Ter Keurs Bros. Inc. Appellant (Defendant) v. Rural Municipality of Last Mountain, 2019 SKCA 10

Court of Appeal for Saskatchewan Docket: CACV3222 Citation: Ter Keurs Bros. Inc. v Last Mountain Valley (Rural Municipality) , 2019 SKCA 10 Date: 2019-01-24 Between: Ter Keurs Bros. Inc. Appellant (Defendant) And Rural Municipality of Last Mountain Valley No. 250 Respondent (Plaintiff) Before: Caldwell, Ryan-Froslie and Schwann JJ.A. Disposition: Appeal allowed Written reasons by: The Honourable Madam Justice Schwann In concurrence: The Honourable Mr. Justice Caldwell The Honourable Madam Justice Ryan-Froslie On Appeal From: 2018 SKQB 58 , Regina Appeal Heard: September 5, 2018 Counsel: Patrick S.

Hopf for the Appellant William R. Howe and Tarissa Peterson for the Respondent Schwann J.A. I. Introduction [ 1 ] Ter Keurs Bros. Inc. [Ter Keurs] appeals from a decision made by a Queen’s Bench judge who granted

summary judgment in favour of the respondent, the Rural Municipality of Last Mountain Valley No. 250 [RM]. The RM had applied for an order declaring it to be the owner of extracted, processed gravel that was stockpiled on land owned by Ter Keurs and for a reasonable amount of time to remove it from the land. The Chambers judge determined there was no genuine issue requiring a trial, then proceeded to deal with the application on its merits, concluding the RM was the lawful owner of the processed gravel. [ 2 ] Ter Keurs identified numerous grounds of appeal in the notice of appeal filed with this Court.

Its principal, and indeed threshold ground, that the Chambers judge erred in failing to allow it to cross-examine the RM’s affiants prior to hearing argument on the

summary judgment application. For the reasons that follow, I would allow the appeal on this basis and set aside the

summary judgment decision. Given this result and the fact the matter will be remitted for another

summary judgment application or trial, it is unnecessary to express an opinion on the remaining grounds of appeal. II. Background [ 3 ] The root issue before the Chambers judge concerned an

interpretation of the terms of an agreement between the parties relative to the RM’s right to extract gravel and stockpile it on land owned by Ter Keurs. Since the agreement in question dates back to an arrangement between the RM and the previous owner of the land and, to some extent depends on the terms of a previous agreement, some background is in order. [ 4 ] On August 6, 1987, the former owner of the land in question, Alvin Kelln, entered into a ten-year lease agreement with James Bleackley and Sherman Stenson [1987 Agreement], whereby Messrs.

Bleackley and Sherman were granted the exclusive right to excavate, sift, process, remove and sell all sand and gravel as may be found on or beneath the land, and, during the term of the 1987 Agreement, to “stockpile any sand and gravel on the said land”. The land encompassed by the 1987 Agreement was

section 31-24-23- W2 [Land]. Messrs. Bleackley and Sherman were obliged by the terms of the 1987 Agreement to pay Mr. Kelln thirty-five cents for every cubic yard of gravel removed from the Land with “such payment to be made thirty (30) days after removal of the said sand or gravel”. [ 5 ] A year later, in May 1988, Messrs. Bleackley and Sherman assigned their interest in the 1987 Agreement to the RM. According to the affidavit of Mr.

Kelln filed in these proceedings, the assignment extended the term of the “lease” from ten to twenty years and permitted the RM to excavate, process and remove sand and gravel as well as to stockpile it on the Land. [ 6 ] Mr. Kelln and Marlene Kelln entered into a new agreement with the RM, entitled the Gravel Removal Agreement [Removal Agreement], on April 25, 2007. Pursuant to its terms, the Kellns purported to “lease” to the RM all of their “rights, title and interest in and to all sand and gravel within, upon or under the said land for the term and pursuant to the provisions herein set forth”.

To exercise these rights, the RM was granted the right to enter upon the Land to “test, search for, dig and carry away such sand, gravel or stone deposits found in any part of the lands as it may desire, and to use or dispose of same as it may desire”. [ 7 ] Other terms of significance contained in the Removal Agreement include the following:

(

a) on expiration of the Removal Agreement, the RM had the right to “remove any of its fixtures within a reasonable period asagreed to by both parties”; (

b) the amount payable for extracted sand and gravel increased from thirty-five cents per cubic yard to one dollar per cubic yardof sand, gravel or stone deposits “removed from the land by the Tenant, payable following the excavation of the gravel during eachconsecutive year of the Term of the Agreement and no later than December 31 of each year”; (

c) payment for the “amount owing for the stockpiled materials” from the previous agreement was to be made at the rate set bythe 1987 Agreement; and (

d) the RM was permitted to “stockpile any sand and gravel on the said land” at any time during the term of the RemovalAgreement. [8] The Kellns sold the Land to Ter Keurs in October 2014 and assigned their rights as “landlord” under the RemovalAgreement to Ter Keurs as the new owner. [9] In the last year of the Removal Agreement, the RM extracted a large quantity of gravel from the Land and arranged to haveit processed on site by an independent third party gravel processor.

