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Court of Appeal File No.: C62587Commercial List No. CV/15/11032/00CL
COURT OF APPEAL FOR ONTARIO
WEYERHAEUSER COMPANY LIMITED
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Plaintiff(Respondent)
HER MAJESTY THE QUEEN AS REPRESENTED BY THE MINISTRY OF THEATTORNEY GENERAL
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RESOLUTE FP CANADA INC.
Defendant(Appellant)
Intervenor(Respondent)
FACTUM OF THE RESPONDENT,WEYERHAEUSER COMPANY LIMITED
March 1, 2017 BORDEN LADNER GERVAIS LLPBay Adelaide Centre, East Tower22 Adelaide Street WestToronto, ON M5H 4E3Fax: (416) 367-6749
Christopher D. Bredt (LSUC #23627Q/3)Tel: (416) 367-6165Email: [email protected]
Markus F. Kremer (LSUC #41893I)Tel: (416) 367-6658Email: [email protected]
Alannah Fotheringham (LSUC#70882F)Tel: (416) 367-6394Email: [email protected]
Lawyers for the Plaintiff (Respondent)
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TABLE OF CONTENTS
PART I — OVERVIEW 1
PART II — FACTS 3
A. The Property and the Site 4
B. The Grassy Narrows and Islington Band's Litigation and the 1979 Indemnity 4
C. The Settlement of the Lawsuit 5
D. The 1985 Indemnity 6
E. Weyerhaeuser's Purchase of the Dryden Property 8
F. The Director's Order and Resulting Lawsuit 10
G. The Decision of the Motions Judge 12
PART III — ISSUES AND LAW 14
A. Standard of Review 14
B. The Motions Judge Correctly Interpreted the Plain Meaning of the 1985 Indemnity 16
C. The Motions Judge Made No Reversible Findings of Fact or Mixed-Fact-and-Law 17
1. The Motions Judge Did Not Overlook Any Relevant Evidence 17
2. The Motions Judge Did Not Make Any Other Errors of Fact 18
D. The Motions Judge Made No Errors of Law 20
1. The Motions Judge Correctly Found that Weyerhaeuser took an Assignment of the
1985 Indemnity in 1998 21
2. Both Weyerhaeuser and Resolute Are Entitled to the Protection of the 1985
Indemnity 23
3. The 1985 Indemnity Benefits Successors in Title 24
4. Weyerhaeuser is a Successor to the 1985 Indemnity 24
5. The Parties Intended the 1985 Indemnity to Include Regulatory Orders 27
6. The Fettering Doctrine Does Not Apply 28
7. The Province's Position is a Collateral Attack on the 1986 Judgment 29
PART IV — ORDER REQUESTED 30
SCHEDULE "A" — AUTHORITIES CITED
SCHEDULE "B" — STATUTES CITED
PART I — OVERVIEW
1. This is a straightforward contractual interpretation case. The Province of
Ontario (the "Province") appeals from a decision of the Honourable Justice Hainey (the
"Motions Judge") that applied the clear and unequivocal terms of a written indemnity
(the "1985 Indemnity") that the Province granted in 1985.
2. The 1985 Indemnity addresses mercury contamination on a property near
Dryden, Ontario (the "Property"). The Province agreed to indemnify the then Property
owner (a pulp and paper manufacturing company named Great Lakes) against any
"obligation, liability, damages, loss, costs or expenses" resulting from any claim, action
or proceeding with respect to the past contamination of the Property. Crucially, the
1985 Indemnity, by its express terms:
(a) Enures to the benefit of the "successors and assigns" of the Property's previous
owner;
(b) Contains no time limit;
(c) Applies to "statutory" claims; and
(d) Applies to claims, actions and proceedings brought by "governments
including any province ... or any agency, body or authority ..."
3. In 2011, the Director of the Province's Ministry of the Environment made an
environmental monitoring, reporting and financial assurance order (the "Director's
Order") against a number of parties, including the Respondents, Weyerhaeuser
Company Limited ("Weyerhaeuser") and Resolute FP Canada Inc. ("Resolute"). The
Director's Order concerns a mercury waste disposal site (the "WDS" or the "Site") that
was constructed on the Property in 1971 and closed in 1981. The Director's Order was
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made against Weyerhaeuser, notwithstanding the fact that the company never caused or
contributed in any way to the Property's contamination, because for approximately two
years from 1998 to 2000, Weyerhaeuser held paper title to the Site, even though it was
never Weyerhaeuser's original intention to hold or purchase the Site.
4. Weyerhaeuser called upon the Province to indemnify it in respect of the
Director's Order, on the basis that Weyerhaeuser was both a successor in title to the
Property and an assignee of the 1985 Indemnity. The Province took the position that
the 1985 Indemnity did not apply and that Weyerhaeuser could not rely upon it.
Weyerhaeuser commenced an action, and the Province, Weyerhaeuser and Resolute
(which was also named in the Director's Order and intervened in the case) all moved for
summary judgment, seeking a determination as to the applicability of the 1985
Indemnity.
5. The Motions Judge: (i) found that the clear and unequivocal terms of the 1985
Indemnity covered Weyerhaeuser's and Resolute's costs of complying with the
Director's Order; (ii) rejected the Province's argument that the 1985 Indemnity could
not be applied to the Director's Order because it would result in the fettering of the
Province's discretion; and (iii) concluded that Weyerhaeuser could rely on the 1985
Indemnity as both a successor and an assignee.
6. The Province's appeal from the decision of the Motions Judge should be
dismissed, because:
(a) The Province's arguments both before the Motions Judge and on this appeal
seek not to interpret the 1985 Indemnity, but to rewrite it. The Province has
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never put forward a plausible reading of the clause that gives meaning to its
express references to statutory claims and proceedings brought by Provinces. In
the absence of fraud, unconscionability or similar equitable claims (none of
which the Province asserts), there is no legal basis for ignoring the language of a
contract, as recently affirmed by the Supreme Court of Canada in Creston Moly
Corp. V. Sattva Capital Corp.
(b) The Motions Judge's interpretation of the 1985 Indemnity consists of findings of
mixed-fact-and-law. The Province cannot and does not identify any alleged
errors that could possibly have affected the outcome of the motions. None of
the alleged errors come close to reaching the applicable standard of palpable and
overriding error.
(c) The Province does not raise any valid extricable errors of law. In particular, the
Motions Judge applied the correct test in interpreting the 1985 Indemnity and
correctly applied binding legal precedents with respect to Weyerhaeuser's
standing to rely upon the 1985 Indemnity and the inapplicability of the fettering
doctrine.
PART II — FACTS
7. The essential facts on this appeal are not in dispute. Weyerhaeuser disagrees
with the relevance or characterization of some of the facts set out in the Province's
factum, but does not dispute their veracity. Weyerhaeuser summarizes below the facts
that it considers to be relevant to this appeal.
