Appeals; contract interpretation; worrying about the law, the judges, and the experts

from Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 per Rothstein J.

(a) When Is Contractual Interpretation a Question of Law?

[42]    … 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.

[43]     Historically, determining the legal rights and obligations of the parties under a written contract was considered a question of law (King v. Operating Engineers Training Institute of Manitoba Inc., 2011 MBCA 80 (CanLII), 2011 MBCA 80, 270 Man. R. (2d) 63, at para. 20, per Steel J.A.; K. Lewison, The Interpretation of Contracts (5th ed. 2011 & Supp. 2013), at pp. 173-76; and G. R. Hall, Canadian Contractual Interpretation Law (2nd ed. 2012), at pp. 125-26). This rule originated in England at a time when there were frequent civil jury trials and widespread illiteracy. Under those circumstances, the interpretation of written documents had to be considered questions of law because only the judge could be assured to be literate and therefore capable of reading the contract (Hall, at p. 126; and Lewison, at pp. 173-74).

[44]     This historical rationale no longer applies. Nevertheless, courts in the United Kingdom continue to treat the interpretation of a written contract as always being a question of law (Thorner v. Major, [2009] UKHL 18, [2009] 3 All E.R. 945, at paras. 58 and 82-83; and Lewison, at pp. 173-77). They do this despite the fact that U.K. courts consider the surrounding circumstances, a concept addressed further below, when interpreting a written contract (Prenn v. Simmonds, [1971] 3 All E.R. 237 (H.L.); and Reardon Smith Line Ltd. v. Hansen-Tangen, [1976] 3 All E.R. 570 (H.L.)).

[45]      In Canada, there remains some support for the historical approach …

[46]      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 (Hall, at pp. 13, 21-25 and 127; and J. D. McCamus, The Law of Contracts (2nd ed. 2012), at pp. 749-51). The second is the explanation of the difference between questions of law and questions of mixed fact and law provided in Canada (Director of Investigation and Research) v. Southam Inc., 1997 CanLII 385 (SCC), [1997] 1 S.C.R. 748, at para. 35, and Housen v. Nikolaisen, 2002 SCC 33 (CanLII), 2002 SCC 33, [2002] 2 S.C.R. 235, at paras. 26 and 31-36.

[47]     Regarding the first development, the 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”  (Jesuit Fathers of Upper Canada v. Guardian Insurance Co. of Canada, 2006 SCC 21 (CanLII), 2006 SCC 21, [2006] 1 S.C.R. 744, at para. 27 per LeBel J.; see also Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC 4 (CanLII), 2010 SCC 4, [2010] 1 S.C.R. 69, at paras. 64-65 per Cromwell J.). 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: …

[48]     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 Moore Realty Inc. v. Manitoba Motor League, 2003 MBCA 71 (CanLII), 2003 MBCA 71, 173 Man. R. (2d) 300, at para. 15, per Hamilton J.A.; see also Hall, at p. 22; and McCamus, at pp. 749-50). As stated by Lord Hoffmann in Investors Compensation Scheme Ltd. v. West Bromwich Building Society, [1998] 1 All E.R. 98 (H.L.):

The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. [p. 115]

[49]     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” (Southam, at para. 35). 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, defined in Housen as “applying a legal standard to a set of facts” (para. 26; see also Southam, at para. 35). However, some courts have questioned whether this definition, which was developed in the context of a negligence action, can be readily applied to questions of contractual interpretation, and suggest that contractual interpretation is primarily a legal affair (see for example Bell Canada, at para. 25).

[50]     With respect for the contrary view, 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.

[51]      The purpose of the distinction between questions of law and those of mixed fact and law further supports this conclusion. One central purpose of drawing a distinction between questions of law and those of mixed fact and law is to limit the intervention of appellate courts to cases where the results can be expected to have an impact beyond the parties to the particular dispute. It reflects the role of courts of appeal in ensuring the consistency of the law, rather than in providing a new forum for parties to continue their private litigation. For this reason, Southam identified the degree of generality (or “precedential value”) as the key difference between a question of law and a question of mixed fact and law. The more narrow the rule, the less useful will be the intervention of the court of appeal: …

. . .

