



COURT OF APPEAL FOR ONTARIO

CITATION: Conseil Scolaire Catholique
    Franco-Nord v. Nipissing

Ouest (Municipalité), 2021 ONCA 544

DATE: 20210728

DOCKET: C67949

Rouleau, Hoy and van Rensburg
    JJ.A.

BETWEEN

Conseil
    Scolaire Catholique Franco-Nord

Applicant (Appellant)

and

La Corporation de la Municipalité
    de Nipissing Ouest

Respondent (Respondent)

Pierre Champagne and Andréane Lafrance,
    for the appellant

Michael F. Sirdevan, for the respondent

Heard: May 31, 2021 by video conference

On appeal from the judgment of Justice David
    R. Nadeau of the Superior Court of Justice, dated December 17, 2019, with
    reasons reported at 2019 ONSC 6474.

Rouleau J.A.:

FACTS

[1]

The Conseil Scolaire Catholique Franco-Nord (the
    school board) is a successor school board to the Nipissing District
Roman Catholic Separate School Board
. In 1988, the
    Nipissing District Roman Catholic Separate School Board sold a property known
    as the St. Jean Baptiste School to the Township of Caldwell (the Township). The
    Municipality of West Nipissing
(the Municipality)
is
    the successor to
the Township. In return for the school, the Township agreed
    to provide snow and garbage removal services to one of the school boards other
    schools located in the Township, the Ste. Marguerite dYouville School.

[2]

The evidence documenting the sale tendered by
    the school board is straightforward. It consists of a March 10, 1988 letter
    from the Township offering to buy the school and a school board resolution
    accepting the offer subject only to the approval of the sale by the Ministry of
    Education. The relevant parts of the Townships offer letter are as follows:

Further to our past discussions regarding the
    above mentioned [school], please be advised that the Council of the Township of
    Caldwell wishes to acquire the St. Jean Baptiste School for the sum of $1.00.

We have been approached by many interested
    groups such as the Recreation Committee, lUnion Culturelle des Femmes Franco-Ontariennes
    etcfor accommodations in this building.



The municipal library is presently in dire
    need of additional space and is also located on a second storey being [a] very unsuitable
    location

As you can tell, we have many plans for the
    use of this building all being for the best of the community. Please note that
    these organizations are all non-profit and are vital to the well-being of the
    area residents.

However, the
    municipality is agreeable to render certain services to the School Board such
    as clearing of snow in school yard and garbage pick-up at Marguerite dYouville
    School. I wish to point out that the school is already using our arena
    facilities at no cost. We are also open to any other suggestions.

[3]

The school boards resolution accepting the
    offer is dated April 13, 1988.
It reads as follows: Que
    le C.E.C.L.F. accepte loffre dachat de lécole St-Jean-Baptiste soumise par
    le canton de Caldwell le 10 mars 1988, sous réserve dautorisation du ministère
    de léducation.
The Township began providing snow and
    garbage removal services to the school board shortly thereafter. These services
    would continue until 2017.

[4]

At the time of the sale, the disposition of
    school board property required approval from the Ministry of Education in
    accordance with the Ministrys 1979 Capital Grant Plan. On June 15, 1988 the
    Ministry granted its approval for the transfer of the school:

It is noted that the requirements of the
    Ministry have been met. Accordingly, this letter may be considered as approval
    to dispose of this school building to the Township of Caldwell for community
    use.

This approval does not absolve the board from
    any other responsibility under the Education Act respecting the sale of
    property. The Regional Office will confirm with you any reduction in recognized
    extraordinary expenditure that may arise as a result of this transaction.

I should like to
    thank the board for its co-operation in the disposal of this surplus asset in
    accordance with section 12.3 of the Capital Grant Plan as amended.

[5]

On September 16, 1988 the school board received
    a letter from its lawyers enclosing a copy of the signed transfer and a cheque
    for $1 as payment in full of the purchase price.

[6]

The transfer included two clauses of relevance
    to this appeal. First, the transfer granted the school board a vendors lien
    over the transferred property in the following terms:

The within
    conveyance is subject to a Vendors Lien in the amount of $27,300.00. In the
    event that the Transferee grants, transfers or in any way conveys its interest
    in the within described lands or any portion thereof, prior to the expiration
    of ten (10) years from the date of registration herein, the Transferee shall
    remit payment of the said sum of $27,300.00 to the Transferor. This Vendors
    Lien shall expire ten (10) years from the date of registration of this
    transfer.

[7]

Second, the transfer granted the school board a
    right of first refusal if the Township intended to sell the school within 20
    years of the initial transfer:

The Transferee
    further grants to the Transferor the right of first refusal to purchase the
    land described herein and any buildings and improvements thereto for the sum of
    ONE ($1.00) DOLLAR. This first right of refusal shall run for a period of
    twenty (20) years from the date of registration of the within transfer. The
    Transferee agrees not to sell the real property described herein to another
    party without first offering the Transferor the right to repurchase the lands
    and buildings for the said sum of ONE ($1.00) DOLLAR.

