2012 NSSC 300, 2012 NSSC 300

SUPREME COURT OF NOVA SCOTIA Citation: Canadian National Railway Company v. Halifax (Regional Municipality ), 2012 NSSC 300 Date: 20120808 Docket: Hfx No. 358564 Registry: Halifax Between: Canadian National Railway Company, a corporation incorporated under the laws of Canada having its head office at 935 de la Gauchetère Street West, Montreal, Quebec H3B 2M9 Applicant v. Halifax Regional Municipality, a statutory body duly incorporated under the laws of the Province of Nova Scotia Respondent Judge: The Honourable Justice Arthur J. LeBlanc Heard: June 28, 2012, in Halifax, Nova Scotia Counsel: Michael Donovan, Q.

C., for the Respondent Dennis James & Melissa MacAdam, for the Applicant By the Court : Introduction [ 1 ] This is a motion brought by the respondent, Halifax Regional Municipality, to strike portions of affidavits filed by the applicant, Canadian National Railway. The motion is brought under Rule 39.04, which provides, in part:

(1) A judge may strike an affidavit containing information that is not admissible evidence, or evidence that is not appropriate to theaffidavit.

(2) A judge must strike a part of an affidavit containing either of the following: (

a) information that is not admissible, such as an irrelevant statement or a submission or plea; (

b) information that may be admissible but for which the grounds of admission have not been provided in the affidavit, such ashearsay admissible on a motion but not supported by evidence of the source and belief in the truth of the information. . . . [2] The main proceeding involves CN's application for a declaration respecting the validity, enforceability, and

interpretation ofan agreement between it and HRM. HRM contests the application. HRM takes the position that three affidavits filed by CN areinadmissible or otherwise contravene the Civil Procedure Rules. [3] Rule 39.04(2) is a codification of certain principles governing the content of affidavits set out by Davison, J. in Waverley(Village) v. Nova Scotia (Minister of Municipal Affairs)(1993), 1993 NSSC 71 , 123 N.S.R. (2d) 46, [1993] N.S.J. No. 151(S.C.), at para. 20. Davison, J. set out the following principles: 1. Affidavits should be confined to facts.

There is no place in affidavits for speculation or inadmissible material. An affidavit should nottake on the flavour of a plea or a summation. 2. The facts should be, for the most part, based on the personal knowledge of the affiant with the exception being an affidavit used in anapplication. Affidavits should stipulate at the outset that the affiant has personal knowledge of the matters deposed to except where statedto be based on information and belief. 3. Affidavits used in applications may refer to facts based on information and belief but the source of the information should be referredto in the affidavit.

It is insufficient to say simply that "I am advised". 4. The information as to the source must be sufficient to permit the court to conclude that the information comes from a second sourceand preferably the original source. 5. The affidavit must state that the affiant believes the information received from the source. [4] Generally speaking, a judge must strike parts of an affidavit that are inadmissible or irrelevant unless an exception applies,whether it be a traditional categorical exception, or admissibility arising under the principled approach by virtue of necessity andreliability.

Expert opinion evidence, meanwhile, must comply with Rule 55. Hearsay [5] Rule 5.13 governs the use of hearsay evidence on applications. Rule 5.13 provides that the "rules of evidence, including therules about hearsay, apply on the hearing of an application and to affidavits filed for the hearing except a judge may, in an ex parteapplication, accept hearsay presented by affidavit prepared in accordance with Rule 39 - Affidavit." This rule, says HRM, indicates thathearsay is not permitted on an application unless a common law hearsay exception applies.

I am satisfied that this would include theprincipled approach to admitting hearsay on the basis of necessity and reliability, as described in R. v. Khelawon, 2006 SCC 57, anddecisions preceding it.

[6] The "essential defining features" of hearsay are . . .

"(1) the fact that the statement is adduced to prove the truth of its contentsand (2) the absence of a contemporaneous opportunity to cross-examine the declarant." (Khelawon at para. 35) It must be emphasizedthat it is "only when the evidence is tendered to prove the truth of its contents that the need to test its reliability arises." (Khelawon atpara. 36) Further, Charron J. said for the court in Khelawon, (paras. 37-38) that while an out-of-court statement by a witness whotestifies will be hearsay if adduced for the truth of its contents: When the witness repeats or adopts an earlier out-of-court statement, in court, under oath or solemn affirmation, of course no hearsayissue arises.