Consistent with past practice, the RM left this processed gravel on theLand but paid Ter Keurs what it considered to be the full amount due pursuant to the terms of the Removal Agreement. [10] In accordance with its terms, the Removal Agreement was set to expire on April 4, 2017. The RM and Ter Keurs engaged in anumber of conversations leading up to the expiration date of the Removal Agreement about renewing their arrangement. However, thenegotiations did not go well and the parties were unable to arrive at a consensus.

Then, on April 4, 2017, Ter Keurs abruptly notified theRM in writing that it did not intend to extend the term of the Removal Agreement beyond the expiration date and, importantly, expresslyprohibited the RM from attending on its Land after that date to remove any of the stockpiled, processed gravel. [11] It is common ground between the parties that (

i) the RM had paid Ter Keurs the sum of $137,300 on January 14, 2016, for137,300 cubic yards of extracted, processed gravel that had been stockpiled on the Land, and (ii) as of April 4, 2017, roughly 109,000cubic yards of extracted, processed gravel remained on the Land. [12] The RM commenced an action against Ter Keurs with ownership of the stockpiled gravel the central issue in the parties’dispute.

The RM then moved for an expeditious resolution by way of an application for an order declaring it to be the rightful owner ofthe extracted, processed gravel stockpiled on the Land and a vesting order in relation to it. The RM also sought an order restraining TerKeurs from removing, disposing or otherwise dealing with the processed gravel that had been stockpiled on the Land. [13] For a variety of reasons, the relief sought by the RM was denied but the Queen’s Bench judge who heard the matter left theproverbial door open for the possibility of a

summary judgment application to be brought as an expeditious means to resolve the parties’dispute. [14] The RM then recast its approach as an application for

summary judgment pursuant to Rule 7-2 of The Queen’s Bench Rules.The RM filed six affidavits in support of the relief sought. A great deal of the RM’s affidavit material touched upon its practice inrelation to how it historically used, measured and paid for the gravel and in relation to use of a third party processor to crush, process,measure and stockpile the gravel on site. Mr. Magel, the Reeve of the RM, deposed to the differences between the 1987 Agreement andthe Removal Agreement and specifically deposed to how those changes were beneficial to the RM. Mr.

Magel also deposed to theexcessive cost and inefficiencies the RM would have to bear if it was required to remove the processed gravel from the Land before itwas actually needed. He spoke generally about the history of stockpiling processed gravel on the Land and the mutual benefits of doingso. [15] Mr. Kelln, the previous owner of the Land, swore an affidavit supportive of the RM’s position.

In it, he recounted hishistorical dealings with the RM and set out his understanding of the differences between the 1987 Agreement and the RemovalAgreement with regard to when payment was to be made and the parties’ arrangement for stockpiling gravel. He concluded with whatcould only be described as a statement of law or an irrelevant statement of what he believed about ownership of the extracted gravel.

Atparagraph 17, he said: “As a landlord and in particular the landlord to the RM for the last 26 years it was my understanding, belief andposition that the gravel processed at the sole cost of the RM belonged to the RM and not me”. [16] When the matter got before the Chambers judge, the RM argued the Removal Agreement was in substance a profit à prendrepursuant to which it acquired ownership in the gravel at the moment in time when the gravel is severed from the soil. The RMmaintained its ownership rights were unaffected by the expiration of the Removal Agreement.

While the RM conceded the extracted,processed gravel cannot remain on the Land indefinitely, it sought a reasonable period of time to haul it away and the right to continue tostockpile it on the Land in the meantime. The RM relied on the decision in Saskatoon Sand & Gravel Ltd. v Steve (1973), (SK KB), 40 DLR (3d) 248 (Sask QB) [Saskatoon Sand & Gravel], and the cases that have followed Saskatoon Sand & Gravel, insupport of its position. [17] Ter Keurs took a dramatically different position.