[8]

Contrary to the application judges finding, the
    school board submits that these clauses had nothing to do with the duration of
    the Townships obligation to provide snow and garbage removal services in
    payment of the purchase price. They were inserted to ensure that the Township
    could not resell the property without first giving the school board the
    opportunity to repurchase it, and to comply with s. 12.7.3 of the Ministrys
    Capital Grant Plan, which provided:

When a complete
    school property is sold to a preferred agency and the sale price is below the
    total undepreciated value of the building, and the market value of the land, a
    commitment in writing shall be obtained from the purchaser which will ensure
    that the board recovers equity if the property is resold within a period of ten
    years from the date of sale.

[9]

In 1999, all of the Townships obligations were
    transferred to the Municipality. The Municipality continued to provide snow and
    garbage removal services to the school board in the same manner as before.

[10]

In 2002, the Municipality advised the school
    board that it intended to put an end to the snow removal service. Following discussions
    between the school board and the Municipality, the Municipality agreed to continue
    providing snow removal services. The school board confirmed that it would hold
    the Municipality harmless for damage to school property.

[11]

In 2012, the Municipality again indicated an
    intention to put an end to the snow and garbage removal services. Once again,
    following discussions, the services were maintained.

[12]

Finally, in November 2017, the Municipality informed
    the school board that it had, by resolution, decided to end the snow and
    garbage removal services. The school board attempted to negotiate with the Municipality
    over the summer of 2018 but the Municipality would not deviate from its
    decision. During these discussions, the school board maintained that the 1988
    agreement was intended to last in perpetuity.

[13]

On August 31, 2018 the school board filed its
    notice of application in this matter, seeking, among other things, a
    declaration that the 1988 contract remained in force and that the Municipality had
    an obligation to continue providing snow and garbage removal free of charge.

[14]

In support of its application, the school board
    filed affidavits of school board employees who were either employed by the
    school board in 1988 or involved in the 1988 agreement with the Township. The
    affiants stated that the contract did not provide for any expiry or term.

DECISION BELOW

[15]

The application judge found that the application
    raised two separate issues as follows:

a.

Was the 1988 contract of perpetual duration?

b.

Could the Municipality terminate the contract unilaterally
    as it had done in November 2017?

[16]

On the first issue, the application judge found
    that the school board had not satisfied him that the agreement was perpetual in
    duration.

[17]

When the application judge turned to the second
    issue, he referenced the case of
1397868 Ontario Ltd. v. Nordic Gaming
    Corporation (Fort Erie Race Track)
, 2010 ONCA 101, finding it to be instructive.
    He also noted that, unlike the case of
Thunder Bay (City) v. Canadian
    National Railway Co.
, 2017 ONSC 3560, revd 2018 ONCA 517, leave to appeal
    refused [2018] S.C.C.A. No. 358, the word perpetual is nowhere mentioned in
    the contract. He acknowledged that there was complete silence as to the
    duration of this contract and that there had been continuous performance of
    snow and garbage removal since 1988.

[18]

In attempting to characterize the relationship
    between the parties, the application judge found that while the relationship
    created by the 1988 contract is not one of employment or partnership, it
    resembles in some fashion a personal services contract, adding that [t]hese
    are the types of contracts into which Courts routinely imply terms of termination
    on reasonable notice.

[19]

The application judge found that the surrounding
    circumstances, including the vendors lien expiring after 10 years and the
    right of first refusal expiring after 20 years, pointed away from a perpetual
    agreement. He considered the non-pecuniary considerations expressed in the
    Townships letter such as mutual betterment of the community but he did not
    explain how these considerations figured into his analysis. The application
    judge also found that the Municipalitys efforts to terminate the agreement in
    2002 and 2012 supported a finding that the contract could be terminated on
    reasonable notice in November 2017.

[20]

Although he did not determine what would
    constitute a reasonable notice provision in the circumstances, the application
    judge was satisfied that the Municipality has properly exercised its implied
    right to terminate its obligations on reasonable notice to the Board.

ISSUES

[21]

The only issue on appeal is whether the
    application judge erred in concluding that the 1988 agreement was terminable on
    reasonable notice. In light of my conclusion that he did so err and that the
    agreement was not terminable on reasonable notice, I need not address the issue
    of whether reasonable notice was in fact given in this case.

THE LAW

[22]

Before addressing the specific arguments raised
    in this case, I will outline the principles that guide the interpretation of
    contracts that are silent on the issue of termination.

[23]

The interpretation of a contract that is not a
    standard form contract or contract of adhesion involves questions of mixed fact
    and law. An appellate court will only intervene if the decision below is
    tainted by palpable and overriding error:
Sattva Capital Corp. v. Creston
    Moly Corp.
, 2014 SCC 53, [2014] 2 S.C.R. 633, at paras. 4, 55-56, and
    69-71.