The statement itself is not evidence, the testimony is the evidence and it can be tested in the usual way by observing thewitness and subjecting him or her to cross-examination. The hearsay issue does arise, however, when the witness does not repeat or adoptthe information contained in the out-of-court statement and the statement itself is tendered for the truth of its contents. . . . [7] Charron, J. went on to discuss the challenges of recognizing hearsay, at paras. 56-58: The first matter to determine before embarking on a hearsay admissibility inquiry, of course, is whether the proposed evidence ishearsay.

This may seem to be a rather obvious matter, but it is an important first step. Misguided objections to the admissibility of anout-of-court statement based on a misunderstanding of what constitutes hearsay are not uncommon. As discussed earlier, not allout-of-court statements will constitute hearsay. Recall the defining features of hearsay. An out-of-court statement will be hearsay when:(1) it is adduced to prove the truth of its contents and (2) there is no opportunity for a contemporaneous cross-examination of thedeclarant.

Putting one's mind to the defining features of hearsay at the outset serves to better focus the admissibility inquiry. As we have seen, thefirst identifying feature of hearsay calls for an inquiry into the purpose for which it is adduced. Only when the evidence is being tenderedfor its truth will it constitute hearsay.

The fact that the out-of-court statement is adduced for its truth should be considered in the contextof the issues in the case so that the court may better assess the potential impact of introducing the evidence in its hearsay form. [8] Second, by putting one's mind, at the outset, to the second defining feature of hearsay – the absence of an opportunity forcontemporaneous cross-examination of the declarant, the admissibility inquiry is immediately focussed on the dangers of admittinghearsay evidence. Iacobucci, J. in R. v.

Starr, 2000 SCC 40 , [2000] 2 S.C.R. 144 identified the inability to test the evidence asthe "central concern" underlying the hearsay rule. Lamer, C.J. in U. (F.J.) expressed the same view but put it more directly by stating:"Hearsay is inadmissible as evidence because its reliability cannot be tested" (para. 22). Extrinsic Evidence [9] The objective of the main application is to interpret a contract between the parties. Generally a contract will be interpretedaccording to its language, and the words of the contract will serve as evidence of the parties' intent.

Parol or extrinsic evidence of theirintent is not normally permissible. A useful outline of the principles of contractual

interpretation can be found in Geoff R. Hall,Canadian Contractual

Interpretation Law (Markham: LexisNexis, 2007)(a second edition is now available). Warner, J. summarizedHall's principles in the following terms in Taylor v. Taylor, 2009 NSSC 380, at para. 17: 1. Contractual

interpretation is all about giving the proper meaning to the words selected by the parties themselves to govern theirrelations, understood within the context in which the words are used. 2. A contract is to be construed as a whole, with meaning given to all of its provisions. This is the first aspect of context. Disputedlanguage is interpreted in the context of the language of the agreement as a whole. 3. This precept deals with the factual matrix extrinsic to the written contract. It is the second aspect of context; the first being wordsin a contract are to be interpreted in the context as a whole.

Disputed agreements are interpreted in the context of the surroundingcircumstances that give rise to the contract.

Interpretation is an objective exercise. Contractual

interpretation seeks to give effect to what the parties objectively manifested bythe words they used, not by what they subjectively intended. 5. Commercial contracts are to be interpreted in a manner that promotes commercial efficacy. 6. Every effort should be made to find a meaning. Courts should be loath to hold contracts void for uncertainty. 7. Contracts are to be interpreted as of the date they are made. Unlike statutes and the Constitution where the

interpretation changesover time, the meaning of a contract is fixed on the day it is made. 8. The parol evidence rule or the extrinsic evidence rule is a much misunderstood rule. It deals with the extent to which extrinsicevidence may be used to affect the

interpretation of a contract. According to Mr. Hall, the rule runs contrary to the modern themes ofcontractual

interpretation. Courts do allow extrinsic evidence in for some purposes. Words in a vacuum are almost meaningless, theymust be interpreted in their context which is first the document itself and second the surrounding circumstances. Evidence of thesubjective intention of either party is precluded, as it is the words used by the parties to implement their intentions, and not theirsubjective intentions, that govern. There is another limitation to the parol evidence rule; the rule excludes, or precludes, admission ofevidence that contradicts the written contract.

