



COURT OF APPEAL FOR ONTARIO

CITATION: RBC Dominion Securities Inc. v. Crew Gold
    Corporation,

2017 ONCA 648

DATE: 20170810

DOCKET: C62781

Weiler, van Rensburg and Huscroft JJ.A.

BETWEEN

RBC Dominion Securities Inc. and Royal Bank of
    Canada Europe Limited

Plaintiffs (Appellants)

and

Crew Gold Corporation

Defendant (Respondent)

Jeremy Devereux and Michael Bookman, for the appellants

Alistair Crawley and Natalia Vandervoort, for the
    respondent

Heard: June 9, 2017

On appeal from the judgment of Justice Arthur M. Gans of
    the Superior Court of Justice, dated September 13, 2016, with reasons reported
    at 2016 ONSC 5529, [2016] O.J. No. 4862.

van Rensburg J.A.:


I.

Overview

[1]

This is an appeal in a contract interpretation
    case.

[2]

The central facts are not in dispute. The
    appellants,
RBC Dominion Securities Inc. and Royal Bank of Canada Europe
    Limited
(together RBC), sued the respondent, Crew Gold
    Corporation (Crew), for a fee, described as a Success Fee, that they argued
    was owed to them under an engagement letter for the provision of investment
    banking services (the Agreement). RBC provided services under the Agreement
    to assist Crew in developing and implementing strategic alternatives. The
    Agreement provided for service fees based on specific work performed by RBC,
    and for a Success Fee, payable on completion of a Transaction, as defined by
    the Agreement.

[3]

In the course of the Agreement, Crew, then a
    public company, was the subject of a takeover, an event that was not
    anticipated by either party. The sole issue at trial was whether, under the
    Agreement, RBC was entitled to a Success Fee in respect of any or all of the
    transactions involved in the takeover even though it played no part in the
    transactions. The trial judge found that RBC was not entitled to a Success Fee
    under the Agreement and dismissed RBCs action.

[4]

RBC appeals, asserting that the trial judge made
    extricable errors of law in his interpretation of the Agreement. I find no such
    errors, and for the reasons that follow, would dismiss the appeal.


II.

Facts

[5]

Crew was a gold mining company whose principal asset was a gold mine in
    West Africa. At all material times, Crews shares were publically traded on the
    Toronto and Oslo Stock Exchanges (the TSE and the Oslo Bors).

[6]

In October 2008, the mine was not yielding sufficient net revenue to
    service Crews significant debt obligations. Crews board of directors (the Crew
    Board) retained RBC as a financial advisor for a term of 18 months to develop,
    evaluate and potentially assist the company in implementing strategic transaction
    alternatives based on its valuation of the company (the 2008 Engagement). After
    RBC presented its strategic alternatives to Crew, RBC invoiced the company and
    was paid US$95,000 for its work under the 2008 Engagement.

[7]

In late November 2008, using a Norwegian securities firm, Crew undertook
    a rights offering on the Oslo Bors to meet its cash flow needs.

[8]

In March 2009, RBC made a further presentation to the Crew Board on Crews
    strategic alternatives in light of the rights offering and improved market
    conditions. These generally contemplated either an
en bloc
sale of
    shares for cash or shares, or the disposition of Crew assets or some form of
    strategic partnership (the RBC Alternatives). In October 2009, RBC made another
    presentation to the Crew Board, outlining, among other things, its strategies
    for implementing one of the RBC Alternatives.

[9]

The parties entered into the Agreement in mid-December, dated as of
    October 20, 2009. The term of RBCs engagement under the Agreement was until
    the earliest of the closing of the Transaction, the termination of the engagement
    by either party upon written notice, and 12 months after the Agreements commencement.

[10]

The relevant terms of the Agreement are as follows:

·

Crew
    engaged RBC as its financial advisor in connection with a potential
    transaction (the Transaction) involving the direct or indirect sale or
    disposition of the Company.

·

The
    Transaction may involve (i) a sale of all or a substantial portion of the
    shares, business or assets of the Company to a third party, (ii) an investment
    by a third party in the Company that results in a change of control of the
    Company or (iii) an amalgamation, arrangement or other business transaction
    involving the Company and a third party to effect such sale or disposition.