[24]

As this court explained in
Thunder Bay
,
    at para. 30, the overriding principle is that the meaning of an agreement and
    the intent of the parties in entering into it must be derived from the words
    the parties used and the context in which they used those words.

[25]

In this case the court must determine whether,
    in the absence of any stipulation as to the duration of the contract or the
    parties rights of termination, the contract should be treated
as either perpetual in
    nature or as an indefinite term contract into which the court implies a
    provision of unilateral termination on reasonable notice
. The
    inquiry focuses on the specific parties to the contract in issue. As the
    Supreme Court specified in
M.J.B. Enterprises Ltd. v. Defence Construction
    (1951) Ltd.
, [1999] 1 S.C.R. 619, at para. 29:

A court, when
    dealing with terms implied in fact, must be careful not to slide into
    determining the intentions of
reasonable
parties
    (emphasis in original).

[26]

The case law has in the last 150 years
    identified certain challenges unique to the issue of when parties are silent on
    issues of duration and termination.

[27]

Historically, courts concluded that contracts of
    indefinite duration were presumptively perpetual and that the burden lay on the
    party seeking termination to establish an implied right of termination.
John McCamus explains as follows:

Initially, the
    common law took the position that if the parties did not stipulate in the
    agreement a method of termination, the agreement should be presumed to be
    perpetual in nature. The presumption could be set aside if the party alleging
    an entitlement to terminate, perhaps on reasonable notice, was able to
    demonstrate either from the wording of the agreement or its nature that the
    presumption should be set aside.

See John McCamus,
The Law of
    Contracts
, 3rd ed. (Toronto: Irwin Law, 2020), at pp. 844-845.

[28]

The 1875 House of Lords decision in
Llanelly
    Railway & Dock Co. v. London & North Western Railway Co.
(1875),
L.R. 7 H.L. 550 is typically
    cited as the starting point for this line of cases. In that case, the Llanelly
    Railway company allowed trains owned by the London & North Western Railway
    to travel on its rails. The contract did not stipulate any kind of term. Lord
    Selborne wrote what was, for a time, the predominant view:

My lords, an
    agreement
de futuro
, extending over a tract of time which, on the face
    of the instrument, is indefinite and unlimited, must (in general) throw upon
    anyone alleging that it is not perpetual, the burden of proving that
    allegation, either from the nature of the subject, or from some rule of law
    applicable thereto.

[29]

The presumption that an indefinite contract was intended
    to be perpetual survived in one form or another into the mid-20
th
century, appearing for example in Kerwin J.s reasons in
Gill Brothers v.
    Mission Saw Mills Limited
, [1945] S.C.R. 766, where he wrote: Speaking
    generally, a contract indefinite in time is
prima facie
perpetual.

[30]

Despite the long lifespan of the historical
    approach, a contrary presumption in favour of termination rights arose in the
    commercial context. The trend favouring a presumptive right to terminate on
    reasonable notice appears to have gained traction following the House of Lords
    decision in
Winter Garden Theatre (London) Ltd. v. Millennium Productions
    Ltd.
,
[1948] A.C. 173, in
    which Lords Porter and Uthwatt acknowledged that, in a business context, it is
    more realistic to expect that parties
do not
intend an indefinite arrangement to be perpetual, and that they would generally
    expect to be granted a right to terminate on reasonable notice: See
Rapatax
    (1987) Inc. v. Cantax Corporation Ltd.
, 1997 ABCA 86, 145 D.L.R. (4th)
    419, at paras. 15-19, leave to appeal refused [1997] S.C.C.A. No. 307. Even
    before
Winter Garden
, however, this court had expressed a view that
    business contracts must be interpreted in a business way; and it would be a palpable
    absurdity to consider such a contract as a perpetual chain on the defendant to
    oblige it for all time to continue the plaintiff in such work; the only
    reasonable way of interpreting it is to consider it as terminable on reasonable
    notice:
Robinson v. Galt Chemical Products Ltd.
, [1933] O.J. No. 114
    (C.A.), at para. 14.

[31]

More recently, the law has evolved to eschew all
    presumptions in favour of a more balanced contextual approach. As McCamus
    explains at p. 844, there is no longer any kind of presumption going either
    way:

Modern authorities appear to accept, however,
    that the matter is to be determined simply on the basis of ordinary principles
    of interpretation, without the aid of a presumption in favour of perpetuity.



While the trend of
    the modern cases appears to lie in the direction of implying rights to
    terminate on reasonable notice, there is no reason, in principle, precluding
    parties from agreeing to indefinite or perpetual obligations and if, on the
    proper construction of the agreement, a perpetual obligation is intended, it
    will be enforced.

