance could be obtained and the WDS was transferred back to Bowater
(AF para. 23).
(e) In 2009, Bowater’s corporate successor filed for protection under the Companies’
Creditors Arrangement Act, R.S.C. 1985 c. C-36 (AF para. 28).
(f) As a consequence, the MOE issued an order (the “Director’s Order”) against
Resolute and Weyerhaeuser, which required monitoring, testing, maintenance,
reporting and a payment to the MOE in financial assurance. (AF para. 28).
8. Resolute disagrees with the other facts, or their characterization, set out in the Province’s
factum. Further relevant facts are set out below.
Ontario offered the 1979 Indemnity to induce Great Lakes to invest in Dryden
9. In 1979, Great Lakes had entered into negotiations to buy the Dryden facilities. However,
the environmental liabilities were proving “a major impediment to the sale.”2 Great Lakes was
reluctant to purchase the property without protection from the environmental risks.3
10. As the motions judge found, the Province “became concerned when Great Lakes
hesitated to complete the sale” because without the sale “the pulp and paper operation in Dryden
would close resulting in serious economic repercussions to the area.”4 The Treasurer of Ontario
concluded that the continued operation and modernization of the Dryden facilities was “of
2 Ontario, Legislative Assembly, Official Report of Debates (Hansard), 31st Parl., 3rd Sess., (6
November 1979) Statement of the Honourable Frank S. Miller, Exhibit “A” at (unnumbered) 2,
Affidavit of Ryan Roberts, sworn December 1, 2014 (“Roberts Affidavit”), Appeal Book and
Compendium of Her Majesty the Queen (“HMQ Appeal Book”), Volume 2, Tab 9A at pp. 556-
557. 3 Reasons for Judgment of Justice Hainey dated July 19, 2016 (“Reasons”), HMQ Appeal Book,
Volume 1, Tab 3 at para. 8. 4 Ibid., at para. 9.
4
considerable importance to the people of this Province” and would result in “substantial and
beneficial employment and economic effects” that were critical to Dryden’s population.5
11. In order to facilitate the sale, the Treasurer of Ontario provided assurances to Great Lakes
that the Province would indemnify Great Lakes for any amounts over $15 million that Great
Lakes was required to pay for damages arising from the pollution on the property. This 1979
Indemnity was conditional on Great Lakes committing to expend $200 million for the
modernization and expansion of the Dryden pulp and paper operation.6 It is not disputed that
Great Lakes completed this modernization. The operative text of the 1979 Indemnity and other
relevant contractual provisions are reproduced at Schedule C to this factum.
12. In providing the 1979 Indemnity, the Province made the conscious decision to take on the
environmental risk of the Dryden property. The Treasurer told the Legislature: “this government
decided it had to share in the risk to ensure a future for that community” to “maintain the
employment of almost 1,700 people in a community that has no other employer of note.”7
The Dryden Agreement
13. As a result of the 1979 Indemnity, Great Lakes entered into the Dryden Agreement in
December 1979, purchasing the Dryden undertakings from Reed.8 Great Lakes indemnified Reed
for any environmental liabilities arising from the Dryden undertakings, including the “presence
5 1979 Indemnity, Exhibit “I”, Affidavit of Trina Rawn, sworn October 14, 2014 (“Rawn
Affidavit”) HMQ Appeal Book, Volume 1, Tab 6I at pp. 191-192. 6 Reasons, HMQ Appeal Book, Volume 1, Tab 3 at para. 9. 7 Hansard Transcript of the debates in the Legislature for November 8, 1979, Exhibit “A” at
(unnumbered) 3, Reply Affidavit of Trina Rawn, sworn December 9, 2014, HMQ Appeal Book,
Volume 2, Tab 7A at pp. 471-478. 8 Reasons, HMQ Appeal Book, Volume 1, Tab 3 at para. 10.
5
of any pollutant, including mercury.”9 The wording of the indemnification is similar to the 1985
Indemnity.
14. Reed agreed to share in the cost of any environmental liability with Great Lakes up to a
maximum of $7.5 million. However, Section 11.4 of the Dryden Agreement carved out from the
cost sharing the costs of compliance with the existing Control Order, as described above, and any
substitute to the extent that it required “substantially the same action to be taken or performed.”10
No other environmental or regulatory costs were excluded.
The 1985 Indemnity
15. In 1985, the First Nations settled a lawsuit they had commenced in 1977 against the
Province, federal government, Reed and Great Lakes for damages resulting from the mercury
contamination. The settlement was documented in the 1985 Memorandum, under which Reed
and Great Lakes made significant payments to the First Nations and released the Province from
the 1979 Indemnity and in return the Province agreed to provide new indemnities to Great Lakes
and Reed.11 The First Nations agreed to dismiss their cases against Great Lakes and Reed and it
was the intent of the settlement “to preclude any further claims” by the First Nations against
Great Lakes or Reed.12
16. The 1985 Indemnity was made by the Province to Great Lakes as an expansion of the
1979 Indemnity. The recitals of the 1985 Indemnity recognized that the Province had entered
into the 1979 Indemnity “for the purpose of facilitating the purchase and sale of a pulp and paper
9 Memorandum of Agreement made as of the 7th day of December, 1979 between Great Lakes
Forest Products Limited, Reed Ltd., and Reed International (“1979 MOA”) at s. 5.3, HMQ Appeal
Book, Volume 3, Tab 13 at pp. 629-634. 10 1979 MOA at s. 11.4, HMQ Appeal Book, Volume 3, Tab 13 at pp. 656-657. 11 Reasons, HMQ Appeal Book, Volume 1, Tab 3 at paras. 11, 13. 12 Memorandum of Agreement, executed November 22, 1985 (“1985 MOA”), Exhibit “J” at ss.