·

RBC
    agreed to provide services in connection with a Transaction, which included
    financial analysis and advice on structuring, planning and negotiating a
    Transaction; if requested, the furnishing of fairness opinions; assistance in
    preparing a confidential information memorandum (CIM) for prospective investors;
    and managing the sale process, including contacting prospective purchasers,
    evaluating offers, and assisting in the completion of a Transaction.

·

The
    fees for RBCs services consisted of a Work Fee of US$25,000 per month for each
    month that RBC was actively involved in assisting in the execution of the
    Transaction; an Announcement Fee/Opinion Fee of US$750,000 payable on the
    earlier of the public announcement of the Transaction or the delivery of a
    fairness opinion; an Additional Opinion Fee of US$125,000 payable upon the delivery
    of each additional fairness opinion provided by RBC (after its initial opinion);
    and a Success Fee.

·

The
    Success Fee was to be calculated as the greater of US$2,000,000, and 0.95% of
    the Transaction Proceeds up to US$325,000,000 plus 1.75% of the Transaction
    Proceeds in excess of US$325,000,000, against which was to be credited 100% of
    the other fees paid or payable under the Agreement.

·

Transaction
    Proceeds included all amounts received by the Company or any affiliate or
    shareholder of the Company from the purchaser.

·

RBC
    was entitled to the Success Fee if a Transaction [was] completed involving any
    party, whether or not solicited by RBC, pursuant to an agreement to effect or
    otherwise complete a Transaction entered into during the term of its engagement
    or for a period of twelve months after termination of its engagement (the
    tail provision).

[11]

While the Agreement was in force, Crew concluded a restructuring
    agreement with its debenture holders that closed in December 2009, and was also
    handled by the Norwegian securities firm. As a result of the restructuring, the
    debenture holders came to own 95% of Crews issued and outstanding equity. GLG
    Partners (GLG), a London-based hedge fund and former debenture holder, became
    Crews largest shareholder, with a control block of approximately 31.6% of Crews
    shares, and appointed three new directors to the Crew Board.

[12]

RBC made another presentation to the Crew Board on December 15, 2009
    regarding the RBC Alternatives. RBC asserted that the time was right to engage
    in a broad solicitation of potential bidders under RBCs stewardship. At a
    meeting on January 22, 2010, the Crew Board approved by resolution the
    implementation of the RBC plan involving the marketing and sale or partial sale
    of the Company. In December 2009 and January 2010, RBC worked on numerous
    tasks to prepare a sale process, including the preparation of a draft CIM and
    identifying potential bidders to purchase GLGs control block.

[13]

RBC and Crew were aware that GLG could sell its interest to a third
    party without their involvement. Neither contemplated, however, that a serious
    purchaser would conclude an agreement without some form of due diligence, which
    would require a CIM and standstill agreement.

[14]

In fact, Endeavour Financial Corporation (Endeavour), a
    Vancouver-based investment bank, was in serious discussions with GLG to buy its
    control block, and was prepared to buy the block without reliance on the RBC/Crew-controlled
    due diligence process and without the execution of a CIM. In January 2010, Endeavour
    purchased GLGs shares and that of another institutional investor through one
    of its subsidiaries on the Oslo Bors, bringing its holdings in Crew to just
    under 38%. Endeavour was not on RBCs list of potential bidders and RBC played
    no part in brokering the deal.

[15]

Immediately after the Endeavour purchase, OAO Severstal (Severstal), a
    Russian mining company, began to significantly increase its holdings in Crew. As
    the trial judge described it, the race was then on between Endeavour and Severstal
    for the ultimate control and ownership of Crew. By early April 2010, each had
    increased its absolute position  Severstal owned almost 27% and Endeavour
    owned almost 43% of the company. In July 2010, Severstal had increased its
    shareholdings in Crew to just over 50%. Endeavour then sold its interest in
    Crew to Severstal in mid-September. Severstal eventually acquired the remaining
    Crew shares in January 2011 through a plan of arrangement.

[16]

While the takeover was unfolding, RBC offered to assist the Crew Board, but
    the offer was refused. Instead, Crew engaged Genuity Capital Markets to assist
    it in the takeover matters. On April 29, 2010, Crew terminated the Agreement. RBC
    immediately invoiced Crew for the Work Fee covering a six-month period, ending
    January 2010, which Crew paid.

