Ter Keurs Bros. Inc. Appellant (Defendant) v. Rural Municipality of Last Mountain, 2021 SKCA 55

Court of Appeal for Saskatchewan Docket: CACV3586 Citation: Ter Keurs Bros. Inc. v Last Mountain Valley (Rural Municipality) , 2021 SKCA 55 Date: 2021-04-09 Between: Ter Keurs Bros. Inc. Appellant (Defendant) And Rural Municipality of Last Mountain Valley No. 250 Respondent (Plaintiff) Before: Ottenbreit, Caldwell and Schwann JJ.A. Disposition: Appeal dismissed Written reasons by: The Honourable Mr. Justice Ottenbreit In concurrence: The Honourable Mr.

Justice Caldwell The Honourable Madam Justice Schwann On appeal from: 2020 SKQB 37 , Regina Appeal heard: November 16, 2020 Counsel: Kevin Mellor and Nicolas Brown for the Appellant Tarissa Peterson for the Respondent Ottenbreit J.A. I. INTRODUCTION [ 1 ] Ter Keurs Bros.

Inc. [TK] appeals the decision of the Court of Queen’s Bench Chambers judge dated February 11, 2020, declaring the Rural Municipality of Last Mountain Valley No. 250 [RM] to be the owner of certain sand and gravel [collectively “product”] stockpiled on land owned by TK [stockpile] and granting other relief related to the declaration: Last Mountain Valley No. 250 (Rural Municipality) v Ter Keurs Bros. Inc. , 2020 SKQB 37 [ Chambers Decision ]. [ 2 ] For the reasons hereafter set forth, the appeal must be dismissed. II.

FACTS AND BACKGROUND [ 3 ] On April 25, 2007, the RM executed a ten-year agreement with Alvin Kelln and Marlene Kelln [Gravel Agreement] permitting the RM to excavate, process, stockpile and remove the product from their land located at 31-24-23 W2 [land]. [ 4 ] The Gravel Agreement was short and read in full as follows: 1. LAND:

a) The Landlord grants to the Tenant the right to enter upon all or any part of the following lands:

Section 31 Township 24 Range 23 West of the Second Meridian, Saskatchewan By its servants, agents and employees with machinery, equipment and vehicles 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, and to locate, construct and maintain such roads, buildings, gates, fences, plant machinery and equipment as may be required for the purposes aforesaid, including the processing upon the lands of any of the said sand, gravel or stone deposit.

b) The Landlord hereby leases all his 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. 2. TERM:

a) The term of this Agreement shall be ten (10) years, commencing on the 5th day of April, 2007 and expiring on the 4th day of April, 2017.

b) Upon expiration of this Agreement, the Tenant shall have the right to remove any of its fixtures within a reasonable time period as

agreed to by both parties.

c) At the termination of the term of this Agreement, the Landlord will grant to the Tenant the first right of refusal to rent the said land, such terms and conditions as to be negotiated between the two parties. 3. RENT:

a) The Tenant will pay to the Landlord a fee of $1.00 for each cubic yard of sand, gravel or stone deposits removed from the land by the Tenant, payable following the excavation of the gravel during each consecutive year of the Term of the Agreement and no later than December 31 of each year.

b) The Tenant will pay to the Landlord the amount owing for the stockpiled materials on this land from the previous agreement which expired April 4, 2007 at the rates set in that agreement. The Tenant will have the stockpiles measured for accuracy and their own expense as soon as reasonable access is available (spring weather conditions subside); and that the amount be paid in full within thirty (30) days of this measurement.

c) The Tenant will keep a proper account of all sand and gravel excavated from the land; and at all reasonable times will allow such accounts to be inspected and copied by the Landlord or his agent in that behalf. 4. PURPOSE OF THE AGREEMENT:

a) This Agreement is granted for the purpose of providing the Tenant with a site for the removal of an unlimited amount of sand, gravel and stone deposits, and may be used by the Tenant and its contractors, agents, invitees, employees and representatives (collectively called “Tenant’s representatives”) only for: 1. testing on the lands for sand, gravel and stone deposits; 2. excavation and removal of sand, gravel and stone deposits from the lands; and 3. access to and from the lands for these purposes. All other uses of lands by the Tenant and Tenant’s representatives are prohibited. 5. TENANT’S USE AND RESPONSIBILITIES:

a) The Tenant shall have exclusive right to all sand, gravel or stone deposits on this land free from all encumbrances.

b) The Tenants [ sic ] may at any time during the term of this agreement stockpile any sand or gravel on the said land.

c) The Tenant shall bear the entire costs of the testing of the lands, and the excavation and removal of the sand, gravel or stone deposits in accordance with this Agreement. 6. LANDLORD’S RESPONSIBILITIES:

a) The Landlord covenants and agrees to pay all taxes, rates and assessments that may be assessed or levied against the surface of the said land during the term hereof. 7. SUCCESSION:

a) It is mutually understood and agreed that this Agreement will inure to the benefit of and be binding upon the parties hereto, their heirs, successors and assigns respectively. [ 5 ] In October of 2014, the Kellns sold the land to TK. The sale included an assignment of the Gravel Agreement to TK as landlord. Arend Jan Ter Keurs, one of the principals of TK, acknowledged that, before buying the land, he had reviewed the Gravel Agreement and “it looked okay”.

He understood the Gravel Agreement allowed the RM to excavate, stockpile and remove as much product as it wanted. [ 6 ] In 2014, the RM experienced severe flooding that washed out and damaged its roads. It therefore contracted with a crushing company to extract as much product as the company was able from the land. As a result, it substantially increased the amount of excavation, crushing and storage to ensure a sufficient stockpile was maintained to repair the damage caused to the RM’s roadways. [ 7 ] In February of 2016, Mr.