It argued that, pursuant to the terms of the Removal Agreement, ownershipin the extracted, processed gravel stockpiled on the Land only passed to the RM when it was physically removed and hauled away fromthe Land. Furthermore, it argued, when the Removal Agreement expired, the RM’s rights under the Removal Agreement came to an end,which meant the RM no longer had any right to enter on the Land or to access the stockpiles of processed gravel.

Ter Keurs’ bottom-lineposition before the Chambers judge and this Court on appeal was quite simple: the stockpiled gravel became its property upon theexpiration of the Removal Agreement and the RM has no further or residual rights under the Removal Agreement to the processedgravel, to stockpile it or to enter on the Land to remove it. [18] In response to the RM’s

summary judgment application, Ter Keurs sought an adjournment for additional time to marshalevidence in response to the RM’s application and for an order striking the affidavit of Mr. Kelln in its entirety and portions of the fiveother affidavits on the footing that much of the material was either irrelevant or argumentative. If the affidavits were not struck as

requested, Ter Keurs sought an order permitting it to cross-examine the RM’s affiants. The basis for its application is set out in its notice of application as follows: ... 7. In its application for

summary judgment, the Plaintiff seeks to introduce parole evidence in order to attempt to reach a different conclusion. The Plaintiff has adduced a very significant amount of affidavit evidence pertaining to the negotiations for the Gravel Extraction Agreement, the representations made during the said negotiation, and the course of conduct between parties to the antecedent gravel agreements over the preceding decades. The evidence the Plaintiff seeks to adduce touches on the central issue of this litigation. ... 9.

The Defendants were not a party to these negotiations, nor a party to the prior course of dealings between the prior owners of the land and the prior interest holders. The defendants are accordingly not in a position to offer evidence directly in opposition to the majority of the assertions made in the materials filed, as Jan and Gerrit Ter Keurs were not present in these meetings or interactions, and were in fact not present in Saskatchewan at the time. The only possible way of assessing credibility of the foregoing evidence is to cross examine [ sic ] the deponents on their statements. 10.

This evidence of matters outside of the four corners of the contract must be assessed for credibility, and is not the proper subject of an application for

summary judgment. Rule 6-13 permits cross-examination of a deponent with respect to an affidavit filed with the Court, and Rule 7-3(2) expressly contemplates cross-examination of the deponents with respect to their affidavits in the context of an application for

summary judgment. III. decision of the Chambers judge [ 19 ] The RM’s application for

summary judgment and Ter Keurs’ application for procedural relief were heard together. Somewhat surprisingly, the Chambers judge who heard the matter did not rule on any portion of the Ter Keurs application or, for that matter, even comment on it in her written decision (see: Last Mountain Valley (Rural Municipality) v Ter Keurs Bros. Inc. , 2018 SKQB 58 ). Presumably, the Chambers judge found it unnecessary to address these matters because she had concluded the substantive issue boiled down to a matter of contractual

interpretation, which, she said, was a matter of law that did not require evidence beyond the Removal Agreement itself. This sort of reasoning also played into her determination that there was no genuine issue requiring a trial. All of this is found at paragraph 3 of the decision: Rule 7-5(1)(

a) of The Queen’s Bench Rules authorizes a

summary judgment procedure if the court is satisfied that there is no genuine issue requiring a trial. In this case, it is abundantly clear that the

summary judgment procedure is an appropriate means of expeditiously resolving the primary issue between the parties. Indeed, the primary issue (as well as aspects of the second issue) could have been dealt with under Rule 7-1. This Rule allows for a point of law in an action to be determined by a judge in chambers if that determination would dispose of all or part of a claim, substantially shorten the trial, or save expense. The primary issue in this case, and much of the second issue, are matters of law that involve the proper

interpretation of a contract. They do not require a standard trial. For the most part, they do not even require evidence beyond the contents of the Gravel Agreement. (Emphasis added) [ 20 ] The Chambers judge then dealt with the application on its merits. She adopted Saskatoon Sand & Gravel and applied it to the terms of the Removal Agreement, concluding (

i) the RM was the owner of all of the processed gravel currently stockpiled on the Land, (ii) Ter Keurs should have given the RM reasonable time to remove the stockpiled gravel following expiration of the Removal Agreement, (iii) by wrongly claiming ownership in the stockpiled gravel and preventing the RM from accessing the Land to remove it, the actions of Ter Keurs rendered its revocation of the RM’s residual licence to store and stockpile gravel ineffective, and (iv) the issue of reasonable notice to remove and compensation (if any) to Ter Keurs if the RM is unable to remove the stockpiled gravel within the period determined by the court was deferred to another