[32]

The modern reconciliation between conflicting
    presumptions is best expressed in the Manitoba Court of Appeal decision in
Shaw
    Cablesystems (Manitoba) Ltd. v. Canadian Legion Memorial Housing Foundation
    (Manitoba)
(1997), 143 D.L.R. (4th) 193. In
Shaw
, a cable company
    provided cable television to two retirement homes at a promotional price. The
    contract provided for a unilateral right of termination in favour of the
    clients, but it was silent on Shaws right to terminate. Ultimately, the
    Manitoba Court of Appeal held that the contract was perpetual, largely because
    the contract included a price adjustment clause ensuring that Shaw was not
    required to provide services at an unreasonably low price in the future.

[33]

Shaw
provides
    an authoritative expression of what has become the dominant approach.

Huband
    J.A. wrote at p. 196:

There is no lack of
    reported cases where the courts have implied a term into a contract allowing
    one of the parties to terminate an agreement that otherwise would be unlimited
    in time, by giving reasonable notice. There is also a host of cases which go in
    the other direction
I think the essence of the case is
    simply that each of the decisions turns on the particular agreement under
    consideration and the circumstances surrounding it
.

[34]

In concurring reasons, Helper J.A. agreed at p.
    211 that whether a contract is on the one hand perpetual in duration or on the
    other hand, terminable by one or both parties, is purely a matter of
    construction. Arguably, contracts are not subject to a presumption one way or
    the other.

[35]

Turning to the particular facts in
Shaw
,
    Huband J.A. explained at p. 200:

Counsel for the company argues that the
    parties must have contemplated from the outset that the company would not
    continue to provide the service on a subsidized basis until the buildings
    crumble into dust.

This would be a
    strong argument indeed, if there was no provision for an increase in the
    monthly fee. But the agreements specifically contemplate the prospect of future
    rate increases. The agreements foresee what has taken place over the years,
    namely, that the individual service fee has more than doubled; and so has the
    fee payable by these customers. The agreements contemplate contingencies far
    into the future, and contemplate that the service fee payable by these
    customers would remain subsidized into the future.

[36]

This court adopted the approach set out in
Shaw
in
Nordic Gaming
, at para. 13, where OConnor A.C.J.O. stated:

When the term of a
    contract is not fixed and there is no provision for termination on reasonable
    notice, a court may treat a contract
as either perpetual
    in nature or as an indefinite term contract into which the court implies a
    provision of unilateral termination on reasonable notice
In
    determining this issue, courts typically look to the specific terms of the
    contract as well as to the relationship between the parties and the surrounding
    circumstances. As the majority of the court explained in
Shaw
at para.
    15, the essence of the cases is simply that each of the decisions turns on the
    particular agreement under consideration and the circumstances surrounding it.
    [Emphasis added. Citations omitted.]

See also
Brown v. Belleville (City)
,
    2013 ONCA 148, 359 D.L.R. (4th) 658, at para. 64.

[37]

In considering the nature of the parties
    agreement, the case law places a particular emphasis on the relationship
    created by the contract. As this court recognized in
Nordic Gaming
, at
    para. 14, certain types of contracts naturally give rise to an implied right to
    terminate upon reasonable notice. Employment relationships, partnerships, and
    personal service contracts, all of which depend upon a level of trust and
    continuous performance, engage specific concerns about the extent to which
    courts should enforce performance when a relationship has collapsed. The
    implied right to terminate a contract for personal services is in a sense the corollary
    to the courts general unwillingness to order specific performance of such
    contracts.

[38]

In
Nordic Gaming
, for example, the
    trust relationship was inherent in the nature of the contract, as OConnor
    A.C.J.O explained at para. 24:

The agreement
    contemplates that the two parties would work together with 139 operating a food
    and beverage service and maintaining the premises, and Nordic running the [off-track
    betting] operation in the premises. Thus, they would have to work together closely
    and co-operation would be important. While the relationship created by the
    agreement was not one of employment, partnership or, strictly speaking, for
    personal services  which are the types of contracts into which courts
    routinely imply terms of termination on reasonable notice  it did involve many
    of the same components, such as the need for trust, confidence and
    satisfaction.

[39]

However, the simple characterization of a
    contract as a personal service contract does not automatically give rise to
    an implied right of termination on reasonable notice; the court is still
    required to examine the agreement in its entire context. Mesbur J. examined
    this question in
Credit Security Insurance Agency Inc. v. CIBC Mortgages
    Inc.
(2006), 268 D.L.R. (4th) 725, affd 2007 ONCA 287. In that case,
    Credit Security agreed to provide pooled mortgage insurance to customers of
    FirstLine Trust, later acquired by CIBC Mortgages. The contract stipulated that
    the agreement could only be terminated by mutual agreement or for fundamental
    breach. CIBC decided for business reasons that it wished to terminate the
    agreement and gave Credit Security three months notice of termination. Credit
    Security commenced an action to enforce the agreement.