[17]

In late August 2010, RBC sent the first in a series of Success Fee
    invoices to Crew, claiming an amount in excess of US$5,700,000, calculated on
    amounts paid by Severstal and Endeavour for the shares they acquired in the
    open market or by agreement with institutional vendors in 2010. Later, after Severstal
    purchased Endeavours block, RBC sent an amended invoice for the Success Fee for
    in excess of US$7,200,000.

[18]

As the trial judge explained, with the exception of the acquisition of
    the last remaining shares, each of the trades leading up to the takeover by
    Severstal, including those obtained by Endeavour, was through an open market
    transaction concluded on the Oslo Bors, and none of the transactions triggered
    Canadian or Norwegian takeover laws.

[19]

After Crew refused to pay the Success Fee invoices, RBC started the
    underlying action.


III.

The Trial Judges Reasons

[20]

The trial judge rejected RBCs claim. After
    setting out the facts, he turned to consider the positions of the parties.

[21]

RBC argued that the language of the Agreement
    was so broad and general as to permit the claim even though RBC was not involved
    in Endeavours or Severstals purchases of Crew shares. RBC argued that
    Severstals activities between February and December 2010 in purchasing the
    entirety of Crews shares and thereafter taking the company private amounted to
    the sale of all of the Companys shares to a third party. Alternatively, RBC
    argued that the separate purchases by Endeavour and Severstal amounted to the
    sale of a substantial portion of the shares of the Company to a third party.
    RBC relied on what it asserted was the expanded definition of Transaction in
    the definition of Transaction Proceeds to argue that these purchases
    constituted Transactions under the Agreement. RBC also asserted that, unlike
    the other fees payable under the Agreement, there was nothing to tie the
    Success Fee to services provided by RBC; and that the payment of the Service
    Fee depended only on the closing of a Transaction. Finally, RBC relied on the
    tail provision in support of the argument that it was entitled to a Success Fee
    so long as a Transaction was concluded within 12 months of the termination of
    the Agreement, regardless of RBCs contribution.

[22]

Crew argued that, for a Transaction to have
    taken place, RBC had to be involved in some manner and that a Success Fee was
    only payable as a consequence of the provision of financial advisory services. For
    a fee to be payable upon the closing of the Transaction, the Transaction must
    arise from the work effort of RBC. The description of services contained in the
    RBC proposals tabled before and after the execution of the Agreement
    underscored the notion RBC would be controlling any process connected to a
    Transaction, and that the Success Fee was payable as a function of the services
    performed. Crew also argued that RBCs interpretation, which would require it
    to pay a Success Fee upon the conclusion of any transaction between a third
    party and Crews shareholders who were disposing of a control block, made no
    commercial sense.

[23]

After setting out the relevant principles of contractual interpretation,
    which were not in dispute, the trial judge interpreted the Agreement.

[24]

First, he noted there was no ambiguity in the language used in respect
    of the terms Transaction or Success Fee. He held that, in interpreting the
    term Transaction and determining the intention of the parties at the time the
    Agreement was drawn, it was too limiting to simply have regard to the preamble
    and the extended definition found in Transaction Proceeds, as proposed by
    RBC, and that regard must be had to the Agreement as a whole.

[25]

The trial judge held that the Agreement was intended to speak to the
    rights and obligations of the parties in engaging RBC as the financial advisor
    in connection with a potential transaction involving the direct or indirect
    sale or disposition of the Company. The Agreement described a range of
    services RBC was to provide, which anticipated RBCs involvement in the Transaction.
    Under the Agreement, according to the trial judge, RBC was to be the composer,
    arranger and orchestrator  if not the orchestra leader  of the Transaction,
    in all its facets, for which it was to be paid a series of fees for services
    rendered.

[26]

The trial judge concluded that RBC was not intended to receive a Success
    Fee unless there was some causal link between its activities and the completed transaction,
    even though RBC was not required to introduce the successful purchaser to the
    transaction and even though RBCs involvement was not required to be a material
    cause of the transaction. The trial judge rejected RBCs submission that the
    wording of Transaction Proceeds expanded the definition of Transaction,
    concluding instead that it described the amounts to be included for Success Fee
    calculation purposes.

