Resolute FP Canada Inc. Appellant v. Her Majesty The Queen as represented by, 2019 SCC 60

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 3of the Indemnity, which are typical of third party indemnities and are meaningful only for third party claims against the indemnifiedparties. Third, the motion judge did not make any palpable and overriding errors in characterizing the reason Great Lakes expendedcertain money or in concluding that the waste disposal site was the source of the mercury contamination.

To the extent that these wereerrors, they could not possibly have had an overriding effect on the conclusion reached by the motion judge. Such minor and collateralfactual findings could not determine the outcome of the case, particularly where the motion judge’s ultimate conclusion on the scope ofthe 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-makingpowers, thereby rendering the Indemnity unenforceable.

As a matter of constitutional law, the executive of the Canadian state cannotbind or restrict the legislature’s sovereign law-making power, whether by contract or otherwise. It follows that a contract entered into bythe executive that purports to require that a certain law be enacted, amended or repealed cannot be enforced by way of injunction orspecific performance. However, there is an important difference between a contract that impermissibly fetters the legislature’s power toenact, amend and repeal legislation, and a contract whose breach by the Crown exposes it to liability.

Where the legislature exercises itslaw-making power in a manner inconsistent with the terms of a contract, the Crown may still face consequences in the form of liability indamages. While the possibility of such liability may deter the legislature from acting in a manner that runs contrary to the Crown’scontractual 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, butthe Indemnity in no way prevents the legislature from exercising its sovereign authority to make or unmake any law whatever, anddeterring or otherwise discouraging the legislature from exercising its law-making power in a certain way would not render itunenforceable 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, themotion judge made no error in interpreting the Indemnity as covering the costs imposed on the successors and assigns of Great Lakes bythe Director’s order. Although his analysis on this point was rooted primarily in the wording of the Indemnity, he also considered itsmeaning in light of the agreement as a whole and the circumstances surrounding its formation in 1985. However, he found that neithersupported 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 theIndemnity to Weyerhaeuser. He failed to read the impugned contractual term in light of the factual matrix and in a commercially sensibleway, focussing his analysis solely on the text of the relevant provisions of the asset purchase agreement between the predecessor andWeyerhaeuser.

Although an indemnified party cannot continue to enjoy the benefit of the Indemnity after it assigns its rights thereunderto a third party, the parties structured the agreement in a way that imposed all risk in relation to environmental liabilities on thepredecessor while the predecessor relinquished its own protection. This risk-allocation structure makes commercial sense only if thepredecessor’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 clauseextended the benefit of the Indemnity to successors-in-title of the Dryden property. The Indemnity’s enurement clause is a standardcontractual term and certainty in commercial transactions is best protected where courts give effect to the common understanding andinclusion of such terms in contracts, absent any indication that the parties intended them to have a different effect.

When used in relationto corporations, a “successor” generally denotes another corporation which, through some type of legal succession, assumes the burdensand becomes vested with the rights of the first corporation. Nothing in the language of the Indemnity or in the circumstances surroundingthe formation of the contract suggests that “successor” in the Indemnity should extend to both corporate successors of Great Lakes andsuccessors-in-title to the Dryden property. However, it may be possible, in other circumstances, for the term “successors” to refer to asuccessor-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. NorthbridgeIndemnity Insurance Co., 2016 SCC 37, [2016] 2 S.C.R. 23; Mandamin v. Reed Ltd., Ont., S.C., No. 14716/77, June 26, 1986; RoyalDevon 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), (ON CA), 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, (SCC), [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.), (SCC), [1991] 2 S.C.R. 525; West Lakes Ltd. v. South Australia (1980), 25S.A.S.R. 389; Reference re Pan-Canadian Securities Regulation, 2018 SCC 48, [2018] 3 S.C.R. 189; Wells v. Newfoundland, (SCC), [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), 2012ONSC 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 TrainingInstitute 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., (SCC), [1999] 3S.C.R. 423; City of Toronto v. W.H. Hotel Ltd., (SCC), [1966] S.C.R. 434; Kentucky Fried Chicken Canada v. Scott’sFood Services Inc. (1998), (ON CA), 114 O.A.C. 357; Brown v. Belleville (City), 2013 ONCA 148, 114 O.R. (3d)561; National Trust Co. v. Mead, (SCC), [1990] 2 S.C.R. 410; Heritage Capital Corp. v. Equitable Trust Co., 2016 SCC19, [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 Dicey, Albert V. Introduction to the Study of the Law of the Constitution , 10th ed.

