Canada: The Burden Of Proof To Rectify A Contract: The Ordinary Civil Standard Applies

The issue

Rectification is an important equitable doctrine allowing courts to rewrite contracts that erroneously record the agreement reached by the parties.  The basic requirements for rectification are well settled.  Where there is a mutual mistake, the party seeking rectification must show (i) that the parties had a common continuing intention prior to the making of the document alleged to be deficient; (ii) that that intention remained unchanged or existed at the time when the document sought to be rectified was signed; and (iii) by mistake, the parties signed a document that did not accurately reflect their common intention.

However, the issue of the onus of proof applicable to this test has been the matter of recent uncertainty.  Historically, reflecting a concern not to open the floodgates to rectification claims, the courts have required something more than the usual civil burden of proof – a standard not as high as the criminal onus, but most recently described as a standard of "convincing proof".  But contradictory messages from the Supreme Court of Canada in recent years cast doubt on the traditional rule.  In a leading rectification decision in 2002, the Supreme Court reiterated and applied the traditional rule.  In a non-rectification case decided in 2008, the Supreme Court stated unequivocally that there is only one onus of proof applicable in all civil cases, namely the balance of probabilities standard.  Since the 2008 case did not mention the 2002 decision, or indeed the issue of rectification at all, it was unclear whether the 2008 case implicitly overruled the 2002 decision on the onus of proof point.

In McLean v. McLean, the Ontario Court of Appeal concluded that there was an implicit overruling and that the normal civil standard now applies in rectification cases.  In coming to this conclusion, the Ontario Court of Appeal joined the only other provincial appellate court to have considered the issue, and treated the point as somewhat self-evident in light of the Supreme Court's unequivocal statement in 2008 that there is only one civil standard of proof.  However, in doing so, the Ontario Court of Appeal did not engage the policy issues that underlie the issue in the rectification context, and its methodology is somewhat questionable.

The contradictory messages from the Supreme Court of Canada

The Supreme Court of Canada's leading decision on rectification is Justice Binnie's judgment in Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd., 2002 SCC 19, which undertook a comprehensive review of the doctrine.  On the question of the onus of proof, Performance Industries applied the traditional rule and settled on the convincing proof standard among a variety of slightly different formulations:

In coming to this conclusion, Performance Industries was applying well settled law: as the foregoing passage illustrates, the principle that there is an enhanced onus of proof in rectification cases had been accepted in three previous Supreme Court of Canada decisions, the earliest dating back to 1916.

Interestingly given what has occurred subsequently, Performance Industries specifically rejected the contention that the onus should be the usual civil standard, citing the traditional concern about opening the floodgates to rectification claims and thereby undermining certainty of contract:

Uncertainty about this holding was generated by F.H. v. McDougall, 2008 SCC 53, a case involving a civil claim for sexual assault authored by Justice Rothstein.  F.H. v. McDougall rejected the contention that a higher onus of proof is required where morally blameworthy or criminal acts are alleged in a civil case, and held that there is only one standard of proof in civil cases:

F.H. v. McDougall was not a rectification case, and in fact did not even mention rectification or Performance Industries at all.  Its statement was clear and unequivocal – there is one standard of proof in civil cases – but its context was entirely different.  Thus after F.H. v. McDougall it was unclear whether it or Performance Industries set the onus of proof in rectification cases.  The question vexed a number of trial courts, but only recently has been taken up at the appellate level.

The Ontario Court of Appeal's resolution of the contradictory messages

In McLean v. McLean, the trial judge had applied the Performance Industries convincing proof standard to deny a rectification claim.  The Ontario Court of Appeal reversed, holding that the trial judge had applied the wrong standard.  The court accepted the argument that Performance Industries had been superseded by F.H. v. McDougall, and rejected the contrary arguments that if F.H. v. McDougall had intended to overrule Performance Industries on the onus of proof point the Supreme Court would have said so, and that F.H. v. McDougall was distinguishable as a civil claim for sexual assault.  In deciding as it did, the Ontario Court of Appeal agreed with the only other provincial appellate court to have considered the issue, although without actually citing the authority in question: in Taylor v. Kemkaran, 2012 MBCA 92 at para. 108, the Manitoba Court of Appeal had come to the same conclusion.