 

[52]      Similarly, this Court in Housen found that deference to fact-finders promoted the goals of limiting the number, length, and cost of appeals, and of promoting the autonomy and integrity of trial proceedings (paras. 16-17). These principles also weigh in favour of deference to first instance decision-makers on points of contractual interpretation. The legal obligations arising from a contract are, in most cases, limited to the interest of the particular parties. Given that our legal system leaves broad scope to tribunals of first instance to resolve issues of limited application, this supports treating contractual interpretation as a question of mixed fact and law.

[53]     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 (Housen, at paras. 31 and 34-35).  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” (King, at para. 21). 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.

[54]      However, courts should be cautious in identifying extricable questions of law in disputes over contractual interpretation …  The warning expressed in Housen to exercise caution in attempting to extricate a question of law is relevant here:

Appellate courts must be cautious, however, in finding that a trial judge erred in law in his or her determination of negligence, as it is often difficult to extricate the legal questions from the factual. It is for this reason that these matters are referred to as questions of “mixed law and fact”. Where the legal principle is not readily extricable, then the matter is one of “mixed law and fact” . . . . [para. 36]

[55]     Although that caution was expressed in the context of a negligence case, it applies, in my opinion, to contractual interpretation as well. As mentioned above, the goal of contractual interpretation, to ascertain the objective intentions of the parties, is inherently fact specific. The close relationship between the selection and application of principles of contractual interpretation and the construction ultimately given to the instrument means that the circumstances in which a question of law can be extricated from the interpretation process will be rare.

Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 per Rothstein J.

On the other hand

 [93]      So far as I am concerned what underlies my raising this point is that I have concluded that justice, in the broad sense, is served more often by getting the facts right than by worrying about what the law is.

Reilly v. Lynn, 2003 BCCA 49 , 10 BCLR (4th) 16 per Southin J.A. (dissenting).

The context of Southin J.A.’s statement:

[1]         This is an appeal by the defendant below, here the appellant, from judgments of the Honourable Mr. Justice Coultas awarding the respondent damages of a little less than $3,000,000.00 and increased costs in this action arising from the negligent operation of a motor vehicle.  The text of the judgments, although not of the reasons for judgment which are more than 200 pages and are to be found reported at [1999] B.C.J. No. 2551 (Q.L.) (B.C.S.C.) with supplementary reasons at 2000 BCSC 1735 (CanLII), [2000] B.C.J. No. 411 (Q.L.), 2000 BCSC 360; [2000] B.C.J. No. 2409 (Q.L.), 2000 BCSC 1735; and 2001 BCSC 709 (CanLII), [2001] B.C.J. No. 999 (Q.L.), 2001 BCSC 709, I shall set out presently.  I agree with the disposition of the costs question proposed by my colleagues and shall say no more about either it or that portion of the award made for loss of earnings before trial.

[2]         Whatever may be so in other of the provinces and territories of Canada, here one’s first thought on seeing an award of damages of $2,340,000.00 for impairment of earning capacity, erroneously labelled “loss of opportunity” in the judgment, is that the plaintiff, who, at the time of trial, was in his thirties, must have had catastrophic injuries depriving him of any rational prospect of the pleasures (including, if work is considered a pleasure, the ability to work) of a normal life but, there being no evidence to the contrary, not diminishing his actuarially predicted lifespan.

[3]         In his opening in the court below, Mr. Murphy, Q.C., for the respondent, summed up the point principally inissue, thus:

     The plaintiff’s evidence shows that Duff Reilly sustained a traumatic brain injury, that I will refer to as a TBI, as a result of the accident.  Some of the evidence refers to the injury as a mild or minor traumatic brain injury, which I will refer to as MTBI.

     The central issue of this case is whether or not this was a life-altering brain injury and whether the career of a promising young lawyer was over before it really began.  That, My Lord, is what I think we will be spending 90 percent of the time addressing.

[4]         The thrust of the respondent’s case was not only that he could never work as a lawyer but also that he could never again follow any remunerative employment, even though, on the evidence, he remains sound of wind and limb, save, perhaps – the evidence is unclear – from some back problem unconnected to the accident, is in full possession of his senses and has no impairment of sexual or other bodily function.

