Case information

Contracts — Interpretation — Agreement providing for reverse termination fee if defined approvals not obtained on or prior to specified date — Trial court concluding one approval not obtained — Court of Appeal finding trial judge committed error in allowing evidence of parties’ subjective intentions during negotiations to overwhelm words of agreement — Court of Appeal concluding approvals obtained — Whether, and if so, in what circumstances, negotiations will be admissible in interpreting a contract.

Case summaries are prepared by the Office of the Registrar of the Supreme Court of Canada (Law Branch). Please note that summaries are not provided to the Judges of the Court. They are placed on the Court file and website for information purposes only.

In October 2015, the respondent, Superior Plus Corporation (“Superior”), and Canexus Corporation entered into an agreement for Superior to acquire all the shares in Canexus by way of a plan of arrangement. The parties were competitors in the specialty chemicals market, and both knew they would require competition and anti-trust regulatory approval in the United States and Canada to complete the transaction. Ultimately, the transaction did not close and another competitor, Chemtrade Electrochem Inc. (“Chemtrade”), acquired Canexus. Litigation ensued as to whether Chemtrade (who now owns Canexus) was entitled to a reverse termination fee from Superior arising out of the failed deal. The agreement provided for the reverse termination fee if certain defined approvals were not obtained on or prior to a specified date. The trial judge concluded that Superior owed the reverse termination fee. She found that one of the relevant approvals had not been obtained. The Court of Appeal allowed Superior’s appeal. It concluded that the trial judge erred in her interpretation of the parties’ agreement by allowing evidence of the parties’ subjective intentions during negotiations to overwhelm the words of the agreement.