[40]

Mesbur J. found that the contract between Credit
    Security and CIBC was a commercial contract with only some of the hallmarks of
    trust and confidence that would normally give rise to an implied right to
    terminate on reasonable notice. She said, at para. 33: While there is no doubt
    that there is a provision of services element to the contract, it is also,
    and primarily, a contract for the provision of a product to CIBC Mortgages, a
    product in which  Credit Security was to retain a long-term proprietary
    interest for which it was to be paid. She continued, at para. 36:

As I have said, it
    is true that there are elements of provision of services within the contract.
What the court must look at, however, is whether, from the
    inception of the contract there should be an implied right to terminate
.
    One does not look at the circumstances at the time that one of the parties
    wishes to terminate to see if it is then commercially reasonable. One must look
    at the time of the formation of the contract to make that determination.

[41]

On appeal, this court held Mesbur J.s analysis
    to be entirely sound in every respect on all issues: at para. 1.

[42]

As
Credit Security
makes clear, the
    existence of a provision of services element in a contractual relationship
    does not automatically relieve the court of going through the exercise of
    determining whether, at the moment of contract formation and in all the
    circumstances, a term could be implied into the parties agreement providing
    for termination on reasonable notice. The existence of a special relationship
    or trust relationship is a strong and often decisive factor, but it is not
    definitive. This aligns with the Manitoba Court of Appeals reasoning in
Shaw
,
where the companys ongoing obligation
    to provide cable services was found to be perpetual, despite what could be
    described as a service element.

[43]

I turn now to the consideration of the issues
    raised in this case.

POSITIONS OF THE PARTIES

[44]

The school board argues that, in carrying out
    his analysis, the application judge committed several errors. Specifically, the
    school board submits that he erred in:

1.

Placing the burden of showing that the contract
    is perpetual on the school board;

2.

Finding that the contract is one of personal
    service involving the need for trust, confidence and satisfaction such that a
    term of termination on reasonable notice ought to be implied;

3.

Considering the Municipalitys post-contract
    desire to terminate; and

4.

Considering the two clauses inserted in the deed
    of transfer as being indicative of value or intention.

[45]

For its part, the Municipality argues that the
    application judges assessment of the circumstances relevant to the contract
    and his determination that it resembles in some fashion a personal services
    contract are reasonable findings. In its submission there is simply no basis to
    set aside his conclusion that the contract did not bind the Municipality in
    perpetuity.

ANALYSIS

[46]

In my view, the path taken by the application
    judge to reach his conclusion was flawed in several respects. As I will
    explain, the application judges analytical approach was confusing, and he
    erred in concluding that the agreement at issue was in the nature of a personal
    service contract such that a right of termination on reasonable notice ought to
    be implied. He also erred in his consideration of the surrounding
    circumstances. On a proper analysis, he ought to have concluded that the
    contract was perpetual in nature

(1)

How the application judge approached his task

[47]

The application judges reasons present the
    analytical task as one involving two steps to address two discrete issues, with
    the first step requiring him to decide if the contract was perpetual in
    duration and the second requiring him to decide whether the contract could be
    terminated unilaterally by the Municipality in the manner it had done.

[48]

In his analysis on this first issue, the
    application judge noted that nowhere is it indicated, or even implied, that
    this contract is to be of perpetual duration. He went on to state that, on the
    basis of what he considered to be cryptic evidence as to the terms of the
    agreement, he had tremendous difficulty finding that the [school board] has
    satisfied me that this indefinite contract is of perpetual duration. He then
    indicated that this did not end the analysis and further consideration was
    necessary. It was at that point that he turned to the second issue, where he reviewed
    the case law and considered the relationship of the parties and the surrounding
    circumstances.

[49]

In my view, the application judges decision to
    divide the analysis into two separate questions was unnecessary and confusing
    in light of the applicable test. As this court explained in
Nordic Gaming
,
    when a contract contains no fixed term and no provision for termination on
    reasonable notice, the court may treat the contract either as perpetual or as
    indefinite into which a provision of unilateral termination on reasonable
    notice is implied. The decision as to which is the proper interpretation is an
    exercise in contractual interpretation which requires the court to examine the
    specific terms of the contract as well as the relationship between the parties
    and the surrounding circumstances. Because there is no presumption either way,
    neither party bears an onus except to the extent that any applicant bears the
    onus in an application for declaratory judgment, such as this one. The
    application judges reasons, however, could be read in such a way as to place
    the onus on the school board to satisfy the court that the contract was
    perpetual. Thus, without giving rise to a reversible error, the application
    judges reasons tend to obscure his approach to the relevant legal principles.

[50]

It was on his second step that the application
    judge considered the application of
Nordic Gaming
and addressed the
    relationship between the parties and the surrounding circumstances. However,
    despite correctly identifying
Nordic Gaming
as the governing authority,
    the application judge committed palpable and overriding errors in its
    application, to which I now turn.