2.2, 2.5, Rawn Affidavit, HMQ Appeal Book, Volume 1, Tab 6J at pp. 200-201
6
plant in Dryden and thereby enabling the modernization and upgrading of the plant” which was
“deemed to be in the public interest.”13
17. The Province agreed to indemnify Great Lakes against any obligation, liability, damages
loss, cost or expense incurred as a result of any “claim, action or proceeding whether statutory or
otherwise” arising or asserted by entities including “governments (including, the Federal
Government of Canada and any province or municipality thereof [ ) ] … relating to any event or
circumstances with respect to the presence of any pollutant, including mercury.”14 The full text of
the indemnity is reproduced in Schedule C to this factum.
18. The rights under the 1985 Indemnity enure to the benefit of the successors and assigns of
Reed and Great Lakes and exist in perpetuity.15 Resolute is the corporate successor of Great
Lakes.16
The Decision below: the 1985 Indemnity applies to the Director’s Order
19. In 2014, both Weyerhaeuser and the Province brought cross-motions for summary
judgment for a determination of the application of the 1985 Indemnity to the Director’s Order.
Both parties consented to the intervention of Resolute as a party in the proceeding. Resolute
brought its own motion for summary judgment.17
20. On July 19, 2016, the motions judge granted Resolute’s motion to intervene as a party
and granted summary judgment in favour of Resolute and Weyerhaeuser. He made the following
holdings:
13 Reasons, HMQ Appeal Book, Volume 1, Tab 3 at para. 17. 14 The full text of the indemnity is reproduced in Schedule C to this factum and para. 17 of the
Reasons. 15 Reasons, HMQ Appeal Book, Volume 1, Tab 3 at paras. 18, 19. 16 Ibid., at para. 55. 17 Ibid., at para. 36.
7
(a) There was no dispute that Resolute, as the corporate successor of Great Lakes, has
the benefit of the 1985 Indemnity.18
(b) The 1985 Indemnity applies to the Director’s Order, both on the clear language of
the indemnity and the surrounding circumstances. In so holding, the motions
judge rejected the Province’s position that the 1985 Indemnity only applied to
claims or proceedings commenced by third parties and not by Ontario.19
(c) The Province’s interpretation that the 1985 Indemnity did not apply to claims by
Ontario would be “commercially absurd” because it would have allowed the
Province to resile from its commitment to protect Great Lakes or its successors
from environmental liability and instead impose substantial environmental
remediation costs on those same parties at any time.20
(d) The 1985 Indemnity did not improperly fetter, directly or indirectly, the
Province’s discretion. The Province cannot breach its past agreement with
impunity; rather, it must be held to the bargain it had made.21
PART III - POSITION ON ISSUES
21. The Province has raised 12 different issues on this appeal, some of which contain distinct
sub-issues. Resolute submits that the central issues in this appeal are as follows:
(a) Is Resolute the beneficiary of the 1985 Indemnity? Yes. Moreover, this issue is
not properly before this Court.
(b) Did the motions judge err in his interpretation of the 1985 Indemnity that it
covered the Director’s Order? No. There was no error, let alone an error on an
18 Ibid., at para. 55. 19 Ibid., at paras. 46, 48. 20 Ibid., at para. 48. 21 Ibid., at para. 53.
8
extricable issue of law, and certainly no palpable and overriding error in the
motions judge’s interpretation of the 1985 Indemnity.
(c) Did the motions judge make a palpable and overriding factual error. No. Any
error is trivial and the Province cannot demonstrate that the result would have
differed in the absence of the impugned findings.
22. To avoid unnecessary duplication, Resolute relies on Weyerhaeuser’s factum for its
response on any issues not directly addressed below.
Standard of review: Palpable and overriding error
23. All of the issues addressed below are alleged errors of fact or mixed fact and law,
including questions of contractual interpretation. Absent palpable and overriding error, findings
of fact or mixed fact and law may not be disturbed.22
Resolute holding the benefit of the 1985 Indemnity is not in dispute
24. Resolute enjoys the benefit of the 1985 Indemnity. This issue is not properly in dispute
before the Court.