London: MacMillan, 1959. 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 financial liability. His conclusion is wrong. The motion judge misconstrued the purpose and effect of the [waste disposal site]. The [waste disposal site] was not a source of ongoing mercury contamination or environmental liability.

Its creation would not give rise to a pollution claim. Quite the opposite. 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. Again, there was no evidence of mercury-contaminated waste being discharged from the [waste disposal site].

Neither respondent submitted otherwise. [paras. 233-34] [ 28 ] We agree that this erroneous factual finding was key to the motion judge’s conclusion that the Director’s Order, which imposed maintenance and monitoring obligations, was a “Pollution Claim” within the meaning of the 1985 Indemnity. [ 29 ] Yet, as Laskin J.A. noted, the 1985 Indemnity was a

schedule to the broader Memorandum of Agreement settling the Grassy Narrows Litigation. The scope of the 1985 Indemnity was limited to the issues defined in that agreement, namely, “[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” (A.R., vol. IV, at p. 140). The motion judge failed to consider this context when interpreting the scope of the 1985 Indemnity.

We agree with Laskin J.A. that, properly interpreted, the 1985 Indemnity was intended to cover only proceedings arising from the discharge or continued presence of mercury in the related ecosystems , not those related to the mere presence of mercury contained in the waste disposal site. [ 30 ] We also agree with Laskin J.A. that the 1985 Indemnity must be read in the context of the 1979 and 1982 Indemnities. Indeed, the 1985 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 Grassy Narrows Litigation, which involved claims brought by third parties , not by Ontario directly.

As Laskin J.A. observed, there is no language in those indemnities that would imply Ontario intended to provide protection against the costs of regulatory compliance. [ 31 ] Although the motion judge concluded that the addition of the phrase “statutory or otherwise” in the 1985 Indemnity expanded the scope of protection beyond that provided previously, we agree with Laskin J.A. that the motion judge’s view of the importance of that phrase and why the parties entered into the 1985 Indemnity was materially affected by a palpable and overriding factual error.

The motion judge found that the 1985 Indemnity was provided in consideration for commitments from Great Lakes to make significant financial investments in the Dryden plant. Given what he found to be the rationale for entering into the 1985 Indemnity, the motion judge concluded that it would be commercially absurd if Ontario could still impose remediation costs. However, Great Lakes’ financial commitments were actually provided as part of the prior 1979 Indemnity. Later, Great Lakes gave no new commitments to modernize in consideration for the 1985 Indemnity. The motion judge thus premised his

interpretation of the 1985 Indemnity on an incorrect factual basis — one that, as Laskin J.A. noted, led him to place too much emphasis on a change in language and misconstrue the bargain actually struck in the 1985 Indemnity. [ 32 ] Moreover, as Laskin J.A. found, the motion judge erred by failing to consider the 1985 Indemnity as a whole when determining whether or not the Director’s Order fell within its scope. Paragraphs 2 and 3 of the 1985 Indemnity are critical in this regard. Paragraph 2 provides that, in “any Pollution Claim . . .

Ontario shall have the right to elect to either take carriage of the defence or to participate in the defence and/or settlement of the Pollution Claim and any proceeding relating thereto as Ontario deems appropriate” (A.R., vol. IV, at p. 190). Paragraph 3 of the 1985 Indemnity also requires the parties to cooperate with Ontario in the defence of a claim. We agree with Laskin J.A. that these clauses would be “utterly meaningless for first party claims”. [ 33 ] Indeed, the inclusion of paras. 2 and 3 in the 1985 Indemnity is completely inconsistent with the notion that para. 1 contemplates first party claims.

Nothing in the 1985 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” (emphasis added). 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. It follows that we agree with Laskin J.A. that the motion judge erred by failing to read the 1985 Indemnity as a whole.

Properly interpreted, the 1985 Indemnity only applies to third party claims. [ 34 ] In sum, we agree with Laskin J.A.’s conclusion that the 1985 Indemnity does not cover the Director’s Order and we would allow Ontario’s appeal on that basis. As a result, we find it unnecessary to address the remaining arguments raised in these appeals. Conclusion [ 35 ] We would allow Ontario’s appeal and grant

summary judgment in its favour, with costs throughout. Resolute and Weyerhaeuser’s appeals are dismissed. The reasons of Côté, Brown and Rowe JJ. were delivered by Côté and Brown JJ. (dissenting in part) — I. Overview [ 36 ] During the 1960s, the owner of a pulp mill in Dryden, Ontario (the corporate predecessor of Reed Ltd.), stemmed the discharge of untreated mercury waste into a nearby river system by burying the waste at an adjacent disposal site.