(2)

The nature of the relationship

[51]

Relying on
Nordic Gaming
, the application
    judge found that the relationship created by the 1988 contract resembles in
    some fashion a personal service contract and that the provision of snow
    removal and garbage disposal involves the need for trust, confidence and
    satisfaction. The application judge then concluded that the contract was the
    type of contract into which courts routinely imply terms of termination on
    reasonable notice.

[52]

I disagree. The contract in this case is
    fundamentally different from the types of contract into which the courts
    routinely imply termination on reasonable notice. In my view, the application
    judges characterization of the agreement between the parties is tainted by
    palpable and overriding error. When compared against the contract at issue in
Nordic
    Gaming
, for example, there are two critical differences.

[53]

First, in
Nordic Gaming
, the services
    being provided were being paid for on an ongoing basis. In the present case,
    the services provided by the Municipality form part of the consideration payable
    for real property transferred in 1988. This is not an ongoing relationship
    where service is being provided and payment made on an ongoing basis. Indeed,
    in
Nordic Gaming
, at para. 27, the court explained that a partys
    large upfront investment can provide an indication that the parties intend to
    create a perpetual agreement:

However, there are
    aspects of the surrounding circumstances which could point to a perpetual
    agreement. Most significantly, was the large cost incurred by 139 in order to
    install fixtures in the premises. In passing, the trial judge indicated that
    this amount was $117,700, but made no clear finding on the point. This sum of
    money could have taken 139 many years to recover.
Thus,
    it may be argued that it would be unusual for 139 to agree to enter a contract
    that could be terminated on reasonable notice where such a significant initial
    investment was needed
. [Emphasis added.]

[54]

The school boards upfront investment was the
    transfer of the school for one dollar. As contemplated in
Nordic Gaming
,
    it would be unusual in this case for the school board to transfer property to
    the Municipality in return for a nominal sum plus ongoing services if those
    services could be terminated unilaterally and potentially prematurely. In that
    regard, it is of particular significance that the school board was transferring
    real property with enduring value.

[55]

A second basic difference is that in
Nordic
    Gaming
, one party was serving the clientele of the other party. As the
    court explained, in such circumstances the parties had to work together
    closely and co-operation would be important. Implying a term permitting one
    party to exit the relationship in such circumstances is reasonable as it would
    be inappropriate to force such parties to continue working together where there
    is no longer any trust.

[56]

The services being provided by the Municipality in
    this case are not the types of services that raise concerns of the nature
    referenced in
Nordic Gaming
. Snow and garbage removal are normal functions
    of a municipality, and the standards to which they are provided is generally
    consistent and uniform throughout the municipality. They do not engender the
    same type of trust relationship that gives rise to a presumption of an implied
    right to terminate. Nor is it suggested that the relationship of trust
    between the school board and the Municipality, if one was required, has
    collapsed or deteriorated to a point where it would be inappropriate to force
    the relationship to continue. In my view, the contract between the Municipality
    and the school board is not the sort of agreement into which courts routinely
    imply a right to terminate on reasonable notice and the application judge erred
    in so concluding.

(3)

The surrounding circumstances

[57]

In his analysis of the surrounding circumstances,
    the application judge referenced:

1.

The mutual betterment of the community;

2.

The provision in the transfer imposing a lien in
    the amount of $27,300 for 10 years and the right of first refusal in favour of
    the school board for 20 years; and

3.

The length of time the Municipality performed
    the services and the Municipalitys express desire to end the relationship.

[58]

The application judge considered that these
    circumstances supported the implication of a term permitting the Municipality to
    terminate the agreement unilaterally in the manner it did. The Municipality in
    its submissions further argued that, because the services had been provided for
    over 30 years, the transferred property had been paid for many times over. This
    provided further support for the application judges decision and addressed the
    concern, discussed above, that a unilateral termination right might prevent the
    school board from recovering fair value for the transferred property if the
    services were terminated prematurely.

[59]

As I will explain, the application judge erred
    in his appreciation of the surrounding circumstances by considering irrelevant
    factors and failing to consider relevant factors. Viewed properly, the
    surrounding circumstances support the conclusion that the contract is perpetual
    in nature. Moreover, the Municipalitys suggestion that it has provided enough
    services over time to pay for the transferred property is not persuasive. The
    circumstances that are most relevant in interpreting the agreement are those
    known to the parties when they reached the agreement, not when the Municipality
    seeks to terminate it. I turn first to the three circumstances identified by
    the application judge.

[60]

The application judge made reference to the
    mutual betterment of the community but he did not provide any indication of how
    it might favour either the school boards or the Municipalitys interpretation
    of the agreement. I view this circumstance as being neutral in that it is
    simply an observation that the transaction was of benefit to the community
    served by both parties. At most, the status of the parties as public bodies working
    for the betterment of the community provides an indication that neither party
    was pursuing strictly commercial aims by entering into the agreement.