25. The motions judge found: “There is no dispute that Resolute, as the corporate successor
of Great Lakes, has the benefit of the Ontario Indemnity.”23 As no party contested below
Resolute’s right to access the indemnity, the Province cannot now challenge this finding as a new
issue on appeal.24
22 Sattva Capital Corp v Creston Moly Corp., 2014 SCC 53 at para. 52, Appellant’s Book of
Authorities (“Appellant’s BOA”) at Tab 2. 23 Reasons, HMQ Appeal Book, Volume 1, Tab 3 at para. 55. 24 College of Optometrists of Ontario v. SHS Optical Ltd., 2008 ONCA 685 at para. 90,
Respondents’ Joint of Book of Authorities (“Respondents’ JBOA”) at Tab 4.
9
26. Moreover, the Province certainly cannot raise a new issue on appeal that was not a
ground of appeal in its Notice of Appeal. Its efforts to do so are contrary to the Rules25 and would
cause significant prejudice to Resolute.26
27. Even if this issue were properly before the Court—and it is not—Resolute maintains the
benefit of the 1985 Indemnity. The enurement clause is clear: the 1985 Indemnity enures both to
the benefit of successors and assigns of Great Lakes. The Province has conceded that the term
“successor” applies to a corporate successor.27 Resolute is that very corporate successor. It enjoys
the benefit of indemnity irrespective of whether Weyerhaeuser is a proper assignee under the
indemnity or whether the term “successor” can also apply to a successor in title.
The motions judge did not err in interpreting the 1985 Indemnity
28. The motions judge held that the 1985 Indemnity, in the context of the surrounding
circumstances, applied to the Director’s Order.
29. The Province alleges that the motions judge erred because his reasons were overly
textualist, without proper regard to the surrounding circumstances. This is wrong. It relies on
both a misreading of Sattva and the Reasons. First, the law provides for—and demands—a
robust analysis of the text, particularly in complex commercial agreements like the one at issue.
Second, contrary to the Province’s allegations, the motions judge did consider the factual matrix
and determined that it did not support the Province’s interpretation.
25 Rules of Civil Procedure, R.R.O. 1990, Reg. 194, c. C. 43 at Rule 61.08(2). 26 College of Optometrists of Ontario v. SHS Optical Ltd., 2008 ONCA 685 at para. 90,
Respondents’ JBOA at Tab 4 citing R. v. Brown, [1993] 2 S.C.R. 918 (“Courts have long frowned
on the practice of raising new arguments on appeal. The concerns are twofold: first, prejudice to
the other side caused by the lack of opportunity to respond and adduce evidence at trial and second,
the lack of a sufficient record upon which to make the findings of fact necessary to properly rule
on the new issue”). 27 Appellant’s Factum at para. 52.
10
30. None of the errors alleged by the Province are extricable errors of law. At its heart, the
issue raised by the Province is whether the motions judge gave due regard to the surrounding
circumstances. He did. Any alleged error in his contractual interpretation must be assessed on the
palpable and overriding standard.
31. The section below first provides an overview of the motions judge’s interpretation of the
1985 Indemnity before addressing, in turn, the Province’s allegations of error.
The 1985 Indemnity applies to the Director’s Order
32. The motions judge determined that the Director’s Order falls under the clear language of
the 1985 Indemnity. With respect to the language of the 1985 Indemnity itself, the motions judge
found that each element of the indemnity clause was met:
“The remediation order is a statutory claim or proceeding,
that imposes obligations, liabilities or future costs on Great Lakes’ successors,
which arise or were asserted by a statutory agency of a province,
because of or relating to events and circumstances,
caused by the presence of mercury deposited in the disposal site by Reed.”28
33. The motions judge rejected the Province’s interpretation that the 1985 Indemnity, on its
terms, was restricted to “third party claims” and precluded the Director’s Order, for the following
reasons:
(a) Statutory claims. The 1985 Indemnity applies to “statutory” claims and
proceedings, including those commenced by the federal government or any
province, municipality or any agency or body thereof. While it was possible for
individuals to bring statutory claims, the motions judge held that the reference to
“any province” together with a statutory claim must be taken to refer to “the
28 Reasons, HMQ Appeal Book, Volume 1, Tab 3 at para. 46.
11
Province of Ontario and its agencies” as Great Lakes’ home province. No other
province would have the constitutional authority to pursue a statutory claim in
Ontario.29 It follows from this holding that it would be absurd to interpret (as the
Province now does) the 1985 Indemnity to cover regulatory actions of the Federal
government or its agencies but not those commenced by Ontario.