In 1979, Reed — by then the owner — sold the entire property (including the waste disposal site) and the pulp and paper operation to Great Lakes Forest Products Limited. As part of a settlement of claims related to the earlier mercury waste discharge, the Province of Ontario granted an environmental liability indemnity to both Reed and Great Lakes (the “Ontario Indemnity”). This indemnity was to inure to the benefit of those corporations’ successors and assigns. [ 37 ] Our reasons address three appeals.

At issue in the appeal brought by the Province is whether the scope of the Ontario Indemnity covers the costs of compliance with first party regulatory orders, including those made under legislation enacted after the execution of the agreement. The appeals brought by Weyerhaeuser Company Limited and Resolute FP Canada Inc. go to whether either or both of those corporations can benefit from the Ontario Indemnity as successors and assigns of Great Lakes.

[ 38 ] These appeals also present an opportunity for this Court to apply the principles of contractual

interpretation articulated in Sattva Capital Corp. v. Creston Moly Corp. , 2014 SCC 53 , [2014] 2 S.C.R. 633, and Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co. , 2016 SCC 37 , [2016] 2 S.C.R. 23, to a series of complex commercial arrangements. The Province’s appeal also invites us to consider the doctrine of fettering as it applies to the legislature’s law-making powers. [ 39 ] For the reasons that follow, we would dismiss the appeals brought by the Province and Weyerhaeuser, and allow the appeal brought by Resolute. II. Factual Background A.

Mercury Contamination of the English and Wabigoon Rivers in the 1960s and 1970s [ 40 ] During the 1960s and 1970s, Dryden Chemicals Limited and Dryden Paper Company Limited operated a mercury cathode chlor-alkali plant and a pulp and paper mill, respectively, on property located in Dryden (the “Dryden Property”). Together, their operations produced various pollutants, including untreated mercury waste, which they released into the nearby English and Wabigoon rivers, harming the health and industry of those nearby, including members of the Grassy Narrows and Islington First Nations.

To dispose of these environmental contaminants, Dryden Paper constructed a waste disposal site on the Dryden Property in 1971. Since 1977, the waste disposal site has been subject to compliance requirements imposed by the Province. [ 41 ] In 1976, Dryden Paper and Dryden Chemicals amalgamated to form Reed. [ 42 ] In 1977, the Grassy Narrows and Islington First Nations sued Reed, Dryden Paper and Dryden Chemicals for damage they say was caused by the contamination of the rivers (the “Grassy Narrows Litigation”). B.

The Sale of the Dryden Property to Great Lakes in 1979 [ 43 ] In 1979, Reed entered into negotiations to sell the operations at the Dryden Property to Great Lakes. Great Lakes was reluctant to proceed with the purchase, however, due to potential liabilities relating to the mercury contamination, including the Grassy Narrows Litigation. At the same time, the Province was anxious to see a successful sale, to ensure the continuing viability of Dryden’s local economy.

It therefore agreed to indemnify both Reed and Great Lakes for any environmental damages caused by Reed in excess of $15 million (the “1979 Indemnity”). In exchange, Great Lakes and Reed agreed to spend around $200 million to modernize and expand the pulp mill. The terms of this agreement were set out in a letter dated November 6, 1979, from the Treasurer of Ontario to the President of Great Lakes.

The relevant portion of this letter reads as follows: The continued viability of the Dryden facilities and the undertaking of major modernization expenditures with respect to them are of considerable importance to the people of this Province. The substantial and beneficial employment and economic effects that the operation of a modernized facility will have on the population and economy of Dryden is of real significance.

In the event that Great Lakes negotiations with the Reed group of companies are successful then in the event that Great Lakes is required to pay any monies as a result of any final decision of a court against Great Lakes, Reed Ltd. or any other person prior to the year 2010 in respect of pollution caused by Reed Ltd. or any of its predecessor companies in the Dryden area prior to the date upon which Great Lakes acquires the assets and undertaking of the Dryden complex of Reed Ltd. or in the event that any settlement with any claimant is made the amount of which settlement has been approved by the Attorney General of Ontario, I have been authorized by the Executive Council of Ontario to advise you that I will make a Recommendation to the Executive Council of Ontario that the Government of Ontario take effective steps to ensure that Great Lakes Forest Products Limited will not be required to pay any monies in excess of the maximum amount of $15 million referred to in paragraph 2 of this letter, provided that over the next three to four years Great Lakes expends in the order of $200 million for the modernization and expansion of the Dryden facilities. (A.R., vol.

