Resolute FP Canada Inc. v. Ontario (Attorney General)

Resolute FP Canada Inc. v. Ontario (Attorney General)
Collection
Supreme Court Judgments
Date
2019-12-06
Neutral citation
2019 SCC 60
Report
[2019] 4 SCR 394
Case number
37985
Judges
Abella, Rosalie Silberman; Moldaver, Michael J.; Karakatsanis, Andromache; Côté, Suzanne; Brown, Russell; Rowe, Malcolm; Martin, Sheilah
On appeal from
Ontario
Notes
Case in Brief
SCC Case Information
Decision Content
SUPREME COURT OF CANADA
Citation: R. v. Resolute FP Canada Inc., 2019 SCC 60, [2019] 4 S.C.R. 394
Appeal Heard: March 28, 2019 Judgment Rendered: December 6, 2019 Docket: 37985
Between:
Resolute FP Canada Inc.
Appellant
and
Her Majesty The Queen as represented by
the Ministry of the Attorney General and
Weyerhaeuser Company Limited
Respondents
And Between:
Her Majesty The Queen as represented by the Ministry of the Attorney General
Appellant
and
Weyerhaeuser Company Limited and
Resolute FP Canada Inc.
Respondents
And Between:
Weyerhaeuser Company Limited
Appellant
and
Her Majesty The Queen as represented by the Ministry of the Attorney General
Respondent
- and -
Attorney General of British Columbia
Intervener
Coram: Abella, Moldaver, Karakatsanis, Côté, Brown, Rowe and Martin JJ.
Joint Reasons for Judgment: (paras. 1 to 35)
Joint Reasons Dissenting in Part: (paras. 36 to 165)
Abella, Moldaver, Karakatsanis and Martin JJ.
Côté and Brown JJ. (Rowe J. concurring)
resolute fp canada v. ontario (a.g.)
Resolute FP Canada Inc. Appellant
v.
Her Majesty The Queen as represented by
the Ministry of the Attorney General and
Weyerhaeuser Company Limited Respondents
‑ and ‑
Her Majesty The Queen as represented by
the Ministry of the Attorney General Appellant
v.
Weyerhaeuser Company Limited and
Resolute FP Canada Inc. Respondents
‑ and ‑
Weyerhaeuser Company Limited Appellant
v.
Her Majesty The Queen as represented by
the Ministry of the Attorney General Respondent
and
Attorney General of British Columbia Intervener
Indexed as: Resolute FP Canada Inc. v. Ontario (Attorney General)
2019 SCC 60
File No.: 37985.
2019: March 28; 2019: December 6.
Present: Abella, Moldaver, Karakatsanis, Côté, Brown, Rowe and Martin JJ.
on appeal from the court of appeal for ontario
Contracts — Interpretation — Indemnity — River system contaminated by mercury waste discharged by operation of pulp and paper mill — Action for damages commenced against mill owners in relation to contamination — Province granting indemnity in context of settlement of action to current and former mill owners in relation to environmental damage caused by mercury discharge — Remediation order later issued by provincial environment regulator in relation to waste disposal site on mill property — Whether indemnity applies to cover costs of complying with remediation order.
In 1985, Ontario granted an indemnity (the “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 to their successors and assigns, “from and against any obligation, liability, damage, loss, costs or expenses incurred by any of them” after the date of the Indemnity, “as a result of any claim, action or proceeding, whether statutory or otherwise”, because of “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”, as set out in para. 1 of the Indemnity. The Indemnity was agreed to by the parties pursuant to the settlement of litigation brought by two First Nations in relation to the mercury waste contamination of two rivers caused by the operation of the Dryden mill.
Twenty‑six years later, the Ministry of the Environment and Climate Change issued a remediation order in relation to monitoring and maintaining a mercury waste 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, Great Lakes’ corporate successor, and Weyerhaeuser, who also owned the Dryden Property for a time. Weyerhaeuser commenced an action in Superior Court, seeking a declaration that the terms of the Indemnity required Ontario to compensate it for the cost of complying with the Director’s order. Resolute sought leave to intervene in order to claim the same protection. Weyerhaeuser, Resolute and Ontario each moved for summary judgment.