Ter Keurs became concerned with the amount of product that had been extracted by the RM. He attended an RM council meeting and advised that he did not think it was fair for the RM to “suddenly extract so much gravel just before their contract expired”. Mr. Ter Keurs stated that he told the council of the RM that it should remove all of the product it intended to take from the land before the contract expired and that TK was not in the business of storage.

RM council members present at the meeting stated there was no discussion of any kind with him at the meeting about the RM having to remove its stockpile if the lease was not renewed. [ 8 ] Attempts were made between February 2016 and the beginning of April 2017 by TK and the RM to negotiate a renewal of the Gravel Agreement. The parties could not agree on new pricing for extraction of the product. Moreover, TK requested a fee of $1.00 per yard of product for each year of storage.

The RM advised TK that it could not afford to pay the proposed storage charge. [ 9 ] The RM eventually received a letter from TK on April 4, 2017, the day the Gravel Agreement expired, stating that TK was not renewing the Gravel Agreement and that it was claiming ownership of the product remaining on the land. TK thereafter prohibited the RM from entering the land and erected “No Trespassing” signage.

[10] The product the RM stored on the land varied over the term of the Gravel Agreement from a low of approximately 22,000yards to a high of approximately 110,000 yards for the period of 2007 to 2016. As at April 10, 2017, the stockpile consisted of 109,600yards of crushed gravel on the land, for which the RM had paid a total of $884,453.75. This was the full cost of the extracted butunremoved product as at the date of expiration of the Gravel Agreement. [11] The gravel pit and storage area encompasses no more than approximately five acres of the land.

The RM acknowledged it didnot arrange for the stockpile to be removed from the land prior to the expiration of the Gravel Agreement. III. THE CHAMBERS DECISION [12] The RM took the position before the Chambers judge that it owned the stockpile. TK contended that once the GravelAgreement had expired, so had the RM’s right to stockpile product and that any stockpile left on the land belonged to TK. [13] The Chambers judge indicated that ownership of the stockpile depended on the

interpretation of the terms of the GravelAgreement. She applied the principles of contractual

interpretation set out in Sattva Capital Corp. v Creston Moly Corp., 2014 SCC 53 atparas 47–48, [2014] 2 SCR 633 [Sattva], which held that contractual

interpretation is not confined to the words used in the contract butincludes the factual matrix surrounding the making of it. The Chambers judge indicated that she had to determine what the parties agreedto when they entered into the Gravel Agreement as it related to the ownership of the product and the rights of the RM to stockpile it,particularly after the expiration of the agreement. [14] The Chambers judge determined there was considerable evidence in the parties’ various affidavits to assist her in a properinterpretation of the Gravel Agreement.

She found ownership of the product depended on whether the contractual relationship was for aprofit à prendre. [15] After reviewing the law respecting profit à prendre, especially as set out in Saskatoon Sand & Gravel Ltd. v Steve (1973), (SK KB), 40 DLR (3d) 248 (Sask QB) [Saskatoon Sand], affirmed (1979), (SK CA), 97 DLR(3d) 685 (Sask CA), the Chambers judge concluded: [37] In this case, the essence of the Gravel Agreement was to create an interest in the gravel severed from the soil. There was noevidence that the intention of the parties was that the Gravel Agreement would provide “otherwise”.

The RM had the right to enter theLands, to dig for, sever and stockpile the gravel and to haul away the stockpiled gravel. On the basis of the evidence presented, I find thatwhen the Gravel Agreement was reached, the parties understood and intended that the processed and stockpiled gravel belonged to theRM.

Thus, I conclude, as Bayda J. did in Saskatoon Sand, that the nature of the interest in this case is a profit à prendre. … [39] On the issue of whether the ownership of the gravel reverted to the landowner when the agreement came to an end, Bayda J. said: [23] I now turn to the first alternative argument put forward by the defendants: even if the gravel were at one point owned by theplaintiff, the ownership came to an automatic end on April 1, 1968, and such ownership reverted to the defendants.

The basis for thisassertion is found in the term “This agreement expires April First 1968.” The proper construction to be placed on this term is that on April1, 1968, the plaintiff’s right to enter the defendants’ lands for the purpose of digging for and severing the gravel from the soil wasterminated. The term, however, cannot be said to operate as a conveyance of or as a transfer of the ownership in the severed and stockpiledgravel. To impute to the term a meaning such as that would be to add words to the term or read words into it which are not there.

It is notfor me to rewrite the parties’ contract. [40] Ter Keurs suggests that clause 5(

b) of the Gravel Agreement provides that the parties did not intend for the RM to have stockpileremaining after the Gravel Agreement expired. Ter Keurs asserts that this language precludes stockpiling once the term has ended. I do notfind this conclusion is supported by the words of the document or the surrounding circumstances. Although the Gravel Agreement wouldcertainly preclude the RM from adding gravel to the stockpile, it does not suggest it should not have reasonable time to remove the gravelor that there would be a reversion of ownership to Ter Keurs if it did not.

This would be patently unfair. [16] The Chambers judge found it was unreasonable for TK to assume that once the agreement ended, it automatically became theowner of the stockpile. [17] The Chambers judge next turned to the question of how the RM could remove the stockpile and the time limitations withinwhich it had to do so.

She again found guidance in Saskatoon Sand: [45] This issue was also dealt with in Saskatoon Sand: [30] There is no doubt that the plaintiff by an oral agreement collateral to the written agreement or by an implied term to the writtenagreement (it is not necessary for me to decide which) acquired the right, the licence, to use the defendants [sic] lands for the purpose ofstoring in stockpiles its processed gravel. The right or licence to store is separate and apart from the plaintiffs [sic] express recorded rightto dig for, sever from the soil and haul away the gravel so dug and severed.