(b) Claims and proceedings. The Director’s Order is properly classified as a “claim”
and a “proceeding” as those broad terms are use in the 1985 Indemnity. The
Supreme Court of Canada has held that the meaning of “proceeding” is
“expansive … and include[s] steps or measures which are not in any way
connected with actions or suits.”30 The Director’s Order is a necessary procedural
step for the Province to assert its statutory rights and thus qualifies as a
proceeding. Likewise, the term “claim” has been interpreted by this Court to be
sufficiently broad to include orders similar to the Director’s Order, for example
holding that an order to comply with the building code issued to a landlord by the
City of Toronto constituted a “claim.”31
(c) Procedural rights. The Province’s procedural rights under the indemnity cannot
limit the operative language of the indemnity. Section 2 requires that the
indemnitee notify Ontario of any pollution claim and states that Ontario has the
right to take carriage of the defence. While Ontario may not want to exercise this
right with respect to some claims covered by the indemnity, such as with respect
to the Director’s Order, the notice provisions are no reason to narrow the clear
and broad language of Ontario’s indemnity obligations.32
29 Reasons, HMQ Appeal Book, Volume 1, Tab 3 at para. 48. 30 Ibid., at para. 43; Markevich v. Canada, 2003 SCC 9 at para. 24, Respondents’ JBOA at Tab 9. 31 Reasons, HMQ Appeal Book, Volume 1, Tab 3 at para. 45. Prudential Assurance Co. v. Walwyn,
Stodgell, Cochran, Murray Ltd. (1985), 50 O.R. (2d) 609 (C.A.) at paras. 14-15, Respondents’
JBOA at Tab 13. 32 Reasons, HMQ Appeal Book, Volume 1, Tab 3 at para. 48.
12
(d) Subsequent conduct. The fact that Resolute and its predecessors did not seek to
claim on the 1985 Indemnity until the Director’s Order cannot affect the meaning
established by the parties in 1985.33
34. The Province alleges that the motions judge ignored the nature of an indemnity. This
argument advances a false dichotomy between a release and an indemnity: indemnities are not
restricted to third party claims and may “protect a party against direct loss.”34 In Transcanada,
the case relied on by the Province, this Court rejected the argument that there is a general
principle that indemnities are limited to third party claims, holding instead that the indemnity at
issue had to be “read more broadly than [covering] simply claims by third parties.”35 Rather than
adopting generalities about the interpretation of indemnities, this Court affirmed the trial judge’s
holding that an indemnity obligation “is governed by the words chosen, when placed and read in
their context.”36 This was the analysis undertaken by the motions judge.
The motions judge did not err in starting with the text of the 1985 Indemnity
35. For the reasons set out above, the motions judge held that the Director’s Order was
“covered by the plain and ordinary meaning of the words used in the” 1985 Indemnity.37 The
Province now alleges that the motions judge’s insistence on starting with the language of the
33 Ibid., at para. 48. The motions judge did not have the benefit of this Court’s recent decision in
Shewchuk v. Blackmont Capital Inc., 2016 ONCA 912 at paras. 41-45, Respondents’ JBOA at Tab
15, which reinforces his reasons. In that decision, the Court decided that, except in cases of
ambiguity, subsequent conduct evidence is inadmissible. The Court also highlights that, as here,
subsequent conduct can itself be ambiguous: the fact that Resolute and its predecessors did not
enforce their “strict legal rights does not mean that [they] never had them.” 34 Excelsior Properties Ltd. v. Cosentino Developments Inc., 2011 ABQB 666 at para. 45,
Respondents’ JBOA at Tab 6. 35 TransCanada Pipelines Ltd. v. Potter Station Power Ltd. Partnership (2003), 226 D.L.R. (4th)
262 (Ont. C.A.) at para. 27, Appellant’s BOA at Tab 26. 36 Ibid., at para. 16. 37 Reasons, HMQ Appeal Book, Volume 1, Tab 3 at para. 46.
13
indemnity was itself an error. Sattva and the subsequent holdings of this Court are to the
contrary.
36. The Supreme Court in Sattva held that, while the factual matrix should be used to help
interpret the text of the contract, the text of the contract must always predominate:
“The interpretation of a written contractual provision must always be grounded in
the text and read in light of the entire contract.”
“While surrounding circumstances will be considered in interpreting the terms of
a contract, they must never be allowed to overwhelm the words of that
agreement.”
“While the surrounding circumstances are relied upon in the interpretive process,
they cannot be used to deviate from the text such that the court effectively creates
a new agreement.” 38 [emphasis added]
37. Sattva did not change the law in this regard. This Court has long held that “the words of
the agreement are paramount.”39 Post-Sattva, this Court has continued to apply the principles in
Ventas that a commercial contract is to be interpreted by “determining the intention of the parties
in accordance with the language they have used in the written document” based on the “cardinal
presumption that they have intended what they have said.”40
38. The Province does not argue that consideration of the surrounding circumstances would
infuse a different meaning into a word, phrase or clause in the indemnity. Rather, it advances a
non-textual interpretation. The Province seeks to use the factual matrix to create a new
commercial agreement with a meaning the text simply cannot support.
38 Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 at para. 57 (internal citations
omitted), Appellant’s BOA at Tab 2. 39 Primo Poloniato Grandchildren’s Trust (Trustee of) v. Browne, 2012 ONCA 862 at para. 71,
Respondents’ JBOA at Tab 12. 40 2249778 Ontario Inc. v. Smith (Fratburger), 2014 ONCA 788 at para. 19, Respondents’ BOA
at Tab 1 citing Ventas, Inc. v. Sunrise Senior Living Real Estate Investment Trust, 2007 ONCA
205 at para. 24.