The motion judge held that the Indemnity applied to a statutory claim brought by an agent of the Province and that both Resolute and Weyerhaeuser were entitled to indemnification for their costs of complying with the Director’s order. He therefore granted summary judgment in their favour. Ontario appealed. The majority at the Court of Appeal agreed with the motion judge’s finding that the Indemnity applied to the Director’s order, but held that Resolute was not entitled to indemnification and remitted Weyerhaeuser’s entitlement to indemnification to the Superior Court. The dissenting judge would have allowed Ontario’s appeal. In his view, the motion judge made reversible errors in his interpretation of the Indemnity; properly construed, the Indemnity was intended to cover only pollution claims brought by third parties, not first party regulatory claims such as the Director’s order. Ontario, Weyerhaeuser and Resolute appeal to the Court.
Held (Côté, Brown and Rowe JJ. dissenting in part): Ontario’s appeal should be allowed and summary judgment granted in its favour. Resolute and Weyerhaeuser’s appeals should be dismissed.
Per Abella, Moldaver, Karakatsanis and Martin JJ.: The Indemnity does not cover the Director’s order. As the dissenting judge in the Court of Appeal concluded, the motion judge made palpable and overriding errors of fact and failed to give sufficient regard to the factual matrix when interpreting the scope of the Indemnity, justifying appellate intervention.
The motion judge erred when he found that the waste disposal site continues to discharge mercury into the environment. His mistaken finding that discharges of mercury from the waste disposal site were an ongoing source of serious environmental liability undoubtedly drove his conclusion that these discharges could give rise to pollution claims, and that unless the Indemnity covered first party claims, Resolute and Weyerhaeuser would be exposed to significant liability. The motion judge misconstrued the purpose and effect of the waste disposal site — this site was not a source of ongoing mercury contamination or environmental liability, and therefore its creation would not give rise to a pollution claim. Rather, the waste disposal site was created and used as a solution to the mercury pollution problem, effectively as a burial site for mercury‑contaminated waste. There was no evidence of mercury‑contaminated waste being discharged from the waste disposal site. This erroneous factual finding was key to his conclusion that the Director’s order was a pollution claim within the meaning of the Indemnity.
Furthermore, the Indemnity was a schedule to a broader settlement agreement, so its scope was limited to the issues defined in that agreement, namely the discharge by Reed and its predecessors of mercury and any other pollutants into the river systems, and the continued presence of any such pollutants discharged by Reed and its predecessors in the related ecosystems. The motion judge failed to consider this context when interpreting the scope of the Indemnity. Properly interpreted, the 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 Indemnity must be read in the context of two prior indemnities given by Ontario in 1979 and 1982 in the context of the litigation brought by the First Nations. The Indemnity was given in partial consideration for Great Lakes and Reed releasing Ontario from its obligations under those prior indemnities. It is clear that the 1979 and 1982 indemnities were in response to the ongoing litigation, which involved claims brought by third parties, not by Ontario directly. There is no language in those indemnities that would imply Ontario intended to provide protection against the costs of regulatory compliance.
The motion judge’s view of the importance of the phrase “statutory or otherwise” in the Indemnity and of why the parties entered into the Indemnity was materially affected by a palpable and overriding factual error. The motion judge found that the Indemnity was provided in consideration for commitments from Great Lakes to make significant financial investments in the Dryden plant. Given what he found to be the rationale for entering into the 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. Later, Great Lakes gave no new commitments to modernize in consideration for the Indemnity. The motion judge thus premised his interpretation of the Indemnity on an incorrect factual basis — one that led him to place too much emphasis on a change in language and misconstrue the bargain actually struck in the Indemnity.