IV, at pp. 135-36) [ 44 ] Great Lakes purchased the pulp mill in December 1979 by way of an asset purchase agreement (the “1979 Dryden Agreement”). That agreement addressed, among other things, environmental responsibilities respecting the Dryden Property. In particular, clause 5.3 of the 1979 Dryden Agreement created a regime for the sharing of costs arising from pollution claims, pursuant to which Reed and Great Lakes were to share the costs of environmental liabilities up to $15 million, leaving Great Lakes exclusively responsible for anything exceeding that amount.

Clause 11.4 carves out of this regime the costs of compliance with a control order that the Province had issued in 1979 (the “Control Order”), making Great Lakes solely responsible for those costs. C. The Settlement of the Grassy Narrows Litigation in 1985 [ 45 ] The Governments of Canada and Ontario initiated a mediation process with the Islington and Grassy Narrows First Nations to address the problems regarding the mercury contamination and to settle the Grassy Narrows Litigation.

Great Lakes was reluctant to participate in any such settlement without releases from liability in relation to the mercury pollution caused by Reed and its predecessors. To overcome this impasse, Ontario’s Provincial Secretary for Resources Development, the Honourable R. H. Ramsay, wrote to Great Lakes on January 28, 1982 (the “1982 Ramsay Letter”), stating that the Province would indemnify Great Lakes against any claims related to mercury pollution: The purpose of this letter is to facilitate a settlement of the current negotiations. . . .

The Government of Ontario recognizes the distinct advantage of the Indian people obtaining a settlement in the very near future. Accordingly, the Government is prepared to indemnify Great Lakes Forest Products Limited against any claims related to mercury pollution such that the Company’s total payments to all claimants in respect of damages awarded by any court or for any settlement approved by the Attorney General of Ontario attributable to the operations of Reed Paper Ltd. or any of its predecessor companies in the Dryden area will be limited to $15 million.

The Government of Ontario will assume responsibility for any damages awarded by any court or for any settlement approved by the Attorney General of Ontario, after $15 million has been paid by the Great Lakes Forest Products Limited, Reed Ltd., Reed International Ltd., Dryden Chemicals Ltd. and Dryden Paper Co. Ltd. in connection with the above mentioned mercury pollution claims. Such claims include personal injury, property damage and economic claims of any claimants, including adults, minors and those yet unborn, related to mercury pollution.

It must be understood that any legal proceedings which could result in the Government of Ontario becoming liable to make payments pursuant to this undertaking must be brought to the attention of the Government of Ontario immediately upon such proceedings being launched, and the Government of Ontario shall have the right either to take carriage of or to participate in the defence and/or settlement of the litigation.

Failure to give such notification or to allow the Government of Ontario to either take carriage of or to participate in the defence and/or settlement of the litigation will preclude the making of any payments by the Province with regard to the action in question. (A.R., vol. III, at pp. 175-76) [ 46 ] The Grassy Narrows Litigation was settled on terms formalized in a Memorandum of Agreement (the “Settlement Agreement”) executed on November 22, 1985, by Canada, the Province, the Grassy Narrows and Islington First Nations, Reed, and Great Lakes.

Its terms were approved by the Supreme Court of Ontario in 1986 ( Mandamin v.

Reed Ltd. , Ont., S.C., No. 14716/77, June 26, 1986), and were given effect by both Parliament and the Ontario Legislature ( Grassy Narrows and Islington Indian Bands Mercury Pollution Claims Settlement Act , S.C. 1986, c. 23 ; English and Wabigoon River Systems Mercury Contamination Settlement Agreement Act, 1986 , S.O. 1986, c. 23 ). [ 47 ] The Settlement Agreement provides that “[t]he parties agree, without admission of liability by any party and 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 the issues ” (A.R., vol.

IV, at p. 141 (emphasis added)).

The “issues” were defined in the recitals 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”). (A.R., vol.

IV, at p. 140) [ 48 ] The Settlement Agreement also required the Province to indemnify Great Lakes and Reed “in respect of the issues” (para. 2.4(a)), which led to the Ontario Indemnity (A.R., vol. IV, at p. 6). That indemnity was incorporated into

Schedule F of the Settlement Agreement. In return, Great Lakes and Reed released the Province from any obligations under the 1979 Indemnity and the 1982 Ramsay Letter (para. 2.4(b); A.R., vol.

IV, at p. 6). [ 49 ] Paragraph 1 of the Ontario Indemnity — the meaning of which lies at the heart of this appeal — reads, in part, as follows: Ontario hereby covenants and agrees to indemnify Great Lakes, Reed, International and any company which was at the Closing Date [December 17, 1979] 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 [1979] Dryden Agreement (hereinafter referred to as “Pollution Claims”). (A.R., vol.