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A. The Property and the Site
8. In the 1960s and 1970s, Dryden Paper Company Limited maintained a pulp and
paper mill on the Property, and its affiliate, Dryden Chemicals Limited, operated a plant
on the Property that produced sodium hydroxide and chlorine used to bleach paper
produced in the mill. Dryden Paper Company Limited and/or Dryden Chemicals
Limited (collectively, "Dryden Paper"), apparently buried mercury-contaminated waste
from the plant at the Site and discharged mercury-containing waste into the nearby river
system. The Province has been aware of the contamination of the Site since the 1970s
and began imposing environmental compliance conditions upon its owners in 1977.1
B. The Grassy Narrows and Islington Band's Litigation
9. In 1977, members of two First Nations Bands affected by the Site contamination
commenced a lawsuit against Dryden Paper and its successor, Reed Limited (together
with its successor, Reed Inc., hereinafter referred to as "Reed") for damages arising out
of the contamination (the "Lawsuit").2
C. The 1979 Indemnity
10. Reed entered into negotiations to sell the Property to Great Lakes Forest
Products Limited ("Great Lakes") in 1979. Great Lakes was reluctant to purchase the
Affidavit of Trina Rawn, sworn October 14, 2014 ("Rawn Affidavit"), at paras. 9-10,
Appeal Book and Compendium of Her Majesty the Queen as Represented by the
Ministry of the Attorney General ("Appeal Book"), Vol. 1, Tab 6, p. 59; Joint
Compendium of Weyerhaeuser Company Limited and Resolute FP Inc. ("Joint
Compendium"), Tab 2, p. 19-20. Affidavit of Charles K. Douthwaite, sworn November
24, 2014 ("Douthwaite Affidavit") at para. 5, Appeal Book, Vol. 2, Tab 8, pp. 488-489;
Joint Compendium, Tab 4, pp. 34-35.2 Rawn Affidavit, at para. 11, Vol. 1, Tab 6, p. 60; Joint Compendium, Tab 2, p. 20.
Douthwaite Affidavit, at para. 6, Appeal Book, Vol. 2, Tab 8, p. 489; Joint
Compendium, Tab 4, p. 35.
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Property without protection from potential environmental liability.3
1 1. In order to induce Great Lakes to purchase the Property, and invest in the
modernization of the pulp and paper mill's operations, the Province entered into an
indemnity by letter agreement with Great Lakes (the "1979 Indemnity").4
D. The Settlement of the Lawsuit
12. The First Nations settled the Lawsuit with the Province, Her Majesty the Queen
(as represented by the Minister of Indian Affairs and Northern Development), Reed and
Great Lakes in 1985. The settlement documents included a Memorandum of Agreement
(the "1985 Memorandum of Agreement") and an Escrow Agreement (the "1985 Escrow
Agreement"). In its recitals, the 1985 Memorandum of Agreement defines the "issues"
it addresses as follows:
The discharge by Reed and its predecessors of mercury and any other
pollutants into the English and Wabigoon and related river systems, and
the continuing presence of any such pollutants discharged by Reed and
its predecessors, including the continuing but now diminishing presence
of methylmercury in the related ecosystems since its initial identification
in 1969, and governmental actions taken in consequence thereof, may
have had and may continue to have effects and raise concerns in respect
of the social and economic circumstances and the health of the present
and future members of the Bands ("the issues").
13. The 1985 Memorandum of Agreement also includes the following provisions,
requiring the Province to provide Great Lakes with an indemnity:
1.1 The parties agree, without admission of liability by any party and
3 Rawn Affidavit, at para. 14, Appeal Book, Vol. 1, Tab 6, p. 60; Joint Compendium,
Tab 2, p. 21. Douthwaite Affidavit, at para. 7, Appeal Book, Vol. 2, Tab 8, p. 489; Joint
Compendium, Tab 4, p. 35.4 Rawn Affidavit, at paras. 15-16 and Exhibit "I", Appeal Book, Vol. 1, Tab 6, p. 61
and Vol. 1, Tab 61, pp. 191-192; Joint Compendium, Tab 2, p. 21 and Tab 6, pp. 56-57.
Douthwaite Affidavit, at paras. 8-11 and Exhibit "A", Appeal Book, Vol. 2, Tab 8, pp.
489-490 and Vol. 2, Tab 8A, pp. 502-505; Joint Compendium, Tab 4, pp. 35-36 and
Tab 8, pp. 63-66.
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subject to the terms of this Agreement, that the settlement is to settle all
claims and causes of action, past, present and future, arising out of theissues.
1.2 Great Lakes will pay $6,000,000 and Reed will pay $5,750,000, on
the terms set forth below, to be allocated to Islington in the sum of
$5,541,500 and to Grassy Narrows in the sum of $6,208,500.
2.4(a) Ontario shall provide to Great Lakes and Reed indemnities in
respect of the issues.
(b) Great Lakes and Reed shall provide to Ontario releases in respect of
the Indemnity.5
14. The indemnity required by section 2.4(a) of the 1985 Memorandum of
Agreement was reduced to writing, titled "1985 Indemnity" and annexed as schedule
"F" to the 1985 Escrow Agreement. The Supreme Court of Ontario approved the
settlement of the Lawsuit in accordance with the terms of the 1985 Memorandum of
Agreement in 1986 and granted a judgment (the "1986 Judgment"). The 1986
Judgement provided:
THIS COURT ORDERS AND DECLARES that the Settlement of the
within action in accordance with the terms of the Memorandum of
Agreement is hereby approved.6
E. The 1985 Indemnity
15. The recitals to the 1985 Indemnity read as follows:
WHEREAS Great Lakes and Reed Ltd., a predecessor of Reed [Inc.],
were two of the parties to a Memorandum of Agreement (the "Dryden
Agreement") made as of the 7th of December, 1979 providing for the
purchase and sale of the Dryden Business;
AND WHEREAS Her Majesty the Queen in Right of the Province of
Ontario entered into an Indemnity Agreement indemnifying on certain
specific terms Great Lakes and Reed for the purpose of facilitating the
5 Rawn Affidavit, Exhibit "J", Appeal Book, Vol. 1, Tab 6J, pp. 197 and 201; Joint
Compendium, Tab 11, pp. 89 and 93. Douthwaite Affidavit, at para. 14, Appeal Book,
Vol. 2, Tab 8, pp. 491-492; Joint Compendium, Tab 4, pp. 37-38.
6 Douthwaite Affidavit, at para. 16, and Exhibit "B", Appeal Book, Vol. 2, Tab 8, p.
492 and Vol. 2, Tab 8B, p. 508; Joint Compendium, Tab 4, p. 38 and Tab 13, p. 105.
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purchase and sale of a pulp and paper plant in Dryden and therebyenabling the modernization and upgrading of the plant in the communityof Dryden as was deemed to be in the public interest;
AND WHEREAS both Great Lakes and Reed have agreed to contributesubstantial sums of money toward the resolution of the issues whichwere the subject of the indemnity provided by Her Majesty the Queen inRight of the Province of Ontario.
NOW THEREFORE THIS AGREEMENT WITNESSETH that inconsideration of the premises and other good and valuable consideration(the receipt whereof is hereby acknowledged) it is agreed by andbetween the parties hereto as follows:7
16. The 1985 Indemnity also includes the following provision:
1. Ontario hereby covenants and agrees to indemnify Great Lakes,Reed, International and any company which was at the Closing Date asubsidiary or affiliate company (whether directly or indirectly) ofInternational, harmless from and against any obligation, liability,damages, loss costs or expenses incurred by any of them after the datehereof as a result of any claim, action or proceeding, whether statutoryor otherwise, existing at December 17, 1979, or which may arise or beasserted thereafter (including those arising or asserted after the date ofthis agreement), whether by individuals, firms, companies, governments(including the Federal Government of Canada and any province ormunicipality thereof or any agency, body or authority created bystatutory 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 inpart, the discharge or escape or presence of any pollutant by Reed or itspredecessors, including mercury or any other substance, from or in theplant or plants or lands or premises forming part of the Dryden assetssold by Reed Ltd. to Great Lakes under the Dryden Agreement(hereinafter referred to as "Pollution Claims"). It is hereby expresslyacknowledged and agreed that in respect of Ontario's covenant andagreement hereunder to indemnify Great Lakes that the term "PollutionClaims" shall include any obligation, liability, damage, loss, costs orexpenses incurred by Great Lakes as a result of any claim, action orproceeding resulting from or in connection with the indemnity agreementof even date herewith made between Great Lakes, Reed andInternational.8 [emphasis added]
Rawn Affidavit, Exhibit "J", Appeal Book, Vol. 1, Tab 6J, pp. 245-248; Joint
Compendium, Tab 12, pp. 99-102. Douthwaite Affidavit, at para. 18, Appeal Book,
Vol. 2, Tab 8, pp. 492-493; Joint Compendium, Tab 4, pp. 38-39.