The motion judge also erred by failing to consider the Indemnity as a whole when determining whether or not the Director’s order fell within its scope. Paragraphs 2 and 3 of the Indemnity are critical to its interpretation. Paragraph 2 provides that in any pollution claim, Ontario has the right to elect to take carriage of the defence or to participate in the defence and/or settlement of the claim and any proceeding relating thereto as it deems appropriate. Paragraph 3 requires the parties to cooperate with Ontario in the defence of a claim. These clauses would be utterly meaningless for first party claims. Their inclusion is completely inconsistent with the notion that para. 1 of the Indemnity contemplates first party claims. Nothing in the Indemnity suggests that pollution claims included both first and third party claims, but that the requirements of paras. 2 and 3 would apply only to the subset of pollution claims brought by third parties. To the contrary, para. 2 applies in “any Pollution Claim”. The fact that the requirements of paras. 2 and 3 would be utterly meaningless in first party claims implies that pollution claims encompass only those brought by third parties. Properly interpreted, the Indemnity only applies to third party claims, and therefore does not cover the Director’s order.
Per Côté, Brown and Rowe JJ. (dissenting in part): The appeals brought by Ontario and Weyerhaeuser should be dismissed and the appeal brought by Resolute should be allowed. The Indemnity enures to the benefit of the successors and assigns of the Province, Reed and Great Lakes. Resolute is entitled to rely on the Indemnity to cover past and future costs incurred in complying with the Director’s order as a corporate successor of Great Lakes, but Weyerhaeuser is neither an assignee of the benefit of the Indemnity nor a corporate successor of either Great Lakes or Reed, and it has no entitlement to benefit under the Indemnity.
The Indemnity is a contract which must be interpreted with a view to ascertaining the objective intentions and reasonable expectations of the contracting parties with respect to the meaning of the contractual provision. The approach is rooted in practicalities and common sense. It considers the language that the parties employed to express their agreement, objective evidence of the background facts that was or reasonably ought to have been within the knowledge of both parties at or before the date of contracting, and the principle of commercial reasonableness and efficacy. The factual matrix cannot overwhelm the words of the contract and cannot change the words of the contract in a manner that would modify the rights and obligations that the parties assumed.
The Indemnity covers the costs of complying with the Director’s order. The motion judge did not make any of the four errors alleged by the Province in interpreting the Indemnity.
First, he did not err in failing to consider the text of the Indemnity with reference to the factual matrix, including the two earlier indemnities, the asset purchase agreement in which Reed sold the entire property to Great Lakes, the settlement agreement to which the Indemnity was a schedule, and certain provisions added to the Environmental Protection Act in 1985. Like the Indemnity, the two earlier indemnities addressed the mercury contamination, but they represent distinct agreements given for distinct purposes in distinct sets of negotiations. The Indemnity captures a broad scope relative to the other indemnities. In addition, the earlier indemnities were replaced by the Indemnity, which suggests that the parties themselves did not view those earlier indemnities as being co‑extensive in scope with the Indemnity. The Indemnity is a separate agreement and must be interpreted by considering the words the parties used in it, not a previous agreement. The asset purchase agreement is of substantially the same scope as the Indemnity, but it exempted the costs of complying with an earlier regulatory order. The Province was aware of its terms, and nothing prevented the parties to the Indemnity from expressly providing that such orders would not fall within the scope of the Indemnity, as the parties to the asset purchase agreement had done. As to the settlement agreement, the issues which that agreement was intended to address included government actions taken in consequence of the mercury contamination. Further, the Indemnity expressly applies in respect of the presence of mercury in the affected lands, and the settlement agreement cannot overwhelm the text in the Indemnity. As for the statutory amendments, even accepting that they are objective and admissible evidence of what the parties had or ought to have had in contemplation when entering into the Indemnity, it is a far leap to the conclusion that they would have understood the reference to statutory claims in the Indemnity to refer solely to claims brought under the amendments or other third party statutory claims which could have been brought at that time. Moreover, reading the Indemnity as excluding first party claims cannot be reconciled with the amendments’ creation of a right of action for the Province, or the Indemnity’s references to “any province” and statutory actors.
Second, the motion judge did not err in failing to interpret the indemnification clause in para. 1 of the Indemnity in light of the agreement as a whole. His reading of that clause was consistent with the notice/control and cooperation provisions at paras. 2 and 3 of the Indemnity, which are typical of third party indemnities and are meaningful only for third party claims against the indemnified parties.