IV, at pp. 189-90) [ 50 ] Paragraph 2 of the Ontario Indemnity requires the party seeking indemnification to promptly notify the Province of the receipt of any notice of “Pollution Claims” (defined in para. 1), and gives the Province the right either to take carriage of the defence, or to participate in the pollution claim’s defence and settlement; para. 3 requires Great Lakes to cooperate with the Province in the investigation, defence and settlement of a pollution claim; para. 4 states that the indemnity shall be valid without limitation as to time; and para. 6 provides that the indemnity enures to the benefit of the parties’ respective successors and assigns.

That provision reads as

follows: The 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) [ 51 ] Great Lakes provided an indemnity to Reed in respect of environmental liabilities contemporaneously, as part of the Settlement Agreement.

The parties contemplated that these two indemnities (this indemnity and the Ontario Indemnity) would operate in tandem; to the extent that Reed claimed on its indemnity against Great Lakes, Great Lakes would be indemnified under the Ontario Indemnity.

This linkage was expressly recognized in the closing words of para. 1 of the Ontario Indemnity: 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 p. 190) [ 52 ] After the parties executed the Settlement Agreement but before they signed the Ontario Indemnity, the Environmental Protection Act , R.S.O. 1980, c. 141, was amended to confer a statutory right of action on the Province and third parties against certain polluters. The amendments arose out of

An Act to amend The Environmental Protection Act, 1971 , S.O. 1979, c. 91, also known as the “Spills Bill”. Although the Spills Bill never came into force, elements of it were incorporated into the 1980 Environmental Protection Act . The relevant provisions came into force in November 1985. For convenience, those amendments will be referred to as the “Spills Bill”. D. The Changes in Corporate Status Between 1985 and 1998 [ 53 ] Reed subsequently amalgamated with other corporations, and its successor corporation was dissolved in 1993.

For its part, Great Lakes became Bowater Pulp and Paper Canada Inc. in July 1998. E. Weyerhaeuser’s Purchase of the Dryden Property in 1998 [ 54 ] On September 30, 1998, Weyerhaeuser bought the Dryden Property from Bowater, along with certain assets used in the pulp and paper operation. This sale was recorded in the “1998 Asset Purchase Agreement”. Because of possible environmental liabilities associated with the waste disposal site, Weyerhaeuser initially sought to exclude the parcel of land on which it was constructed from the transaction, and Bowater agreed to this.

This parcel could not be severed from the property before the closing date, however, and the deal was therefore restructured such that Bowater conveyed title to the entire Dryden Property — including the waste disposal site — to Weyerhaeuser. Weyerhaeuser then immediately leased the waste disposal site back to Bowater.

Once title to the waste disposal site was severed from the rest of the Dryden Property, it was to be transferred back to Bowater. [ 55 ] The lease agreement between Bowater and Weyerhaeuser in respect of the waste disposal site (the “Lease Agreement”) required Bowater to indemnify Weyerhaeuser for, among other things, “the presence or release of mercury and any other contaminant, substance or waste on or in the Lands” (A.R., vol. V, at p. 126).

This indemnity was to survive the term of the lease. [ 56 ] Bowater and Weyerhaeuser acknowledged that they had entered into the Lease Agreement “solely as an interim agreement pending severance approval under the Planning Act ”, at which time title to the waste disposal site was to be transferred back to Bowater ( ibid. , at p. 123). Approval of the severance was obtained around two years later, and Weyerhaeuser re-conveyed the waste disposal site to Bowater on August 25, 2000. [ 57 ] In 2007, Weyerhaeuser sold the Dryden pulp mill to Domtar Inc. F.

Bowater’s Corporate Restructuring [ 58 ] In April 2009, Bowater (which by then had become Bowater Canadian Forest Products Inc.) and a number of related companies filed for creditor protection under the Companies’ Creditors Arrangement Act , R.S.C. 1985, c. C-36 (“ CCAA ”). At this point, Bowater still owned the waste disposal site. As part of the CCAA proceedings, Bowater was granted an order authorizing it to transfer the waste disposal site to 4513541 Canada Inc. in October 2010.

Several months later, 4513541 Canada Inc.’s receiver obtained court approval to abandon the waste disposal site, with no associated liability. [ 59 ] In 2012, Bowater became Resolute FP Canada Inc. G.