8 Ibid.
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17. The 1985 Indemnity is expressly stated to be of unlimited duration:
4. The foregoing indemnity shall be valid without limitation as to time.9
18. The 1985 Indemnity also contains an enurement clause (the "Enurement
Clause"), which provides:
6. The indemnity shall be binding upon and enure to the benefit of the
respective successors and assigns of Ontario, Reed, Internationaland Great Lakes, provided however that Ontario shall not be entitled toassign the indemnity without the prior written consent of the otherparties hereto.19 [emphasis added]
19. Weyerhaeuser was provided with a copy of the 1985 Indemnity prior to its
acquisition of the Dryden pulp and paper manufacturing operation in 1988.
Weyerhaeuser's counsel reviewed the 1985 Indemnity in detail at that time.11 On cross-
examination, Weyerhaeuser's in-house counsel gave evidence that Weyerhaeuser relied
upon the 1985 Indemnity when it purchased the Dryden operation.12
F. Weyerhaeuser's Purchase of the Dryden Property
20. On August 4, 1998, Weyerhaeuser purchased the Property and manufacturing
assets from Great Lakes' successor, Bowater, pursuant to an Asset Purchase Agreement
(the "1998 Agreement"). The 1998 Agreement included a description of the assets
9 Ibid.
I° Ibid.
1 1 Douthwaite Affidavit, at para. 20, Appeal Book, Vol. 2, Tab 8, p. 493; Joint
Compendium, Tab 4, p. 39.
12 Transcript of the Cross-Examination of Charles K. Douthwaite, on his affidavit sworn
November 24, 2014, taken on March 26, 2015 ("Douthwaite Cross"), p. 40, QQ. 131-
134, Appeal Book, Vol. 3, Tab 11, p. 603; Joint Compendium, Tab 5, p. 51. The
witness remembered the Ontario Indemnity distinctly because of its highly unusual
nature. Douthwaite Cross, pp. 32-33, QQ. 108-109, Appeal Book, Vol. 3, Tab 11, pp.
598-599; Joint Compendium, Tab 5, pp. 48-49.
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Weyerhaeuser was purchasing, including the contractual rights and indemnities relating
to the Dryden operation:
3.1 Property and Assets to be Purchased and Sold
Subject to the terms and conditions hereof, the Vendor agrees to sell,assign and transfer to the Purchaser and the Purchaser agrees topurchase as, at and from the Effective Time the following property andassets of the Business:
(vii) Agreement, Contracts and Commitments — the full benefit of allunfilled orders received by the Vendor relating to the Business and allright, title and interest of the Vendor in, to and under all agreements,contracts and commitments and other rights of or relating to theBusiness, whether written or oral, including, without limitation, the fullbenefit and advantage of all forward commitments by the Vendor forsupplies or materials entered into in the Ordinary course of the Businesswhich are exclusively for use in the Business whether or not there areany written agreements, contracts or commitments with respect thereto(individually a "Contract" and collectively, the "Contracts")
(xiv) Warranty Rights — the full benefit of all representations,warranties, guarantees, indemnities, undertakings, certificates,covenants, agreements and the like and all security therefore received bythe Vendor on the purchase or other acquisition of any part of thePurchased Assets or otherwise.13 [emphasis added]
21. As Weyerhaeuser had no desire or intent to purchase the Site, the 1998
Agreement also provided that Bowater agreed to retain the WDS. This required a
severance of the WDS pursuant to Ontario's Planning Act. Under the 1998 Agreement,
Bowater was required to obtain a severance of the Site prior to, or as soon as possible
after, the closing of the transaction.14 However, because the Dryden Property was
13 Rawn Affidavit, Exhibit "N", Appeal Book, Vol. 2, Tab 6N, pp. 300-303; Joint
Compendium, Tab 14, pp. 108-111. Douthwaite Affidavit, at para. 23, Appeal Book,Vol. 2, Tab 8, pp. 494-495; Joint Compendium, Tab 4, pp. 40-41.
14 Rawn Affidavit, at para. 24, and Exhibit "N", Appeal Book, Vol. 1, Tab 6, p. 43 and
Vol. 2, Tab 6N, p. 304; Joint Compendium, Tab 2, p. 23 and Tab 14, pp. 112.
Douthwaite Affidavit, at para. 22, Appeal Book, Vol. 2, Tab 8, p. 494; JointCompendium, Tab 4, p. 40.
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located in an "unorganized municipality," the severance required the consent of the
Province's Minister of Municipal Affairs. Due to a delay in the Minister providing
consent, Bowater was unable to obtain a severance of the Site until August 25, 2000,
approximately two years after closing.
22. As a result, through no fault of its own, Weyerhaeuser held title to the Site on
paper for approximately two years. During this time, Weyerhaeuser leased the Site back
to Bowater, so that Bowater remained in control and possession of the Site.15
Weyerhaeuser did not in any way cause or contribute to the Site's contamination. The
lease included a separate indemnity given by Bowater to Weyerhaeuser. This indemnity
covered a number of different issues, including mercury contamination.16 At the end of
the two year lease, Bowater obtained the severance and resumed title to the Site on
paper and in practice." Weyerhaeuser sold the Dryden pulp and paper operation to
Domtar Inc. in 2007.18
G. The Director's Order and Resulting Lawsuit
23. In 2011, the Director of the Ministry of the Environment issued the Director's
Order, which requires Weyerhaeuser, Resolute and others, to provide mandatory
15 Rawn Affidavit, at paras. 25-27, Appeal Book, Vol. 1, Tab 6, p. 64; Joint
Compendium, Tab 2, p. 24. Douthwaite Affidavit, at paras. 24-26, Appeal Book, Vol.
2, Tab 8, p. 495; Joint Compendium, Tab 4, p. 41.
16 Rawn Affidavit, Exhibit "P", Appeal Book, Vol. 2, Tab 6P, p. 382-383; Joint
Compendium, Tab 15, pp. 130-131. Douthwaite Affidavit, at paras. 27-28, Appeal
Book, Vol. 2, Tab 8, pp. 495-496; Joint Compendium, Tab 4, pp. 41-42.17Rawn Affidavit, at para. 27, Appeal Book, Vol. 1, Tab 6, p. 64; Joint Compendium,
Tab 2, p. 24. Douthwaite Affidavit, at para. 29, Appeal Book, Vol. 2, Tab 8, p. 496;
Joint Compendium, Tab 4, p. 42.18 Douthwaite Cross, p. 77, QQ. 270-272, Appeal Book, Vol. 3, Tab 11, p. 607; Joint
Compendium, Tab 5, p. 53.
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environmental monitoring, reporting and financial assurance in respect of the Site.