Third, the motion judge did not make any palpable and overriding errors in characterizing the reason Great Lakes expended certain money or in concluding that the waste disposal site was the source of the mercury contamination. To the extent that these were errors, they could not possibly have had an overriding effect on the conclusion reached by the motion judge. Such minor and collateral factual findings could not determine the outcome of the case, particularly where the motion judge’s ultimate conclusion on the scope of the Indemnity rested on different factual and contextual considerations.
Fourth, the motion judge did not err in interpreting the Indemnity so as to impermissibly fetter the legislature’s law‑making powers, thereby rendering the Indemnity unenforceable. As a matter of constitutional law, the executive of the Canadian state cannot bind or restrict the legislature’s sovereign law‑making power, whether by contract or otherwise. It follows that a contract entered into by the executive that purports to require that a certain law be enacted, amended or repealed cannot be enforced by way of injunction or specific performance. However, there is an important difference between a contract that impermissibly fetters the legislature’s power to enact, amend and repeal legislation, and a contract whose breach by the Crown exposes it to liability. Where the legislature exercises its law‑making power in a manner inconsistent with the terms of a contract, the Crown may still face consequences in the form of liability in damages. While the possibility of such liability may deter the legislature from acting in a manner that runs contrary to the Crown’s contractual promises — sometimes referred to as an “indirect fetter” — the legislature is not thereby truly fettered.
In this case, the enactment of new statutory claims might expose the Province to greater liability under the Indemnity, but the Indemnity in no way prevents the legislature from exercising its sovereign authority to make or unmake any law whatever, and deterring or otherwise discouraging the legislature from exercising its law‑making power in a certain way would not render it unenforceable at law. The legislature’s freedom of action is not impacted.
As to whether Resolute and Weyerhaeuser could benefit from the Indemnity as successors and assigns of Great Lakes, the motion judge made no error in interpreting the Indemnity as covering the costs imposed on the successors and assigns of Great Lakes by the Director’s order. Although his analysis on this point was rooted primarily in the wording of the Indemnity, he also considered its meaning in light of the agreement as a whole and the circumstances surrounding its formation in 1985. However, he found that neither supported an interpretation of the Indemnity that would exclude coverage for first party claims.
However, the motion judge did err in principle in holding that a predecessor of Resolute had assigned the benefit of the Indemnity to Weyerhaeuser. He failed to read the impugned contractual term in light of the factual matrix and in a commercially sensible way, focussing his analysis solely on the text of the relevant provisions of the asset purchase agreement between the predecessor and Weyerhaeuser. Although an indemnified party cannot continue to enjoy the benefit of the Indemnity after it assigns its rights thereunder to a third party, the parties structured the agreement in a way that imposed all risk in relation to environmental liabilities on the predecessor while the predecessor relinquished its own protection. This risk‑allocation structure makes commercial sense only if the predecessor’s interests remained protected by the Indemnity.
The motion judge also committed a palpable and overriding error when he concluded that the Indemnity’s enurement clause extended the benefit of the Indemnity to successors‑in‑title of the Dryden property. The Indemnity’s enurement clause is a standard contractual term and certainty in commercial transactions is best protected where courts give effect to the common understanding and inclusion of such terms in contracts, absent any indication that the parties intended them to have a different effect. When used in relation to corporations, a “successor” generally denotes another corporation which, through some type of legal succession, assumes the burdens and becomes vested with the rights of the first corporation. Nothing in the language of the Indemnity or in the circumstances surrounding the formation of the contract suggests that “successor” in the Indemnity should extend to both corporate successors of Great Lakes and successors‑in‑title to the Dryden property. However, it may be possible, in other circumstances, for the term “successors” to refer to a successor‑in‑title.