summary judgment application or trial if necessary. Finally, the Chambers judge ruled that until further order, and subject to the RM giving Ter Keurs 48 hours’ notice, the RM had a residual licence to enter the Land for the purpose of removing the stockpiled gravel. IV. ISSUES [ 21 ] In seeking to overturn the lower court decision, Ter Keurs advanced numerous grounds of appeal. However, for the reasons explained below, it is only necessary to address the first ground, that is, whether the Chambers judge erred by proceeding with the

summary judgment application on its merits without first giving Ter Keurs the right to cross-examine the RM’s affiants on their affidavits. V. the standard of review [ 22 ] In broad terms, the bottom-line decision made in the court below was a final decision in relation to the issue of ownership of the stockpiled gravel. Questions of law in relation to such matters are assessed on a correctness standard (see: Housen v Nikolaisen , 2002 SCC 33 , [2002] 2 SCR 235 [ Housen ]). [ 23 ] Absent an error of law, the exercise of powers under the

summary judgment process attracts deference. A determination of whether there exists a genuine issue requiring trial is a question of mixed fact and law. Where there is no extricable error in principle, findings of mixed fact and law should not be overturned absent palpable and overriding error (see: Housen ; Hryniak v Mauldin , 2014

SCC 7 at paras 81–84 , [2014] 1 SCR 87 [ Hryniak ]; Deren v Sask Power , 2017 SKCA 104 at para 41 ). [ 24 ] The fundamental issue raised by the appellant in this appeal is whether the Chambers judge erred in failing to grant Ter Keurs the right to cross-examine the RM’s affiants before moving on to address the merits of the

summary judgment application. Whether to permit cross-examination on an affidavit is a discretionary decision and, as such, attracts a measure of deference. That is, an appellate court should only interfere with a discretionary decision if the Chambers judge erred in principle, misapprehended or overlooked material evidence, took irrelevant factors into consideration, failed to act judicially or reached a decision that was so clearly wrong that it amounts to an injustice (see: Rimmer v Adshead , 2002 SKCA 12 , [2002] 4 WWR 119; Saskatchewan Crop Insurance v McVeigh , 2018 SKCA 76 ). VI. Analysis A.

Did the Chambers judge err in failing to grant Ter Keurs the right to cross-examine the RM’s affiants on the affidavits filed in these proceedings prior to hearing the

summary judgment application? [ 25 ] To properly address this issue requires an understanding of the fundamental principles relating to cross-examination on affidavits in the

summary judgement context and the law relating to

interpretation of contracts. I will deal with each in turn. 1. The

summary judgment process and cross-examination on affidavits [ 26 ] It is not apparent from the Court of Queen’s Bench file or from the written decision below how the Chambers judge dealt with and resolved Ter Keurs’ application to cross-examine the RM’s affiants. Interpreted most favourably, the Chambers judge appears to have been of the view that it was unnecessary to make a ruling in relation to the relief sought by Ter Keurs because the question raised by the RM’s

summary judgment application concerned “matters of law that involve the proper

interpretation of a contract”, which “[f]or the most part ... do not even require evidence beyond the contents of the Gravel Agreement” (at para 3). [ 27 ] It is settled law that a party does not have an automatic or inherent right to cross-examine an affiant on his or her affidavit (see, for example: Wallace v Canadian National Railway , 2009 SKQB 178 , 338 Sask R 174; Crown & Hand Pub Ltd. v Bank of America Corporation , 2013 SKQB 348 , 430 Sask R 80).

A party making a request of this nature must establish that the cross-examination will assist in resolving the issue before the court and not result in an injustice. Granting leave to cross-examine on an affidavit is a discretionary remedy. [ 28 ] These general principles hold true in a

summary judgment context (see: Regional Tire Distributors (Saskatchewan) Inc. v Quality Tire Service Ltd. , 2016 SKQB 411 [ Regional Tire ]). As Barrington-Foote J. (as he then was) commented in that case: while the

summary judgment rules do not specifically provide for the right to cross-examine on affidavits filed by the moving party, the wording, structure and intent of Rule 7-3 contemplates the possibility of cross-examination taking place. The Rule in question provides: Evidence on application 7-3

(1) A response to an application for

summary judgment must not rely solely on the allegations or denials in the respondent’s pleadings, but must set out, in affidavit material or other evidence, specific facts showing that there is a genuine issue requiring a trial.

(2) The Court may draw an adverse inference from the failure of a party to cross-examine on an affidavit or to file responding or rebuttal evidence.