[27]

The trial judge then reviewed the factual matrix. He found that the
    entire thrust of RBCs strategy after the debt restructuring was to maximize
    shareholder value by creating and rolling out an RBC Alternative, namely a
    process for the sale of Crews assets or control shares. RBCs presentations all
    emphasized some form of an
en bloc
sale of assets or shares through a
    process orchestrated by RBC. RBC never spoke of the possibility of a third
    party purchase. Further, it was not on anyones radar that any one of the RBC
    Alternatives would include a purchase of control through the acquisition of
    sufficient shares on the Oslo Bors, or that any purchaser would acquire a
    significant interest in Crew without a due diligence inquiry, which would have
    involved RBC.

[28]

The trial judge offered an alternative ground for his
    interpretation of the Agreement that was not argued by the parties. The
    Agreement provided for the
negotiation of an additional fee in the event
    that there was an investment by a third party in the Company that does not
    result in a change of control. The trial judge characterized the share purchases
    by Severstal and Endeavour in the first six months of 2010 to be a substantial
    portion of Crews outstanding shares, but concluded that these purchases did not
    amount to a change of control. Therefore, RBC would not be entitled to a
    Success Fee on the purchases that took place in the lead up to an actual change
    of control. I note here that Crew
does not necessarily agree
    with this characterization and does not seek to uphold the trial judges
    decision on this basis.



IV.

Standard of Review

[29]

The primary goal of contractual interpretation
    is to determine the objective intent of the parties at the time the contract
    was drawn. Contractual interpretation involves the application of contractual
    interpretation principles to the words of the contract, considered in light of
    the factual matrix, and is therefore a question of mixed fact and law, which is
    entitled to deference absent a palpable and overriding error:
Sattva
    Capital Corp. v. Creston Moly Corp.
, 2014 SCC 53, [2014]
    2 S.C.R. 633, at paras. 50, 55. The palpable and overriding error test is met
    if the trial judge misapprehended the evidence in that the findings are
    clearly wrong, unreasonable or not reasonably supported by the evidence:
L.(H.)
    v. Canada (Attorney General)
, 2005 SCC 25, [2005] 1
    S.C.R. 401, at paras. 55-56.

[30]

Where an extricable error of law can be
    identified independent of the trial judges application of the law to the
    facts, the error is to be reviewed on a standard of correctness. Extricable
    errors of law made in the course of contractual interpretation may include the
    application of an incorrect principle, the failure to consider a required
    element of a legal test, or the failure to consider a relevant factor:
Sattva
, at para. 53, citing
King v. Operating Engineers
    Training Institute of Manitoba Inc.
, 2011 MBCA 80, 270
    Man. R. (2d) 63, at para. 21. The circumstances in which a question of law can
    be extricated from the interpretation process will be rare:
Sattva
, at para. 55.


V.

Issues

[31]

RBC contends that, although the trial judge
    correctly identified the proper principles of contractual interpretation, he
    did not apply these principles and, as such, committed errors of law. RBC
    argues that there were three categories of extricable errors of law in the
    trial judges interpretation of the Agreement, which can be broadly described
    as follows:

1.

The trial judge failed to consider the plain
    words of the Agreement in the context of the contract as a whole, and in a
    manner that gives meaning to all of its terms and that avoids an interpretation
    that would render one or more of its terms ineffective.

2.

The trial judge failed to correctly consider the objective evidence
    of the surrounding circumstances and relied on his findings as to the parties
    subjective intentions or the lack thereof, and allowed those findings to
    overwhelm the wording of the Agreement.

3.

The trial judge failed to consider the
    commercial reasonableness of the interpretation of the Agreement advanced by
    RBC.

[32]

Within these three categories, RBC seeks to
    identify specific errors. I will address each category in turn.


VI.

Discussion

(1)

Alleged Failure to Consider the Plain Words of
    the Agreement in the Context of the Contract as a Whole

[33]

RBC contends that the trial judge failed to
    determine the meaning of the words in the Agreement by construing the contract
    as a whole, in a manner that gives meaning to all of its terms, and avoids an
    interpretation that would render one or more of its terms ineffective:
Salah
    v. Timothys Coffees of the World Inc.
, 2010 ONCA 673,
    268 O.A.C. 279, at para. 16.

[34]

Here RBC relies on many of the same arguments it
    advanced at trial  essentially that Transaction is broadly defined in the
    Agreement; that the purchases by Endeavor and Severstal fell within the
    enumerated examples of Transaction in the Agreement, as Endeavors purchased a
    substantial portion of Crews shares and Severstals purchases resulted in a
    change of control; and that the definition contained no express requirement
    for the involvement of Crew or RBC in the Transaction.

