Canadian Lawyer

50 A U G U S T 2 0 1 5 w w w . C A N A D I A N L a w y e r m a g . c o m For the uninitiated, Sattva was a fight over a finder's fee. Creston agreed to pay Sattva a fee in relation to the acquisition of a molybdenum mining property in Mexico. Under the deal, Sattva would be paid US$1.5 million in shares of Creston. However, a dispute arose over the date that should be used to price the shares, which impacted the number of shares Sat- tva would receive. Sattva argued it should receive 11.46 million shares priced at 15 cents, while Creston said it should receive 2.454 million shares priced at 70 cents. Experienced corporate lawyer Leon Getz heard the arbitration and found in Sattva's favour, awarding the company $4.1 million — the price at which Sattva could have sold the shares after a four-month hold period. The case then bounced around in the B.C. courts. Creston sought leave to appeal the arbitrator's ruling, but that was denied on the basis that the appeal was not a question of law. The B.C. Appeal Court reversed that decision and granted Creston's application for leave saying the arbitrator's failure to address a "maximum amount proviso" in the contract amount- ed to a question of law. The Superior Court then heard Creston's appeal and dismissed it, finding that the arbitrator's interpretation of the agreement was cor- rect. That prompted Creston to appeal. The appeal court sided with Creston, finding the arbitrator's result was absurd. That prompted Sattva to challenge the leave ruling and the Court of Appeal find- ing. The Supreme Court of Canada tossed out the "historical approach to contract interpretation," ruling that contracts involve "issues of mixed facts and law as it is an exercise in which the principles of contrac- tual interpretation are applied to the words of the written contract, considered in the light of the factual matrix." It also held that appeals from commer- cial arbitration awards are limited to ques- tions of law and the standard of review is reasonableness and that courts should defer to "first instance decision-makers on points of contractual interpretation." The Supreme Court said "one central purpose of drawing a distinction between questions of law and those of mixed fact and law is to limit the intervention of appel- late courts to cases where the results can be expected to have an impact beyond the parties to the particular dispute. It reflects the role of courts of appeal in ensuring the consistency of the law, rather than in pro- viding a new forum for parties to continue their private litigation." The court noted that, "circumstances in which a question of law can be extri- cated from the interpretation process will be rare," effectively shutting down appeals from most contract disputes. Since then, Sattva has been cited in everything from lease renewal agreements to insurance policies, collective agreement interpretations and land deeds, to uphold lower court or arbitrator rulings. That's not to say appeals won't fly. But as Michael Feder, the McCarthy Tétrault LLP lawyer who successfully argued Sat- tva at the SCC, says there is a "reduction in the scope of the appellate court." Now he tells clients if they litigate a contract and lose, "they shouldn't expect to win on appeal." Feder says "there are judges that lament the ways in which the Sattva deci- sion insulates issues of contractual inter- pretation from appellate review." Already, some courts are in denial and looking at carve outs. In Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., the Alberta Court of Appeal declined to apply Sattva, oddly stating that "some of the restrictive language in Sattva does not apply to ordinary appeals in Alberta." The Northwest Territories Court of Appeal in Northwest Territories (Attorney General) v. Association des parents ayants droit de Yellowknife took umbrage with the SCC ruling and its comments about litigants using the appeal courts as a new forum for litigation, calling them "unnec- essarily derogatory." Harsh words aimed at the country's top court. Sure, Sattva has the potential to stunt the development of commercial law, since appeal courts are now less likely to weigh in on most cases. However, most compa- nies already rely on private courts to settle many of their disputes outside the scope of public courts. What Sattva does is give finality to contract fights, and focuses appeal atten- tion on pure legal issues. We know that bad facts make bad law. So Sattva should focus attention on the brass tacks of contract law that needs judicial atten- tion. It should also reduce caseloads in our already overcrowded courts. That's not such a bad thing, despite what some appeal courts seem to think. Jim Middlemiss is a principal at WebNews- Management.com. B A C K PA G E O P I N I O N @JimMiddlemiss By Jim Middlemiss ugust marks one year since the Supreme Court of Canada issued its key ruling in Sattva Capital Corp. v. Creston Moly Corp. Sattva was last year's sleeper case, which didn't garner much mainstream media attention because it was too legalistic. But it sure is packing a punch in the legal community. It has raised the hackles of some appeal court judges and limited appeal options for lawyers and companies when it cones to contractual disputes. By mid-June, Sattva had been cited an astounding 170 times, almost a citation once every two days since its release, according to CanLII. About 43 per cent of those cases involve an appeal court ruling. It's a testament to the importance of the case and the impact it is having on both contract law and, more importantly, appellate review. Sattva reach growing daily A

• Cover