[61]

As for the two provisions inserted into the transfer,
    these provisions appear to flow directly from the requirements of the Ministrys
    Capital Grant Plan and the school boards desire to ensure that the Municipality
    would not simply resell the property. They are of little assistance in
    interpreting the Municipalitys obligation to provide snow and garbage removal,
    which is not tied to its continued ownership of the property.

[62]

With respect to the third surrounding
    circumstance considered by the application judge, the length of time the Municipality
    rendered the services and its repeated attempts to bring them to an end, this
    circumstance may have relevance once it is decided that a reasonable notice
    period should be implied. It is, however, of little assistance in deciding the
    central issue as to whether the agreement is perpetual or one into which a
    reasonable notice provision should be implied.

[63]

Similarly, the Municipalitys argument that the transferred
    property has been paid for many times over is of no assistance. The Municipality
    submits that this is relevant because the Township would have been alive to
    this possibility at the time of contract formation and would not have agreed to
    a contract requiring it to continue providing services until long after the
    aggregate value of the services exceeded the value of the property. The Municipality
    suggests that because it has provided services in excess of the propertys
    value many times over, it should now be permitted to terminate the agreement.

[64]

I reject the Municipalitys position for two
    reasons. First, the record does not permit an accurate assessment of either the
    value of the school property or the value of the municipal services either at
    the time the contract was entered into or in the years following. The Municipality
    refers to the affidavit of Stephan Poulin, Director of Economic Development and
    Community Services for the Municipality of West Nipissing, where the
    calculation of the overpayment is contained. In his affidavit, Mr. Poulin
    suggests that the amount of the vendors lien included in the transfer, some
    $27,300, was the value of the property at the time of transfer. There is
    nothing to substantiate his evaluation on this point, and no indication of how
    the value of the property might have changed in relation to the value of the
    services over time. It is simply impossible to determine on this record the
    value of the property, whether at the date of the sale or in the period since
    the sale.

[65]

With respect to the value of the snow and
    garbage removal services, Mr. Poulin estimated that the value of the services
    provided by the Municipality since 1988 could be as much as $270,000. This too
    is impossible to substantiate. Mr. Poulins figure is taken from the affidavit
    of Mr. Cantin, for the school board, who deposed that in 2017-18, when, on
    short notice, the school board was forced to pay for its own snow and garbage
    removal, it paid $4,500 for each service, or $9,000 for the year. Mr. Poulin
    then apparently extrapolates back to 1988, simply multiplying $9,000 by 30
    years (1988-2019) to reach the figure of $270,000. There is no evidence of the
    value to the school board of the snow and garbage removal over the period, nor of
    the cost to the Municipality of providing the services. The amounts paid by the
    school board in 2017-18 for the services previously provided by the Municipality
    are of no assistance in determining the value of the services that the Township
    agreed to provide.

[66]

Second, and more importantly, even if it could
    be shown that the value of snow and garbage removal had exceeded the value of
    the property since the 1988 sale, it does not necessarily follow that the
    parties did not intend those services to be provided in perpetuity. Contractual
    interpretation focuses on the intentions of the parties at the moment of
    contract formation:
Sattva
, at para. 58. Or, as Mesbur J. wrote
    in
Credit Security
, at para. 36: One does not look at the
    circumstances at the time that one of the parties wishes to terminate to see if
    it is then commercially reasonable. One must look at the time of the formation
    of the contract to make that determination.

[67]

At the time the contract was entered into, the
    parties would not have known how long the school board would continue to
    operate the Ste. Marguerite dYouville School. Obviously, if the school is closed,
    the Municipalitys obligations would come to an end. The schools closure could
    have occurred five, ten or more years after the agreement was entered into. An
    early closure would potentially constitute a windfall for the Municipality. The
    fact that the school has remained in operation for over 30 years may result in
    a windfall to the school board, which it would turn out was not known nor
    likely contemplated by the parties when they made their contract. It ought not
    to have been a factor in the application judges decision.

[68]

The application judge also appears to have overlooked
    other relevant considerations, such as the nature of the contracting parties as
    well as additional surrounding circumstances.

[69]

This was an agreement between two public
    institutions. Both were in the business of providing services to the community
    they served, and both saw the agreement as a win-win in that regard. Neither
    party was pursuing strictly commercial objectives and it is doubtful, based on
    their relationship and on the available evidence, that much consideration was
    given to whether one might achieve a windfall at the others expense. It simply
    was not the focus of the parties negotiations.