[35]

As well, RBC says the trial judge ignored the
    fact that, while the other fees under the Agreement are expressly linked to
    services provided by RBC, the Success Fee is payable upon the closing of the
    Transaction. RBC contends that this distinction supports the conclusion that a
    causal link between its services and a Transaction was not necessary for
    entitlement to a Success Fee. RBC also argues that the trial judge disregarded
    the broad definition of Transaction Proceeds, which it says does not exclude
    the sale of Crew shares from qualifying as a Transaction simply on the basis
    that the shares were purchased on a stock exchange.

[36]

All of these arguments were addressed by the
    trial judge at paras. 56 to 61 of his reasons. As the trial judge observed, the
    specific words RBC relied on had to be considered in the context of the
    Agreement as a whole. In rejecting its proposed interpretation, the trial judge
    did not, as RBC alleges, fail to apply proper contract interpretation
    principles; rather, the trial judge applied the principles, just not in the
    manner proposed by RBC.

[37]

The trial judges interpretation of the Success
    Fee requirement as being linked to some action on the part of RBC is a
    reasonable interpretation borne out by a consideration of the Agreement as a
    whole.

[38]

As the trial judge observed, the Success Fee was
    payable in the context of RBCs engagement as a financial advisor to Crew in
    connection with a potential Transaction. The range of services to be provided
    by RBC covered the entire sale process, whatever form that took, and the
    Agreement anticipated RBCs involvement in the Transaction. In exchange for
    these services, RBC was to receive a variety of fees. RBC was unable to provide
    most of the anticipated advisory services because of the intervention of the
    takeover and the way it took place. Indeed, the Agreement was terminated only a
    few months after it had been concluded and, at that point, RBC was only on the
    cusp of providing services with respect to the RBC Alternatives.

[39]

The Transaction was the culmination of RBCs
    financial advisory services, and the provision of a very large Success Fee to
    be paid on completion of the Transaction was presumably meant to reward RBC for
its success
in completing
    the Transaction and implied that there must be a connection between the
    services provided by RBC and the Transaction. Indeed,
all
of the fees payable under the
    Agreement, including the Success Fee, are stated to be for its services
    hereunder. This contemplates a nexus between RBCs services and all of the
    fees payable to RBC under the Agreement, including the Success Fee.

[40]

RBCs approach to interpreting the Agreement is too
    narrow  focusing on the terms Transaction and Transaction Proceeds,
    without considering the nature and substance of the Agreement as a whole. In my
    view, there would have been an extricable error of law if the trial judge had
    adopted the approach advocated by RBC and read the provision[s] of [the]
    contract in isolation rather than construe[d] the contract as a whole:
1298417
    Ontario Ltd. v. Lakeshore (Town)
, 2014 ONCA 802, 122 O.R.
    (3d) 401, at para. 8.

[41]

In addition to the arguments set out above, RBC
    claims that the trial judge ignored the tail provision, which provided that RBC
    would be entitled to a Success Fee even if RBC did not solicit the Transaction
    and where the agreement to effect the Transaction was entered into in the 12-month
    period after the termination of the engagement (in other words, at a time when
    RBC had no obligation to provide Crew with services under the Agreement). RBC
    says the tail provision expressly contemplates that RBC will be paid for a
    Transaction in respect of which it did not provide services, and that the trial
    judge failed to deal with this provision.

[42]

I agree with Crew that, while the trial judge
    might have fleshed out in greater detail his analysis of this provision and its
    impact on the interpretation of the Agreement, he adverted to the wording of
    the tail provision at para. 60 of his reasons, where he stated that a causal
    link was required even though RBC was not required to introduce the successful
    purchaser to the transaction, and even though RBCs involvement was not
    required to be a material cause. As well, his reasons as a whole reject the
    interpretation advanced by RBC. The tail provision simply provides for the
    payment of a Success Fee if a mandate is carried out after the Agreement has been
    terminated. This interpretation of the tail provision is not inconsistent with
    the requirement that the Transaction in respect of which a Success Fee is
    payable relate to work performed by RBC before the Agreement was terminated. Nor
    is this interpretation inconsistent with the evidence of Patrick Meier, relied
    on by RBC, who testified about the commercial purpose of the clause.