(3) An affidavit for use on an application for

summary judgment may be made on information and belief as provided in rule 13-30, but, on the hearing of the application, the Court may draw an adverse inference from the failure of a party to provide the evidence of any person having personal knowledge of contested facts. [ 29 ] As is apparent from the wording of Rule 7-3(1), when faced with a

summary judgment application a responding party is expressly cautioned not to rely solely on allegations or denials contained in its pleadings, but to “set out, in affidavit material or other evidence, specific facts showing that there is a genuine issue requiring a trial”. In very pointed terms, Rule 7-3(2) goes on to alert a responding party to the possibility of a court drawing an adverse inference where the responding party fails to cross-examine on an affidavit.

In this way, Rule 7-3(2) signals the possibility of the responding party cross-examining an affiant in order to demonstrate that a genuine issue requiring a trial is evident from the circumstances of the case. Whether it is desirable to do so, of course, depends on the issues and the evidence put forth by the moving party. [ 30 ] To be clear, though, Rule 7-3 does not provide a stated right to cross-examine the affiants of the moving party. Nonetheless, because a party responding to a

summary judgment is obliged to “put its best foot forward”, these considerations, generally speaking, weigh in favour of permitting cross-examination. As Barrington-Foote J. explained in Regional Tire : [9] This Rule, including sub-rule 7-3(2), reflects the principle that a party responding to a

summary judgment application must put its best foot forward. That principle weighs in favour of permitting cross-examination, as does the fact that a

summary judgment application is intended to dispose of all or part of the claim. [ 31 ] Similarly, in Casbohm v Winacott Spring Western Star Trucks , 2018 SKQB 15 at para 64 [ Casbohm ], Kalmakoff J. stated:

The “best evidentiary foot” properly includes such “affidavit and other evidence” as will permit the judge to reach a fair and justdetermination based on that evidence alone (see Tchozewski v Lamontagne, 2014 SKQB 71, at para 30, 440 Sask R 34 [Tchozewski]). Inthe context of a

summary judgment application, in my view, this clearly contemplates such “other evidence” as read-ins from questioningor the transcripts from cross-examination on the affidavits filed in support of the application. (Emphasis added) [32] Whether to permit cross-examination is a case-specific decision. Factors guiding this decision include the proportionalityprinciple expressed in Rule 1-3(4): 1-3(4) Resolving a claim justly in a timely and cost effective way includes, so far as is practicable, conducting the proceeding in waysthat are proportionate to: (

a) the amount involved in the proceeding; (

b) the importance of the issues in dispute; and (

c) the complexity of the proceeding. [33] Other factors may include the need to test any conflict in the evidence, the need to allow for exploration of specific issues, andthe possibility that evidence generated by cross-examination may actually assist parties in deciding whether to even proceed by way ofsummary judgment (Regional Tire at para 12). On the other hand, there may be occasions where the purpose of cross-examination is notself-evidently to facilitate resolution, but to thwart it.

Courts must be alert to “the need to discourage conduct that unnecessarily orimproperly delays proceedings or unnecessarily increases their costs” (Casbohm at para 62; see also: Regional Tire at para 11). Wherecross-examination is considered unlikely to assist in resolving the substantive issues, or is little more than a fishing expedition, cross-examination will be denied (Wells v General Motors of Canada Company, 2018 SKQB 253). [34] The bottom line to be emphasized here is that the evidence placed before the court on a

summary judgment application mustgive the judge hearing it the confidence to know that the matter can be justly and fairly resolved. As Kalmakoff J. noted in Casbohm: [66] ... The best foot forward principle, as I interpret it, requires an applicant to provide sufficient evidence to permit the judgehearing the

summary judgment application to comfortably decide the necessary issues, rather than leaving the judge to speculate aboutwhether there is better evidence available. In my view, the decisions in Tchozewski, Surespan, Jardine v Saskatoon Police Service, 2017SKQB 217, and Viczko v Choquette, 2016 SKCA 52, 476 Sask R 273 all stand as authority for the proposition that the “best footforward” principle requires the parties to make efforts to ensure that the affidavits and “other evidence” address the issues ascomprehensively as possible within the context of a

summary judgment application, to give the judge hearing the matter confidence thatthe matter can be justly and fairly resolved on that basis. Sometimes that will require cross-examination on affidavits before the partiesproceed to the hearing of the

summary judgment application. [35] Framed in the context of the matter under appeal, the Chambers judge who heard this matter was obliged to consider the TerKeurs application to cross-examine the RM’s affiants having regard to Rule 7-3, the “best foot forward” principle, the proportionalityprinciple, the jurisprudence relating to cross-examination of affiants (particularly in a