The 2011 Director’s Order [ 60 ] On August 25, 2011, the Province, through its Ministry of the Environment, issued a Director’s Order against 4513541 Canada Inc., Weyerhaeuser, Bowater, and several of Bowater’s directors, requiring them: . . . to repair certain site erosion, perform specified groundwater and surface water testing, and file annual reports containing specified information; (ii) to deliver to the [Ministry of the Environment] the sum of $273,063 as financial assurance in respect of the [Waste Disposal Site]; and (iii) 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.” (C.A. reasons, at para. 50, citing the Director’s Order, A.R., vol. IV, at p. 27.) Paragraph 3.1 of the Director’s Order described these requirements as “minimum requirements only”, adding that their discharge would not relieve the named parties from “complying with any other applicable Order, Statute or Regulation”, or from “obtaining any approvals or consents not specified in [the Director’s] Order” (A.R., vol.

IV, at p. 28). [ 61 ] The Director’s Order was issued under the Environmental Protection Act , R.S.O. 1990, c. E.19 . That statute had been amended in 1990 to empower the Director to impose certain obligations upon former owners and those who previously held management or control of a given undertaking or property (see Environmental Protection Statute Law Amendment Act, 1990 , S.O. 1990, c. 18, ss. 18(1) and 21 to 23). [ 62 ] Both Weyerhaeuser and Resolute appealed the Director’s Order to the Environmental Review Tribunal. The Province says that these appeals are in abeyance.

Weyerhaeuser also filed a proof of claim in Bowater’s CCAA proceedings (which were still ongoing at the time) for indemnification under the Lease Agreement for the present value of the work required by the Director’s Order and estimated legal costs, amounting to approximately $373,063. In settlement of its claim, Weyerhaeuser received shares in a company that emerged from CCAA protection, which shares were subsequently sold in May 2015. III.

Proceedings Below [ 63 ] Shortly after being served with the Director’s Order, counsel for Weyerhaeuser provided notice thereof to Ontario’s Ministry of the Attorney General, invoking paras. 2 and 6 of the Ontario Indemnity, and claiming indemnity as a successor and assignee of Great Lakes. In response, the Attorney General denied that the costs of complying with the Director’s Order fell within the scope of the Ontario Indemnity.

Weyerhaeuser sued the Province for an order declaring that it is entitled to be indemnified under the terms of the Ontario Indemnity “for the costs that it has incurred and may incur as a result of [the] Director’s Order made effective on September 6, 2011” (A.R., vol. II, at p. 3). Resolute was granted leave to intervene as a party to that proceeding. A. Decision of the Ontario Superior Court of Justice, 2016 ONSC 4652 , 60 B.L.R. (5th) 237 [ 64 ] All parties brought various motions for

summary judgment before the Ontario Superior Court of Justice. At issue was whether the Ontario Indemnity covered the costs of complying with the Director’s Order and, if so, whether Weyerhaeuser and Resolute are entitled to benefit thereunder. [ 65 ] The motion judge found in favour of Weyerhaeuser and Resolute, holding that the scope of the Ontario Indemnity, as set out in its own first paragraph, covered first party regulatory orders.

He further held that the Ontario Indemnity did not improperly fetter the Ontario Legislature’s law-making powers. [ 66 ] The motion judge also held that the enurement clause extended the rights and obligations under the Ontario Indemnity to Resolute and Weyerhaeuser — Resolute as a corporate successor to Great Lakes, and Weyerhaeuser as both a successor-in-title to the Dryden Property and an assignee of the Ontario Indemnity from Bowater pursuant to s. 3.1(xiv) of the 1998 Asset Purchase Agreement. B.

Decision of the Court of Appeal, 2017 ONCA 1007 , 77 B.L.R. (5th) 175 [ 67 ] The Province appealed, arguing the motion judge erred in holding that the Ontario Indemnity covers the costs of complying with the Director’s Order, and that Weyerhaeuser and Resolute enjoyed the benefit of indemnification thereunder. [ 68 ] At the Court of Appeal, the majority found no error in the motion judge’s finding that the Ontario Indemnity covered the costs of complying with first party claims, including the Director’s Order.

Nor did the majority disturb the finding that the 1998 Asset Purchase Agreement had the effect of transferring the full benefit of the Ontario Indemnity from Bowater to Weyerhaeuser. Given that Weyerhaeuser had subsequently sold the Dryden pulp mill to Domtar in 2007, however, the issue of what rights, if any, Weyerhaeuser possessed as an assignee of the Ontario Indemnity at the time the Director’s Order was issued in 2011 was returned to the Ontario Superior Court of Justice for decision.