[43]

Finally, RBC argues that the trial judge failed
    to recognize and apply the case law holding that a contract may call for
    payment based solely on the occurrence of an event, without the
    service-provider having to demonstrate that it caused or contributed to the
    event. RBC says that the Agreement is similar to that in
Galan v.
    Alenkno
, [1950] O.R. 397 (C.A.) where the plaintiff was
    entitled to a commission on any sale effected during the currency of its
    authority, including sales that occurred without the plaintiffs intervention
    or assistance.

[44]

To the contrary, the trial judge did not dismiss
    out of hand RBCs claim for a Success Fee because RBC had not provided services
    in respect of the transactions that occurred. Rather, he interpreted the
    Agreement to determine whether a Success Fee was payable in such circumstances,
    and concluded that in respect of
this
Agreement, a causal link was required before a Success Fee was
    payable. Similarly, the fact that there are reported cases involving contracts
    that anticipate a fee being paid on the occurrence of an event, without the
    provision of services in respect of the transaction, does not assist: See, for
    example,
Re Hemosol Corp
., 37 C.B.R. (5th)
    128. As RBCs counsel submitted in argument, these cases simply stand for the
    principle that each contract must be interpreted according to its own terms and
    factual context.

(2)

Alleged Reliance on the Parties Subjective
    Intentions and Failure to Consider the Objective Surrounding Circumstances

[45]

In
Dumbrell v. The Regional Group of Companies
    Inc
., 2007 ONCA 59, 85 O.R. (3d) 616, at para. 50,
    Doherty J.A. emphasized that, when interpreting written contracts in the
    context of commercial relationships, it is not helpful to frame the analysis in
    terms of the subjective intention of the parties at the time the contract was
    drawn. The purpose of the interpretation of a contract is not to discover how
    the parties understood the language of the text they adopted, but to determine
    the meaning of the contract against its objective contextual scheme. The focus
    must be on the intent expressed in the written words. The
court must
    consider, among other things, the contract as a whole, the factual matrix
    underlying it, and the need to avoid commercial absurdity. But the court does
    not consider the subjective intention of the parties:
Downey v. Ecore International Inc.
,
2012 ONCA 480
,
294 O.A.C. 200
, at
    paras. 37-38 and
Salah
,
    at para. 16.

[46]

RBC argues that the trial judge based his
    decision that RBC was not entitled to a Success Fee unless there was some
    causal link between its activities and the Transaction, in large part on his
    findings as to the parties subjective intentions, or lack of thereof, and that
    he allowed evidence of subjective intention to overwhelm his interpretation of
    the plain meaning of the Agreement. RBC contends that the trial judge did not
    limit himself to the parties
objective
intentions as expressed in the words of the contract, as required.

[47]

There is no indication in the trial judges reasons
    that he relied on any evidence of the parties subjective intentions in
    interpreting the Agreement. The passages RBC relies on (which appear to be
    every occasion where the trial judge uses the words intention or intended)
    simply do not support this argument. An example is para. 57, where the trial
    judge stated that it was his view that the Agreement
was intended to
speak to the rights and
    obligations of the parties in engaging RBC as Crews financial advisor, and
    that the words in the Agreement
were intended to
describe the services RBC would undertake. The trial judge here was
    doing no more than determining, based on his review of the Agreement, what was
    objectively intended by the Agreement, or the intent expressed in the written
    words. There is no reference to either Crews or RBCs
subjective
intentions.

[48]

Nor is the trial judges description of the
    takeover as not on anyones radar a statement of the parties subjective
    intentions. This was simply a statement of an obvious background fact. The
    parties agreed that the takeover was an unexpected event they had not
    contemplated when they entered into the Agreement. And there is no indication,
    as argued by RBC, that the trial judge dismissed its claim simply because it
    arose from an unanticipated transaction (which RBC contends is an absence of
    subjective intentions). Rather, the trial judge was interpreting the Agreement
    to determine whether the unanticipated transaction was a Transaction that would
    give rise to the payment of a Success Fee under the Agreement.