summary judgment context) and (as discussedbelow) the issues that emerged from the pleadings. In the end, although it was a discretionary decision, it was one which had to havebeen made with these principles in mind. Unfortunately, it does not appear as though any of this analysis was undertaken by theChambers judge. 2. Principles governing contractual

interpretation [36] The Chambers judge correctly identified ownership of the stockpiled gravel as the central issue presented by the pleadingsand that the answer to this question was to be discerned from an

interpretation of the Removal Agreement. Thus, the law relating tocontractual

interpretation was key to her analysis. In this respect, it was therefore incumbent on the Chambers judge to have analyzed theRemoval Agreement utilizing the interpretative principles pronounced by the Supreme Court of Canada in Sattva Capital Corp. vCreston Moly Corp., 2014 SCC 53, [2014] 2 SCR 633 [Sattva]. [37] Prior to Sattva,

interpretation of a contract was based on the objective intentions of the parties with “reference to the words[the parties] used in drafting the document, possibly read in light of the surrounding circumstances which were prevalent at the time. ...Evidence of one party’s subjective intention has no independent place in this determination” (Eli Lilly & Co. v Novopharm Ltd., (SCC), [1998] 2 SCR 129 at para 54 [Eli Lilly]). Where an agreement was unambiguous on its face, resort to extrinsicevidence was unnecessary (at para 55). [38] Sattva rejected the traditional approach to contractual

interpretation reflected in Eli Lilly and the long line of decisions thathad held to similar effect. Speaking for the Court, Rothstein J. in Sattva adopted an expanded, fact-based approach to contractualinterpretation, stating: [47] Regarding the first development, the

interpretation of contracts has evolved towards a practical, common-sense approach notdominated by technical rules of construction. The overriding concern is to determine “the intent of the parties and the scope of theirunderstanding” (Jesuit Fathers of Upper Canada v. Guardian Insurance Co. of Canada, 2006 SCC 21, [2006] 1 S.C.R. 744, at para. 27,per LeBel J.; see also Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC 4, [2010] 1 S.C.R. 69, atparas. 64-65, per Cromwell J.).

To do so, a decision-maker must read the contract as a whole, giving the words used their ordinary andgrammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract.Consideration of the surrounding circumstances recognizes that ascertaining contractual intention can be difficult when looking atwords on their own, because words alone do not have an immutable or absolute meaning: No contracts are made in a vacuum: there is always a setting in which they have to be placed. ... In a commercial contract it is certainly

right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating. ( Reardon Smith Line , at p. 574, per Lord Wilberforce) [48] The meaning of words is often derived from a number of contextual factors, including the purpose of the agreement and the nature of the relationship created by the agreement (see Moore Realty Inc. v. Manitoba Motor League , 2003 MBCA 71 , 173 Man.

R. (2d) 300, at para. 15 , per Hamilton J.A.; see also Hall, at p. 22; and McCamus, at pp. 749 - 50). As stated by Lord Hoffmann in Investors Compensation Scheme Ltd. v. West Bromwich Building Society , [1998] 1 All E.R. 98 (H.L.) : The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words.

The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. [p. 115] (Emphasis added) [ 39 ] In practical effect, adoption of a common sense approach to the

interpretation of contracts means that (

i) the judicial exercise is no longer dominated by technical strictures, and (ii) evidence concerning the surrounding circumstances known to the parties at the time they entered into the contract is generally admissible with admission no longer restricted to instances of contractual ambiguity. What this means, the Court stated, is that contractual

interpretation is to be regarded as a question of mixed fact and law: [50] ... Contractual

interpretation involves issues of mixed fact and law as it is an exercise in which the principles of contractual

interpretation are applied to the words of the written contract, considered in light of the factual matrix. [ 40 ] That said, Rothstein J. cautioned that even though background facts can “deepen a decision-maker’s understanding of the mutual and objective intentions of the parties as expressed in the words of the contract” (at para 57), the factual matrix cannot overwhelm the words of the contract. [ 41 ] A second important development ushered in by Sattva relates to the standard of review. Under the former approach, the question of contractual

interpretation was categorized as a pure question of law reviewable on a standard of correctness. But since this is now an exercise in which the principles of contractual

interpretation are applied to the words of the written contract – in light of the factual matrix – issues of mixed fact and law are engaged. As such, it will attract a deferential standard of review from appellate courts. [ 42 ] Even so, Rothstein J. recognized there may be instances where it was possible to identify an extricable question of law from what initially was characterized as a question of mixed fact and law (at para 53). He provided the following examples of when this might be apparent: [53] ... Legal errors made in the course of contractual