Cases Cited
By Côté and Brown JJ. (dissenting in part)
Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633; Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, [2016] 2 S.C.R. 23; Mandamin v. Reed Ltd., Ont., S.C., No. 14716/77, June 26, 1986; Royal Devon and Exeter NHS Foundation Trust v. ATOS IT Services UK Ltd., [2017] EWCA Civ 2196, [2018] 2 All E.R. (Comm.) 535; Scanlon v. Castlepoint Development Corp. (1992), 11 O.R. (3d) 744; Antaios Compania Naviera S.A. v. Salen Rederierna A.B., [1985] 1 A.C. 191; Interprovincial Co‑operatives Ltd. v. The Queen, [1976] 1 S.C.R. 477; Benhaim v. St‑Germain, 2016 SCC 48, [2016] 2 S.C.R. 352; South Yukon Forest Corp. v. R., 2012 FCA 165, 4 B.L.R. (5th) 31; Reference re Canada Assistance Plan (B.C.), [1991] 2 S.C.R. 525; West Lakes Ltd. v. South Australia (1980), 25 S.A.S.R. 389; Reference re Pan‑Canadian Securities Regulation, 2018 SCC 48, [2018] 3 S.C.R. 189; Wells v. Newfoundland, [1999] 3 S.C.R. 199; Pacific National Investments Ltd. v. Victoria (City), 2000 SCC 64, [2000] 2 S.C.R. 919; Andrews v. Canada (Attorney General), 2014 NLCA 32, 354 Nfld. & P.E.I.R. 42; Rio Algom Ltd. v. Canada (Attorney General), 2012 ONSC 550; Ontario First Nations (2008) Limited Partnership v. Ontario (Minister of Aboriginal Affairs), 2013 ONSC 7141, 118 O.R. (3d) 356; Pacific National Investments Ltd. v. Victoria (City), 2004 SCC 75, [2004] 3 S.C.R. 575; King v. Operating Engineers Training Institute of Manitoba Inc., 2011 MBCA 80, 341 D.L.R. (4th) 520; Nickel Developments Ltd. v. Canada Safeway Ltd., 2001 MBCA 79, 156 Man. R. (2d) 170; Humphries v. Lufkin Industries Canada Ltd., 2011 ABCA 366, 68 Alta. L.R. (5th) 175; Reardon Smith Line Ltd. v. Hansen‑Tangen, [1976] 3 All E.R. 570; Guarantee Co. of North America v. Gordon Capital Corp., [1999] 3 S.C.R. 423; City of Toronto v. W.H. Hotel Ltd., [1966] S.C.R. 434; Kentucky Fried Chicken Canada v. Scott’s Food Services Inc. (1998), 114 O.A.C. 357; Brown v. Belleville (City), 2013 ONCA 148, 114 O.R. (3d) 561; National Trust Co. v. Mead, [1990] 2 S.C.R. 410; Heritage Capital Corp. v. Equitable Trust Co., 2016 SCC 19, [2016] 1 S.C.R. 306.
Statutes and Regulations Cited
Act to amend The Environmental Protection Act, 1971, S.O. 1979, c. 91.
Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C‑36 .
English and Wabigoon River Systems Mercury Contamination Settlement Agreement Act, 1986, S.O. 1986, c. 23.
Environmental Protection Act, R.S.O. 1980, c. 141.
Environmental Protection Act, R.S.O. 1990, c. E.19, ss. 7(1) [am. 1990, c. 18, s. 18(1)].
Grassy Narrows and Islington Indian Bands Mercury Pollution Claims Settlement Act, S.C. 1986, c. 23 .
Authors Cited
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Elderkin, Cynthia L., and Julia S. Shin Doi. Behind and Beyond Boilerplate: Drafting Commercial Agreements. Scarborough, Ont.: Carswell, 1998.
Hall, Geoff R. Canadian Contractual Interpretation Law, 3rd ed. Toronto: LexisNexis, 2016.
Hogg, Peter W., Patrick J. Monahan and Wade K. Wright. Liability of the Crown, 4th ed. Toronto: Carswell, 2011.
Horsman, Karen, and Gareth Morley, eds. Government Liability: Law and Practice. Toronto: Thomson Reuters, 2007 (loose‑leaf updated June 2019, release 32).
Murray, John E., Jr. Corbin on Contracts — Third Party Beneficiaries, Assignment, Joint and Several Contracts, vol. 9, rev. ed. Newark: LexisNexis, 2007.
Ogilvie, M. H. “Re‑defining Privity of Contract: Brown v. Belleville (City)” (2015), 52 Alta. L. Rev. 731.