Weyerhaeuser has appealed the Order to the Environmental Review Tribunal (the
"ERT"). The hearing before the ERT is on hold pending the outcome of this litigation.19
24. On the same day it filed its Notice of Appeal with the ERT, Weyerhaeuser's
counsel wrote to the Ministry of the Attorney General (the "AG"), asking the Province
whether it intended to assume the defence of the Order or to indemnify Weyerhaeuser
for the costs it would incur as a result. Weyerhaeuser wrote to the AG two more times
before the AG responded, taking the position that the 1985 Indemnity was not intended
to apply to "any proceeding brought by the Province at all," and indicating that the
Province would not pay Weyerhaeuser any compensation under the 1985 Indemnity.20
25. Accordingly, Weyerhaeuser issued its Statement of Claim in this action on May
10, 2013, seeking an order requiring the Province to indemnify Weyerhaeuser for all
costs it has incurred, and may be required to incur in the future, as a result of the
19 Rawn Affidavit, at paras. 4 and 41-42 and Exhibit "A", Appeal Book, Vol. 1, Tab 6,
pp. 58 and 68-69, and Vol. 1, Tab 6A, pp. 81-86; Joint Compendium, Tab 2, p. 18 and
pp. 28-29, and Tab 16, pp. 146-151. Douthwaite Affidavit, at paras. 30-32 and Exhibit
"C", Appeal Book, Vol. 2, Tab 8, p. 496 and Vol. 2, Tab 8C, pp. 536-542; Joint
Compendium, Tab 4, p. 42 and Tab 17, p. 152-158. Douthwaite Affidavit, at paras. 33-
40 and Exhibits "D", "E", "F" and "G", Appeal Book, Vol. 2, Tab 8, pp. 496-499 and
Vol. 2, Tabs 8D, 8E, 8F, 8G, pp. 544, 546, 548 and 550-551; Joint Compendium, Tab 4,
pp. 42-45 and Tab 18, pp. 160, 162, 164 and 166-167.
20 Rawn Affidavit, at paras. 4 and 41-42 and Exhibit "A", Appeal Book, Vol. 1, Tab 6,
pp. 58 and 68-69, and Vol 1, Tab 6A, pp. 70-86; Joint Compendium, Tab 2, p. 18 and
pp. 28-29, and Tab 16, pp. 135-151. Douthwaite Affidavit, at paras. 30-32 and Exhibit
"C", Appeal Book, Vol. 2, Tab 8, p. 496 and Vol. 2, Tab 8C, pp. 536-542; Joint
Compendium, Tab 4, p. 42 and Tab 17, p. 152-158. Douthwaite Affidavit, at paras. 33-
40 and Exhibits "D", "E", "F" and "G", Appeal Book, Vol. 2, Tab 8, pp. 496-499 and
Vol. 2, Tabs 8D, 8E, 8F, 8G, pp. 544, 546, 548 and 550-551; Joint Compendium, Tab 4,
pp. 42-45 and Tab 18, pp. 160, 162, 164 and 166-167.
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Director's Order.21 The Province brought a motion for summary judgment, seeking to
have the action dismissed. Weyerhaeuser responded with a cross-motion for summary
judgment. Resolute sought leave to intervene, on consent of the parties, and brought its
own motion for summary judgment.
H. The Decision of the Motions Judge
26. The motions were heard on April 4 and 5, 2016, and the Motions Judge released
his reasons on July 19, 2016. In his reasons, after granting Resolute leave to intervene,
and deciding that summary judgment was appropriate in the circumstances, the Motions
Judge decided the following issues:
(a) Does the 1985 Indemnity cover Weyerhaeuser's and Resolute's costs of
complying with the Director's Order?
(b) If it does cover these costs, does this result in impermissible fettering of
statutory discretion by the province?
(c) Can Weyerhaeuser rely upon the 1985 Indemnity as a successor or an assignee?
27. With respect to whether the 1985 Indemnity covered Weyerhaeuser's and
Resolute's costs of complying with the Director's Order, the Motions Judge first looked
to the plain and ordinary meaning of the words used in the 1985 Indemnity. Finding the
language used in the 1985 Indemnity to be clear and unequivocal, he stated:
The ordinary and grammatical meaning of these words makes it clearthat the Province agreed to indemnify Great Lakes for any costs orexpenses resulting from any claim or proceeding, which may be assertedthereafter by a government, including any province or statutory agency
21 Rawn Affidavit, at para. 43, Appeal Book, Vol. 1, Tab 6, p. 69; Joint Compendium,
Tab 2, p. 29. Douthwaite Affidavit, at para. 41, Appeal Book, Vol. 2, Tab 8, p. 499;
Joint Compendium, Tab 4, p. 45.
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with respect to the discharge or presence of any pollutant on the Drydenproperty.22
28. The Motions Judge subsequently found that the broad wording of the 1985
Indemnity indicated that the parties intended it to apply to a statutory claim or
proceeding brought by a provincial agency, such as the Director's Order issued by the
Ministry of the Environment.23 His Honour considered the factual matrix, which, for
the reasons set out below, supports an interpretation that adheres to the ordinary and
grammatical meaning of the words used in the 1985 Indemnity. Accordingly, the
Motions Judge concluded that the 1985 Indemnity covered Weyerhaeuser's and
Resolute's costs of complying with the Director's Order.
29. With respect to whether the 1985 Indemnity improperly fettered the Province's
discretion, the Motions Judge found it did not, because:
(i) the fettering doctrine only applies to agreements that restrictlegislative functions, and the 1985 Indemnity is a business agreementthat does not restrict the Province's legislative functions;
(ii) the Province did not challenge the 1986 Judgment approving the1985 Indemnity and they cannot now engage in a collateral attack of thatjudgment by arguing it could not enter into the court-approvedindemnity; and
(iii) when entering into contracts, the Province is subject to the privatelaw of contracts, and is
(a) presumed to have acted in good faith when it granted the 1985Indemnity; and
(b) believed it to be fully enforceable and not restricted by thefettering doctrine.24
22 Reasons for Judgment of Justice Hainey, dated July 19, 2016 ["Reasons"] at para. 42,Appeal Book, Vol. 1, Tab 3, p. 20; Joint Compendium, Tab 1, p. 9.
23 Reasons, supra at paras. 44-47, Appeal Book, Vol. 1, Tab 3, pp. 20-21; JointCompendium, Tab 1, pp. 9-10.
24 Reasons, supra at para. 51, Appeal Book, Vol. 1, Tab 3, p. 23; Joint Compendium atTab 1, p. 12.
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30. Finally, with respect to whether Weyerhaeuser could rely on the 1985 Indemnity
as a "successor" or "assignee" of Great Lakes within the meaning of the Enurement
Clause, the Motions Judge found the language used in the clause to be broad and
unqualified. Upon finding that the 1985 Indemnity was indeed assigned by Bowater to
Weyerhaeuser under the 1998 Agreement, the Motions Judge held that Weyerhaeuser
could rely upon the 1985 Indemnity as Great Lakes' assignee.25
31. Accordingly, the Motions Judge held that Weyerhaeuser and Resolute were
entitled to be indemnified under the 1985 Indemnity for their costs of complying with
the Director's Order, granted the motions of Weyerhaeuser and Resolute, and dismissed
the motion of the Province.
PART III — ISSUES AND LAW
32. The issues on this Appeal are:
(a) The applicable standard of review;
(b) Whether the Motions Judge properly interpreted the 1985 Indemnity;
(c) Whether the Motions Judge made any palpable and overriding errors of fact or
mixed-fact-and-law; and
(d) Whether the Motions Judge made any errors of law.