14
39. Nor can an appeal lie from the organization of the motions judge’s analysis: the
allegation that he erred by considering the text before examining the surrounding circumstances
is the height of formalism. Indeed, given the importance placed by the Supreme Court on the
contractual text, it is not surprising that he began with the words of the clause themselves.41
40. Starrcoll Inc. v. 2281927 Ontario Ltd. is of no assistance to the Province in this regard.
The issue in Starrcoll was not the consideration of text before the factual matrix, but the fact that
the application judge refused to consider the factual matrix at all. As Justice Doherty held, the
context adds meaning to the text.42 However, the motions judge did consider the context. As
detailed below, the motions judge carefully looked at the surrounding circumstances and
determined that the meaning of the text, informed by those circumstances, required the
Director’s Order to be covered by the 1985 Indemnity.
The factual matrix supports the application of the 1985 Indemnity to the Director’s Order
41. The motions judge considered the lengthy factual matrix evidence put to him. He
concluded that the surrounding circumstances evidenced a quid pro quo: “The Province offered
Great Lakes and its successors future protection from environmental liability to encourage it to
acquire the Dryden pulp and paper operation.”43 In contrast, as the Province acknowledged in
cross-examination, under its interpretation of the 1985 Indemnity, Great Lakes would have
agreed to have no recourse to the indemnity if, at any time after Great Lakes had made its
41 In Algo Enterprises Ltd. v Repap New Brunswick Inc., 2016 NBCA 35 at para. 21, Respondents’
JBOA at Tab 2, the New Brunswick Court of Appeal rejected a similar argument, refusing to hold
that “by first addressing the ‘plain language’ of [the impugned clause], the trial judge ‘tainted’ his
analysis of the issues he subsequently addressed.” 42 Starrcoll Inc. v. 2281927 Ontario Ltd., 2016 ONCA 275 at paras. 16-17, Appellant’s BOA at
Tab 22. 43 Reasons, HMQ Appeal Book, Volume 1, Tab 3 at para. 48.
15
significant investment in Dryden, the MOE ordered Great Lakes to remediate the WDS, even at
substantial cost to Great Lakes:
Q: And I take it the implication of the Crown's position in this
matter is that Ontario could have ordered Great Lakes to remediate
the mercury contamination in the river and on the site it acquired
one day after the 1979 indemnity or the 1985 indemnity?
Mr. Marsello [counsel for the Province] : Correct. 44
42. In the face of the surrounding circumstances, the motions judge held that the Province’s
interpretation was “commercially absurd.”45
43. The Province ignores this broader commercial context and attempts to selectively pick
individual clauses from separate, historical agreements to impose language on the 1985
Indemnity. This is not only inconsistent with the purpose of factual matrix evidence but
unhelpful because these agreements are broadly consistent with the motions judge’s
interpretation:
(a) 1979 Indemnity. The Province argues that the language of the 1979 Indemnity
excludes claims by Ontario. First, for the reasons set out above, the requirement in
the 1979 Indemnity for Great Lakes to invest $200 million in the Dryden
undertaking makes this lack of protection commercially absurd. Second, the
language that the Province argues restricts the 1979 Indemnity (i.e. references to a
decision of a court or approved settlement) is not repeated in the 1985 Indemnity.
If anything, the lack of such language in 1985 shows the parties’ intent to remove
any such restrictions in the 1985 Indemnity.
(b) Dryden Agreement. The Dryden Agreement—to which the Province was not a
party—carved out the costs of compliance of the Control Order from the cost
sharing agreement between Reed and Great Lakes. The Province argues that since
44 Transcript of Cross Examination of Trina Rawn, December 17, 2014 at p. 30, lines 7-15, HMQ
Appeal Book, Volume 3, Tab 10 at p. 572. 45 Reasons, HMQ Appeal Book, Volume 1, Tab 3 at para. 48.
16
the Control Order was the only existing regulatory obligation that would bind
Reed after the 1979 sale, the carve-out was, in fact, a blanket exemption for
regulatory costs.46 Not so. The parties could have exempted all regulatory costs
from the cost sharing, including future or unknown regulatory costs. They did not.
Moreover, the motions judge held that the absence of any such regulatory carve-
out language from the 1985 Indemnity confirms the parties’ intent to indemnify
against such costs.47
(c) 1985 MOA. The Province argues that the 1985 Indemnity must be interpreted in
light of the purpose of the 1985 MOA, which was to settle the First Nations’
claims. The motions judge was aware of this context, citing the relevant
provisions of the 1985 MOA in the Reasons.48 Nonetheless, there is nothing in
either the 1985 MOA or the 1985 Indemnity restricting the indemnity to the First
Nations’ claim. Indeed, any such interpretation would make the 1985 Indemnity
commercially meaningless because the First Nations had already granted Great
Lakes a full release in the 1985 settlement.49
No palpable and overriding errors of fact
44. The Province points to a series of small, alleged factual misstatements and tries, in the
aggregate, to conjure a significant error. It cannot. For a factual error to be palpable and
overriding, it is not enough to identify errors; the error must be “shown to have affected the
result.”50 That test is not met here.