It is either a bare (gratuitous) licence or a contractual one. It isnot necessary to decide the category. If the category is the first one, then the licence is revocable at will and the licensee (the plaintiff) isto be given a reasonable time to remove its property, namely, the processed gravel [citations omitted]. [46] If the right to stockpile was a contractual one, then it could be revoked on reasonable notice. If it was a “gratuitous license”, thenTer Keurs was obliged to give the RM a reasonable time within which to remove its stockpiles.

Either way, Ter Keurs did not givereasonable notice to the RM nor did they give it a reasonable time to remove its gravel. Rather, they elected to wrongfully appropriate theprocessed gravel and assert ownership over it on the date the contract expired. They erected “No Trespassing” signs and gave the RMimmediate notice that it was prohibited from entering the Land to remove its property.

[47] Ter Keurs understood that the RM could extract and stockpile as much gravel as it desired. I find that implicit in the Gravel Agreement was an intention by the parties that should the agreement expire before the RM could remove its stockpiles, a reasonable opportunity should be afforded to it to remove the stockpiles. To find otherwise would mean that excavation and extraction would have to cease long before the contract expired so that removal could be effected by that time.

As I said earlier, I am not satisfied that Ter Keurs gave notice in 2016 that the Gravel Agreement would not be renewed and that the RM would have to remove its stockpiles by the expiration date. I find as a fact that negotiations were ongoing up until a few months before the expiration date and that the RM genuinely believed a new agreement would be reached. I also find that even after Mr. Ter Keurs told Mr.

Flavel he did not want to renew the agreement, the negotiations were renewed to some extent with Gerrit. [ 18 ] The Chambers judge then addressed the matter of reasonable notice to be given to the RM to remove the stockpile. She found the RM’s suggestion of five years to be unreasonable. She determined she had insufficient evidence before her to decide what was just and equitable in the circumstances and gave the parties leave to file additional affidavit evidence addressing that issue. [ 19 ] She concluded: [50] In

summary, I order: 1. There shall be a declaration that the RM is the owner of the processed gravel currently stockpiled on the Land; 2. Ter Keurs is required to give the RM reasonable time to remove its stockpiles for processed gravel on the Land; 3. The issues of what constitutes reasonable time for the RM to remove its gravel stockpiles for the Land and any damages that result from its failure to do so are left to be determined by an application brought before me, with further affidavit evidence on the issues and in any manner as the parties may agree; 4.

The RM has the right to enter upon the Land, with 48 hours’ notice to Ter Keurs, for the purpose of removing all or part of its gravel stockpiles without further compensation to Ter Keurs until further court order or written agreement between the parties; … IV. ISSUES [ 20 ] There are three issues in this appeal. All are subsets of whether the Chambers judge erred by misinterpreting the Gravel Agreement: (

a) Did the Chambers judge err by applying the wrong law? (

b) Did the Chambers judge err regarding her conclusion on ownership of the stockpile? (

c) Did the Chambers judge err regarding her conclusion on rights of storage and removal of the stockpile after the termination of the Gravel Agreement? V. ANALYSIS A. Did the Chambers judge err by applying the wrong law? [ 21 ] As a preliminary point, this issue must be evaluated in the context of a previous proceeding in this Court concerning the Gravel Agreement: Ter Keurs Bros. Inc. v Last Mountain Valley (Rural Municipality) , 2019 SKCA 10 , 429 DLR (4th) 269 [ Ter Keurs Bros. 2019 ]. In that proceeding, the RM had successfully obtained a

summary judgment in the Court of Queen’s Bench for the identical relief granted by the Chambers judge in this case. On appeal, this Court found that the Chambers judge had erred in not allowing cross- examination of the RM’s affiants and set aside the decision. It was determined that the error resulted from the Chambers judge not applying Sattva in the

interpretation of the Gravel Agreement and in failing to consider that the surrounding circumstances of the contract were relevant. This Court held that it was incumbent on the Chambers judge to have applied Sattva and sent the matter back for rehearing . That rehearing resulted in the Chambers Decision , which is now being appealed. [ 22 ] The Chambers judge applied Sattva in interpreting the Gravel Agreement. [ 23 ] The Supreme Court of Canada recently summarized the principles of contractual

interpretation set forth in Sattva in Resolute FP Canada Inc. v Ontario (Attorney General), 2019 SCC 60 , 444 DLR (4th) 77: [74] This Court has described the object of contractual

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

interpretation as discerning the parties’ “reasonable expectations with respect to the meaning of a contractual provision” ([ Ledcor Construction Ltd. v Northbridge Indemnity Insurance , 2016 SCC 37 , [2016] 2 SCR 23], at para. 65). In meeting these objects, the Court has signalled a shift away from an approach to contractual

interpretation that is “dominated by technical rules of construction” to one that is instead rooted in “practical[ities and] common-sense” ( Sattva , at para. 47 ). This requires courts to read a contract “as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract” ( ibid .). [ 24 ] In Sattva , Rothstein J. described the role that surrounding circumstances have in the exercise of contractual

interpretation: [58] The nature of the evidence that can be relied upon under the rubric of “surrounding circumstances” will necessarily vary from case

to case. It does, however, have its limits. It should consist only of objective evidence of the background facts at the time of the execution of the contract ([ King v Operating Engineers Training Institute of Manitoba Inc. , 2011 MBCA 80 , 270 Man R (2d) 63], at paras. 66 and 70), that is, knowledge that was or reasonably ought to have been within the knowledge of both parties at or before the date of contracting .

