The Ontario Court of Appeal recently held that the standard of appellate review for the interpretation of a standard form title insurance policy is correctness. On December 3, 2015, the Court of Appeal released its decision in MacDonald v. Chicago Title Insurance Company of Canada, 2015 ONCA 842. Justices Cronk, Hourigan and Benotto held in a unanimous decision that the Supreme Court of Canada's recent decision in Sattva Capital Corp. v. Creston Moly Corp., [2014] 2 S.C.R. 633 does not apply to standard form title insurance contracts, which are not negotiated and are presented to receiving parties on a "take-it-or-leave-it" basis.
In Sattva, the Supreme Court held that the traditional view that contract interpretation must be reviewed on a correctness standard should be abandoned, because the interpretation of contracts is an issue of mixed fact and law, reviewable on a spectrum. Where the factual matrix or surrounding circumstances at the time an agreement was entered into are relevant to its interpretation, it will be reviewable on a more deferential standard (the "palpable and overriding error" standard). The interpretation of an "extricable question of law", such as a legal principle or test, is reviewable with less deference to the judge of first instance (the "correctness" standard).
In MacDonald , the Ontario Court of Appeal distinguished Sattva and held that the standard of review for the interpretation of standard form contracts such as the title insurance contract at issue is correctness. The Court of Appeal held that the two justifications relied on by the Supreme Court in Sattva in support of the proposition that contractual interpretation is an issue of mixed fact and law did not apply in the particular context at issue in MacDonald, i.e., standard form contracts where the parties did not negotiate their terms. First, the Court held, factual circumstances surrounding entry into an agreement are not relevant in the context of standard form contracts that are not negotiated. Second, the interpretation of a standard form contract may in certain circumstances be of general importance beyond the parties to a particular lawsuit; in the view of the Court of Appeal, in order to ensure consistency in interpreting identical standard form agreements, appellate courts should have the power to review decisions without significant deference to original triers of fact.
It is difficult to predict whether the issues in MacDonald are of sufficient national importance to obtain leave to appeal to the Supreme Court of Canada, or indeed if leave to appeal will be sought by the defendant title insurer. Stay tuned.
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