46 Appellant’s Factum at paras. 63-65, citing Clauses 5.3 and 11.4 in the 1979 MOA, HMQ Appeal
Book, Volume 3, Tab 13 at pp. 629-634, 656-657. In arguing that the 1985 Indemnity should be
interpreted to “track what was intended” in the Dryden Agreement, the Province shows the internal
contradictions in its own argument. The Province argues that the 1985 Indemnity cannot cover
direct claims by the Province because indemnities are intended to cover only third party claims
(Appellant’s Factum at para. 67). But in 1979, Ontario was a third party to the Dryden Agreement.
It is unclear why, on the Province’s own argument, the 1979 language would include claims by
Ontario but that the same “tracked” language in 1985 would, by some alchemy, exclude it. 47 Reasons, HMQ Appeal Book, Volume 1, Tab 3 at para. 48. 48 Reasons, HMQ Appeal Book, Volume 1, Tab 3 at paras. 11-17. 49 Reasons, HMQ Appeal Book, Volume 1, Tab 3 at para. 13; 1985 MOA, ss. 2.2, 2.5; HMQ
Appeal Book, Volume 1, Tab 6 at 200-201. 50 L(H) v. Attorney General (Canada), 2005 SCC 25 at para. 55, Appellant’s BOA at Tab 10.
17
45. Upon closer examination, many of the alleged errors of fact are simply not errors at all.
None are overriding. This factum addresses the following alleged errors:
(a) Description of Director’s Order. It is clear that the motions judge understood the
content of the Director’s Order and it was accurately outlined in the Reasons.
(b) The Ramsay Letter. The absence of reference to the 1982 letter was not an error,
but an indication that the letter had little, if any, probative value.
(c) Timing of the Dryden modernization. Any mistake as to the date of the
modernization is ultimately irrelevant; the relevant issue is that, in reliance on
indemnities from the Province, Great Lakes expended significant funds to
modernize the Dryden undertaking and create employment in Northern Ontario.
46. The remaining allegations are fully addressed by Weyerhaeuser. Resolute adopts its
submissions.
Calling the Director’s Order a “Remediation Order” is irrelevant
47. The motions judge made no error in his findings regarding the content and effect of the
Director’s Order. He described the requirements of the order accurately:
requiring Weyerhaeuser and Resolute (as Great Lakes’ corporate successor) … to
conduct mandatory environmental monitoring and reporting with respect to the
disposal site and to make substantial payments to the Province as financial
assurances in respect of the site.51
48. The motions judge chose to describe the Director’s Order as a “remediation order.” The
Province’s complaint is that defining it as such “implies … far greater” financial consequences
than it “actually requires.”52 The Province’s attempt to elevate a judicial naming convention into
a palpable and overriding error would be a triumph of form over substance.
51 Reasons, HMQ Appeal Book, Volume 1, Tab 3 at para. 26. 52 Appellant’s Factum at para. 41.
18
49. Even if the motions judge had found that the Director’s Order required remediation,
nothing would turn on this point. The Director’s Order required Resolute to actively expend
funds on the financial assurance and on repair and preventative measures.53 It fits squarely into
the motion judge’s interpretation of a claim or proceeding and into the 1985 Indemnity itself.
The Ramsay Letter is not probative evidence
50. In 1982, R. H. Ramsay, the Provincial Secretary for Resources Development, wrote to
Great Lakes to facilitate a settlement with the First Nations, reasserting the 1979 Indemnity. The
Province argues that the Ramsay letter supports “the conclusion that the 1985 Indemnity was
meant to address the potential risk posed by further third party actions and not against regulatory
proceedings.”54
51. The motions judge’s alleged failure to refer to the letter is not an error. There was no
obligation for him to do so.55 The mere absence of a reference to the letter does not establish that
the motions judge “ignored that evidence, but rather that [he] did not regard that evidence as
significant.”56 The Ramsay letter had no probative value to the interpretation of the 1985
Indemnity. The letter is little more than the Province’s unilateral offer of indemnity three years
before the actual indemnity was mutually agreed. Contractual negotiations—in contrast to factual
matrix evidence of the objective circumstances underlying the negotiations—should be treated
53 Director’s Order dated August 25, 2011, Exhibit “A” at pp. 12-13, Rawn Affidavit, HMQ
Appeal Book, Volume 1, Tab 6A at pp. 82-83. 54 Appellant’s Factum at para. 38. 55 K(K) v G(KW), 2008 ONCA 489 at para. 91, Respondents’ JBOA at Tab 8, (“Although the trial
judge did not explicitly refer in his reasons to all the conflicting evidence on these issues, he was
not obliged to do so.”). 56 Waxman v Waxman (2004), 44 BLR (3d) 165 at para. 344 (C.A.), Respondents’ JBOA at Tab 17.
19
“with caution as inherently suspect, as they necessarily involve an element of subjectivity … At
best, they tend to show only what a party wanted, not what they got, in the ultimate bargain.”57
The Dryden Modernization: no confusion regarding its role in the 1985 Indemnity
52. The modernization of the Dryden Undertaking was a condition of the 1979 Indemnity. It
was completed in advance of the 1985 Indemnity after which Great Lakes continued to operate
the modernized plant.