Subject to these requirements and the parol evidence rule discussed below, this includes, in the words of Lord Hoffmann, “absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man” ([ Investors Compensation Scheme Ltd. v West Bromwich Building Society , [1998] 1 All ER 98 (H.L.) ], at p. 114).

Whether something was or reasonably ought to have been within the common knowledge of the parties at the time of execution of the contract is a question of fact. (Emphasis added) [ 25 ] However, the Ontario Court of Appeal in Shewchuk v Blackmont Capital Inc. , 2016 ONCA 912 , 404 DLR (4th) 512, rejected the contention that conduct subsequent to the formation of the contract fell within the definition of surrounding circumstances: [41] In my view, subsequent conduct must be distinguished from the factual matrix .

In Sattva , the Supreme Court stated at para. 58 that the factual matrix “consist[s] only of objective evidence of the background facts at the time of the execution of the contract , that is, knowledge that was or reasonably ought to have been within the knowledge of both parties at or before the date of contracting ” (citation omitted and emphasis added). Thus, the scope of the factual matrix is temporally limited to evidence of facts known to the contracting parties contemporaneously with the execution of the contract.

It follows that subsequent conduct, or evidence of the behaviour of the parties after the execution of the contract, is not part of the factual matrix : see Eco-Zone Engineering Ltd. v. Grand Falls – Windsor (Town) , 2000 NFCA 21, 5 C.L.R. (3d) 55 , at para. 11 ; and King v. Operating Engineers Training Institute of Manitoba , 2011 MBCA 80 , 270 Man.

R. (2d) 63, at para. 72 . … [46] … Evidence of subsequent conduct should be admitted only if the contract remains ambiguous after considering its text and its factual matrix. (Italicized emphasis in original; underlined emphasis added) [ 26 ] This approach has also been followed by this Court (see: Mosten Investments LP v The Manufacturers Life Insurance Company (Manulife Financial) , 2021 SKCA 36 at paras 134 and 180 [ Mosten ]; and Jans Estate v Jans , 2020 SKCA 61 at paras 47–48 , 59 ETR (4th) 53). [ 27 ] In relation to the meaning of particular words, the Court in Sattva said: [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 [Geoff R. Hall, Canadian Contractual

Interpretation Law , 2d ed (Markham, Ont: LexisNexis, 2012)], at p. 22; and [John D. McCamus, The Law of Contracts , 2d ed (Toronto: Irwin Law, 2012)] 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] [ 28 ] Before the Chambers judge, TK accepted that Sattva applied but argued that it was unnecessary to consider any affidavit evidence and that only the terms of the agreement need be considered.

On appeal however, TK now argues the Chambers judge erred by interpreting the Gravel Agreement in accordance with Sattva and by considering the parties’ subsequent dealings. [ 29 ] It now submits the Gravel Agreement must not be interpreted on the basis of the principles set out in Sattva , but rather on the basis of those set in Ledcor Construction Ltd. v Northbridge Indemnity Insurance Co. , 2016 SCC 37 , [2016] 2 SCR 23 [ Ledcor ].

It argues that the Gravel Agreement, as with the contract in Ledcor , is a standard form contract that the RM acquired from the website of the Saskatchewan Association of Rural Municipalities [SARM]. This argument was manifestly not made before the Chambers judge and is, therefore, new in this Court. Moreover, TK resiles from its position taken before the Chambers judge that

interpretation of the Gravel Agreement is a question of mixed fact and law under Sattva . [ 30 ] This Court is generally loath to entertain a wholly new argument on appeal (see: Phillips Legal Professional Corporation v Vo, 2017 SKCA 58 , [2017] 12 WWR 779). The concern is, of course, unfairness to the opposing party presented with the new argument, especially where that party would have wanted to introduce additional evidence in the court below if it had been aware of the issue. However, this is not a concern in this case because the question is simply whether

interpretation of the Gravel Agreement gives rise to questions of law or of mixed fact and law. Additional evidence is not needed. The issue is grounded on the cross-examination of Allan Magel (the Reeve of the RM), who averred that the Gravel Agreement was based on a standard form contract that the RM obtained from SARM. Moreover, the RM has addressed this issue in its factum and the matter was fully argued before this Court. On this basis, I will address this issue. [ 31 ] I am not satisfied that the Gravel Agreement is a standard form contract in the way that Ledcor defines the term. [ 32 ] Ledcor identified an exception to the presumptive rule established by Sattva that contractual

interpretation is a question of mixed fact and law and subject to appellate review on a palpable and overriding error standard of review. Ledcor holds that

interpretation of a standard form contract in the absence of a meaningful factual matrix that is specific to the parties is a question of law subject to a correctness standard of review when certain criteria are satisfied (see para 46). [ 33 ] The issue of contractual

interpretation and the integration of the principles in Sattva and in Ledcor has been recently reviewed in Mosten , where this Court explained the three criteria set out in Ledcor necessary to determine if the contract or contractual provision gives rise to an issue of standard form contract

interpretation reviewable on a correctness standard of review:

[52] … A contract (or issue) is a standard form contract (or an issue of standard form contract

interpretation) for the purposes of appellate review only if three conditions are met. First, there must be an identical or a substantially identical form of contract language capable of standardised use by multiple, different parties. In the overwhelming majority of cases, that means the standard form contractual language at issue will have been entirely reduced to writing. The assertion of an oral, handwritten or typed term or condition or other deviation from standard form text relevant to the issue of

interpretation in question connotes the existence of a meaningful factual matrix specific to the contracting parties, such that the issue of

interpretation is a question of mixed fact and law—i.e., being unique, it lacks precedential value (for example, see Albo v The Winnipeg Free Press , 2020 MBCA 50 at para 18 , [2020] 6 WWR 187). [53] Second, there must be no factual matrix that is specific to the parties to the contract and that is probative of the issue of contract

interpretation. In [John D. McCamus, The Law of Contracts , 3d ed (Toronto: Irwin Law, 2020)], the author describes standard form contracts as follows (at 202–203): In these kinds of situations, the document put forward will typically constitute a standard printed form that the party proffering the document invariably uses when entering transactions of this kind. The form will often be offered on a “take it or leave it” basis. In the typical case, the other party, then, will have no choice but either to agree to the terms of the standard form or to decline to enter the transaction altogether.