It is striking that both the Ontarioand the Manitobacases simply applied the conclusion of F.H. v. McDougall that there is a single standard of proof in civil cases, and that neither undertook any analysis of the underlying policy issues in the rectification context.  The onus of proof is much more than a theoretical issue.  On a practical level, the onus can dictate who wins and loses a case.  Many criminal accused are acquitted because the Crown cannot meet the very high onus of proving guilt beyond a reasonable doubt.  McLean v. McLean itself demonstrates the point: when the convincing proof standard was applied at trial, the party claiming rectification lost; on appeal, when the balance of probabilities standard was applied, she won.  On a policy level, the standard of proof recognizes that there is always the risk of judicial error through incorrect findings of fact, and reflects how the legal system deals with that unfortunate but unavoidable reality.  In a criminal case, where the issue is whether the presumption of innocence has been displaced and where a person's liberty may be at stake, few chances are taken and a high burden is imposed on the Crown to prove its factual allegations.  When the stakes are just money, there is a greater tolerance of error.  In the rectification context, the longstanding traditional rule reflects a policy concern not to undermine written agreements, and a determination that in close cases the written agreement should prevail.  It may well be the right thing to jettison that approach and even the playing field between a written agreement and a rectification claim, but simply citing F.H. v. McDougall's conclusion that there is a single burden of proof in civil cases – determined in an entirely different context – does not engage the relevant policy debate in any way.  It is somewhat surprising that the longstanding principle that there is an enhanced burden of proof in rectification cases has simply been discarded by two provincial appellate courts without any serious consideration of the rationale underlying the principle.

It is also difficult to believe that F.H. v. McDougall actually intended to abolish the traditional rule in the rectification context.  The Supreme Court of Canada has repeatedly emphasized that overruling one of its prior decisions is not a step to be taken lightly (see Ontario (Attorney General) v. Fraser, 2011 SCC 20 at para. 56).  Can it truly be the case that F.H. v. McDougall intended to overrule at least four Supreme Court of Canada precedents, including one only six years old, without even mentioning the point?  It seems more likely that the rectification context was simply not considered.  The author of the majority judgment in Perfomance Industries (Justice Binnie) did not sit on F.H. v. McDougall.  Indeed, because of changes in the Court's personnel between 2002 and 2008, only two justices sat on both cases (Chief Justice McLachlin and Justice LeBel).  Moreover, the Supreme Court's own application of F.H. v. McDougall has been less than dogmatic: in Merck Frost Canada Ltd. v. Minister of Health, 2012 SCC 3 at para. 94, the Court held that context may require a party to bear a "heavy onus" even if the standard of proof is the balance of probabilities.

The methodology of finding Performance Industries to have been implicitly overruled is also questionable.  In Craig v. Canada, 2012 SCC 43 at paras. 18-23, the Supreme Court of Canada held that an intermediate appellate court should not find a Supreme Court precedent to be implicitly overruled by subsequent Supreme Court case law that does not expressly overrule the precedent, but rather should write reasons explaining why the precedent is problematic and leave it to the Supreme Court of Canada to make the decision to overrule or not.  The circumstances in Craig were somewhat different, but it might have been preferable for McLean v. McLean to have followed the Craig approach, applying Performance Industries (which was directly on point) while noting that, although not expressly overruled, Performance Industries is difficult to reconcile with the Supreme Court's subsequent decision in F.H. v. McDougall.

Significance

Unless an appeal is taken to the Supreme Court of Canada, McLean v. McLean appears to represent the end of the longstanding principle that rectification cases must be proven to a standard higher than the usual civil standard, or at the very least represents a growing consensus among provincial appellate courts that the principle no longer exists.  Whether this will open the floodgates to rectification claims and undermine the certainty of written agreements – the historical policy concern driving the traditional rule – remains to be seen.

Case information

McLean v. McLean, 2013 ONCA 788

Court Docket: C56293

Date of Decision: December 27, 2013

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