Swan, Angela, Jakub Adamski and Annie Y. Na. Canadian Contract Law, 4th ed. Toronto: LexisNexis, 2018.
Tolhurst, Greg. The Assignment of Contractual Rights, 2nd ed. Oxford: Hart Publishing, 2016.
Waddams, Stephen M. The Law of Contracts, 7th ed. Toronto: Thomson Reuters, 2017.
APPEALS from a judgment of the Ontario Court of Appeal (Laskin, Lauwers and Brown JJ.A.), 2017 ONCA 1007, 13 C.E.L.R. (4th) 28, 77 B.L.R. (5th) 175, [2017] O.J. No. 6654 (QL), 2017 CarswellOnt 20156 (WL Can.), reversing a decision of Hainey J., 2016 ONSC 4652, 3 C.E.L.R. (4th) 278, 60 B.L.R. (5th) 237, [2016] O.J. No. 3900 (QL), 2016 CarswellOnt 11807 (WL Can.). Appeal of Resolute FP Canada Inc. dismissed, Côté, Brown and Rowe JJ. dissenting. Appeal of Her Majesty The Queen as represented by the Ministry of the Attorney General allowed, Côté, Brown and Rowe JJ. dissenting. Appeal of Weyerhaeuser Company Limited dismissed.
Andrew Bernstein, Jeremy Opolsky and Jonathan Silver, for the appellant/respondent Resolute FP Canada Inc.
Leonard F. Marsello, Tamara D. Barclay and Nansy Ghobrial, for the appellant/respondent Her Majesty The Queen as represented by the Ministry of the Attorney General.
Christopher D. Bredt and Markus Kremer, for the appellant/respondent Weyerhaeuser Company Limited.
Elizabeth J. Rowbotham, for the intervener the Attorney General of British Columbia.
The following is the judgment delivered by
[1] Abella, Moldaver, Karakatsanis and Martin JJ. — In 1985, the Province of Ontario granted an indemnity (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, for “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.
[2] Twenty-six years later, the Director of the Ministry of the Environment and Climate Change issued a remediation order in relation to monitoring and maintaining 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, 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.
[3] Although the parties in these appeals raise a number of issues relating to Resolute and Weyerhaeuser’s claims for indemnification, the threshold question is whether the 1985 Indemnity covers the Director’s Order. In our view, and for the dissenting reasons of Laskin J.A. (2017 ONCA 1007, 77 B.L.R. (5th) 175), it does not. We would, therefore, allow Ontario’s appeal, and grant Ontario’s motion for summary judgment.
[4] In the 1960s, the Dryden Paper Company Limited owned and operated a pulp and paper mill in Dryden. As part of the operation of the paper mill, Dryden Paper — through a related company, Dryden Chemicals Limited — operated a mercury cathode chlor-alkali plant on property near the mill. The chlor-alkali plant released untreated mercury waste into the English and Wabigoon rivers, which resulted in harm to the health of some local residents, the closure of a commercial fishery and damage to the region’s tourism industry. Many of the affected people were members of the Grassy Narrows and Islington First Nations who lived on reserves downstream.
[5] In 1971, Dryden Paper constructed a waste disposal site on its lands to serve as a burial site for mercury-contaminated waste from the chlor-alkali plant. Six monitoring wells were installed when the waste disposal site was created, with three additional wells installed in 2002, and one in 2010. These monitoring wells were sampled and analyzed twice per year. Since 1977, the waste disposal site has been the subject of various certificates under the Environmental Protection Act, R.S.O. 1990, c. E.19. The initial Provisional Certificate of Approval required the monitoring of groundwater and surface water by the owner of the waste disposal site. In 2011, the site was thought to have 35 years remaining in its “contaminating lifespan”.
[6] In 1976, Dryden Paper and Dryden Chemicals amalgamated to form Reed.
[7] In June 1977, the two First Nations bands sued Reed, Dryden Paper and Dryden Chemicals for damages in relation to the mercury waste contamination of the rivers (the “Grassy Narrows Litigation”).