Standard form agreements are a pervasive and indispensable feature of modern commercial life. It is simply not feasible to negotiate, in any meaningful sense, the terms of many of the transactions entered into in the course of daily life. … See also MacDonald v Chicago Title Insurance Company of Canada , 2015 ONCA 842 at para 33 , 127 OR (3d) 663; and Corydon Village Mall Ltd. v TEL Management Inc. , 2017 MBCA 8 at paras 30–48 , 407 DLR (4th) 263. [54] Third, the standard form contract must be one that has been or will be repeatedly entered into. [55] These three factors are characteristic of a contract, the

interpretation of which will have precedential value. The

interpretation of a standard form contract or of a standard form clause is always a question of law because the answer has precedential value. That is so because the law and the facts are the same each time the standard form contract language is interpreted. The

interpretation is, accordingly, a finding of law that is subject to appellate review for its correctness. [ 34 ] Where these criteria are not met, Ledcor and Mosten confirm that the

interpretation of even a standard form contract may involve issues of mixed fact and law reviewable on the deferential standard of palpable and overriding error. [ 35 ] In Mosten , the Court explained the role of the court in contractual

interpretation: [71] Regardless of nomenclature, “the role of courts in interpreting contracts is to give effect to the bargain by which the parties intended to be bound”: Ruth Sullivan, Contract

Interpretation in Practice and Theory (2000), 13 SCLR (2d) 369 (QL) at para 24 . As such, when asked to interpret a contract, the court’s principal objectives are to determine whether there was consensus ad idem at the time the parties purportedly made their contract and, if so, what it entailed. [72] In every case, contract

interpretation begins with the words of the contract, whether reduced to writing or not. To give meaningful effect to consensus ad idem , the interpretive process must remain firmly grounded in the language chosen by the parties to govern their relationship. Contextual factors are used to assist with achieving an accurate

interpretation of the contract.

Contextual assistance is gleaned from the contract itself and from the circumstances surrounding its formation, i.e., the factual matrix ( Prenn v Simmonds , [1971] 3 All ER 237 (HL) at 239–240 [ Prenn ] ; and Sattva ). … (Emphasis in original) [ 36 ] The use of extrinsic evidence in the interpretative process was also explained in Mosten : [84] Aggregating this guidance in the most encompassing of terms, relevant extrinsic evidence will include anything that tends to establish the facts known, or facts that reasonably ought to have been known, to all parties at or before the date of contracting and that deepens the interpreting court’s understanding of the mutual and objective intention of the parties as expressed by the words of the contract ( Sattva at paras 57, 58 and 60 ).

Broadly stated, the proper approach to contract

interpretation involves the determination of consensus ad idem on the basis of the text of the contract as a whole together with a matrix of extrinsic evidence that objectively manifests what the parties understood the contested contract text to mean at the time of contract formation. [ 37 ] The Gravel Agreement was based on a draft agreement obtained from SARM. There is no evidence of what the standard clauses would have been because a copy of the draft that had been made available by SARM was not introduced into evidence. It is difficult to say how much of it was similar to the Gravel Agreement.

The Gravel Agreement is bare bones, consisting of seven headings or contractual topics. It is a standard form in the sense that it purports to be a certain kind of agreement, i.e., a gravel agreement. It is more of a template than anything else. However, none of the foregoing compels a conclusion that it is a standard form contract in the sense that correctness necessarily applies in an appeal on its

interpretation. [ 38 ] There was no evidence that the Gravel Agreement was, or could be, described as a contract of adhesion, such as an insurance contract as was the case in Ledcor . In the case of standard form contracts, the parties do not generally negotiate the terms. There is no evidence that the contract was presented to the Kellns as a take-it-or-leave-it proposition by the RM, even if some of it was boilerplate. Indeed, even TK entered into a period of negotiations to renew the Gravel Agreement on different terms.

Moreover, the Gravel Agreement, unlike a contract of adhesion, was provided by the purchaser of the product rather than by the seller as, for example, in the case of an insurance contract. [ 39 ] I am also not satisfied that this is a situation where there would have been no meaningful factual matrix specific to the parties who entered into the Gravel Agreement to assist in the

interpretation of ownership and storage rights. Most certainly there was. This is because in Ter Keurs Bros. 2019 , Mr. Kelln, one of the original parties to the Gravel Agreement, provided an affidavit that appeared to shed some light on the formation of the agreement. However, in the iteration of the case now before this Court, there was no evidence tendered from anyone who had negotiated the agreement regarding that issue.

[40] Last, this is a case not so much about the

interpretation of the existing clauses, but rather about the absence of specific termsthat address the situation in which the parties now find themselves. Although regard must be had to the terms of the Gravel Agreement,the interpretive question revolves around not the meaning of the clauses as a standard form, but the meaning of the existing clauses andabsence of certain clauses insofar is it sheds light on the parties’ intentions as to when ownership of the product passes and any rights ofstorage and access to the land after the end of the term of the agreement. [41] The criteria set out in Ledcor that mandate an

interpretation of an agreement as a standard form contract are, in this case, notmet. Accordingly, on appeal, the Chambers judge’s

interpretation of the Gravel Agreement gives rise to questions of mixed fact and law,which are reviewable on the palpable and overriding error standard under the general principles of Sattva. [42] TK argues that even if the Gravel Agreement is to be interpreted on the basis of Sattva, there is no extrinsic evidence of whatthe parties intended when the it was entered into. TK submits that all the affidavit evidence considered by the Chambers judge concernedevents that took place many years after the Gravel Agreement was signed and does not shed any light on what the RM and the Kellnsintended.

