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Contract - Appeals - SOR - Corner Brook v Bailey (SCC, 2021). Corner Brook (City) v. Bailey
In Corner Brook (City) v. Bailey (SCC, 2021) the Supreme Court of Canada considered the standard of appellate review that applies generally to contract issues:B. Standard of Review
[44] In Sattva, this Court also explained that contractual interpretation is a fact specific exercise, and should be treated as a mixed question of fact and law for the purpose of appellate review, unless there is an “extricable question of law”. The exception is standard form contracts, which is not relevant here: see Ledcor Construction. Extricable questions of law in the context 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”: Sattva, at para. 53, quoting King v. Operating Engineers Training Institute of Manitoba Inc., 2011 MBCA 80, 270 Man. R. (2d) 63, at para. 21. The circumstances in which a question of law can be extracted will be uncommon. Whether something was or should have been within the common knowledge of the parties at the time the contract was entered into is a question of fact: Sattva, at paras. 49-55 and 58.
[46] I disagree that any of these constitutes an error warranting appellate intervention. While this first point may describe an error as to an extricable question of law, it is not an error that the application judge made. The application judge did consider what was objectively contemplated or intended by the City, but it is clear that he did not consider this to be determinative of mutual intent. The application judge explicitly considers what was in the contemplation of both parties beginning at para. 29. He explains that the Baileys could have negotiated the terms of the release, but that they chose not to, and he concludes that “what was in the contemplation of the parties was that Mrs. Bailey could no longer bring any claim or demand whatsoever against the City relating to the Accident”: para. 43; see also paras. 41-42 and 44. With respect, the Court of Appeal mischaracterized what the application judge did.
[47] The second and third points are not extricable questions of law. This Court held in Sattva that whether something was or reasonably should have been within the common knowledge of both parties at the time a contract was entered into is a question of fact. The Court of Appeal treated the question of how the surrounding circumstances inform the words of a contract as an “extricable question of law”. This undermines the deferential approach to appellate review of contractual interpretation urged by this Court in Sattva. The Court of Appeal simply disagreed with the application judge’s interpretation of the surrounding circumstances, characterized it as a question of law, and then substituted its own factual conclusions. This does not accord with Sattva.
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