[8] In 1978, the Ministry of the Environment issued two further Provisional Certificates of Approval that required Reed to maintain the water monitoring program at the waste disposal site.
[9] By 1979, Reed wanted to sell its Dryden properties. Its prospective purchaser, Great Lakes, expressed reluctance to complete the sale because of the Grassy Narrows Litigation. Concerned that the local economy would suffer if the pulp and paper mill closed, Ontario intervened. It agreed to limit the combined liability of Great Lakes and Reed for any environmental damages caused by Reed prior to Great Lakes’ purchase of the Dryden operation to $15 million. Great Lakes and Reed agreed to share the financial consequences of the Grassy Narrows Litigation up to that limit. Great Lakes also agreed to spend approximately $200 million on the expansion and modernization of the Dryden facilities in consideration for the indemnity granted by Ontario (the “1979 Indemnity”).
[10] On December 4, 1979, the Ministry of the Environment issued another Provisional Certificate of Approval. It required Reed to register the certificate against title to the waste disposal site. That same month, the sale of the Dryden properties to Great Lakes closed in accordance with the terms set out in a Memorandum of Agreement dated December 7, 1979.
[11] In January 1980, the Ministry issued another Provisional Certificate of Approval requiring Great Lakes to maintain the groundwater monitoring and testing program at the waste disposal site.
[12] Contemporaneously, the Governments of Ontario and Canada engaged in mediation with the Islington and Grassy Narrows First Nations to address the harms caused by mercury discharge. These discussions involved the Grassy Narrows Litigation. Great Lakes, meanwhile, was reluctant to contribute to any settlement of the litigation unless it obtained a release from liability. On January 28, 1982, the then Provincial Secretary for Resources Development wrote to Great Lakes, indicating that Ontario was “prepared to indemnify Great Lakes Forest Products Limited against any claims related to mercury pollution” (the “1982 Indemnity” (A.R., vol. III, at p. 176)). The 1982 Indemnity stated that Ontario would indemnify Great Lakes for any damages awarded by a court or any settlement above $15 million. Any mercury pollution-related actions were to be brought to the attention of Ontario, which would then become involved in the litigation.
[13] In late 1985, the Grassy Narrows Litigation settled. The terms of the settlement were set out in a Memorandum of Agreement dated November 22, 1985, entered into by Canada, Ontario, the Islington and Grassy Narrows First Nations, Reed and Great Lakes. The issues, as defined in the Memorandum of Agreement, pertained to “[t]he discharge by Reed and its predecessors of mercury and any other pollutants into the English and Wabigoon and related river systems, and the continu[ed] presence of any such pollutants discharged by Reed and its predecessors . . . in the related ecosystems”. Significantly for the purposes of the present appeals, para. 2.4 of the Memorandum of Agreement stipulated that Ontario would indemnify Great Lakes and Reed with respect to the issues, and Great Lakes and Reed would provide Ontario releases in respect of the 1979 and 1982 Indemnities.
[14] The indemnification required by para. 2.4 of the Memorandum of Agreement is contained in a schedule to the settlement agreement entitled the “Ontario Indemnity” (referred to herein as the “1985 Indemnity”) which was signed by Ontario, Great Lakes, Reed and Reed International. These appeals involve the interpretation of the 1985 Indemnity, and particularly para. 1, which reads:
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. [A.R., vol. IV, at pp. 189-90]
[15] Paragraph 2 of the 1985 Indemnity requires Great Lakes or Reed to give Ontario prompt notice of any Pollution Claim as defined in para. 1, at which point Ontario could take carriage of or participate in the litigation. Great Lakes and Reed must cooperate with Ontario in relation to the investigation of any Pollution Claims (para. 3). The 1985 Indemnity is “valid without limitation as to time” (para. 4). An enurement clause contained in para. 6 provided that “[t]he indemnity shall be binding upon and enure to the benefit of the respective successors and assigns of Ontario, Reed, International and Great Lakes, provided however that Ontario shall not be entitled to assign this indemnity without the prior written consent of the other parties hereto” (A.R., vol. IV, at pp. 191-92).
