Canadian Lawyer InHouse

23 CANADIANLAWYERMAG.COM/INHOUSE MARCH/APRIL 2019 Leave was granted last fall. Douglas Sarro, a lawyer and co-author with Davis of the paper on the case and its legal issues, says he believes Laskin's judgment is more in line with the way the Supreme Court has suggested to go about interpreting these kinds of agreements. "I think the Supreme Court is going to have to remind the courts below about the ap- proach it set out in Sattva," says Sarro, senior advisor, research and regulatory in- novation at the Ontario Securities Com- mission (his comments are not on behalf of the OSC). "Given the structure of this indemnity, it makes more sense to me as one that cov- ered third-party claims," Sarro says, in part because of other aspects of the agreement that was signed in 1985 by the provincial and federal governments, the companies and First Nations. There is not a lot of Canadian case law on the scope of indemnities in circumstances such as the Weyerhaeuser/Resolute case. In their law paper, the lawyers also argue that the majority did not follow the approach of other jurisdictions, both in the United States and some Commonwealth countries, in determining whether the indemnity cov- ered third-party claims. Broad language on its own is not enough to expand the scope of an indemnity without considering the con- text, they write. Not surprisingly, the Ontario govern- ment is in agreement with the analysis con- ducted by Laskin in his dissent on whether the indemnity applied to direct claims. "Further, the Court of Appeal ought to have corrected the motion judge's conclu- sion that the 1985 indemnity was a busi- ness agreement. The settlement was not commercial in nature. It refl ected a policy objective to address concerns arising from the mercury contamination," state Ontario lawyers Leonard Marsello, Tamara Barclay and Nansy Ghobrial in written submissions fi led with the Supreme Court. Agreements with government are differ- ent than contracts solely between private- sector entities, they argue, because of the public interest requirements. "Absent ex- press language, courts should not imply an obligation to compensate for breach of contract resulting from future legislation," they write. Resolute, in its written submissions, sug- gests the issues before the court are not ac- tually complex. "In 1979 and again in 1985, the province of Ontario gave indemnities to Great Lakes Forest Products Limited. It gave those indemnities to persuade Great Lakes to buy and invest $200 million in a pulp and paper mill, to settle environmen- tal litigation with First Nations bands and to save the economy of Dryden, a single in- dustry town. . . . [B]ut in 2011, when envi- ronmental liabilities arose from the buried mercury, Ontario sought to renege from its bargain," write Andrew Bernstein, Jeremy Opolsky and Jonathan Silver at Torys LLP. In his dissent, Laskin did not address whether the companies involved in the litigation still enjoyed the benefi t of the in- demnity, because he found it only ever ap- plied to third-party claims. The fi nding by the majority that the ben- efi t had extinguished over time through the various commercial transactions is criti- cized by both companies in their written submissions before the Supreme Court, on the basis of failing to apply the stan- dard principles of contractual interpreta- tion. "Those principles required the court to consider the wording of the enurement provision in the context of the indemnity as a whole, the factual matrix, and the princi- ple that commercially unreasonable results should be avoided," write Weyerhaeuser's lawyers Christopher Bredt, Markus Kre- mer and Alannah Fotheringham at Borden Ladner Gervais LLP. The fi nding by the majority in the Court of Appeal ruling that more evidence is re- quired to determine if Weyerhaeuser "lost" the benefi t of the indemnity in the 2007 sale of the Dryden plant leads to a "com- mercially absurd result," they argue. "It would be very diffi cult for an indemnitee to sell a contaminated property if a purchaser knows that it will be exposed to liability upon becoming the property's owner. By the same token, few owners would be will- ing to sell a contaminated property if they know that, by doing so, they will lose the benefi t of the indemnity," they state. If you are indemnifi ed only while you hold title to the property and the indem- nity, but once you sell and assign it you are opened up to an order "doesn't seem to be a reasonable commercial outcome," says Mullins. "The ministry would be po- tentially getting a windfall." When draft- ing indemnity agreements, it is important to make clear what you are protected from and who is protected, Mullins adds. Depending on how the Supreme Court rules in this case, it may be necessary for le- gal departments to revisit past agreements to determine the scope of an indemnity, says Michael Barbero, a lawyer at McLen- nan Ross LLP in Calgary, whose practice focuses on environmental law and regula- tory compliance. "Identify whether the agreement has a robust defi nition of claim, such that you can ascertain whether direct claims, third- party claims or both are captured by the agreement. Then identify whether the commercial context is relevant and worth arguing," says Barbero. Davis agrees that reviewing past indem- nity agreements may be worthwhile. "You may have to go back and look and see what other sections of the contract say," he adds. In future agreements, "if the intention is to limit it to third-party claims, use that ex- press language," Davis says. IH Identify whether the agreement has a robust defi nition of claim, such that you can ascertain whether direct claims, third-party claims or both are captured by the agreement. Then identify whether the commercial context is relevant and worth arguing. MICHAEL BARBERO, McLennan Ross LLP

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