In other words, evidence of the background circumstances or factual matrix may beadmitted if there is an ambiguity within the context of the document as a whole; but evidence that purports to contradict the expressterms of the contract is inadmissible. [10] Warner, J. contrasted the state of the law in Canada with that in the United Kingdom, where, he stated, ". . . the use of extrinsicevidence has progressed … to permit extrinsic evidence of ‘almost anything'." (para. 18).

This, he wrote, "is not the law in Canada, andone of the controversies of the law in Canada is the extent to which negotiations are admissible. . . . Conduct preceding,contemporaneous with, and subsequent to the agreement, is admissible to give context." (para. 19). Opinion Evidence [11] In addition to extrinsic evidence concerns, this case raises issues of opinion evidence. Charron, J. (as she then was)summarized the law on opinion evidence in R. v. Collins (2001), (ON CA), 160 C.C.C. (3d) 85, at para. 17: In the law of evidence, an opinion means an “inference from observed fact”: see R. v.

Abbey (1982), (SCC), 68 C.C.C.(2d) 394 at 409. As stated in Abbey, as a general rule, witnesses testify only as to observed facts and it is then up to the trier of fact todraw inferences from those facts. A lay witness will be permitted to give an opinion only with respect to matters that do not requirespecial knowledge and in circumstances where it is virtually impossible to separate the facts from the inferences based on those facts. Awitness testifying that “a person was drunk” is a common example of an opinion that can be provided by a lay witness. See R. v.

Graat(1982), (SCC), 2 C.C.C. (3d) 365 (S.C.C.) for a review of the law on non-expert opinion. Otherwise, opinion evidencewill only be received with respect to matters calling for special knowledge beyond that of the trier of fact. In those cases, an expert in thefield may be permitted to provide the judge and jury with an opinion, that is “a ready-made inference which the judge and jury, due tothe technical nature of the facts, are unable to formulate” (Abbey at 409). The law as to expert opinion evidence was authoritativelyrestated in Mohan, supra. Before expert opinion evidence can be admitted, the evidence: (

a) must be relevant to an issue in the case; (

b) itmust be necessary to assist the trier of fact; (

c) it must not be subject to any other exclusionary rule; and (

d) it must be given by aproperly qualified expert. [12] Paciocco and Stuesser, in The Law of Evidence in Canada, 6th ed. (Irwin Law, 2011) the authors summarize the law governinglay opinion evidence at 183: Lay witnesses may present their relevant observations in the form of opinions where • they are in a better position than the trier of fact to form the conclusion;

• the conclusion is one that persons of ordinary experience are able to make; • the witness, although not expert, has the experiential capacity to make the conclusion; and • the opinions being expressed are merely a compendious mode of stating facts that are too subtle or complicated to be narrated as effectively without resort to conclusions. The Reynolds Affidavit [ 13 ] David Reynolds is CN's Senior Manager for Design and Construction, Eastern Region. In his affidavit, Mr. Reynolds describes his background as an engineer on CN projects and negotiating with third parties.

He recounts that in 2008 CN applied to the Canadian Transportation Agency for a determination of the parties' respective responsibilities for the maintenance of the bridges. The matter was referred to the CTA's mediation services, and in 2008 and 2009 Mr. Reynolds was involved in the negotiation of the Agreement between CN and HRM, working with Jean Patenaude, CN's Assistant General Counsel, and Dominique Poirier, CN's Senior Officer for Design and Construction, Eastern Region. The Agreement allocates costs of repair and replacement work on the bridges. [ 14 ] Mr.

