ONTARIO – Appeal – Standard of Review – Contractual Interpretation – Absent error, the application judge’s interpretation of a contract is owed considerable appellate deference and is reviewable on a standard of “palpable and overriding error”.

ONTARIO – Appeal – Standard of Review – Where the appeal involves the incorrect application (error) of a legal principle, the failure to consider a required element of a legal test, or the failure to consider a relevant factor, the standard is correctness.

ONTARIO – Contract Interpretation – Ambiguity – Where fundamental terms material to the calculation of a contractual rate in an agreement were undefined and unclear, the contract was ambiguous. It is an error of law to find such a contract unambiguous.

1284225 Ontario Limited v. Don Valley Business Park Corporation
2024 ONCA 247 (April 4, 2024)
Ontario Court of Appeal (Roberts, George, and Monahan JJ.A.)

This was an appeal from the application judge’s interpretation of section 4 of a parking agreement dated May 19, 1972 and the calculation of the new parking rate the appellants were required to pay to the respondent. (para. 1) Following oral submissions, the Court of Appeal allowed the appeal with reasons to follow.

The provision at issue was the following:

[Appellants] agree[s] to pay parking rates to [respondent] with respect to the parking spaces which [respondent] shall be required to make available to [appellants] from time to time, in accordance with the provisions of this agreement. The rates to be paid by [appellants] to [respondent] for each such parking space, shall be the average of commercial, bona fide, arm’s length parking rates being charged from time to time to the public using parking facilities located within one-half mile from the Project Lands and which parking facilities are serving office buildings. (para. 3)

The Court of Appeal first addressed the standard of review. Where there is no error, the “palpable and overriding error” standard of review applies – absent error, the application judge’s interpretation of the contractual provision is owed “considerable deference”. If, however, the appeal involves “the incorrect application of a legal principle, the failure to consider a required element of a legal test, or the failure to consider a relevant factor”, the standard is correctness. (para. 4)

The Court of Appeal held that the application judge’s interpretation of the agreement was not owed deference because their analysis involved the incorrect application of a relevant legal principle. The application judge erred in interpreting the agreement by finding it was unambiguous even though “fundamental terms material to the calculation of the new parking rate were undefined and unclear.” (para. 5)

The Court found that ambiguities arose from the terms “ ‘commercial, bona fide, arm’s length parking rates’ being charged to ‘the public’ using parking facilities ‘serving office buildings.” Despite finding that the provision of the agreement was “clear and unambiguous”, the application judge resolved these ambiguities by relying on contested, inadmissible hearsay that the application judge had found was inadmissible as expert evidence. In making those findings, the Court of Appeal held that the application judge had “incorrectly relied in part on the lay opinion of the respondent’s affiant who was not independent and, as the application judge acknowledged, could not be treated as an expert.” That error caused the application judge to erroneously reject “out of hand” the appellants’ expert evidence, concluding that expert evidence on this issue was “unnecessary and irrelevant”. (paras. 6-7)

The Court of Appeal held that the above errors were “analytical errors”. The Court of Appeal set aside the application judge’s decision. The Court of Appeal found that it had a sufficient evidentiary record to consider the interpretation of Section 4 of the Parking Agreement afresh and made findings of what the monthly parking rates were to be during the relevant time periods. (paras. 8-9)