A. Standard of Review
33. The Motions Judge's findings of fact and findings of mixed-fact-and-law attract
a standard of review of palpable and overriding error. The Motions Judge's decision
was fundamentally an exercise in contractual interpretation. The Supreme Court has
25 Reasons, supra at paras. 61-64, Appeal Book, Vol. 1, Tab 3, pp. 25-26; Joint
Compendium at Tab 1, pp. 14-15.
- 15-
held that the interpretation of a contract is a question of mixed-fact-and-law. As such, it
attracts the standard of review of palpable and overriding error. Courts should hesitate
to find extricable questions that are simply a shortcut around this standard.26
34. The palpable and overriding error standard requires the error to be "clearly
wrong" or plainly seen, and to be one that would have altered the result or may well
have altered the result. The Supreme Court of Canada has confirmed that the palpable
and overriding error standard emphasizes the need to "put one's finger on the crucial
flaw, fallacy or mistake" before appellate intervention is warranted.27
35. The Supreme Court of Canada recently adopted with approval the following
statement of the applicable principle:
Palpable and overriding error is a highly deferential standard of review
... "Palpable" means an error that is obvious. "Overriding" means an
error that goes to the very core of the outcome of the case. When
arguing palpable and overriding error it is not enough to pull at leaves
and branches and leave the tree standing. The entire tree must fall.28
36. As a result, even if the Motions Judge made erroneous factual findings, this
would only warrant interference on appeal if such findings go to the core of the case. In
this case, there was no such palpable and overriding error.
26 Creston Moly Corp. v. Sattva Capital Corp., 2014 SCC 53 at paras. 50 and 55
["Sattva"]; Appellant's Book of Authorities ("Appellant's BOA") at Tab 2, Ledcor
Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37 at paras. 35-
36 ["Ledcor"]; Appellant's BOA at Tab 12.
27 Housen v. Nikolaisen, 2002 SCC 33 at paras. 5, 36 and 37; Appellant's BOA at Tab
9. H.L. v. Canada (Attorney General), 2005 SCC 25 at paras. 55, 56, 69 and 70;
Appellant's BOA at Tab 10. Benhaim v. St-Germain, 2016 SCC 48, paras. 37-40; Joint
Brief of Authorities of Weyerhauser Company Limited and Resolute FP Inc.
("Respondents' JBOA") at Tab 3.28 Benham v. St.-Germain, 2016 SCC 48 at para. 38, quoting from South Yukon Forest
Corp. v. R., 2012 FCA 165 at para. 46, Respondents' JBOA at Tab 3.
- 16-
37. While Weyerhaeuser agrees that questions of law attract a standard of review of
correctness, as explained further below, Weyerhaeuser submits that few, if any, of the
errors alleged by the Province are pure matters of law that would attract that standard.
B. The Motions Judge Correctly Interpreted the Plain Meaning of the 1985
Indemnity
38. The Motions Judge applied the correct approach to interpreting the 1985
Indemnity when he focused on the ordinary and grammatical meaning of section 1 of
the agreement. The Supreme Court highlighted the importance of the written terms of a
contract in Sattva:
The interpretation of a written contractual provision must always be
grounded in the text and read in light of the entire contract. While the
surrounding circumstances are relied upon in the interpretive process,
courts cannot use them to deviate from the text such that the court
effectively creates a new agreement.29
39. Consistent with this approach, the Motions Judge reviewed section 1 of the 1985
Indemnity, and found that the ordinary and grammatical meaning of the clause made it
clear that:
[T]he Province agreed to indemnify Great Lakes for any costs or
expenses resulting from any claim or proceeding, which may be asserted
[...] by a government, including any province or statutory agency with
respect to the discharge or presence of any pollutant on the Dryden
property.3°
40. Both before the Motions Judge and on this appeal, the Province has failed to
advance any interpretation of the 1985 Indemnity that gives a plausible meaning to the
agreement's express reference to statutory proceedings brought by a Province or
agency. Instead, the Province seeks to use the surrounding circumstances to override
29 Sattva, supra at para. 57 (citations omitted); Appellant's BOA at Tab 2.
30 Reasons, supra at para. 42, Appeal Book, Vol. 1, Tab 3, p. 20; Joint Compendium,
Tab 1, p. 9.
- 17-
the clear language of the 1985 Indemnity. This is precisely what a court may not do,
according to the Supreme Court of Canada in Sattva.
41. In any event, the surrounding circumstances, which the Motions Judge did
consider, support the Motions Judge's conclusion that the indemnity covers
Weyerhaeuser and Resolute's costs of complying with the Director's Order, as set out
below. Indeed, if the Province's interpretation were correct, and the 1985 Indemnity
did not apply to the Province's own regulatory orders, then it would have been open to
the Province to make an order against the Property's owner, the day after having
induced the owner to pay millions of dollars to settle the Lawsuit. No reasonable
company would have agreed to a settlement that left it vulnerable to this type of
liability.
C. The Motions Judge Made No Reversible Error of Fact or Mixed-Fact-and-Law
1. The Motions Judge Did Not Overlook Any Relevant Evidence
42. The Province submits that the Motions Judge made an unreasonable finding of
fact when he failed to consider the evidence of Mr. Douthwaite with respect to the
assignment of the 1985 Indemnity. Specifically, the Province relies upon the fact that,
when Mr. Douthwaite was cross-examined about the 1998 Agreement, by which
Weyerhaeuser acquired the Property, he was allegedly unclear about which contractual
provisions assigned the benefit of the 1985 Indemnity to Weyerhaeuser. What is
relevant, however, is the wording of the 1998 Agreement, not Mr. Douthwaite's
understanding of that agreement when he was cross-examined seventeen years later. As
set out above, the 1998 Agreement expressly assigned to Weyerhaeuser all rights under
any contract or agreement, as well as the full benefit of all indemnities.
- 18-
43. The Province does not explain how Mr. Douthwaite's subjective understanding
of the assignment is relevant to the exercise of contractual interpretation. As the
Supreme Court noted in Sattva, the goal of contractual interpretation is "to ascertain the
objective intentions of the parties."31 Indeed, elsewhere in their factum on this appeal,
the Province acknowledges that it would be an error of law to interpret a contract from
the perspective of one contracting party. The Province cannot have it both ways.
44. The Province also submits that the Motions Judge made an unreasonable finding
of fact when he failed to consider a letter written by the Province's Treasurer in 1979
(the "Ramsay Letter"). However, there is no evidence that the Motions Judge failed to
consider the Ramsay Letter. He simply concluded that this letter (which preceded the
written agreement embodied in the 1985 Indemnity) was not determinative of the
meaning of the clear and unequivocal wording of the 1985 Indemnity. Weyerhaeuser
adopts the submissions made in Resolute's factum on this issue.
2. The Motions Judge Did Not Make Any Other Errors of Fact
45. The Province takes issue with four other findings of fact made by the Motions
Judge. Specifically, the Province submits that the Motions Judge made errors of fact
when he found that:
(a) the WDS itself (rather than operations on the Property) discharged mercury into
the nearby river system;
(b) the 1985 Indemnity was given for the purpose of modernizing Dryden's pulp
and paper operations;
31 Sattva, supra at para. 55 [emphasis added]; Appellant's BOA at Tab 2.
- 19-
(c) the Director's Order is a remediation order (rather than a monitoring, reporting
and financial assurance order); and
(d) Ontario delayed the severance of the WDS.
46. While parsing the Motions Judge's reasons in order to identify these minor
alleged errors, the Province fails entirely to demonstrate that they affected the outcome
of the motions in any way. In particular, the Province fails to draw any concrete
connections between these alleged errors of fact and the Motions Judge's conclusion
that the Director's Order is covered by the 1985 Indemnity. To adopt the Supreme
Court of Canada's analogy, the Province has tried to identify a few spots on the leaves
of the Motions Judge's decision but falls well short of shaking the tree, let alone causing
it to fall. Accordingly, and for the reasons outlined below, these alleged errors do not
meet the standard of palpable and overriding errors justifying this Court's intervention.
