Summary

Keywords

First application: Environmental law — Contracts — Indemnity — Assignment — When a party assigns an indemnity, whether the coverage of the indemnity follows the liability — When a party assigns an environmental indemnity, unless the indemnity agreement expressly provides otherwise, whether the assignor remains a third-party beneficiary under the indemnity.

Second application: Crown law — Government contracts — Fettering discretion — Environmental indemnities —Whether the rule against indirect fettering applies in the provincial environmental regulatory context — Whether the business contracts exception to the rule against indirect fettering applies to provincial contracts — Whether the lower courts properly applied Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53.

Third application: Contracts — Interpretation — Indemnities — Whether different interpretive principles and standards of appellate review apply to different types of contracts — Whether indemnities should be interpreted in a way that is fundamentally different from other contracts — Interpretation of “successors and assigns”.

Summary

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First appeal: Environmental law - Contracts - Indemnity - Assignment - Whether the Court of Appeal erred in failing to find that the terms of the 1985 Indemnity mean that Resolute FP Canada Inc. is entitled to benefit from the 1985 Indemnity as the corporate successor of Great Lakes Forest Products Limited - Whether that benefit accrues to Resolute regardless of any assignment of rights under the indemnity to Weyerhaeuser Company Limited - Whether the Court of Appeal erred in concluding that the assignment to Bowater absolutely assigned the 1985 Indemnity to Weyerhaeuser in 1998 - If the 1985 Indemnity was assigned, whether the Court of Appeal erred in failing to consider whether it was effective only in equity because it did not comply with the Conveyancing and Law of Property Act.

Second appeal: Contracts - Interpretation - Indemnities - Fettering - Business agreement exception - Whether the appellate court had erred in failing to correct the motions judge’s approach to this Court’s decision in Sattva and in upholding his conclusion that the 1985 Indemnity covers first party claims and that the Director’s Order gives rise to a pollution claim as contemplated in the memorandum of agreement - Whether the appellate court erred in not correcting the motions judge’s failure to consider the 1985 Indemnity as a whole, thereby ignoring its control of defence and cooperation clauses - Whether the appellate court erred in failing to recognize that two errors of fact made by the motions judge were of a palpable and overriding nature - Whether the appellate court erred in failing to correct the motions judge’s decision that the 1985 Indemnity was a business agreement to which the indirect fettering rule did not apply and otherwise in the manner in which they applied Pacific National Investments Ltd. v. Victoria (City), 2000 SCC 64.

Third appeal: Contracts - Interpretation - Indemnities - Assignment - Successors and assigns - What is the applicable standard of review - Whether the appellate court erred in applying a “general principle” that a party who assigns the benefit of an indemnity presumptively loses the benefit for itself rather than interpreting the 1985 Indemnity according to ordinary principles of contractual interpretation - Whether the appellate court erred in applying a “general principle” that the term “successors” when used in respect of a corporation refers only to corporate successors rather than interpreting the Indemnity according to ordinary principles of contractual interpretation.

In the 1960s, a pulp and paper operation owned and operated by the Dryden Paper Company Limited discharged mercury into the nearby river system, causing harm to the First Nations downstream. In 1971, a waste disposal site was constructed. In 1976, Dryden Paper and Dryden Chemicals were amalgamated to form Reed Ltd., and, in 1977, the First Nations bands sued Reed, Dryden Paper and Dryden Chemicals for various damages resulting from the mercury waste contamination of the river (the “Grassy Narrows litigation”). In 1979, Reed was sold to Great Lakes Forest Products Limited. The Grassy Narrows litigation was settled with court approval in 1985. Great Lakes and Reed paid $11.75 million to the First Nations and released Ontario in respect of two previous indemnities. Ontario gave a new indemnity (the “1985 Indemnity”, sometimes referred to as the “1985 Indemnity”). It promised to indemnify Great Lakes, Reed and others against claims and proceedings arising from “any damage, loss, event or circumstances, caused or alleged to be caused by or with respect to. . . the discharge or escape or presence of any pollutant by Reed or its predecessors, including mercury or any other substance, from or in the plant or plants or lands or premises forming part of the Dryden assets sold by Reed Ltd. to Great Lakes under the Dryden Agreement”. It was to “be binding upon and enure to the benefit of the respective successors and assigns of Ontario, Reed and Great Lakes”.

Thereafter, Reed’s successor was dissolved, and Great Lakes, essentially, became Bowater, which became Abitibi Bowater, which became Resolute. In the interim, Weyerhaeuser purchased certain Dryden assets (including the waste disposal site, which could not be severed from the other assets in time to complete the sale) from Bowater in 1998. Bowater leased the waste disposal site back until the severance was completed, when it was reconveyed to Bowater. Eventually, the owner of the waste disposal site abandoned it with court approval and was discharged from any associated liability in 2011, under the Companies’ Creditors Arrangements Act, R.S.C. 1985, c. C-36.

On August 25, 2011, the Ontario Ministry of the Environment issued a Director’s Order requiring, inter alia, Weyerhaeuser and Resolute, as prior owners of the site, to perform remedial work on the waste disposal site. Weyerhaeuser unsuccessfully sought to revoke or amend the Director’s Order before the Environmental Review Tribunal. Weyerhaeuser and Resolute both appealed the result, and that appeal was ongoing when Weyerhaeuser commenced this action against Ontario, with Resolute as an intervener. All of the parties moved for summary judgment, asking whether the 1985 Indemnity covers the costs of complying with the Director’s Order, and, if so, whether Weyerhaeuser and Resolute are entitled to its benefit.

The motions judge granted Resolute leave to intervene, dismissed Ontario’s motion for summary judgment, and granted Weyerhaeuser and Resolute’s cross-motions for summary judgment. The Court of Appeal set aside the motions judge’s decision. It granted Ontario summary judgment against Resolute. As to Weyerhaeuser, it substituted a declaration that Bowater assigned the full benefit of the 1985 Indemnity to Weyerhaeuser under the 1998 Asset Purchase Agreement and directed a final adjudication by the court below on the issue of what rights, if any, Weyerhaeuser possessed as assignee of the 1985 Indemnity when the Director’s Order was made in 2011.

Lower Court Rulings