The majority did, however, find palpable and overriding error in the motion judge’s conclusion that Weyerhaeuser could claim the benefit of the enurement clause in the Ontario Indemnity, holding that this clause applies only to corporate successors. [ 69 ] As to Resolute, the majority held that the motion judge erred in finding that Resolute could claim the benefit of the Ontario Indemnity as a corporate successor of Great Lakes, following the assignment of the Ontario Indemnity from Bowater to Weyerhaeuser under the 1998 Asset Purchase Agreement.

The effect of this assignment was to extinguish Bowater’s interest therein, such that Bowater could not then pass that interest on to Resolute as its corporate successor. [ 70 ] In dissent, Laskin J.A. would have found that the Ontario Indemnity did not cover the Director’s Order, because it was not intended to cover first party claims, and because the Director’s Order does not constitute a “Pollution Claim” as defined in that document.

Having so concluded, he found it unnecessary to address the question of whether Resolute and Weyerhaeuser (or either of them) could benefit from the Ontario Indemnity as successors and assignees. IV. Issues and Positions of the Parties [ 71 ] The Province, Resolute and Weyerhaeuser each appeal to this Court. Although they raise various interrelated issues, these appeals can be resolved by answering the following two questions: 1. Did the motion judge err in concluding that the Ontario Indemnity covers the costs of complying with the Director’s Order?

2. Did the motion judge err in concluding that Resolute and Weyerhaeuser benefit from the Ontario Indemnity as successors and assignsof Great Lakes? [72] The Province argues that the motion judge erred in both these respects and, further, that his

interpretation of theOntario Indemnity has the effect of impermissibly fettering the Ontario Legislature’s law-making power. Resolute and Weyerhaeuserseek to uphold the motion judge on both questions, and further argue that the Province’s obligation under the Ontario Indemnity does notimpose an impermissible fetter upon the Ontario Legislature. V. Analysis A. Principles of Contractual

Interpretation [73] The Ontario Indemnity is a contract. Today’s lawyers are fortunate to live in “an age when there is a galaxy of highappellate guidance on how to interpret contracts” (Royal Devon and Exeter NHS Foundation Trust v. ATOS IT Services UK Ltd., [2017]EWCA Civ 2196, [2018] 2 All E.R. (Comm.) 535, at para. 45). While not wishing to add more gas and dark matter to the “galaxy”, wedo find it helpful here to stress certain first principles which we see as important in interpreting this particular contract. [74] This Court has described the object of contractual

interpretation as being to ascertain the objective intentions of theparties (Sattva, at para. 55). It has also described the object of contractual

interpretation as discerning the parties’ “reasonableexpectations with respect to the meaning of a contractual provision” (Ledcor, at para. 65). In meeting these objects, the Court hassignalled a shift away from an approach to contractual

interpretation that is “dominated by technical rules of construction” to one that isinstead rooted in “practical[ities and] common-sense” (Sattva, at para. 47). This requires courts to read a contract “as a whole, giving thewords used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time offormation of the contract” (ibid.). [75] We recognize that this Court’s references to the objective intentions of the parties at the time they entered into thecontract, and to parties’ reasonable expectations, may leave a degree of uncertainty respecting the objects of contractual

interpretation(see A. Swan, J. Adamski and A. Y. Na, Canadian Contract Law (4th ed. 2018), at pp. 673-916). Since there is no suggestion here of adivergence between the parties’ intentions and their expectations, we do not find it necessary to resolve this here, but we simply note theinconsistency. [76] Contractual

interpretation begins with reading the words of the contract. A legitimate

interpretation will be consistentwith the language that the parties employed to express their agreement (G. R. Hall, Canadian Contractual

Interpretation Law (3rd ed.2016), at p. 11). As this Court stated in Sattva, the meaning of a contract is rooted in the actual language used by the parties (para. 57). Ameaning that strays too far from the actual words fails to give effect to the way in which the parties chose to define their obligations(Canadian Contractual

Interpretation Law, at p. 9). [77] This is not to say that the words of the contract are to be read in isolation. This Court’s direction in Sattva was that thewords of the contract are to be read in light of the surrounding circumstances — sometimes referred to as the “factual matrix” — whichconsist of “objective evidence of the background facts at the time of the execution of the contract, that is, knowledge that was orreasonably ought to have been within the knowledge of both parties at or before the date of contracting” (para. 58 (citation omitted)).