47. In response to the Province's specific allegations of factual errors,
Weyerhaeuser adopts the submissions in Resolute's Responding Factum on this appeal.
Weyerhaeuser's position may be summarized as follows:
(a) Since the 1985 Indemnity covers the Property as a whole (including the WDS),
whether the Motions Judge believed the contamination to originate in the WDS
or elsewhere on the property is irrelevant to whether or not the agreement
applies to the Director's Order.
(b) Whether the 1985 Indemnity Order was given to encourage modernization
efforts or to settle litigation is irrelevant to the meaning of its clear and
unequivocal terms.
- 20-
(c) The Motions Judge's use of the term "remediation order" to describe the
Director's Order is a matter of semantics with no practical consequences given
that: (i) the Motions Judge clearly understood and accurately described what the
order required;32 and (ii) the quantum of the costs that Weyerhaeuser would be
required to incur in response to the Director's Order is irrelevant to determining
whether it is covered by the 1985 Indemnity.
(d) Given that the severance of the WDS required the consent of the Province's
Minister of Municipal Affairs, and that it took almost two years to obtain, it was
reasonable for the Motions Judge to infer that that the delay was caused by the
Province. In any event, this finding merely goes to the history of the possession
of the WDS and is irrelevant to the interpretation of the 1985 Indemnity.
D. The Motions Judge Made No Errors of Law
48. The Province submits that the following of the Motions Judge's findings
constituted "errors of law":
(a) Weyerhaeuser took an assignment of the 1985 Indemnity;
(b) Weyerhaeuser and Bowater can both hold the "full benefits" of the 1985
Indemnity;
(c) the 1985 Indemnity can run with the land;
(d) Weyerhaeuser is a successor to the 1985 Indemnity;
(e) the Parties intended the 1985 Indemnity to include regulatory orders;
(f) the 1985 Indemnity does not fetter the Province's legislative discretion; and
(g) Ontario's position is a collateral attack on the 1985 Memorandum of Agreement.
32 Reasons, supra, at para. 26, Appeal Book, Vol. 1, Tab 3, p. 17; Joint Compendium, at
Tab 1, p. 6.
- 21-
49. As noted above, contractual interpretation is a question of mixed-fact-and-law
reviewable on the palpable and overriding standard. Extricable questions of law, rare as
they are, may arise in the course of contractual interpretation where an incorrect
principle is applied, there is a failure to consider failure to consider a required element
of a legal test, or there is a failure to consider a relevant factor.33
50. The "errors of law" identified by the Province do not involve incorrect
principles, or the failure to consider a required element of a legal test or other relevant
factors. Rather, the errors alleged by the Province are based on the allegations that the
Motions Judge gave insufficient weight to certain considerations in the course of his
contractual interpretation. These are findings of mixed-fact-and-law, reviewable on the
standard of palpable and overriding error. Accordingly, Weyerhaeuser submits that
"errors of law" alleged by the Province should also be subject to the standard of review
of palpable and overriding error. In the alternative, Weyerhaeuser submits that even on
a correctness standard, the Motions Judge's findings are correct.
1. The Motions Judge Correctly Found that Weyerhaeuser took an
Assignment of the 1985 Indemnity in 1998
51. The Motions Judge did not commit an error of law when he found the words of
Clause 3.1(xiv) in the 1998 Agreement to clearly and unequivocally provide for an
express assignment of all indemnities. Contrary to the assertions of the Province, the
assignment is valid in the context of the 1998 Agreement, and is commercially logical.
52. The Province contends that the assignment of the Indemnity from Bowater to
Weyerhaeuser does not make sense in the context of the 1998 Agreement. In support of
33 Ledcor, supra at para. 21; Appellant's BOA at Tab 12.
- 22-
this proposition, the Province relies upon the fact that, in his affidavit, Mr. Douthwaite
failed to state that he believed Weyerhaeuser took an assignment of the 1985 Indemnity.
The Province neglects to mention, however, that when cross-examined on his affidavit,
Mr. Douthwaite stated unequivocally that Weyerhaeuser relied upon the 1985
Indemnity when it entered into the 1998 Agreement.34 In any event, Mr. Douthwaite's
subjective understanding of the contract, as outlined above, is irrelevant to the proper
objective interpretation of the 1998 Agreement.35
53. The Province also submits that the Motions Judge erred by failing to engage in
any legal analysis of the clause in the 1998 Agreement, but does not identify any
specific legal principles that the Motions Judge allegedly failed to consider. The
Province merely submits that it would have taken "no effort" to include an express
reference to the 1985 Indemnity in the 1998 Agreement, and that it would be "highly
unlikely" that the 1985 Indemnity would have been transferred without specific
reference. The Province cited no legal principle that would require the 1998 Agreement
to list each indemnity individually. Accordingly, the Motions Judge made no error of
mixed-fact-and-law or pure law in interpreting the assignment in the context of the 1998
Agreement.
54. The Motions Judge was also correct when he found that it made commercial
sense for Weyerhaeuser to have taken an assignment of the 1985 Indemnity. Contrary to
the assertion of the Province, there was nothing commercially unreasonable about
Weyerhaeuser's decision to obtain both an assignment of the 1985 Indemnity and a
34 Douthwaite Cross, p. 40, QQ. 132-134, Appeal Book, Vol. 3, Tab 11, p. 603; JointCompendium, Tab 5, p. 51.
35 Sattva, supra at para. 55; Appellant's BOA at Tab 2.
- 23-
separate indemnity from Bowater. Taking a "belt and suspenders" approach to minimize
risk is a practice accepted by the courts.36 Moreover, the Province's reliance on the
indemnity that Bowater gave to Weyerhaeuser in connection with the lease of the WDS
ignores the fact that, while that indemnity covered only the WDS, the 1985 Indemnity
covers the entirety of the Property.
55. Moreover, contrary to the assertion of the Province, the assignment is not
commercially illogical on the basis that it left Bowater exposed to liability. Based on a
plain reading of the 1985 Indemnity, each party is entitled to rely upon the indemnity in
respect of liabilities relating to its possession of the land. As such, the Motions Judge
made no error of mixed-fact-and-law or pure law when he concluded that the
assignment in the 1998 Agreement was commercially reasonable.
2. Both Weyerhaeuser and Resolute Are Entitled to the Protection of the1985 Indemnity
56. The Motions Judge did not err in finding that both Weyerhaeuser and Resolute
are entitled to be indemnified under the 1985 Indemnity. The Province continues to
misconstrue the position of the respondents as being that both companies can
simultaneously claim the full benefit of the indemnity. Weyerhaeuser's position is that
both Weyerhaeuser and Resolute can rely upon the 1985 Indemnity in respect of
liabilities relating to the period of time that they owned the Property. The Enurement
Clause in the 1985 Indemnity expressly contemplates multiple and successive holders
of the indemnity. Accordingly, the Motions Judge made no error of mixed-fact-and-
law or law in finding that Weyerhaeuser and Resolute are both entitled to the protection
of the 1985 Indemnity.
36 Trillium Motor World Ltd. v. General Motors of Canada Limited, 2015 ONSC 3824at paras. 221-222; Respondents' JBOA at Tab 17.