Reynolds goes on in his affidavit to state that "As a professional engineer specializing in civil engineering, I understand the terminology involved with bridge repair." He goes on to discuss the phrase "top of the arch" appearing in M. E. Donovan's letter of September 12, 2008. The Agreement states, at para. 2.2, that "HRM is responsible for 100% of the maintenance of the road and road works that pass over these bridges. The road and road works comprises the asphalt, sidewalks, curbs, lighting, as well as the subsurface layers to the surface of the arch." Mr.

Reynolds states, at para. 12 of his affidavit: These arch bridges can be described as a curved concrete slab in the shape of an arch which provides the opening for the train to operate through. The arch is framed on either side by a parapet wall and an abutment at either end. This creates a ‘tub' shape where the asphalt, gravel, and other roadway fill layers are placed (the ‘Tub'). The ‘surface of the arch' refers to the bottom of the Tub. [Emphasis added.] [ 15 ] HRM submits that the

interpretation of the phrase "surface of the arch" in para. 2.2 of the agreement is a central issue on the application, and that the crux of the dispute is whether "surface of the arch" refers to "the subsurface layers down to the point where the surface of the arch is first encountered at its apex, as contended by HRM; or, the ‘ surface of the arch' at all points in its curve, as contended by CN." By this reasoning, Mr. Reynolds's statement offering his

interpretation of the phrase "surface of the arch" is inadmissible as a submission or plea. Alternatively, HRM says, Mr. Reynolds's statement constitutes opinion evidence which has not been offered in compliance with the rules governing expert opinion evidence in Rule 55, nor with the common law rules on opinion evidence (see, for instance, Lunenburg Industrial Foundry v. Commercial Union Assurance Co. of Canada , [2004] N.S.J. No. 525 .) [ 16 ] In response, CN says the opinion offered by Mr.

Reynolds is "the evidentiary support that is required for the submission that the Agreement stands for the meaning that [CN believes] was agreed upon during the negotiations," without which there is "no evidence with which to determine what the parties agreed upon and what the Agreement stands for." Further, CN says, Mr. Reynolds is not offering expert evidence as contemplated by Rule 55, but evidence of "a witness to the negotiations, who is versed in the engineering and terminology of bridge repair and construction." [ 17 ] CN argues generally that Mr.

Reynolds is not speaking as an expert, but as a witness to the negotiations who happened to be knowledgeable about bridges. I am satisfied that the opinion offered by Mr. Reynolds in paragraph 12 consists of specific opinion evidence about bridges, which would beyond the knowledge of an ordinary person. It amounts to expert evidence and must be struck. It also constitutes evidence of Mr. Reynolds's subjective understanding of the meaning of the contract, which is irrelevant to the court's

interpretation of the contract. [ 18 ] Mr. Reynolds goes on his affidavit, at para. 14:

Under the Agreement, the Applicant is 100% responsible for the Tub and the Respondent is 100% responsible for the road and road-works, including all of the subsurface layers that are contained within the Tub.

The costs for the waterproofing, needed on the inside of the arch where backfill material will be placed, are to be split equally between the Parties. [ 19 ] HRM objects to the statement that it is responsible for "all of the subsurface layers that are contained within the Tub." It submits that this is a statement of opinion, submission or plea, sharing the same objectionable features as the impugned part of paragraph 12. CN submits that paragraph 14 consists of "logical reasoning" from his

interpretation of the scope of HRM's responsibility under the Agreement, "not opinion." [ 20 ] I conclude that the passage in question must be struck for reasons similar to paragraph 12. This passage amounts to an attempt to provide expert opinion evidence, as well as a statement of Mr. Reynolds's subjective view of the meaning of the Agreement. [ 21 ] At para. 15 of his affidavit Mr. Reynolds states: I informed Mr.

Patenaude that the reference to the ‘top of the arch' was incorrect in the context of our negotiations and indicated that the ‘surface of the arch' was descriptive and accurate for what had been agreed upon during our negotiations. [ 22 ] HRM submits that this paragraph is irrelevant if it does no more than indicate that he made the statement to Mr. Patenaude; it is likewise irrelevant as a statement of Mr. Reynolds's opinion about which of the two phrases most accurately reflected the negotiations, given that that the phrase "surface of the arch" was adopted by the parties in the agreement.

