Nelligan O'Brien Payne gratefully acknowledges the contribution of Alessia Petricone-Westwood, Student-at-Law in writing this article.
The Supreme Court of Canada (‘SCC’) has clarified the rules of contractual interpretation in its recent decision, Sattva Capital Corp v Creston Moly Corp. This decision, which centers on the interpretation of a finder’s fee clause in a commercial contract, affirmed the contextual approach to contractual interpretation, which allows decision-makers to take ‘surrounding circumstances’ into account when attempting to determine the parties’ intentions. The Court also confirmed that the standard of review for commercial arbitration decisions was reasonableness and that appellate courts must pay considerable deference to commercial arbitrators.
Creston Moly Corporation entered into an agreement with Sattva Capital Corporation on January 12, 2007, which required Creston to pay a finder’s fee to Sattva in relation to Creston acquiring a mining property. Under the Agreement, the parties decided that Sattva was entitled to a finder’s fee of US$1.5 million, to be paid in shares of Creston, cash or a combination of both. The dispute at the center of this case concerned which date should be used to determine the price of the Creston shares, as this would determine the number of shares Sattva was entitled to.
The new rules governing contractual interpretation outlined by the SCC in this case acknowledge the sophistication of the parties that enter into these agreements. Words are given particular meaning depending on the objective and intentions of the parties. A reviewing court will now look at the factual circumstances that lead to the creation of the contract when discerning the parties’ intent. Companies engaging in contract negotiations will want to keep in mind that factors outside the contract itself may be used as interpretation guidelines if debates arise. As such, companies will want to make efforts to ensure that most terms are as unambiguous as possible.
The Supreme Court has also narrowed the circumstances under which commercial arbitration decisions may be appealed. Even if leave to appeal is granted, the courts will accord considerable deference to the arbitrator’s decision. This will likely result in greater finality of commercial arbitration decisions regarding contractual interpretation. Companies will therefore want to carefully consider their choice of arbitrator, as that individual will likely be resolving the matter in its entirety. When contemplating an appeal of a commercial arbitrator’s decision, companies will also want to ensure that the question they are appealing is a question of law. If it is more a question of mixed fact and law, it is unlikely that leave to appeal will be granted.
Please click here to read the full article, ‘Supreme Court of Canada Clarifies Approach to Contractual Interpretation and Limits Right to Appeal Commercial Arbitration Decisions.’