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Contract - Appeals - SOR - Exceptions - Standard Contracts (2). Ayuba v. Erhunmwun
In Ayuba v. Erhunmwun (Ont CA, 2026) the Ontario Court of Appeal considered three related appeals, here arising "from two failed transactions involving the assignment of agreements to purchase pre-construction homes".
Here the court considered the appellate SOR for standard form contract issues:[28] The material provisions are contained in standard-form OREA agreements and Stateview’s template vendor consents. Their interpretation has precedential value beyond the parties and is, therefore, reviewed for correctness: Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, [2016] 2 S.C.R. 23, at paras. 4, 24 and 46. The contracts must be read as a whole, giving their words their ordinary and grammatical meaning consistently with the surrounding circumstances and the objective reasonable expectations of the parties: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at paras. 47-48; Ledcor, at para. 65. . Panasonic Canada Inc. v. XL Specialty Insurance Company
In Panasonic Canada Inc. v. XL Specialty Insurance Company (Ont CA, 2026) the Ontario Court of Appeal allowed an insurance appeal, here brought against a ruling which "found in Panasonic’s favour, declared the applicable retention [SS: a concept akin to, but apparently not the same as, a deductible] was $1.5M USD, and ordered XL to pay Panasonic the agreed-on amount that exceeded the retention".
The court considered the appellete SOR applicable to issues of standard form contractual interpretation (Ledcor):[25] Based on Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, [2016] 2 S.C.R. 23, XL submits the issue is a legal question reviewable on a correctness standard. It makes two arguments in contending it has met the Ledcor factors. First, it maintains the issue is of precedential value because both the Base Policy and Endorsement #023 are copyrighted company standard forms issued in the United States and Canada, and there is a “dearth” of Canadian jurisprudence on the forms. Second, XL says there is no meaningful factual matrix specific to these parties that assists in the interpretation of the relevant policy provisions.
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[31] In my view, XL has met its onus to show that the Ledcor exception applies. Accordingly, this court must apply the correctness standard when reviewing the application judge’s interpretation of the relevant policy provisions. A brief review of Ledcor provides useful context for the application of its factors.
[32] The policy in Ledcor was “all risks” property insurance. It contained an exclusion clause in which the cost of “making good faulty workmanship” was excluded. A contractor hired to clean the windows of a building scratched them and they had to be replaced. The insured made a claim for the cost of replacing the windows; the question for the court was whether the faulty workmanship exclusion applied.
[33] At first instance, the court found the exclusion clause was ambiguous and applied the contra proferentem principle to hold the insurer liable. The Alberta Court of Appeal reversed that decision. A further appeal to the Supreme Court of Canada was successful and the insurer was found liable.
[34] When the Supreme Court decided Ledcor, Sattva was the governing authority on the appellate standard of review on questions of contractual interpretation. Sattva holds that because contractual interpretation is a question of mixed fact and law, a deferential standard generally applies.
[35] However, in Ledcor, the Supreme Court pronounced that standard form contracts are an exception to the Sattva approach. At para. 24 of Ledcor, the court explains:[W]here an appeal involves the interpretation of a standard form contract, the interpretation at issue is of precedential value, and there is no meaningful factual matrix that is specific to the parties to assist the interpretation process, this interpretation is better characterized as a question of law subject to correctness review. [36] The Court goes on to note, at para. 28, that “[s]tandard form contracts are particularly common in the insurance industry”.
[37] In sum, Ledcor identifies two factors which determine whether the correctness standard of review applies to the interpretation of a contract: (1) where the interpretation of a standard form contract is of precedential value; and (2) there is no meaningful factual matrix specific to the parties that assists in the interpretative process: at para. 46.
[38] In my view, XL has satisfied its onus on both factors.
Ledcor – the first factor
[39] There are two related aspects to the first factor: whether the contract to be interpreted is a standard form contract and whether its interpretation is of precedential value.
[40] On the issue of standard form, the evidence is that XL copyrighted both the Base Policy and Endorsement #023 and it uses those forms throughout the United States and Canada. A comparison of Endorsement #023 with Endorsement #027 of the Panasonic North America policy shows they are identical. If there are differences in the base policy forms, they appear to be minor. In any event, the focus of the interpretative process in this case is Endorsement #023 and, to reiterate, its wording is identical to that in Endorsement #027 of the Panasonic North America policy.
[41] In my view, the evidence that the forms are copyrighted and used throughout the United States and Canada, and that identical forms of Endorsement #023 were used both for Panasonic and Panasonic North America, satisfies XL’s burden to prove that the policy is a standard form contract. Accordingly, this case is distinguishable from Atradius, in which this court found at para. 6, “[t]here is simply no evidence that the Policy is a standard form contract as that term is used in Ledcor”.
[42] Ledcor offers guidance on when the interpretation of a standard form contract is precedential. At para. 39, it states that it would be undesirable for courts to interpret identical or very similar standard form provisions inconsistently without good reason. It also points to the mandate of appellate courts, which is to ensure consistency of the law, a matter which is advanced by permitting appellate courts to review the interpretation of standard form contracts for correctness. At para. 40, the Court stresses that consistency is particularly important in the interpretation of standard form insurance contracts because both insurance companies and customers benefit from certainty and predictability.
[43] These considerations – the need for consistency and its ensuing benefits of certainty and predictability – apply in this case. We have been advised that this is the first case in which Endorsement #023 has been interpreted. Applying a correctness standard of review to the decision below will ensure that future courts will not arrive at different results on the same or similar language.
[44] I conclude on the first factor by indicating I do not find Tien Lung Taekwon-Do Club of assistance in deciding whether Endorsement #023 is of precedential value for three reasons. First, that case was decided before Ledcor. Second, the policy in question was interpreted for a very different legal reason, namely, whether an insurer owed a duty to defend the insured in a court action. Third, the statement at para. 19 of Tien Lung Taekwon-Do Club relied on by Panasonic does not suggest that a paucity of Canadian jurisprudence means a lack of precedential value. Rather, in that statement, the Alberta Court of Appeal is simply noting that the parties were unable to provide any Canadian jurisprudence dealing with the provision in question.
Ledcor – the second factor
[45] The second Ledcor factor requires the court to consider whether there is anything in the factual matrix specific to these parties that bears on the interpretation process. In my view, there is not – and I do not understand Panasonic to argue to the contrary.
[46] Paragraphs 31-32 of Ledcor offer guidance on this factor. They explain that the surrounding circumstances to the formation of a standard form contract remain relevant, despite the application of a correctness standard of review. Such circumstances include the purpose of the contract, the nature of the relationship it creates, and the market or industry in which it operates. However, the Court goes on to explain that while relevant, the surrounding circumstances play less of a role in the interpretation process, tend not to be specific to the particular parties, and are usually the same for everyone who may be a party to a particular standard form contract.
[47] These comments apply to this case. Cybersecurity breach events and self-insured retentions are not unique to the parties to this proceeding, a consideration that underscores the need for the courts to interpret Endorsement #023 consistently. Hence, the second Ledcor factor also supports a correctness standard of appellate review in this case.
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