If the accuracy with which this language reflects the negotiations is an issue in the proceedings, the court must draw its own conclusion. If this point is not an issue, Mr. Reynolds's opinion remains irrelevant. [ 23 ] CN says paragraph 15 is not irrelevant, adding that his understanding of the meaning of the words in question during negotiations is a fact for the court to consider, and submitting (without supporting authority) that the "existence of a term in an agreement is important, but it is also essential for the Court to understand why a different term was not used.

That is where the recollections of those involved in the negotiation become crucial." [ 24 ] As was the cases with paragraphs 12 and 15, CN provides no explanation of why Mr. Reynolds's subjective understanding of the meaning of the words in question, as communicated to Mr. Patenaude, would be relevant to the

interpretation of the Agreement by the court. The court is concerned with the objective manifestation of the parties' agreement, not their subjective intentions or understanding in the course of negotiations. Consequently, the paragraph is irrelevant, in addition to constituting an opinion on a question of law. It will be struck accordingly. [ 25 ] HRM submits, and CN concedes, that paragraphs 17-20 are irrelevant. The Poirier Affidavit [ 26 ] HRM objects to the last sentence of para. 9 of the affidavit of Dominique Poirier. Mr. Poirier is CN's Senior officer for Design and Construction, Eastern Region.

He worked with Mr. Reynolds in the negotiation of the Agreement. His affidavit recounts a meeting attended by representatives of both parties on September 10, 2008, during which he took notes. He states, at para. 9 of his affidavit: I recorded in my notes that the Respondent agreed to take responsibility for the maintenance of the asphalt, base, sub-base and subgrade over the Bridges.

This would include, based upon my recollection of the discussion at the Meeting, everything from the asphalt through the granular base and the granular sub-base, to the earth fill that makes up the compactable subgrade. [Emphasis added.] [ 27 ] HRM contends that the second sentence of this paragraph is an interpretative conclusion, and is not fact, but amounts to an

opinion or submission. CN says this sentence is a statement by Mr. Poirier as to what he believed at the time of the negotiations; therefore, it is argued, it is a statement of fact, not

interpretation. Further, CN says, it goes to the question of whether the parties achieved consensus ad idem. [ 28 ] Subjective understandings are not relevant in interpreting a contract. I am satisfied that the phrase "my recollection" in the context of this sentence amounts, in substance, to offering a view of how the contract should be interpreted. As with Mr. Reynolds's affidavit, this amounts to offering a witness's subjective view of the meaning of the language as an interpretative aid. The second sentence of this paragraph is therefore struck from the affidavit.

The Patenaude Affidavit [ 29 ] The third impugned affidavit is that of Jean Patenaude, CN's Assistant General Counsel. Mr. Patenaude provides a historical review of Canadian legislation governing railways and bridges, with particular emphasis on those in HRM. [ 30 ] At paragraphs 19 and 20, Mr. Patenaude describes a review of CN records "to locate copies of agreements with respect to utilities, entered into with the Applicant, which involve bridges between mile 0.7 and mile 4.0 Bedford Subdivision." This information comes from Mr. Poirier, and is referenced in Mr. Poirier's own affidavit at paras. 11-12. Mr.

Patenaude goes on to say, at para. 21, that a "plan relating to the carrying of ocean water as well as sewer lines on or near South Street was also located but no agreement was found for these installations." This, too, appears to rest on information and belief derived from Mr. Poirier, and resembles information at para. 13 of his affidavit. At paragraph 27, Mr. Patenaude states that "I was informed by Mr.

Poirier, and do verily believe, that no agreements or licenses were found, with respect to power lines or cables, or telecommunication lines or cables entered into by the Applicant, which involve bridges between mile 0.7 and mile 4.0 Bedford Subdivision." Similar statements appear in Mr. Poirier's affidavit at para.14. HRM says these statements are hearsay. [ 31 ] According to CN, since Mr. Patenaude is referencing statements made by another affiant, who is available for cross-examination, any hearsay concerns should be put aside.