53. In one sentence the motions judge indicated:
The Ontario Indemnity replaced the 1979 Indemnity and was part of the
settlement of the lawsuit in which Great Lakes agreed to pay millions of dollars,
and also continued to spend significant amounts of money to modernize the pulp
and paper operation in Dryden.58
54. The motion judge’s use of the phrase “modernize” the pulp and paper operations when he
meant that Great Lakes continued to expend money to “operate” the operations falls well short of
palpable and overriding error.
55. Instead, it is clear that the motions judge understood the contents of the indemnities. He
found that the 1979 Indemnity was contingent on a $200 million modernization and his
description of the 1985 Indemnity referenced no modernization obligation.59 This issue was not
in dispute; indeed the terms of the 1979 Indemnity required the modernization to be completed
by 1983.60
57 Jones Collombin Investment Counsel Inc. v Fickel, 2016 ONSC 6536 at para. 26, Respondents’
JBOA at Tab 7. 58 Reasons, HMQ Appeal Book, Volume 1, Tab 3 at para. 48 (emphasis added). 59 Reasons, HMQ Appeal Book, Volume 1, Tab 3 at paras. 9-19. 60 1979 Indemnity, Exhibit “I”, Rawn Affidavit, HMQ Appeal Book, Volume 1, Tab 6I at pp. 191-
192.
21
SCHEDULE “A”
LIST OF AUTHORITIES
1. Sattva Capital Corp v Creston Moly Corp., 2014 SCC 53
2. College of Optometrists of Ontario v. SHS Optical Ltd., 2008 ONCA 685
3. Markevich v. Canada, 2003 SCC 9
4. Prudential Assurance Co. v. Walwyn, Stodgell, Cochran, Murray Ltd. (1985), 50 O.R. (2d)
609 (C.A.)
5. Shewchuk v. Blackmont Capital Inc., 2016 ONCA 912
6. Excelsior Properties Ltd. v. Cosentino Developments Inc., 2011 ABQB 666
7. TransCanada Pipelines Ltd. v. Potter Station Power Ltd. Partnership (2003), 226 D.L.R.
(4th) 262 (Ont. C.A)
8. Primo Poloniato Grandchildren’s Trust (Trustee of) v. Browne, 2012 ONCA 862
9. 2249778 Ontario Inc. v. Smith (Fratburger), 2014 ONCA 788
10. Algo Enterprises Ltd. v Repap New Brunswick Inc., 2016 NBCA 35
11. Starrcoll Inc. v. 2281927 Ontario Ltd., 2016 ONCA 275
12. L(H) v Attorney General (Canada), 2005 SCC 25
13. K(K) v G(KW), 2008 ONCA 489
14. Waxman v Waxman (2004), 44 BLR (3d) 165 at para. 344 (C.A.)
15. Jones Collombin Investment Counsel Inc. v Fickel, 2016 ONSC 6536
22
SCHEDULE “B”
TEXT OF STATUTES, REGULATIONS & BY-LAWS
Rules of Civil Procedure R.R.O. 1990, Reg. 194
AMENDMENT OF NOTICE OF APPEAL OR CROSS-APPEAL
Supplementary Notice to be Served and Filed
61.08 (1) The notice of appeal or cross-appeal may be amended without leave, before the appeal
is perfected, by serving on each of the parties on whom the notice was served a supplementary
notice of appeal or cross-appeal (Form 61F) and filing it with proof of service.
Argument Limited to Grounds Stated
(2) No grounds other than those stated in the notice of appeal or cross-appeal or supplementary
notice may be relied on at the hearing, except with leave of the court hearing the appeal.
Relief Limited
(3) No relief other than that sought in the notice of appeal or cross-appeal or supplementary
notice may be sought at the hearing, except with the leave of the court hearing the appeal.
23
SCHEDULE “C”
RELEVANT CONTRACTUAL PROVISIONS
1979 Indemnity
The continued viability of the Dryden facilities and the undertaking of major modernization
expenditures with respect to ·them are of considerable importance to the people of this Province.
The substantial and beneficial employment and economic effects that the operation of a
modernized facility will have on the population and economy of Dryden is of real significance.