interpretation include “the application of an incorrect principle, the failure to consider a required element of a legal test, or the failure to consider a relevant factor” ( King , at para. 21). Moreover, there is no question that many other issues in contract law do engage substantive rules of law: the requirements for the formation of the contract, the capacity of the parties, the requirement that certain contracts be evidenced in writing, and so on. [ 43 ] Extricable questions of law in disputes over contractual

interpretation are, however, rare and the courts should exercise caution in characterizing the issue at hand as an extricable questions of law (at paras 54 and 55). [ 44 ] To summarize in relation to the matter under appeal, the Chambers judge was tasked with interpreting the Removal Agreement. To do so, she had to discern what the parties had agreed to when they entered into the Removal Agreement in 2007 on three fundamental issues: (

i) whether ownership in the extracted gravel passed to the RM, and if so, when it passed; (ii) whether the RM had the right to stockpile extracted gravel on the Land; and (iii) the rights of the parties to the extracted gravel and the right to stockpile gravel after the Removal Agreement expired. In order to properly interpret the terms of the Removal Agreement in relation to these issues, it was incumbent on the Chambers judge to have utilized the interpretative approach pronounced by the Supreme Court in Sattva . 3.

Should the trial judge have permitted cross-examination in this case? [ 45 ] With those legal principles in mind, I now turn to whether the Chambers judge erred in failing to permit cross-examination on the RM’s affidavits before going on to deal with the

summary judgment application on its merits. As mentioned above, even though the two applications had been heard at the same time (i.e., the RM’s for

summary judgment and Ter Keurs’ to strike affidavits or allow cross-examination), it is not apparent from the record or the written reasons that the Chambers judge dealt squarely with the relief sought by Ter Keurs. [ 46 ] Instead, the Chambers judge turned her mind to the

summary judgment process and the pleadings. She was satisfied the

summary judgment process was amenable to the issues before her because it engaged “a point of law” and that the issues concerned “matters of law that involve the proper

interpretation of a contract” (at para 3). Framed in this way, the Chambers judge was satisfied a trial was unnecessary and that further evidence was not required in order for her to interpret the terms of the Removal Agreement. [ 47 ] As mentioned, in support of its position that the Removal Agreement should be interpreted as a profit à prendre and not a true lease, the RM filed a number of affidavits touching on negotiations that had taken place with respect to the original “lease” agreement and concerning the history and dealings with the Land over the years.

Ter Keurs was at an obvious disadvantage in responding to the RM’s evidence because it had only acquired ownership of the Land and an assignment of Mr. Kelln’s rights under the Removal Agreement in 2014. Using these affidavits, the RM attempted to fashion an argument favouring its

interpretation of the Removal Agreement largely based on background information and a pattern of dealing that Ter Keurs was not a party to. [ 48 ] The Chambers judge recognized that the facts leading up to the parties’ dispute had been primarily provided through the affidavits filed by the RM. As to the relative absence of evidence from Ter Keurs, she remarked: “This is to be expected as the defendant

[Ter Keurs] was not involved with the Land or the [Removal Agreement] until 2014” (at para 4).

In spite of Ter Keurs’ lack of involvement until 2014, the Chambers judge nonetheless found the pre-2014 facts uncontroverted and accepted them outright, albeit she also considered them irrelevant to a determination of the issues because, as she stated, the “Gravel Agreement speaks for itself” (at para 4). [ 49 ] In spite of how she viewed the pre-2014 state of affairs (that is to say “irrelevant”) and cast the matter before her as strictly a question of law, the Chambers judge nonetheless commented on some of the facts in relation to how she framed her reasoning on the issues.

For instance, she noted the parties to the 1987 Agreement operated on the basis that payment to the landlord was only required when the processed gravel was actually hauled away from the Land. She also commented on the change to the arrangement with respect to the timing of the tenant’s obligation to pay the landlord: [7] … Payments under the Gravel Agreement were now to be made upon the gravel being extracted from the ground and crushed rather than 30 days after the crushed gravel was physically removed from the site.

This change resulted in payment to the landlord being based on the processor’s records of the quantity of gravel processed rather than the records of the contractor that hauled the processed gravel off site. [ 50 ] An examination of the affidavits of Mr. Kelln and Mr. Magel reveal them to contain a fair bit of information with regard to the RM’s relationship with Mr. Kelln, notably how Mr. Kelln and the RM had treated issues of severance of the gravel, timing of payment, ownership of the extracted gravel and the right to stockpile extracted gravel.