[16] In accordance with the Memorandum of Agreement, Reed and Great Lakes released Ontario from its obligations under the 1979 and 1982 Indemnities. The settlement of the Grassy Narrows Litigation was approved by the Supreme Court of Ontario on June 26, 1986.
[17] In subsequent years, both Reed and Great Lakes underwent corporate changes. After amalgamating with other corporations, Reed’s successor corporation dissolved in 1993. In 1998, Great Lakes became Bowater which, in 2010, became part of Abitibi-Consolidated Inc. In 2012, it became Resolute.
[18] In August 1998, Weyerhaeuser entered into an agreement with Bowater, Great Lakes’ corporate successor, to purchase certain assets used in the Dryden pulp and paper business. Given the potential environmental liabilities, Weyerhaeuser initially sought to exclude the waste disposal site from the purchased assets. However, this exclusion required severing the waste disposal site from title, which could not be effected before the closing of the sale. As a result, when the transaction closed, Bowater conveyed title to the waste disposal site to Weyerhaeuser, which then immediately leased it back to Bowater. When severance finally occurred some two years later, Weyerhaeuser reconveyed the waste disposal site to Bowater. Title was registered in Weyerhaeuser’s name from September 30, 1998, to August 25, 2000. In 2007, Weyerhaeuser sold the Dryden paper plant to Domtar Inc.
[19] In April 2009, Bowater and its related companies filed for protection under the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36 (“CCAA ”). In the course of the CCAA proceedings, with court approval, the waste disposal site was abandoned in April 2011.
[20] On August 25, 2011, the Ministry of the Environment issued a Director’s Order to Weyerhaeuser (as a former owner of the waste disposal site) and Bowater, Resolute’s corporate predecessor. This order imposed three main obligations: (1) to repair certain site erosion, perform specific groundwater and surface water testing, and file annual reports containing specified information; (2) to deliver to the Ministry of the Environment the sum of $273,063 as financial assurance in respect of the waste disposal site; and (3) to “take all reasonable measures to ensure that any discharge of a contaminant to the natural environment is prevented and any adverse effect that may result from such a discharge is dealt with according to all legal requirements” (A.R., vol. IV, at p. 27).
[21] Weyerhaeuser filed a notice of appeal to the Environmental Review Tribunal, seeking to revoke or amend the Director’s Order.
[22] In May 2013, Weyerhaeuser commenced an action in Superior Court seeking a declaration that the terms of the 1985 Indemnity required Ontario to compensate it for the cost of complying with the Director’s Order. 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.
[23] 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 (2016 ONSC 4652, 60 B.L.R. (5th) 237).
[24] Ontario appealed. The majority at the Court of Appeal for Ontario agreed with the motion judge with respect to the scope of the 1985 Indemnity, namely that it applied to the Director’s Order. The majority concluded, however, that Resolute was not entitled to indemnification and remitted the issue of Weyerhaeuser’s entitlement to indemnification to the Superior Court.
[25] Justice Laskin, dissenting, would have allowed Ontario’s appeal. In his view, the motion judge made reversible errors in his interpretation of the 1985 Indemnity. Properly construed, the 1985 Indemnity was intended to cover only pollution claims brought by third parties. First party regulatory claims, such as the Director’s Order, did not fall within the scope of the 1985 Indemnity.
Analysis
[26] The overriding issue in this case is the scope of the 1985 Indemnity. We would, with respect, allow Ontario’s appeal substantially for the reasons of Laskin J.A. We conclude, as he did, that the motion judge made palpable and overriding errors of fact and failed to give sufficient regard to the factual matrix when interpreting the scope of the 1985 Indemnity justifying appellate intervention. We find it difficult to improve on his reasons, and would add only the following brief comments.
[27] Both Laskin J.A. and the majority at the Court of Appeal agreed that the motion judge erred when he found that the waste disposal site continues to discharge mercury into the environment. In the words of Laskin J.A.:
The motion judge’s mistaken finding that discharges of mercury from the [waste disposal site] were an ongoing source of “serious environmental liability” undoubtedly drove his conclusion that these discharges could give rise to “pollution claims”, and that unless the 1985 Indemnity covered first party claims, the respondents would be exposed to significant fina