- 24-
3. The 1985 Indemnity Benefits Successors in Title
57. The Province submits that the Motions Judge erred in finding that the indemnity
runs with the land. However, this was not the finding of the Motions Judge. On the
basis of the plain and ordinary meaning of the 1985 Indemnity, he found that the
intention of the parties was that the Province would "indemnify future owners of the
disposal site for any environmental liability that might arise."37 The 1985 Indemnity, on
its terms, expressly enures to the benefit of the successors of Great Lakes. If the parties
sought to exclude successors in title from the benefit of the 1985 Indemnity, there
would be language to demonstrate that exclusion. Accordingly, the Motions Judge's
finding on this point was correct, and does not amount to either an error of mixed-fact-
and-law or an error of law.
4. Weyerhaeuser is a Successor to the 1985 Indemnity
58. The Province submits that the term "successor" as used in the 1985 Indemnity
should be read narrowly to only apply to corporate successors, despite the fact that the
agreement contains no such limiting language. The Province cites the Supreme Court of
Canada's decision in Heritage Capital Corp. v. Equitable Trust Co. in support of this
proposition. However, in that case, the Supreme Court found that the term "successors"
used in an enurement clause only applied to corporate successors because elsewhere in
the agreement, the parties had specified that certain other benefits extended specifically
to "successors in title" and to "subsequent owners." Accordingly, the explicit exclusion
of "successors in title" and "subsequent owners" from the enurement clause had to be of
37 Reasons, supra at para. 63, Appeal Book, Vol. 1, Tab 3, p. 26; Joint Compendium,
Tab 1, p. 15.
- 25-
some significance. As the Court stated of the use of differing terms in the same contract:
"Contracting parties are presumed to intend the legal consequences oftheir words." (G.R. Hall, Canadian Contractual Interpretation Law ...)
Meaning must be given to the choice to use one term in one clause
and a different term in a different clause of the same agreement, andin this case, of the same section of an agreement.38 [emphasis added]
59. The 1985 Indemnity does not draw the same distinction in terms between
"successors," "successors in title" and "subsequent owners". Accordingly, the Supreme
Court's rationale for finding that the enurement clause only extended to corporate
successors in Heritage Capital is inapplicable to the within facts, and the Motions Judge
did not make an error of mixed-fact-and-law or an error in law in finding that Ontario
was a successor to the 1985 Indemnity.
60. Furthermore, the Motions Judge did not err in law when he relied on this Court's
decision in Brown v. Belleville to conclude that Weyerhaeuser could rely upon the
Enurement Clause as a successor in title. Contrary to the assertion of the Province, the
Court's decision in Brown is directly applicable to the 1985 Indemnity and the Motions
Judge correctly treated it as binding.
61. In Brown, the Court had to decide whether a municipality's obligation to
maintain a drainage system of a property owner could be enforced by the property
owner's successor. The obligation arose out of an indenture agreement, which
contained an enurement clause with wording very similar to that at issue in the present
case. The enurement clause in Brown read:
THIS INDENTURE Shall inure [sic] to the benefit of and be binding
upon the parties hereto and their respective heirs, administrators,
38 Heritage Capital Corp. v. Equitable Trust Co., 2016 SCC 19 at paras. 46-47
(citations omitted); Appellant's BOA at Tab 17.
- 26-
successors and assigns.39
62. The Province asserts that this Court only found the Browns to be successors
within the meaning of the enurement clause because they were the current owners of the
land, and because the agreement at issue imposed an obligation on the owners to allow
access to their property. This assertion finds no support in the Court's reasons. To the
contrary, it is clear from the reasons of this Court that it was the language of the
enurement clause that led the Court to find the Browns to be successors:
The broad and unqualified language of the enurement clause
constitutes an express stipulation by the contracting parties that they
intended the benefit of the Agreement to be shared by future owners of
Mr. Sills's lands, as his successors or assigns or by way of
inheritance. The language of the enurement clause unequivocally
confirms that the contracting parties intended and agreed that the
benefit of the Agreement would extend to an aggregation or class of
persons that includes successor landowners of Mr. Sills.40 [emphasis
added]
63. Accordingly, contrary to the assertion of the Province, the municipality's need
for continued access was not determinative of the issue of whether the current property
owners could rely on the enurement clause. The Court held that this conclusion was
merely "fortified" by the fact that the municipality required continuing access to the
affected lands, which could only be provided by the property owner at the time the
municipality required that access.41
64. Accordingly, the Motions Judge's finding that Weyerhaeuser was a "successor"
within the meaning of the 1985 Indemnity: (i) is a finding of mixed-fact-and-law
39 Brown v. Belleville, 2013 ONCA 148 at para. 80 ["Brown"]; Appellant's BOA at Tab
140 Brown, supra at para. 84; Appellant's BOA at Tab 1.
41 Brown, supra at para. 86; Appellant's BOA at Tab 1.
- 27-
entitled to considerable deference; (ii) is consistent with the plain and ordinary meaning
of the words used in the indemnity; (iii) is supported by this Court's holding in Brown;
and (iv) is, in any event, correct.
65. It is worth noting that the Enurement Clause was an essential part of the 1985
Indemnity. If the 1985 Indemnity does not benefit successors and assigns, it would be
virtually impossible for an owner of the Property to sell it to a third party, since no
purchaser would be willing to assume liability for the Property's well-known
environmental contamination. Without the Enurement Clause, the Property's value
would have been significantly undermined and there would have been little reason for
the then-owner to have settled the lawsuit.
5. The Parties Intended the 1985 Indemnity to Include Regulatory Orders
66. The Province submits that the Motions Judge made three errors of law in
interpreting the 1985 Indemnity by: (i) failing to properly consider the factual matrix;
(ii) failing to acknowledge the nature of an indemnity in general; and (iii) failing to
consider the 1985 Indemnity as a whole.
67. Weyerhaeuser adopts the submissions found in Resolute's Responding Factum
for this appeal on this issue. Weyerhaeuser's position can be summarized as follows:
(a) The surrounding circumstance cannot override the clear and unequivocal
wording of the 1985 Indemnity;
(b) The surrounding circumstances (which include the fact that, in contrast to the
1979 Indemnity, the 1985 Indemnity added an express reference to statutory
proceedings brought by any province and that the 1985 Indemnity was part of a
- 28-
(c)
settlement that required the payment of millions of dollars) support
Weyerhaeuser's interpretation; and
Indemnities are subject to the ordinary rules of contract, and their scope is
determined by their wording.
6. The Fettering Doctrine Does Not Apply
68. Contrary to the assertion of the Province, neither Weyerhaeuser nor Resolute are
disputing the validity of the Environmental Protection Act, or the ability of the Director
to make the Director's Order. Rather, the respondents submit that the Province's
obligation to compensate them was triggered when the Director's Order was issued. The
fact that the Director's Order was issued under legislative provisions that did not exist at
the time of the 1985 Indemnity does not alter the fact that the Director's Order
constitutes a proceeding under a statute and, as such, is caught by the 1985 Indemnity.
Requiring the Province to indemnify Weyerhaeuser with respect to the costs flowing
from a particular statutory proceeding in no way fetters the Province's legislative
discretion.
69. Moreover, the Motions Judge was correct in finding that the fettering doctrine
does not apply to the 1985 Indemnity on account of it being a business agreement. The
Supreme Court of Canada has held that, while a legislative body cannot fetter its
legislative power, the Crown can enter into business contracts and will be liable in
damages for breaching them.42 Ontario courts have repeatedly held that the fettering
doctrine does not apply to indemnification agreements entered into by the Provincial
42 Pacific National Investments Ltd. v. Victoria (City), 2000 SCC 64 at paras. 65 and 69,
Appellant's BOA at Tab 5, Pacific National Investments Ltd. v. Victoria City, 2004
SCC 75, Respondents' JBOA at Tab 12.