These affidavits are also vitally important for the insight they provided into what Mr. Kelln and the RM had in mind when the parties negotiated the new arrangement reflected by the terms of the Removal Agreement. Obviously, the positions of the parties at the time of the negotiations coupled with their reasoning behind the changes to the Removal Agreement is information known to Mr. Kelln and the RM, but clearly not Ter Keurs. The position advanced by the RM in the court below, and reflected in its brief of law, demonstrates how it used this “historical” information to support an

interpretation of the Removal Agreement favourable to it, that is, that ownership in the gravel passed to the RM at the time of extraction and not when it was subsequently removed from the Land. The RM contended this

interpretation reflects the parties’ understanding of the right to stockpile the extracted gravel for an indefinite period of time. [ 51 ] Finally, there was substantial evidence filed by the RM with regard to its dealings with Ter Keurs after the latter had assumed ownership of the Land in 2014, particularly in relation to possible renewal of the Removal Agreement and the events leading up to and in the immediate aftermath of the expiration of the Removal Agreement. Ter Keurs provided some responding affidavit evidence on these points.

I am satisfied that a great deal of the evidence that had been filed by the parties on these points was controverted. [ 52 ] With that evidentiary backdrop in mind, I return to Sattva . The Supreme Court was quite clear: contractual

interpretation is no longer an exercise dominated by technical rules of construction absent (albeit rare) an extricable question of law. Courts must take the surrounding circumstances of a contract – that is the factual matrix – into account when interpreting a written agreement (at para 46). The overriding concern here is to determine the intent of the parties and the scope of their understanding. The purpose, genesis, context, and relationship of the parties are important considerations in this interpretative exercise (at paras 47 and 48). [ 53 ] That the Chambers judge approached the

interpretation of the Removal Agreement as a pure question of law determined solely from the words of the Agreement is an error of law. Sattva represents a significant shift in the analytical paradigm with regard to

interpretation of contracts. It now requires courts to consider the surrounding circumstances and ascertain the contractual intention of the parties, which understandably changes the approach from a question of law to a question of mixed fact and law.

Given that the Chambers judge needed to understand the circumstances surrounding the parties’ intentions when they entered into the Removal Agreement in order to properly interpret its terms, it was incumbent on her to fashion a process that would allow Ter Keurs to both probe the credibility of the RM’s affiants and explore the circumstances and issues that gave rise to the Removal Agreement. [ 54 ] It was all the more important to do so in view of the fact that, even though Ter Keurs was not a party to either the 1987 Agreement or the Removal Agreement, it was nonetheless required to put its “best foot forward” in the context of

summary judgment proceedings. Permitting cross-examination on the affidavits was a proportionate and fair means for Ter Keurs to do just that without the necessity of a full-blown trial. In light of Sattva and the “best foot forward” principle applicable to

summary judgment applications, it is clear the Chambers judge should have allowed cross-examination of the RM’s affiants. Given this error, the decision under appeal must be set aside in its entirety. [ 55 ] In coming to this conclusion, I am not unmindful of how

summary proceedings can truncate otherwise lengthy and expensive civil litigation and thereby enhance access to justice. There is no question that courts must be open to a more flexible approach to promoting timely and affordable access to the civil justice system and that

summary judgment rules are to be interpreted broadly, favouring proportionality and fair access to affordable, timely and just adjudication of claims. However, at bottom, a judge who hears the matter must not be too eager to embrace a process that superficially appears to be more expeditious and less expensive if, in the given circumstances,

summary judgment is not capable of achieving a fair and just adjudication of the issues. The Supreme Court expressed this underlying concern in Hryniak in the following way: [50] These principles are interconnected and all speak to whether

summary judgment will provide a fair and just adjudication. When a

summary judgment motion allows the judge to find the necessary facts and resolve the dispute, proceeding to trial would generally not be proportionate, timely or cost effective. Similarly, a process that does not give a judge confidence in her conclusions can never be the proportionate way to resolve a dispute. It bears reiterating that the standard for fairness is not whether the procedure is as exhaustive as a trial, but whether it gives the judge confidence that she can find the necessary facts and apply the relevant legal principles so as to resolve the dispute. B.

Other grounds of appeal [ 56 ] As this matter will have to be adjudicated in the Court of Queen’s Bench with a more robust evidentiary foundation, it is both unnecessary and inappropriate to address the balance of the issues raised by Ter Keurs on its appeal.

VII. conclusion [ 57 ] The appeal is allowed and the

summary judgment is set aside. Ter Keurs shall have its costs assessed in the usual way. “Schwann J.A.” Schwann J.A. I concur. “Caldwell J.A.” Caldwell J.A. I concur. “Schwann J.A.” for Ryan-Froslie J.A.