Canadian courts of appeal were, as one judge of the Ontario Court of Appeal told me, in “open revolt” over Sattva Capital; it was not a well-crafted decision.  Their concerns were mostly dealt with by the Supreme Court’s decision in Ledcor Construction.

 

The Ontario Court of Appeal attempted, before the Supreme Court’s decision in Ledcor Construction, to make sense of the law in MacDonald v. Chicago Title Insurance Company of Canada, 2015 ONCA 842.  The question there was the correct interpretation of a title insurance policy.  Hourigan J.A., for the Court, held that the interpretation of an insurance policy raised solely a question of law.  He emphasized that there are no relevant surrounding circumstances when a court has to deal with a standard form contract, presented to an insured on a take-it-or-leave-it basis.  There were no negotiations and nothing else that would add a factual basis to the inquiry into the meaning of the policy.  He further observed that, unlike many contracts, there is precedential value in the interpretation of an insurance policy because many insureds, similarly situated to the plaintiffs in MacDonald, will be affected by the decision.

Hourigan J.A. said:

[33]      The importance of the factual matrix is far less significant, if at all, in the context of a standard form contract or contract of adhesion where the parties do not negotiate terms and the contract is put to the receiving party as a take-it-or-leave-it proposition. Any search for the intention of the parties in the surrounding circumstances of these contracts “is merely a legal fiction”: Ledcor [Construction Ltd. v. Northbridge Indemnity Insurance Co., 2015 ABCA 121, 386 D.L.R. (4th) 482], at para. 14.

[34]      The Title Policy was a pre-printed contract produced by Chicago Title and provided to the appellants on a take-it-or-leave-it basis. Chicago Title did not sit across from the appellants and hammer out the details of their bargain. The terms of the Title Policy were simply not negotiated in any meaningful sense and it would be illusory to suggest that anything could be inferred about the meaning of the contract from the facts surrounding its formation.

[35]      Thus, one of the fundamental bases underlying the treatment of contractual interpretation as a question of mixed fact and law in Sattva, being the importance of interpreting a contract in light of the factual matrix, is wholly inapplicable to the Title Policy.

In an interesting and careful jurisprudential note Hourigan J.A. went on to explore briefly the role of appellate courts and courts of first instance and how their respective roles should be respected.  He referred to a decision of the Northwest Territories Court of Appeal, Northwest Territories (Attorney General) v. Association des parents ayants droit de Yellowknife, 2015 NWTCA 2, where Slatter J.A. usefully sets out their roles:

[22]      In short, the standard of review analysis should not be seen as a competition between recognizing the legitimate role of trial courts, and recognizing the legitimate role of appeal courts. The two levels of court are equally important components of one system.  It is equally important to recognize that appeal courts need deference in their role as much as first instance courts need deference in theirs.  Tipping the balance too far either way effectively compresses the system into a single rank of court.  Doing so undermines both the capacity of the system to give individual justice and also the capacity of the system to ensure equal justice under law to everyone.

[23]      The law is ultimately an honour system in the sense that its authority depends on the integrity and credibility of the justice system, and self-discipline by each level of court in staying within its mandate.  A system that effectively transfers the fact finding role of the first instance court to an appeal court could essentially reduce the first instance court to an expensive decoration.  A system that effectively puts findings of fact or mixed fact and law by the first instance court beyond review has the similar potential for analogous damage to the ability of the appeal court to play its role.  Appeal courts are expected to operate at a higher level of legal generality and, crucially, are to review outcomes for legality and reasonableness.  If the appeal court is ineluctably confined to a structure of findings by the first instance court, there would be little or no real “review for legality” at the level of generality of appeal courts.  The confidence of the enlightened public in a justice system with only one real level of judicial authority within and for each province or territory would soon wither.

Slatter J.A.’s approach to appellate review is, I think, useful.

 

With best wishes,

 

Angela Swan

 

 

 

Paul,

 

Yes, I agree that the law/fact distinction is not and should not be the beginning and end, and like any distinction can be abused. But I think our courts have done a pretty good job of teasing out some of the nuances of what is and should be appealable (facts based on oral evidence or discretionary decisions, very rarely; facts based on documents or decisions with a much more structured discretion, more frequently; law, easily) and it is these detailed sub-rules that provide the sensible guidance, not the simple law/fact distinction alone. And it often works out (e.g. standard form contracts, your example, have much less factual matrix given their wider audience and so will naturally be more appealable than one-offs anyway, quite apart from the public interest).