CN also suggests that this information should be admitted on the basis of necessity and reliability, in order to permit Mr. Patenaude to comment on documents that he reviewed but did not locate, and to "put important documents in front of the Court … ." Since Mr. Patenaude can be cross-examined, CN argues, the evidence is sufficiently reliable. It is not clear why the documents must be put in front of the court by way of hearsay evidence from Mr. Patenaude, rather than through the evidence of Mr. Poirier. [ 32 ] I am satisfied that paragraphs 19-21 and 27 of Mr. Patenaude's affidavit are hearsay. Mr.

Poirier's evidence on these points, of course, is available and is not hearsay. However, for Mr. Patenaude to repeat this evidence raises the concern that this is evidence of out-of-court statements not tested by cross-examination. I am not satisfied that the repetition of these statements in Mr. Patenaude's affidavit are saved by any exception to the hearsay rule, however. [ 33 ] At paragraph 23 of his affidavit, Mr.

Patenaude states that ""[i]n my opinion, clauses 6 and 7 from the Mumford Road 1948 Agreement inform the question of utility lines, which is an issue in this application." [ 34 ] Consequently, paragraphs 19 – 21 and 27 must be struck if they are being offered for the truth of their contents. [ 35 ] Paragraph 26 states, "[i]n my opinion, clause 7 of the Young Avenue Agreement informs the question of utility lines, which is an issue in this application." HRM says these are legal submissions and are improper in an affidavit.

CN says these statements are not opinion, but fact, so as "to provide context for the documents that the Court is reviewing," it being allegedly necessary for the court to admit evidence from the people involved in drafting the document "for the context as to how the terms were arrived at," in order to determine the intentions of the parties. [ 36 ] While CN argues that the use of the word "opinion" does not definitively establish that the content of these paragraphs is opinion evidence, I am satisfied that even if the words "in my opinion" are excised, paragraphs 23 and 26 remain statements of opinion, as well as being legal submissions.

They should therefore be struck.

[ 37 ] At paragraph 54 of his affidavit, Mr. Patenaude states, "[i]t is my belief that there was an understanding between the Parties that the Respondent's responsibilities under Clause 2.2 would include the water lines, sewer lines, electrical lines and other infrastructure ("Utilities") that run through the road and road works." HRM says this paragraph is a legal submission, or a pure opinion unsupported by a factual foundation. [ 38 ] CN says this paragraph is the entire basis for its position on the application, in that it goes to the question of whether the parties achieved consensus ad idem.

Rather than argument as to why the court should agree with the statement, CN submits, it is a statement of Mr. Patenaude's understanding following the negotiations. If, on the other hand, it is opinion evidence, CN says, the entire affidavit serves as the factual basis for it. [ 39 ] In my view, HRM has correctly characterized the impugned statement as one that not only offers a legal opinion, but also speculates about the state of mind of the other party to the Agreement. This statement must be struck. [ 40 ] At paragraph 55 of his affidavit, Mr.

Patenaude states that [b]ased upon conversations with David Reynolds, Sr. Manager Design & Construction, Eastern Region, CN, whom I do verily believe, there are Utilities which have lines running through the road on the South Street Bridge. The Utility lines are located above the surface arch of the bridge and below the surface of the asphalt. HRM points out that this information does not appear in Mr. Reynolds's own affidavit, and says the paragraph is hearsay. I agree. [ 41 ] Mr.

Patenaude does not indicate that he has any personal knowledge of the contents of this paragraph, and the information does not appear in Mr. Reynolds's affidavit. Mr. Reynolds's affidavit is his direct evidence; he cannot give further direct evidence on the hearing of the application unless the presiding judge permits it: Rule 53.02. There is no persuasive reason argued to admit this hearsay evidence. Conclusion [ 42 ] The challenged passages in the CN affidavits are compromised by a combination defects that include hearsay, inadmissible opinion and legal argument.

Further, much of the impugned material amounts to little more than accounts of what the witness thought particular language meant at the time. Accordingly, HRM's motion is allowed and the impugned passages are struck from the affidavits. [ 43 ] If the parties are unable to agree on costs, they may provide written submissions by August 31, 2012. LeBlanc, J.