Apart from evidence of renewal negotiations between the RM and TK germane to the issue of storage rights and theappropriateness of an implied term, TK is correct. [43] Based on the jurisprudence set out above, the Chambers judge erred in considering the subsequent dealings in relation to theGravel Agreement as part of the factual matrix surrounding the formation of the contract.

There is just no evidence as to what the originalparties at the time of the formation of the agreement intended on the crucial issues of ownership, storage and removal of the product aftertermination of the lease. [44] The evidence of subsequent dealings between TK and the RM, as outlined by the Chambers judge, concerned the process andamount of excavation of product, as well as negotiations regarding the renewal of the agreement. Although the Chambers judge indicatedthat she found this evidence informed the

interpretation of the agreement, little of it sheds light on the matter of what the parties, by theterms of the Gravel Agreement, intended regarding ownership of the stockpile. In that respect, the Chambers judge erred. However, thaterror is not fatal to her determination of ownership, as I will explain. [45] As well, the subsequent conduct of the parties in respect to renewal negotiations does inform the determination of whether animplied term is necessary regarding the storage of the stockpile after the termination of the Gravel Agreement.

This issue will be dealtwith below. [46] To conclude, on this part of TK’s argument, the Chambers judge erred in using evidence of the subsequent behaviour of theparties to inform the question of their intention when the Gravel Agreement was entered into but she made no palpable and overridingerror in interpreting the Gravel Agreement. B.

Did the Chambers judge err regarding her conclusion on ownership of thestockpile? [47] TK argues that, without evidence of the circumstances informing the ownership of the stockpile and storage after thetermination of the Gravel Agreement those issues must be determined on the basis of only its terms. Although Sattva explains thatsubsequent conduct of the parties can be a consideration where there is an ambiguity in the agreement, this is not a case of ambiguity somuch as the absence of crucial clauses.

Moreover, as mentioned above, the evidence of subsequent conduct between the parties is nothelpful in determining questions of ownership after termination. [48] TK submits that the starting point for any analysis of ownership is The Sand and Gravel Act, RSS 1978, c S-5, s 3 [Act]. TK’sargument respecting the Act does not appear in its factum and was not well developed in oral argument. As I understand TK’s submission,s. 3 provides that the owner of the surface of the land (i.e., TK) is the owner of the sand and gravel and that ownership continues aftertermination of the Gravel Agreement.

However, s. 3 does not assist in the determination of ownership. The rights to ownership of sand andgravel can be sold or leased by agreement or reserved on a sale of the land containing the sand and gravel. The provisions of the Act arenot an impediment to doing so (see: Coward v Genstar Corp., (SK KB), [1992] 103 Sask R 290 (QB)). The GravelAgreement provides that the owners “leased” their title and interest in the product to the RM for ten years. The Gravel Agreement wasassigned to and accepted by TK. In other words, TK took the land subject to the reservation of the rights of the RM.

Clearly, the partiesintended that ownership of the leased product would pass at some point to the RM. In fact, over the years it did, because the product wasused by the RM. The question is, when did the parties intend for the transfer of ownership to happen? [49] TK argues that Saskatoon Sand does not assist in that determination because it does not apply to the Gravel Agreement. Itsubmits that, unlike Saskatoon Sand, essential rights respecting ownership and storage were dealt with in the Gravel Agreement.

However,this submission relies, for the most part, not on what the Gravel Agreement contains, but rather on what it does not. [50] TK submits the Gravel Agreement expressly distinguishes the terms excavated or excavation used, for example, in paragraphs3(

c) and 4(a)(2), and the term removed in paragraph 3(a). It submits that paragraph 3(

a) requires that consideration be paid when theproduct is removed from the land and not when it is excavated therefrom. It argues that ownership of the product excavated from the landpasses to the RM when it is removed from the land. In short, TK submits the change of ownership is dependent on the RM taking theproduct off the land and not in excavating it from the ground. [51] The reasoning in TK’s argument is faulty.

TK’s argument implicitly assumes that ownership passes upon payment ofconsideration and, because consideration is not payable until the product is removed, ownership does not therefore pass until removal. Butthe governing law is that ownership of property passes when the parties intend it to pass (see: Hewlett Packard (Canada) Ltd. v Canada,2004 FCA 240, 324 NR 201; and Royal Bank of Canada v 216200 Alberta Ltd., (SK CA), [1987] 1 WWR 545 (SaskCA)). [52] The Gravel Agreement does not expressly say when ownership passes. As clause 3(

a) reads, it is equally capable of aninterpretation that ownership passes on payment, despite there being no express obligation to pay before the product is actually removed

from the land. Indeed, TK’s starting assumption that ownership passes upon payment of consideration, if taken by itself, results in thestockpile being owned by the RM because it has paid for it, even though it has not been removed. [53] In short, the Gravel Agreement is silent as to the exact indicia of transfer of ownership of the stockpile.

However, the meaningof words and the meaning of an agreement can be informed by “a number of contextual factors, including the purpose of the agreementand the nature of the relationship created by the agreement” (Sattva at para 48). [54] Here, the purpose of the Gravel Agreement is to allow the RM to excavate and remove the product from and under the land. Itcontemplates a right to secure and take a product from the land.