- 29-
government, which are fully enforceable.43 The fact that the 1985 Indemnity was part
of a broader policy agenda and legislative program of the Province aimed at addressing
the issues presented by the Lawsuit does not alter the fundamental nature of the 1985
Indemnity itself. To find the 1985 Indemnity unenforceable on the basis of broader
policy objectives would impair the ability of the Province to enter into settlements and
other business agreements.
7. The Province's Position is a Collateral Attack on the 1986 Judgment
70. At the time the Lawsuit was settled, the Parliament of Canada passed the
Grassy Narrows and Islington Indian Bands Mercury Pollution Claims Settlement
Act,44 which expressly declared the Escrow Agreement (which includes the 1985
Indemnity) to be valid. At the same time, the Legislature of the Province enacted An
Act to implement the Terms of a Settlement of all Claims arising out of the
Contamination by Mercury and other Pollutants of the English and Wabigoon and
Related River Systems,45 which implemented the terms of the Memorandum of
Agreement pursuant to which the Province granted the 1985 Indemnity. Where the
Province itself, through valid legislation, has chosen to implement an agreement, it
cannot possibly argue that the agreement impermissibly fetters the Province's
discretion. Finally, the 1986 Judgment of the Supreme Court of Ontario approved the
terms of the Memorandum of Agreement.
43 Rio Algom Ltd. v. Canada, 2012 ONSC 550, at paras. 152 to 155, Respondents'
JBOA at Tab 15, Ontario First Nations (2008) Limited Partnership v. Ontario (Minister
of Aboriginal Affairs), 2013 ONSC 7141, at paras. 58 to 59, Respondents' JBOA at Tab
1 1.
44 SC 1986, c. 2, ss. 2(1) and 3(1).
45 SO 1986, c. 23, s. 2.
- 30-
71. While the Province claims that it never challenged the validity of the 1986
Memorandum of Agreement, the 1986 legislation passed to give it effect or the abilities
of the indemnitees to call upon the Province to compensate them for third party
pollution claims, the necessary implication of the Province's fettering argument is that
the 1985 Indemnity would be invalid if applied to the Director's Order. A finding that
the 1985 Indemnity is invalid would be a challenge to the validity of the federal and
provincial legislation that approved it and a collateral attack on the court order (to
which the Province consented), that incorporated it.46 As a result, it is not open to the
Province to argue that the 1985 Indemnity is invalid.
PART IV — ORDER REQUESTED
72. For the reasons outlined above, Weyerhaeuser requests that the Province's
appeal be dismissed, with costs.
ALL OF WHICH IS RESPECTFULLY SUBMITTE
March 1, 2017
Christopher D. Bredt
Ala h Fotheringham
Counsel for the Plaintiff (Respondent)
46 Cunningham v. Moran, 2010 ONSC 4310 at paras. 35 to 40, Respondents' JBOA at
Tab 5.
CERTIFICATE
I, Markus F. Kremer, lawyer for the Respondent, Weyerhaeuser Company
Limited, certify that:
(i) an order under subrule 61.09(2) (original record and exhibits) is not
required; and
(ii) the estimated time required for the oral argument on behalf of the
Respondent, Weyerhaeuser Company Limited, not including reply is
90 minutes.
March 1, 2017
SCHEDULE "A" — AUTHORITIES CITED
1. Benhaim v. St-Germain, 2016 SCC 48
2. Brown v. Belleville, 2013 ONCA 148
3. Creston Moly Corp. v. Sattva Capital Corp., 2014 SCC 53
4. Cunningham v. Moran, 2010 ONSC 4310
5. Heritage Capital Corp. v. Equitable Trust Co., 2016 SCC 19
6. Housen v. Nikolaisen, 2002 SCC 33
7. Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37
8. Ontario First Nations (2008) Limited Partnership v. Ontario (Minister of AboriginalAffairs), 2013 ONSC 7141
9. Pacific National Investments Ltd. v. Victoria (City), 2000 SCC 64
10. Pacific National Investments Ltd. v. Victoria City, 2004 SCC 75
11. Rio Algom Ltd v. Canada, 2012 ONSC 550
12. Trillium Motor World Ltd. v. General Motors of Canada Limited, 2015 ONSC 3824
SCHEDULE "B" — STATUTES CITED
Grassy Narrows and Islington Indian Bands Mercury Pollution Claims Settlement Act, SC1986, c. 2, ss. 2(1) and 3(1).
3. (1) The Agreement is hereby approved, given effect and declared valid.
"Agreement" means the Memorandum of Agreement between Her Majesty the Queen in Rightof Canada as represented by the Minister of Indian Affairs and Northern Development, HerMajesty the Queen in Right of the Province of Ontario, Reed Inc., Great Lakes Forest ProductsLtd., the Islington Indian Band and the Grassy Narrows Indian Band, signed by each partythereto in the month of November, 1985, tabled in the House of Commons by the Minister ofIndian Affairs and Northern Development on May 21, 1986 and recorded as document number331-7/43, as amended by the Escrow Agreement;
"Escrow Agreement" means the Escrow Agreement between Great Lakes Forest ProductsLimited, Her Majesty the Queen in Right of the Province of Ontario, Reed Inc. and NationalTrust Company, the terms of which were approved of and consented to by the Grassy NarrowsIndian Band and Islington Indian Band and by Her Majesty the Queen in Right of Canada asrepresented by the Minister of Indian Affairs and Northern Development, dated as of the 16thday of December, 1985, tabled in the House of Commons by the Minister of Indian Affairs andNorthern Development on May 21, 1986 and recorded as document number 331-7/43.
An Act to implement the Terms of a Settlement of all Claims arising out of the Contamination byMercury and other Pollutants of the English and Wabigoon and Related River Systems, SO1986, c. 23, s. 2.
2. The purpose of this Act is to implement, to the extent that the legislative authority of theLegislature extends thereto, the terms of a settlement, subject to certain exceptions containedtherein, of all claims, whether past, present or future, arising out of the contamination bymercury and other pollutants of the English and Wabigoon and related river systems, the terms of
which settlement are embodied in a Memorandum of Agreement signed by the parties thereto in
the month of November, 1985, made between Her Majesty the Queen in Right of Canada asrepresented by the Minister of Indian Affairs and Northern Development, Her Majesty the Queen
in Right of the Province of Ontario, Reed Inc., Great Lakes Forest Products Ltd., The Islington
Indian Band and The Grassy Narrows Indian Band.
WEYERHAEUSER COMPANY
LIMITED
Pla
inti
ff (Res
pond
ent)
- and -HER MAJESTY THE QUEEN AS REPRESENTED BY
THE MINISTER OF THE ATTORNEY GENERAL
Defendant (App
ella
nt)
Cour
t of App
eal Fi
le No.: C62587
Commercial List No. CV/15/11032/00CL
- and -
RESOLUTE FP CANADA
INC.
Inte
rven
or (R
espondent)
COURT OF APPEAL FOR ONTARIO
PROCEEDING COMMENCED AT TORONTO
FACTUM OF THE RESPONDENT,
WEYERHAEUSER COMPANY LIMITED
BORDEN LADNER GERVAIS LLP
Bay Adelaide Ce
ntre
, Ea
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22 Adelaide Street West
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onto
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Christopher D. Bredt (LSUC #23627Q13)
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6165
Ema
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: (416) 367
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8Ema
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