[70]

The public nature of the contracting parties
    also explains an additional surrounding circumstance with which the application
    judge failed to grapple. The parties did not carry out a valuation of the St.
    Jean Baptiste School being transferred, nor did they estimate the costs to the Municipality
    of incorporating the snow and garbage removal services for the Ste. Marguerite
    dYouville School into their usual operations. An after-the-fact analysis as to
    whether the arrangement turns out to be economically advantageous to one party
    or the other ought not to have factored into the interpretation of the agreement
    that was reached. The fact that an agreement reached between two parties is
    not, after many years of operation, economically fair to one party or the
    other should not operate so as to justify ending the relationship. It is not
    the courts role to save a contracting party from a bargain that proves
    improvident with hindsight:
Northrock Resources v. ExxonMobil Canada
    Energy
, 2017 SKCA 60, at para. 21; see also
Churchill Falls (Labrador)
    Corp. v. Hydro-Québec
, 2018 SCC 46, [2018] 3 S.C.R. 101.

[71]

I hasten to add that, even if I were to conclude
    that the contract was ambiguous such that it became necessary to look at the
    subsequent conduct of the parties, that is, the fact that the service continued
    to be provided for over 30 years despite the twice stated intention of the Municipality
    to end it, this would not assist the Municipality. The fact that the Municipality
    continued to provide the services until 2017, well after the 10 and 20 year
    periods set out in the transfer had passed and despite the twice stated
    intention to end the provision of the services, is, in my view, more consistent
    with the agreement being perpetual in nature. The continuous 30-year
    performance and the abrupt termination in 2017, without any reference to an
    understanding that the agreement contained an implied termination provision,
    suggests that the agreement had been treated by the Municipality, until then,
    as being perpetual.

CONCLUSION

[72]

In summary, in determining whether to treat a
    contract
as either
    perpetual in nature or as an indefinite term contract into which the court
    implies a provision of unilateral termination on reasonable notice
,
    the court looks to the specific terms of the contract as well as to the
    relationship between the parties and the surrounding circumstances.

[73]

The contract in this case does not contain any
    clear indication as to whether it was intended to be perpetual. The word
    perpetual does not appear in the contract, nor does the contract provide for unilateral
    termination.

[74]

As I have explained, the application judge erred
    in his analysis of the surrounding circumstances and in his characterization of
    the contract as a personal services contract into which courts routinely imply
    a right of termination upon reasonable notice. Viewed properly, the
    relationship between the parties and the surrounding circumstances suggest that
    no such right of termination was intended, nor should one be implied. As noted
    above, the contracting parties are two public institutions offering services to
    the same community. The arrangement reached was mutually beneficial. This was a
    relatively small township seeking to acquire a property it needed but was
    unable to pay for. In exchange for the acquisition of this capital asset, it
    made a commitment that was neither onerous nor unusual for a municipality. It
    already had the perpetual obligation to carry out snow and garbage removal
    throughout its boundaries. The Ste. Marguerite dYouville School, a school
    located in and serving its township, would simply be treated as the Municipality
    might treat municipal arenas, libraries, parks and the like. It would clear
    snow from the parking lot and remove garbage for as long as the facility
    continued to operate.

[75]

The school board, for its part, disposed of a
    capital asset and, although it did not receive payment for it, nonetheless
    benefitted in that the arrangement reduced its ongoing operating costs for the
    Ste. Marguerite dYouville School. It is not possible to determine at this
    point and on this record what a sale of the property at fair market value might
    have generated in 1988 or what income might have been derived from investing
    the proceeds of sale, nor is that information necessary to understand and
    properly construe the bargain struck between the parties at the time. In
    exchange for an enduring capital asset, the school board received an enduring
    benefit, one that would last for as long as the school board continued to
    operate the Ste. Marguerite dYouville School.

[76]

Both parties also saw the advantage, as public
    bodies, of the St. Jean Baptiste School continuing to benefit the community
    served by them.

[77]

Therefore, considering the terms of the
    agreement, the relationship of the parties and the surrounding circumstances at
    the time the contract was entered into, I conclude that the obligation of the
    municipality to provide snow and garbage removal services to the Ste.
    Marguerite dYouville School is perpetual in nature.

DISPOSITION

[78]

As a result, I would allow the appeal, set aside
    the application judges decision and grant judgment:

a.

declaring that the 1988 agreement between the
    parties remains in force;

b.

awarding the appellant damages in the amount of
    $9,000 plus applicable taxes per year from the month of November 2017 to the
    date of this decision; and

c.

awarding costs of the appeal fixed in the amount
    of $12,000 to the appellant, together with costs of the application below.

[79]

If the parties cannot agree on the amount of
    costs of the application below, I would ask the parties to submit brief written
    submissions not exceeding three pages, with the appellants submissions due
    within 10 days hereof and the respondents submissions due 7 days thereafter.

Released: July 28, 2021 P.R.

Paul
    Rouleau J.A.

I
    agree Alexandra Hoy J.A.

I
    agree K. van Rensburg J.A.