It clearly concerns the taking of property that is in the nature of a profit àprendre. [55] A profit à prendre is a right to enter on the land of another person and take some profit of the soil, such as minerals, oil, stones,trees, turf, fish or game, for the use of the owner of the right. It is an incorporeal hereditament.

At common law, the creation of a profit àprendre implied that title passed when the fruits of the land were detached from the land (see: Halsbury’s Laws of Canada (online), RealProperty (2016 Reissue), “Easements” (IV) at HRP-294 (QL)). [56] As with the agreement in Saskatoon Sand, the Gravel Agreement is neither comprehensive nor sophisticated, and essentialrights were not provided for in it. Therefore, this case is no different than Saskatoon Sand in that respect. [57] Saskatoon Sand is the case most often relied on regarding the

interpretation of gravel leases. The conclusion in Saskatoon Sandthat ownership of gravel passed when it was severed from the soil has been followed in numerous decisions in Alberta, British Columbia,Ontario and Nova Scotia (see: Atlantic Concrete Ltd. v Levatte Construction Co.

Ltd. (1975), (NS CA), 62 DLR (3d)663 (NSSC (AD)) at paras 75 and 92; Lenko v Grabler (1993), (AB KB), 14 Alta LR (3d) 414 (QB) at para23; Bussey Seed Farms Ltd. v DBC Contractors Ltd., 2016 ABQB 577; Wheeler’s Haulage Ltd. v 310220 Co., 1985 CarswellOnt 3614(WL) (Dist Ct); and 1056 Enterprises Co. v Katchmar Enterprises Inc., 1987 CarswellBC 2491 (WL) (SC)). [58] In Saskatoon Sand, the court explained the essential nature of a profit à prendre related to the product as: (

a) the right to enterthe lands of the landowner; (

b) the right to dig for and sever the gravel from the soil; and (

c) the right to haul away the gravel so severedfor the use of the tenant. [59] The court explained further: [19] … These rights go to and define the very essence of the transaction. The agreement also provides for certain ancillary rights whichemanate from such terms as those prescribing the duration of the agreement, the price to be paid for the gravel and the like. Theseancillary rights, although material and important, cannot be said to define the essence.

The presence in the agreement of the three essentialrights which I have enumerated leads me to conclude that the nature of the interest intended to be conferred is a profit à prendre (seeHalsbury’s Laws of England, 3rd ed., vol. 12, p. 620, paras. 1348, 1349, 1350; Berkheiser v. Berkheiser and Glaister (1957), (SCC), 7 D.L.R. (2d) 721, [1957] S.C.R. 387; James Jones & Sons, Ltd. v. Earl of Tankerville, [1909] 2 Ch. D. 440). [60] In determining whether the Gravel Agreement is in the nature of a profit à prendre, the agreement must be examined as awhole.

This Court in Amoco Canada Resources Ltd. v Potash Corp. of Saskatchewan Inc. (1991), (SK CA), 93 Sask R300 (CA), stated: [25] … One must look, to the extent one can, to the whole of the instrument and all that surrounds it to determine whether there arosean interest in the interest in the nature of a profit à prendre. See, for example, Berkheiser v. Berkheiser; The Queen v. Tener, (SCC), [1985] 1 S.C.R. 533; 59 N.R. 82; Atlantic Concrete Ltd. v Le Vatte Construction Co. Ltd. (1975), (NS CA),62 D.L.R.(3d) 663; Saskatoon Sand & Gravel v. Steve; and Siewert, Moench et al. v.

Seward , (AB CA), [1975] 3W.W.R. 584 (Alta. C.A.). … [61] An examination and analysis of the Gravel Agreement as a whole reveals that the parties intended (and expressly stated so) thatthe RM should have the essential rights set forth above in Saskatoon Sand signifying a profit à prendre. On this basis, title to the productpasses on severance from the land and it matters not whether or when it is removed off the land.

Moreover, title passing is not contingenton payment for the severed product, although, in this case, the RM has clearly paid for the product it has excavated. [62] However, TK argues that the RM lost ownership of the stockpile because it had no rights of storage after the termination of theGravel Agreement. It submits the parties specifically contemplated some rights would survive the termination of the Gravel Agreementbut, with respect to storage rights, only provided for same during the term of the Gravel Agreement.

TK points to the specific reference tothe RM’s right to remove fixtures after the term of the agreement in paragraph 2(

b) in contrast to a right of storage only during the term ofthe Gravel Agreement under paragraph 5(b). TK observes that a provision for storage after the expiry of the term is absent. [63] TK submits that this combination of contractual drafting leads to the conclusion that no post-expiry right of storage exists, norwas such a right intended under the agreement. It argues the maxim expressio unius est exclusio alterius applies: “to express one thing isto exclude another” (Dorval v Dorval, 2006 SKCA 21 at para 10, 264 DLR (4th) 512). This is essentially the same argument made by thedefendant in Saskatoon Sand.

As in that case, there is no merit to this submission. [64] There is nothing in the Gravel Agreement, nor has TK pointed to anything in the jurisprudence, that suggests that the ownershipof the stockpile reverts to TK by virtue of the termination clause if it continues to be stored on the land after the end of the term. [65] The Chambers judge found that the termination clause did not preclude stockpiling of product. She implicitly found thetermination of the Gravel Agreement could not be said to operate as a conveyance or transfer of the ownership in the severed andstockpiled product back to TK. I agree.

The Gravel Agreement, properly interpreted as dealing with a profit à prendre, provides that theproduct continues to be owned by the RM after its termination. [66] I conclude that the Chambers judge appropriately applied Saskatoon Sand and made no palpable and overriding error indetermining that ownership of the product passed to the RM on severance from the soil and that the RM continued to own the product

stockpiled on the land after termination of the Gravel Agreement. C.