In the event that Great Lakes negotiations with the Reed group of companies .are successful then
in the event that Great Lakes .is required ro. pay any monies as a result of any final decision of ·a
court against Great Lakes, Reed Ltd. or any other person prior to the year 2010 in respect of
pollution caused by Reed Ltd. or any of its predecessor companies in the Dryden area prior to the
date upon which Great Lakes acquires the assets and undertaking of the Dryden complex of
Reed Ltd. or in the event that any settlement with any claimant is made the amount of which
settlement pas been approved by the Attorney General of Ontario, I have been authorized by
Executive Council of Ontario to advise you that I will make a Recommendation to the Executive
Council of Ontario that the Government or Ontario take effective steps to ensure that Great
Lakes Forest Products Limited will not be required to pay any monies in excess of the maximum
amount of $15 million referred to in paragraph 2 of this letter, provided that over the next three
to four years Great Lakes expends in the order of $200 million for the modernization and
expansion of the Dryden Facilities
1979 Memorandum of Agreement, ss. 5.3, 11.4
5.3 (i) The Purchase hereby covenants and agrees to indemnify and save the Vendor, Reed
International and any company which is at the Closing Date a subsidiary or affiliate company
(whether directly or indirectly) of Reed International, harmless from and against any obligation,
liability, damage, loss, costs or expenses incurred by any of them after the Closing Date as a
result of any claim, action or proceeding existing at the Closing Date or which may arise or be
asserted thereafter, whether by individuals, firms, companies, governments (including the federal
of Canada and any province or municipality thereof or any agency, body or authority created by
statutory or other authority) or any group or groups of the foregoing, because of or relating to
any damage, loss, event or circumstances, caused or alleged to be caused by or with respect to,
either in whole or in part, the discharge or escape or presence of any pollutant, including mercury
or any other substance, from or in the plant or plants or lands or premises forming part of the
Dryden assets sold by the Vendor to the Purchaser (hereinafter referred to as “Pollution
Claims”); but if any order, judgment or law is made or obtained or enacted, or if with the
approval of the Vendor or Reed International settlement of a Pollution Claim is made by the
Purchaser, which imposes any obligation or liability in respect of a Pollution Claim based on or
related to actions, circumstances or events up to the Closing Date as a result of which the
Vendor, Reed International and any company which is at the Closing Date a subsidiary or
affiliate company (whether directly or indirectly) of Reed International, and/or the Purchaser or
Canadian Pacific Limited or any company which is at the Closing Date a subsidiary or affiliate
company (whether directly or indirectly) of Canadian Pacific Limited; is obligated to pay any
24
monetary amount or amounts or perform any action which results in the expenditure of any
monetary amount or amounts, then the Purchaser and the Vendor shall each bear and pay 50% of
such monetary amount or amounts or settlement (hereinafter collectively referred to as “Awarded
Amounts” which term shall not include Awarded Costs as hereinafter defined) it being
understood and agreed that the Awarded Amounts to be borne and paid by the Vendor shall not
exceed $7,500,000 in the aggregate.
[…]
11.4 The Vendor and Purchaser acknowledge and agree that notwithstanding anything herein
contained in the Vendor shall have no obligation under the indemnity provided for in clause 5.3
hereof to the extent of any action taken or performed by the Purchaser after the Closing Date in
compliance with the existing Control Order dated September 5, 1979 against the Vendor or in
compliance with any Control Order which may be issued in substitution therefor following the
sale of the Dryden Business to the extent that such substituted Control Order requires
substantially the same action to be taken or performed by the Purchaser. It is further
acknowledged and agreed that obligations of the Vendor under such Control Order constitute
commitments of the Vendor which are to be assumed by the Purchaser hereunder without
adjustment to the purchase price.
1985 Indemnity, Clause 1
1. Ontario hereby covenants and agrees to indemnify Great Lakes, Reed, International and any
company which was at the Closing Date a subsidiary or affiliate company (whether directly or
indirectly) of International, harmless from and against any obligation, liability, damage, loss,
costs or expenses incurred by any of them after the date hereof as a result of any claim, action or
proceeding, whether statutory or otherwise, existing at December 17, 1979, or which may arise
or be asserted thereafter (including those arising or asserted after the date of this agreement),
whether by individuals, firms, companies, governments (including the Federal Government of
Canada and any province or municipality thereof or any agency, body or authority created by
statutory or other authority) or any group or groups of the foregoing, because of or relating to
any damage, loss, event or circumstances, caused or alleged to be caused by or with respect to,
either in whole or in part, the discharge or escape or presence of any pollutant by Reed or its
predecessors, including mercury or any other substance, from or in the plant or plants or lands or
premises forming part of the Dryden assets sold by Reed Ltd. to Great Lakes under the Dryden
Agreement (hereinafter referred to as “Pollution Claims”). It is hereby expressly acknowledged
and agreed that in respect of Ontario’s covenant and agreement hereunder to indemnify Great
Lakes that the term “Pollution Claims” shall include any obligation, liability, damage, loss, costs
or expenses incurred by Great Lakes as a result of any claim, action or proceeding resulting from
or in connection with the indemnity agreement of even date herewith made between Great Lakes,
Reed and International.
COURT OF APPEAL FOR ONTARIO
Proceeding commenced at TORONTO
FACTUM OF THE RESPONDENT,
RESOLUTE FP CANADA INC.
Torys LLP
79 Wellington St. W., 30th Floor
Box 270, TD South Tower
Toronto, ON M5K 1N2
Fax: 416.865.7380
Crawford Smith (LSUC #: 42131S) Tel: 416-865-8209
Jeremy R. Opolsky (LSUC #: 60813N)
Tel: 416-865-8117
Lawyers for the Respondent, Resolute FP
Canada Inc.
Court of Appeal File No.: C62587
Commercial List File No. CV/15/11032/00CL
WEYERHAEUSER COMPANY LIMITED v. HER MAJESTY THE QUEEN AS
REPRESENTED BY THE MINISTRY OF
THE ATTORNEY GENERAL
Plaintiff/Respondent Defendant/Appellant