[5]         If the accident in issue, for which he was not at fault, has caused such mental devastation that the respondent cannot earn even a modest living, a question arises as to why he has not been found by “reason of mental infirmity incapable of managing his own affairs”.  See the Patients Property Act, R.S.B.C. 1996, c. 349.  There was nothing in the argument put before us by the respondent which answers that question.

. . .

[13]   While a layman in his innocence might think the question arising in this Court is whether the learned judge was right or wrong or what is a Court of Appeal for, a lawyer might frame the question differently (I frequently do myself) and pose the question as whether the learned judge committed reversible error.  I shall in the course of these reasons for judgment address whether these questions are different in substance in contradistinction to whether they are simply different ways of saying the same thing, and, if these are different questions, which of them, on the statute law of this Province, Court of Appeal Act, R.S.B.C. 1996, c. 77, particularly s. 9, is the right question.

. . .

[14]   At this point, I note only that the conclusions of the learned judge are not findings of primary fact in the sense, for instance, that a finding in a case of oral contract of what A said to B on a certain day, or in a case of negligent navigation, what was the course and speed of the vessels, or in a case of occupier’s liability, whether the homeowner had salted the walkway upon which the plaintiff fell, are such findings.  Nor are the conclusions of the learned judge founded on assessments of credibility, thus attracting a consideration of the rationale of Powell v. Streatham Manor Nursing Home, [1935] A.C. 243 (H.L.), with the speeches in which I shall assume the reader is familiar, and such cases in this Court as Vancouver Milling Co. v. Farrell (1922), 67 D.L.R. 237 (B.C.C.A.).

. . .

[79]   In the cases which are usually cited to us on the extent of our powers, Jaegli Enterprises Ltd. v. Taylor (Guardian of), 1981 CanLII 26 (SCC), [1981] 2 S.C.R. 2, and Toneguzzo-Norvell (Guardian ad litem of) v. Burnaby Hospital, 1994 CanLII 106 (SCC), [1994] 1 S.C.R. 114, the Supreme Court of Canada – and I say this conscious that I may be condemned as guilty, if not of lèse majesté then at least of effrontery – did not address the statutory provisions to which I refer, nor did it, in Stein v. The Ship “Kathy K”, 1975 CanLII 146 (SCC), [1976] 2 S.C.R. 802, refer to the provisions in pari materia in the Federal Court Act.

[80]   In earlier times, with all respect, the Supreme Court of Canada did not take such a narrow view of the proper function of this Court.  I reviewed, in Tucker (Public Trustee of) v. Asleson1993 CanLII 2782 (BC CA), (1993), 102 D.L.R. (4th) 518, 78 B.C.L.R. (2d) 173 at 192-194 (C.A.), a number of cases in the Supreme Court of Canada in which a court of appeal which had overruled a trial judge on the issue of negligence or no negligence was sustained.  Such an issue I take to be one of mixed law and fact.

[81]   Section 9 is as broad in scope as any grant of power could be.  What it means is nothing more nor less than if we are of the opinion that the judgment below, for whatever reason, ought to be reversed, we should do what we think ought to have been done.

[82]   Nothing in the Act requires that we draw fine distinc­tions between questions of law, questions of mixed fact and law and questions of fact, whether such facts are primary or material, direct or inferred.

[83]   It does not follow that I am suggesting that the Legislature, by the words it adopted in 1982, intended that this Court should retry the case.

[84]   In my opinion, it would take express words to abolish the rule that an appellate court, in the absence of legal error, would only interfere with the verdict of a jury if that verdict were perverse, or to take away the reluctance of appeal courts to interfere with the decision of a trial judge as to which witnesses he or she believes, a reluctance the rationale of which is expressed in Powell v. Streatham Manor Nursing Home, supra.  But that reluctance can and should yield when, in the opinion of an appellate court, a trial judge has made what, in the opinion of the appellate court, is an unjust finding.