[49]

Finally, RBC argues that the trial judge erred
    in interpreting the contract by relying on the parties conduct following the
    execution of the contract. RBC points to the trial judges reference to the
    conduct of the parties after learning of GLGs intention to sell its shares in
    Crew at paras. 70 and 71 of his reasons  namely, that RBC attempted to ensure
    that either GLGs shares were sold to a compliant buyer or that a standstill
    agreement would be concluded. RBC contends that this contravened this courts
    caution that evidence of subsequent conduct should be admitted only if the
    contract remains ambiguous after considering its text and its factual matrix:
Shewchuk
    v. Blackmont Capital Inc.
, 2016 ONCA 912, 404 D.L.R. (4th)
    512, at para. 46.

[50]

I disagree that, in interpreting the contract, the
    trial judge relied on the subsequent conduct of the parties. These observations
    were made after he had interpreted the Agreement. They were not part of his
    analysis of the meaning of the Agreement but confirmatory of his conclusions. The
    trial judge specifically stated that this was not part of the classical
    factual matrix and was consonant with [his] conclusion on the intention of
    the parties at the time the Agreement was executed.

[51]

There is simply no merit to this ground of
    appeal. The trial judge did not make findings as to the parties subjective
    intentions in entering the Agreement, nor did he allow evidence of subjective
    intention to oust the plain words of the Agreement, as alleged by RBC.

(3)

Commercial Common Sense

[52]

RBC contends that the trial judge adopted an
    interpretation of the Agreement that was not in accordance with sound
    commercial principles and good business sense:
Kentucky Fried
    Chicken v. Scotts Food Services Inc
. (1998), 41 B.L.R.
    (2d) 42 (Ont. C.A.), at para. 27.
In particular,
RBC
    argues that the trial judge failed to recognize the business reasons for
    allocating risk in contracts by providing for payment based on the occurrence
    of an event rather than services rendered, and that the trial judge failed to
    appreciate that it would be impracticable to require RBC to demonstrate the
    extent to which it caused or contributed to a transaction.

[53]

RBC relies principally on the evidence of its witness, Patrick
    Meier, RBCs lead investment banker on the Crew mandate, who provided an
    explanation of the commercial purposes for transaction-based fees in investment
    banking contracts. In
Kentucky Fried Chicken
,

however, this court cautioned that the construction of contracts in
    accordance with sound commercial principles and good business sense must be
    done objectively rather than from the perspective of the contracting parties.
    Further, Mr. Meiers evidence did not fully support RBCs interpretation. He
    acknowledged under cross-examination that some connection to the services provided
    would be required before a Success Fee would be payable.

[54]

Simply because the trial judge did not analyze
    the parties arguments on this point under a separate heading does not mean
    that he ignored the commercial realities in interpreting the Agreement. Considerations
    of commercial reasonableness permeate his reasons. The objective evidence of
    the circumstances or factual matrix in this case was that both parties had a
    plan to embark on a sale process, which they were unable to complete because of
    the unanticipated takeover. The trial judge made a specific finding on the
    evidence that was available to him (and which has not been argued or demonstrated
    to be a palpable and overriding error) that the parties anticipated a sale
    process. The expectation was that RBC would have provided services in
    connection to the process culminating in the closing of a Transaction to
    warrant payment of a Success Fee.

[55]

I agree with Crew that the interpretation
    adopted by the trial judge was not commercially unreasonable and made
    commercial sense. Although the words of the Agreement might bear the
    interpretation RBC proposes, the interpretation advocated by RBC would have resulted
    in a significant windfall, with RBC receiving a very large Success Fee where
    there was no association between any services it provided Crew and the transactions,
    and where Crew was not in a position to avail itself of RBCs services.

[56]

RBC also argues that the trial judge failed to
    recognize the commercial sense in the allocation of risk in contracts that call
    for payment upon the occurrence of an event, such as in the real estate
    context. I agree with Crew that the commercial context here is very different
    from an exclusive listing agreement in the real estate agency context. Here, the
    Crew Board retained RBC to assist the company in pursuing specific strategic
    alternatives to maximize shareholder value. In my view, the requirement to pay
    the significant fee claimed by RBC in respect of the transactions that occurred,
    which did not relate in any way to RBCs financial services would be
    commercially unreasonable.

VII.

Conclusion and Disposition

[57]

For these reasons I would dismiss the appeal. I
    would award Crew its costs fixed at $40,000, inclusive of HST and
    disbursements.

K. van Rensburg J.A.

I agree K.M. Weiler
    J.A.

I agree Grant Huscroft
    J.A.

Released: August 10, 2017


