The Court of Appeal for Ontario has held that appeal courts will
review decisions interpreting standard form contracts on a
correctness standard, as opposed to the more deferential standard
of review of reasonableness.
The decision means parties to standard form contracts may have
increased chances of successfully appealing contractual
interpretations made by lower court judges than parties to
In MacDonald v. Chicago Title Insurance Company of
Canada (MacDonald), a couple purchased a
multi-storey home that was insured by a title policy from Chicago
Title Insurance Company of Canada. Years later, the couple
discovered that load-bearing walls had been removed during
renovation work done by a previous homeowner, making the second
floor of the home unsafe.
The couple subsequently undertook renovations to the home, as
required by the City of Toronto. They made a claim under the title
policy for the costs of the repairs. Chicago Title denied the claim
on the grounds that the couple lacked coverage and/or that the
claim was excluded under the terms of the policy.
On a motion for summary judgment, a judge ruled in favour of
Chicago Title and determined that the repairs to the property were
not covered by the title policy.
COURT OF APPEAL DECISION
The Court of Appeal overturned the decision of the motion judge
and determined that the policy did in fact cover the damage to the
property, entitling the couple to coverage and indemnification.
A critical issue in the case was whether the Court of
Appeal's consideration of the motion judge's interpretation
of the policy was subject to a "reasonableness" or
"correctness" standard of review. Under the former
standard, a reviewing court is limited to determining whether a
judge's contractual interpretation falls within a reasonable
range of alternatives, making it more difficult for a party to
succeed on appeal. Under the latter standard, a reviewing court may
substitute its own "correct" interpretation of a
contract, making it easier for a party to challenge a judge's
interpretation of a contract.
In Sattva, the Supreme Court had reasoned that the
reasonableness standard is most often appropriate for review of
decisions interpreting contracts because the interpretation of
individual contracts are often fact-specific and generally do not
have implications other than for the parties to the dispute.
In MacDonald, the Court of Appeal held that the
rationales relied upon in Sattva do not apply in respect
of standard form insurance contracts. In other words, since
standard form contracts are not fact-specific and apply broadly,
there is no good reason for reviewing courts to be deferential to
the determinations made by lower court judges on how to interpret
these contracts. To the contrary, there is a need for appellate
court oversight of such interpretations to ensure consistency in
Subject to any further appeal, the MacDonald case
serves to limit the application of the Supreme Court's decision
in Sattva. As the law stands in Ontario, if a party can
demonstrate that a contract is significant for individuals beyond
the parties to the dispute, there may be a greater chance of
successfully appealing a decision involving that contract's
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