[85]   To be condemned as a liar when one is not must destroy one’s belief in justice.  Miscarriages of justice may not be as cruel in civil cases as they are in criminal cases but they are not inconsequential.

. . .

[88]   Earlier in this judgment, I remarked that a layman might ask what in civil cases is a court of appeal for?  No one disputes our jurisdiction on questions of law.  But, in addition, and without essaying a complete answer to the question, I would put it as to have regard to local circumstances, just as, on the 19th November, 1858, Governor Douglas proclaimed:

     It is therefore hereby enacted and proclaimed by the Governor of British Columbia that the Civil and Criminal Laws of England, as the same existed at the date of the said Proclamation of the said Act, and so far as they are not, from local circumstances, inapplicable to the Colony of British Columbia, are and will remain in full force within the said Colony, till such time as they shall be altered by Her said Majesty in Her Privy Council, or by me, the said Governor, or by such other Legislative Authority as may hereafter be legally constituted in the said Colony;

[89]   Founded on local knowledge, we should be able, without resorting to catch phrases:

1.   To ensure a broad consistency in the assessment of damages for personal injuries;

2.   To determine what sort of conduct, especially in motor car and occupiers liability cases, is or is not negligent;

3.   In deciding whether to accept a trial judge’s findings of fact, to take into account what we know of the judge [this is today only rarely of any importance but fifty years ago, when the Province had some very bad trial judges who were given to leaping to conclusions, thereby avoiding the weary task of thinking, it mattered a great deal – it would be naïve to pretend that the judges of this Court in those days did not have regard to the reputation of the trial judge whose judgment was in issue in determining whether or no to accept his findings of fact] and our collective knowledge of the worth of the opinions of any particular expert witness.

[90]   As to the latter point, in paragraph 12 I remarked on one of the expert witnesses in Enge v. Trerise.  By the time I became a trial judge in 1985, his opinions were generally discredited.  Whether today the judges of the Supreme Court of British Columbia, it having become a very large court, have the opportunity to compare notes, so to speak, on the reliability of professional expert witnesses, I do not know.  By “professional expert witnesses”, I mean those witnesses who appear to turn up over and over again in court and always on the same side.  This concern might cease if the expert witness system, especially in personal injury cases, was reformed.

[91]   As I see the developments in this branch of the law over the last 20 years, there is now apparently conferred in Canada on the findings of fact of trial judges the same inviolability that was conferred at common law before the Judicature Act upon the verdict of a jury.  Thus, we appear to have departed without any reason founded in differences, either cultural or statutory, between the common law provinces and the United Kingdom from the principles expressed in Benmax v. Austin Motor Co., [1955] 1 All E.R. 326 (H.L.).

 [93]      So far as I am concerned what underlies my raising this point is that I have concluded that justice, in the broad sense, is served more often by getting the facts right than by worrying about what the law is.

[94]   For the reasons which I have given, as I have already indicated, I consider that the judgment below ought to be varied by deleting the item “(e) Present Value: Loss of Opportunity $2,340,000.00” in paragraph 1 of the judgment bearing date the 28th February, 2000, and substituting “(e) Impairment of Earning Capacity $750,000.00”, and I would of course leave it to counsel to make the necessary amendment to subparagraph (g).

 

Reilly v. Lynn, 2003 BCCA 49  at para. 92, 10 BCLR (4th) 16 per Southin J.A. (dissenting).

 

The majority disagreed, somewhat.

[95]   We have read in draft form the reasons for judgment of Madam Justice Southin.  We are in complete agreement with her comments in paras. 15 to 24 concerning the procedural history of these appeals.  We respectfully disagree with the disposition she proposes of the issue of quantum of damages for impairment of earning capacity.

[96]   We read with great interest our colleague’s discussion of the appellate powers of this court commencing at para. 63 of her draft reasons.  We do not share her opinion that this court, matters of credibility aside, can recast the findings of fact made by the trial judge to what we think they should be.

[147]     In summary, we would allow the appeal of the order fixing damages only to the extent of reducing the damages for loss of earning capacity from $2,340,000 to $1,650,000; and we would allow the appeal of the order for increased costs and order costs at trial at scale 5.

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