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INTERPRETATION - General principles - Context

Friday, December 06, 2019 @ 12:37 PM  

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Appeals from a judgment of the Ontario Court of Appeal, reversing a decision declaring that the terms of an indemnity agreement concluded in 1985 (the 1985 Indemnity) required the Province of Ontario to compensate the respondents for the cost of complying with an order of the Director of the Ministry of the Environment and Climate Change (Director). In 1985, the Province of Ontario granted the 1985 Indemnity to Reed Ltd. and Great Lakes Forest Products Limited, both former owners of a pulp and paper mill located in Dryden, Ontario, as well as their successors and assigns. The indemnity covered “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”. The 1985 Indemnity was agreed to by the parties in the context of the settlement of litigation brought by two First Nations in relation to mercury pollution caused by the operation of the Dryden mill. Twenty-six years later, the Director issued a remediation order in relation to a mercury disposal site at the Dryden mill. In the intervening period, ownership of the mill had changed hands in several transactions. The Director’s order was issued to both Resolute, who was Great Lakes’ corporate successor, and Weyerhaeuser, which also owned the Dryden property for a time. Both Resolute and Weyerhaeuser sought indemnification from Ontario for the costs of complying with the Director’s order. Weyerhaeuser commenced an action in Superior Court, and Resolute sought leave to intervene. Ontario submitted it was not responsible for the costs of complying with the Director’s order. All three parties moved for summary judgment. The motion judge held that the 1985 Indemnity clearly applied to a statutory claim or proceeding brought by an agent of the Province and that both Resolute and Weyerhaeuser were entitled to indemnification under the 1985 Indemnity for their costs of complying with the Director’s order. He therefore granted summary judgment in favour of Resolute and Weyerhaeuser. Ontario appealed. The Court of Appeal for Ontario agreed with the motion judge that the 1985 Indemnity applied to the Director’s order, but concluded that Resolute was not entitled to indemnification and remitted the issue of Weyerhaeuser’s entitlement to indemnification back to the Superior Court.

HELD: Appeal by Ontario allowed and summary judgment granted in its favour; appeals by Resolute and Weyerhauser dismissed. The motion judge erred when he found that the waste disposal site continued to discharge mercury into the environment. This erroneous factual finding was key to the motion judge’s conclusion that the Director’s order, which imposed maintenance and monitoring obligations, was a “Pollution Claim” within the meaning of the 1985 Indemnity. The scope of the 1985 Indemnity was limited to the issues defined in that agreement. Properly interpreted, the 1985 Indemnity was intended to cover only proceedings arising from the discharge or continued presence of mercury in the related ecosystems, not those related to the mere presence of mercury contained in the waste disposal site. The motion judge found that the 1985 Indemnity was provided in consideration for commitments from Great Lakes to make significant financial investments in the Dryden plant. Based on that rationale for entering into the 1985 Indemnity, the motion judge concluded that it would be commercially absurd if Ontario could still impose remediation costs. However, Great Lakes’ financial commitments were actually provided as part of the prior 1979 Indemnity. Great Lakes gave no new commitments to modernize in consideration for the 1985 Indemnity. The motion judge thus premised his interpretation of the 1985 Indemnity on an incorrect factual basis that led him to place too much emphasis on a change in language and misconstrue the bargain actually struck in the 1985 Indemnity. Moreover, the motion judge erred by failing to consider the 1985 Indemnity as a whole when determining whether or not the Director’s order fell within its scope. Properly interpreted, the 1985 Indemnity only applied to third party claims. The 1985 Indemnity did not cover the Director’s order.

R. v. Resolute FP Canada Inc., [2019] S.C.J. No. 60, Supreme Court of Canada, R.S. Abella, M.J. Moldaver, A. Karakatsanis, S. Côté, R. Brown, M. Rowe and S.L. Martin JJ., December 6, 2019. Digest No. TLD-December22019015-SCC