Did the Chambers judge err regarding her conclusion on rights of storageand removal of the stockpile after the termination of the Gravel Agreement. [67] In view of my conclusion regarding ownership, it remains to be determined on what basis the RM has rights of storage andremoval of the stockpile and to enter the land, as well as the nature and extent of those rights. [68] Despite a complete absence of a term with respect to storage, the court in Saskatoon Sand found there was either an oralcollateral agreement or an implied term to the written agreement providing a licence or right allowing the storage.

The court determinedthat, in either case – i.e., whether the licence was contractual or a bare licence – the right of storage could only be terminated onreasonable notice. [69] The Chambers judge took the same approach to the issue of storage that was taken in Saskatoon Sand. She likewise found aright to stockpile after termination and that whether that right could be construed as contractual or as a bare licence, the RM would beafforded a reasonable opportunity to remove the product belonging to it. [70] It was appropriate for the Chambers judge to imply the terms for storage and reasonable notice as she did.

While courts willgive primacy to the express terms of a contract (see: Vorvis v Insurance Corporation of British Columbia, (SCC), [1989]1 SCR 1085 at 1096) and should generally “be cautious in their approach to implying terms to contracts” (G. Ford Homes Ltd. v DraftMasonry (York) Co. Ltd. (1983), (ON CA), 1 DLR (4th) 262 at 264), on occasion, it may be necessary for a court toimply a term in order to resolve a legal dispute. As stated by John D.

McCamus in The Law of Contracts, 3d ed (Toronto: Irwin Law,2020) at 832–833 [McCamus], judicial recognition of implied terms can arise from a variety of circumstances: In the course of construing or interpreting agreements, courts often conclude that the parties have not given complete expression to theiragreement and that gaps in the agreement must be filled in with implied terms. Gaps or omissions may arise because the parties havecontented themselves to agree only to the main or essential terms of the agreement.

Alternatively, the parties may simply not haveforeseen and provided for a point of difficulty or a contingency that emerges in the course of their contractual relationship. … [71] At page 833, McCamus delineates three established categories of implied terms: (1) implied terms that integrate custom orusage; (2) implied terms that are either necessary or obvious from the factual matrix of the particular contract; and (3) terms implied bylaw.

While the first two categories rely on courts interpreting what the presumed intent of the parties to the contract was, the last categoryis not founded in presumed intent (Canadian Pacific Hotels Ltd. v Bank of Montreal, (SCC), [1987] 1 SCR 711 at 776[Canadian Pacific Hotels]). The second category is germane in this case. [72] Two overlapping tests, first developed in England, have been accepted into Canadian common law with respect to theimplication of terms based on the factual matrix or surrounding facts: the officious bystander test and the business efficacy test.

Theofficious bystander test was introduced in England in Shirlaw v Southern Foundries

(1926) Ltd., [1939] 2 KB 206 at 227 (CA) and wasdescribed by MacKinnon L.J. as follows: … Prima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes withoutsaying; so that, if, while the parties were making their bargain, an officious bystander were to suggest some express provision for it in theiragreement, they would testily suppress him with a common “Oh, of course!” [73] The business efficacy test was formulated by Bowen L.J. in The Moorcock (1889), 14 PD 64 at 68 (CA), in the following way: … In business transactions such as this, what the law desires to effect by the implication is to give such business efficacy to the transactionas must have been intended at all events by both parties who are business men. [74] Canadian jurisprudence suggests the two tests are fundamentally equivalent, or that the officious bystander test encompassesthe business efficacy test (Canadian Pacific Hotels at 775). [75] McCamus suggests that where there is no evidence available regarding the actual intentions of the parties, in practice “theexercise of implying a term is essentially indistinguishable from asking what the parties would, as reasonable people, have agreed to if thematter had been raised at the time of contracting” (at 842). [76] Based on the foregoing, the Chambers judge was correct to imply a term into the Gravel Agreement that allowed storage of theproduct after termination. [77] The Chambers judge made several factual findings based on the evidence surrounding renewal negotiations between TK andthe RM.

She was not satisfied that TK gave notice to the RM in 2016 that the Gravel Agreement would not be renewed and that it wouldhave to remove its stockpile before the expiry of the agreement. She also found that the negotiations for renewal were ongoing until a fewmonths before the expiration date and the RM genuinely believed the agreement would be renewed. These factual findings were notchallenged on appeal. [78] Moreover, there were gaps in the terms of the agreement. It is a barebones agreement that sets forth only essential terms.

Aswell, the RM has paid for the product and, in such circumstances, business efficacy, as explained above, requires the implication of a termdealing with storage and removal of the product. If the officious bystander test mentioned above were to be applied, I would conclude thatthe question of whether the RM could continue to store the stockpile on the land for which it had paid after termination of the agreement,subject to reasonable notice to remove the same, would be answered with an “of course”.

The implication of such a term is both necessaryand fits in and does not conflict with what had clearly been agreed upon by the parties at the formation of the Gravel Agreement. [79] I conclude that the Chambers judge did not err in finding that the RM’s right to continued storage was subject to termination on

reasonable notice. In the circumstances, and given her factual findings set forth above, the Chambers judge made no error in determining that the RM had not received reasonable notice to remove the stockpile. [ 80 ] The Chambers judge reserved the issues of what that reasonable notice should be as well as the compensation payable to TK by the RM for storage subject to the filing of further evidence. On that basis, the matter will be remitted to the Court of Queen’s Bench for determination of those issues. VI.

CONCLUSION [ 81 ] I would dismiss the appeal with costs to the RM in the usual manner. “Ottenbreit J.A.” Ottenbreit J.A. I concur. “Caldwell J.A.” Caldwell J.A. I concur. “Schwann J.A.” Schwann J.A.