Aninterpretation that ignores the context in which the contract was formed will not accurately discern what the parties intended to achieve,even if the

interpretation is “literally correct” (Canadian Contractual

Interpretation Law, at p. 9; see also Sattva, at para. 57). Put simply,contractual text derives its meaning, in part, from the context. [78] We stress that text derives its meaning from context in part. This leads to an important caveat: the context — that is,the factual matrix — cannot “overwhelm the words” of the contract or support an

interpretation that “deviate[s] from the text such thatthe court effectively creates a new agreement” (Sattva, at para. 57). The factual matrix assists in discerning the meaning of the wordsthat the parties chose to express their agreement; it is not a means by which to change the words of the contract in a manner that wouldmodify the rights and obligations that the parties assumed thereunder (Canadian Contractual

Interpretation Law, at pp. 33-34). [79] As we will explain below, contractual

interpretation also requires courts to consider the principle of commercialreasonableness and efficacy. Contracts ought therefore to be interpreted “in accordance with sound commercial principles and goodbusiness sense” (Scanlon v. Castlepoint Development Corp. (1992), (ON CA), 11 O.R. (3d) 744, at p. 770). As LordDiplock explained in Antaios Compania Naviera S.A. v.

Salen Rederierna A.B., [1985] 1 A.C. 191 (H.L.), at p. 201, “if detailedsemantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, itmust be made to yield to business commonsense”. The principle that requires contracts to be read in a commercially reasonable andefficient manner is therefore an important interpretive aid in construing contractual terms. [80] Ultimately, contractual

interpretation involves the application of various tools — including consideration of thefactual matrix and the principle of commercial reasonableness — in order to properly understand the meaning of the words used by theparties to express their agreement. B. The Province’s Appeal [81] At issue in the Province’s appeal is whether the motion judge erred in concluding that the Province’s obligation toindemnify under para. 1 of the Ontario Indemnity extends to the costs of compliance with first party regulatory orders, such as theDirector’s Order.

In so finding, the motion judge placed considerable emphasis on the text of para. 1, which referred to “any claim,action or proceeding, whether statutory or otherwise . . . whether by individuals, firms, companies, governments (including the FederalGovernment of Canada and any province or municipality thereof or any agency, body or authority created by statutory or otherauthority)” (A.R., vol. IV, at p. 189 (emphasis added)).

In his view, neither a reading of the contract as a whole nor the surroundingcircumstances supported reading the Ontario Indemnity as excluding from coverage the costs of compliance with first party regulatory

orders. [ 82 ] The Province sees it differently. It says that para. 1, properly interpreted, covers only “third party claims, whether statutory or at common law, in the nature of those settled in 1985” (Ontario A.F., at para. 3).

Because the Director’s Order was made in 2011 by the Province’s Ministry of the Environment using provisions of the 1990 Environmental Protection Act , which was enacted five years after the Settlement Agreement was executed, the Province says that the obligation to indemnify does not extend to the resulting compliance costs to Weyerhaeuser and Resolute. [ 83 ] More specifically, the Province says the motion judge made four errors: (1) failing to consider the text of the Ontario Indemnity with reference to the factual matrix, which, the Province says, includes the 1979 Indemnity, the 1982 Ramsay Letter, the 1979 Dryden Agreement, the Settlement Agreement, and the Spills Bill; (2) failing to interpret para. 1 of the Ontario Indemnity in light of the remainder of the Ontario Indemnity; (3) making palpable and overriding errors in two factual findings; and (4) interpreting the Ontario Indemnity so as to impermissibly fetter the Legislature’s law-making powers, thereby rendering the Ontario Indemnity altogether unenforceable. [ 84 ] Like the majority at the Court of Appeal, we reject each of these arguments, and would dismiss the Province’s appeal.

The motion judge made no error in interpreting the Ontario 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 para. 1 of the Ontario Indemnity, the motion judge also considered para. 1’s meaning in light of the agreement as a whole, and with reference to the circumstances surrounding its formation in 1985.

Far from excluding the context of the agreement as a whole or the surrounding circumstances from consideration, he considered them, and then simply found that neither supported an

interpretation of the Ontario Indemnity that would exclude coverage for first party claims.

(1) Did the Motion Judge Err in His Appreciation of the Factual Matrix? [ 85 ] The Province submits that the motion judge erred by focusing on the text of the Ontario Indemnity and that, in so doing, he “failed to appreciate that events going back to 1979 significantly informed the meaning of the [Ontario] Indemnity” (Ontario A.F., at para. 71). He ought, the Province says, to have considered the interrelationship between the Ontario Indemnity and the 1979 Indemnity, the 1982 Ramsay Letter, the 1979 Dryden Agreement, the Settlement Agreement (inclusive of an escrow agreement and schedules), and the enactment of the Spills Bill. [ 86 ] The motion judge’s appreciation o

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