 

I’d like to see more cases like RBS v Carlyle [2015] UKSC 13, where the unanimous Supreme Court (on an appeal from Scotland) discussed throughout the necessary deference given to factual findings (e.g. “the rationale of the legal requirement of appellate restraint on issues of fact is not just the advantages which the first instance judge has in assessing the credibility of witnesses. It is the first instance judge who is assigned the task of determining the facts, not the appeal court. The re-opening of all questions of fact for redetermination on appeal would expose parties to great cost and divert judicial resources for what would often be negligible benefit in terms of factual accuracy. It is likely that the judge who has heard the evidence over an extended period will have a greater familiarity with the evidence and a deeper insight in reaching conclusions of fact than an appeal court whose perception may be narrowed or even distorted by the focused challenge to particular parts of the evidence.”)

It then restored the first instance decision, allowing the appeal from the Second Division with the regrettably rare position as follows: “Were I deciding the matter at first instance and if the findings of fact record all the material evidence, I think that I might have shared the view of the Second Divison…But deciding the case as if at first instance is not the task assigned to this court or to the Inner House.”

So I think we probably agree, save that I have rather more faith in the existing general approach based on oral evidence/written evidence/law etc (if properly applied to written contracts) to reach a sensible answer in most cases (although would not say that every time a judge decides what a contract means that should be unappealable), and remain a little unclear what you propose in its stead.

 

Clients rightly wonder as to the point of months of preparation for weeks of trial including oral evidence of fact and experts as to factual matrix that the parties agree is relevant, if an appeal court is too ready to decide it all de novo in two or three days with only the written evidence a few necessarily extracted transcripts of the oral evidence.

 

Perhaps you have simply had more joy on appeal than me!

 

Adam

 

 

 

I don't necessarily disagree with Adam about the need for caution in relation to appeal or review, but I think the problem is a bit deeper.

If you insist on dividing questions into "law" and "fact", and making that distinction decisive for the standard of review, you nearly always end up with anomalies. The meaning of a contract in a commonly used form (whether or not strictly speaking a "standard form" in the sense of being a contract of adhesion or a contract issued by an institution or a trade association) may be something that deserves close appellate scrutiny; the meaning of a contract which is a "one-off" may not. How much turns on the case for the parties may surely also matter. But if your only tool for deciding whether an appeal court should look at the case is an abstract binary classification as "law" or "fact", it's quite difficult to explain in principled terms why a misunderstanding of the very same words in one contract is "law" and in another is "fact".

Of course, strictly speaking the (English) Court of Appeal *doesn't* depend on such a distinction: you can have appeals on the facts as well as the law, and although lip-service is paid to the idea that the court is reluctant to interfere, the reality is messier, and *how* reluctantly it will interfere with even a definitely factual finding depends a great deal on the particular finding in question, and the reasons for it. In arbitration there is that distinction, but there the categorisation of something as law isn't (in England at least) determinative because there are additional requirements which mean that many points of law are not appealable in practice, which is probably as it should be, and in any event seen as necessary to allow England to compete as an "arbitration venue". Since the parties can anyway completely exclude appeal if they want to, and often do, it probably doesn't matter.

Basically, making appeal standards critically dependent on classification as law or fact is troublesome. And we end up with Sattva which effectively turns the thing on its head and avowedly categorises the question in order to induce what the court thinks is just the right amount of intrusion. Whenever you have a rule which says "You can X if Y" and you find a court saying "in order to decide if Y I am going to decide if I think it would be a good idea to X" you should smell a rat, because the rule has effectively become "You can call this Y if you think you should X". That is more or less where we have (always) got to with the law/fact distinction: a smokescreen or fig-leaf for instrumental reasoning.

If you adopt a Sattva sort of approach, you just end up with the same sort of uncertainty: a mixed question of fact and law which gives judges free rein to "extract" a legal question if they want to (and really, do we actually want *more* navel gazing over "the rules of legal interpretation", whose constant downpour from the Rainy Sky has filled page after page of law reports to precious little benefit in terms of predictability or clarification of principle for these many years?) or refuse to if they don't. It just creates a sort of intellectually dishonest satellite argument, where people pretend to be arguing about which of two incomprehensible categories a putative error should be put into, when the real discussion ought to be about whether it is worthwhile to have an appeal court consider the issue at all.

I'm not against the idea that there are plenty of cases where it might make good sense for an appeal court to say, "it shouldn't matter whether we agree with the judge or not: it's a close case which is important only for the parties and depended on a good deal of detailed evidence, and the judge's answer seems reasonable, so we'll let it stand even though we might have decided it differently ourselves". But insisting that *every* time a judge has decided "what a contract means" is one of those cases, or not, seems silly.

Grant or restriction of rights of appeal depends on too many things that can't be neatly captured in a rather fruitless attempt to sort questions (or errors) into two boxes. To me, that makes Sattva a rather dull case, not because its result is silly, but because it's dealing with a silly question (and in any event, not a question of *contract law* at all, but one of civil procedure).

Paul


--
Paul Stanley QC
Essex Court Chambers
24 Lincoln’s Inn Fields
London WC2A 3EG

+44 20 7813 8000

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