Canada: The Ontario Court Of Appeal Considers The Presumption Of Consistent Expression In Contractual Interpretation

Introduction

The Ontario Court of Appeal recently had occasion, in Baffinland Iron Mines LP v. Tower-EBC G.P., S.E.N.C.,¹ to examine a rarely considered rule of contractual interpretation – the presumption of consistent expression. This is the presumption "that language in a contract is used consistently, with the same words meaning the same thing and, by corollary, the use of different words indicating an intention to refer to different things."²

Applying general principles of contractual interpretation, which eschew technical rules of interpretation in favour of a practical approach to discerning the intentions of contracting parties that draws upon multiple data points of meaning, Baffinland found the presumption of consistent expression to be a weak one. Moreover, Baffinland applied the presumption in a manner that demonstrates its weakness by ascribing the same meaning to two differently worded provisions. The outcome in Baffinland provides a lesson for contractual drafting: the use of similar but not identical words or phrases can serve to reinforce the intended meaning, rather than injecting uncertainty as to whether different meanings were intended.

The background

The issue arose in the context of a dispute about appeal rights to a court following an arbitration. Under the Ontario Arbitration Act, 1991,³ an arbitral award may be appealed on a question of law with leave of the court, but only if the arbitration agreement does not deal with appeals. The contract in question used two phrases. One of the phrases, "final and binding", has been recognized in the authorities to preclude appeals to a court. But the arbitration in question arose under a provision using a different phrase: "finally settled". Did the presumption of consistent expression require the phrase "finally settled" to have a different meaning than "final and binding"? Did the use of a different phrase than "final and binding" evince an intention to preserve appeal rights to a court, as opposed to barring them? Baffinland said no, and interpreted both phrases to bar appeals.

A weak presumption

The analysis began with the Supreme Court of Canada's statement in Sattva Capital Corp v. Creston Moly Corp. that "the interpretation of contracts has evolved towards a practical, common-sense approach not dominated by technical rules of construction."⁴ As a result, "although the presumption of consistent expression may in some cases be helpful in illuminating the parties' intention, it is important not to treat the presumption as a dominating technical rule of construction that overwhelms the interpretation of a contract based on the ordinary and grammatical meaning of its text."⁵

Therefore, the presumption of consistent expression does not "bar the use of differently worded but mutually reinforcing phrases which can only be understood to have the same meaning. A contractual draftsperson may use multiple expressions that mean the same thing to ensure that there is no doubt about a point."⁶ If the meaning of different words or phrases is clearly the same based on the application of the usual principles of contractual interpretation, "the presumption cannot be applied to force a different meaning on one set of words or phrases."⁷

Understood in this manner, the presumption of consistent expression is a weak one, easily overcome by contractual language that demonstrates an intention to use different phrases to mean the same thing. This approach is entirely consistent with the way contracts are interpreted in Canada – a contextual approach that reads language in the manner businesspeople use it in commercial interactions, as opposed to reading it literally. From that perspective, a strict presumption of consistent expression would not fit easily with the law of contractual interpretation in Canada generally. This might explain the relative obscurity of the presumption in Canada: the only authorities Baffinland mentioned in support of it were a single trial-level decision and a text from England.⁸

Application of the presumption to give the same meaning to differently worded phrases

On that basis, Baffinland went on to apply the presumption to conclude that "final and binding" and "finally settled" meant the same thing: in both cases, the parties intended to preclude appeal rights following an arbitration. Both phrases used the same word ("final"/"finally") – a factor which pulled in favour of identical meaning. The addition of one extra word – "binding" in one instance and "settled" in the other instance – would change the common meaning only if "the additional word suggests a material modification to the meaning." Yet in this case "the use of additional words in the two phrases did not materially modify that meaning."⁹ Instead, the presumption of consistent expression favoured "a consistent meaning to the repeated word 'final' (or 'finally') when it was used with 'binding' and when it was used with 'settled'."¹⁰

Conclusion

Baffinland's expression and application of the presumption of consistent expression fit nicely within the law of contractual interpretation generally. Contractual interpretation does not involve a literal reading of language or the application of rigid rules. Rather it relies on multiple data points – including the text of the contractual provision, the factual matrix in which the contractual language is used, commercial efficacy, the presumption of consistent expression, and other principles of interpretation – to discern the meaning most consistent with the parties' mutual and objective intention. Following that approach, it would be curious that contracting parties would intend no appeal rights by using the phrase "final and binding" but intend the exact opposite by using the phrase "finally settled".

The outcome is also helpful for contract drafters. Clarity of expression should prevail, and the use of similar but not identical words or phrases should not change a contract's meaning but rather can be used as a device to achieve clarity and reinforce the intended meaning.

Footnotes

1. 2023 ONCA 245.

2. Baffinland Iron Mines LP v. Tower-EBC G.P., S.E.N.C., 2023 ONCA 245 at para. 34 [Baffinland].

3. S.O. 1991, c. 17, s. 45(1).

4. Ibid. at para. 36, citing Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 at para. 47.

5. Ibid. at para. 37.

6. Ibid. at para. 38.

7. Ibid.

8. Ibid. at para. 34, citing Healy v. Gregory (2009), 75 C.C.P.B. 178 (Ont. S.C.J.) at para. 79, and Kim Lewison, The Interpretation of Contracts, 4^th ed. (London: Sweet & Maxwell, 2007) at pp 244-245.

9. Ibid. at paras. 40-41.

10. Ibid. at para. 43.

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