Canadian Lawyer

16 N o v e m b e r / D e c e m b e r 2 0 1 4 w w w . C A N A D I A N L a w y e r m a g . c o m by PhiliP Slayton top Court talEs Muddying up contract law The SCC's poorly crafted judgment in Sattva seems to open up a new and much broader approach to the interpretation of contracts. i once had a love affair with the law of contract. This long-established legal subject was elegant and beguil- ing. It had good architecture and historic interest. There were time- less textbooks — Cheshire and Fifoot's Law of Contract, for example. Part of the edifice was the parol evidence rule. This rule and other principles of con- tract interpretation were centre-stage in the recent Supreme Court of Canada case of Sattva Capital Corp. v. Crestor Moly Corp. The decision reminds us of the day-to-day importance and impact of the court's work, sometimes eclipsed by the drama of failed appointments to its bench, constitutional clashes with the executive branch, etc. In Sattva, regrettably, the court tinkered with traditional contract law in an unnecessary and muddled way. The facts of the case were relatively straightforward. Sattva Capital Corp. intro- duced Creston Moly Corp. to the possibil- ity of acquiring a Mexican molybdenum mine. They agreed in writing that if Creston acquired the property it would pay Sattva a maximum of $1.5 million in Creston shares as a finder's fee. Creston bought the mine. The parties then disputed the appropriate date for determining the price of Creston shares and thus the number of shares that Sattva would get. Sattva argued the share price was dic- tated by the market price definition in the written agreement, which was the price of the shares "as calculated on close of business day before the issuance of the press release announcing the Acquisition." On this inter- pretation, Sattva would receive more than 11 million shares. Creston claimed the relevant date was the date the fee was payable, which was no later than five days after the closing date of the transaction. In that case, Sattva would only get about two million shares. The contract provided that disputes were to be settled under the B.C. Arbitration Act. An arbitrator interpreted the contract and decided in favour of Sattva. Section 31(1) of the B.C. Arbitration Act limits appeals from an award to questions of law. Creston tried to appeal, but the British Columbia Supreme Court found there to be no ques- tion of law. The B.C. Court of Appeal reversed the trial court on this point. It fell to the Supreme Court of Canada to decide the issue. Justice Marshall Rothstein gave a unanimous judgment for a seven-member panel holding that there was no question of law permitting appeal from the award. (Strangely, Justice Thomas Cromwell, who probably has the best understanding of the law of contract on the Supreme Court, was not part of the panel.) For a long time, interpretation of a contract was considered a matter of law. On that view, Creston could have appealed the arbitrator's award. But, said Rothstein, things have changed. Contract interpreta- tion, said Rothstein: "has evolved towards a practical, common-sense approach not dominated by technical rules of con- struction. The overriding concern is to dushAn miliC

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