



COURT OF APPEAL FOR ONTARIO

CITATION: Weyerhaeuser Company Limited v. Ontario (Attorney
    General), 2017 ONCA 1007

DATE: 20171220

DOCKET: C62587

Laskin, Lauwers and
    Brown JJ.A.

BETWEEN

Weyerhaeuser Company
    Limited

Plaintiff
(Respondent)

and

Her Majesty the Queen
    as represented by the

Ministry of the
    Attorney General

Defendant
(Appellant)

and

Resolute FP Canada Inc.

Intervener

(Respondent)

Leonard Marsello, Tamara Barclay, and Nansy Ghobrial, for
    the appellant, Her Majesty the Queen as represented by the Ministry of the
    Attorney General

Christopher Bredt, Markus Kremer, and Alannah
    Fotheringham for the respondent, Weyerhaeuser Company Limited

Crawford Smith and Jeremy Opolsky, for the respondent,
    Resolute FP Canada Inc.

Heard: May 2 and May 3, 2017

On appeal from the order of Justice Glenn A. Hainey of
    the Superior Court of Justice, dated July 19, 2016, with reasons reported at
    2016 ONSC 4652 and costs reasons reported at 2017 ONSC 1814.



BROWN J.A.:

I.

OVERVIEW

[1]

On August 25, 2011 the Ontario Ministry of the Environment issued a
    Directors Order requiring the respondents, Weyerhaeuser Company Limited and
    Resolute FP Canada Inc., to perform remedial work on an abandoned mercury waste
    disposal site near Dryden, Ontario. The respondents are two of the previous
    owners of the site.

[2]

Weyerhaeuser and Resolute took the position they enjoyed the benefit of
    a December 1985 indemnity provided by the Government of Ontario to earlier
    owners of the Dryden pulp and paper facility, including the waste disposal
    site. As a result, they contended Ontario was obligated to indemnify them for
    any costs incurred to comply with the Directors Order.

[3]

Ontario denied the 1985 indemnity had any such effect. It took the
    position the indemnity only covered third party claims resulting from mercury
    spills emanating from the Dryden property, not the regulatory compliance costs
    incurred by the owners of the waste disposal site. This litigation ensued.

[4]

All parties moved for summary judgment, raising two issues: (i) whether
    the indemnity covers the costs of complying with the Directors Order; and (ii)
    if it does, whether Weyerhaeuser and Resolute are entitled to its benefit.

[5]

The motion judge granted summary judgment in favour of Weyerhaeuser and
    Resolute, holding both were entitled to be indemnified by Ontario for the
    costs, losses, expenses, liabilities or obligations they had incurred and might
    incur as a result of the Directors Order.

[6]

Ontario appeals, contending the judgment should be set aside because the
    motion judges reasoning was marred by errors on certain extricable questions
    of law, as well as palpable and overriding errors of fact. Ontario seeks
    summary judgment in its favour. Ontario also seeks leave to appeal the motion
    judges award of full indemnity costs in favour of the respondents.

[7]

For the reasons that follow, I conclude the motion judge did not err in finding
    the 1985 indemnity covered the costs of complying with the Directors Order.
    That said, I conclude he erred in finding that the respondents are entitled to
    claim indemnification under the indemnity. I would allow Ontarios appeal in
    respect of Resolute: the motion judge erred in finding Resolute enjoyed the
    benefit of the indemnity as a successor of Great Lakes. I would grant judgment
    in favour of Ontario dismissing Resolutes claim.

[8]

As to Weyerhaeuser, I would allow Ontarios appeal in part, set aside
    the dismissal of its summary judgment motion, grant a declaration that Bowater
    Pulp and Paper Canada Inc. (a corporate predecessor to Resolute) assigned the
    full benefit of the indemnity to Weyerhaeuser under a 1998 asset purchase
    agreement, and direct a final adjudication by the court below on the issue of
    what, if any, rights Weyerhaeuser possessed as assignee of the indemnity at the
    time the Directors Order was made in 2011.


II.

CHRONOLOGY OF EVENTS

A.

The Dryden operations

[9]

In the 1960s, the Dryden Paper Company Limited (Dryden Paper) owned
    and operated a pulp and paper mill in Dryden, Ontario. To secure a supply of
    the sodium hydroxide and chlorine used to bleach paper, Dryden Paper, through a
    related company, Dryden Chemicals Limited (Dryden Chemicals), operated a
    mercury cathode chlor-alkali plant on property near the paper plant.

[10]

The chlor-alkali plant released untreated mercury waste into the English
    and Wabigoon Rivers. The contamination of the river system resulted in harm to
    the health of some in the area, the closure of the commercial fishery, and damage
    to the areas tourism industry. Many of those affected by the mercury waste
    discharge were members of the Grassy Narrows and Islington First Nations who
    lived on reserves downstream from the chlor-alkali plant.

[11]

In 1971 Dryden Paper constructed a waste disposal site (WDS) on lands
    it owned to serve as a burial site for mercury-contaminated waste from the
    chlor-alkali plant. From 1971 to 1981, eight concrete cells were buried at the
    WDS. The cells contained stabilized mercury contaminated sludge, as well as mercury
    contaminated rubble and equipment from the demolished chlor-alkali plant.

[12]

When the WDS was created, six monitoring wells were installed. Three
    additional wells were installed in 2002 and a further one in 2010. The monitoring
    wells were sampled and analyzed twice a year for mercury, chlorides, pH,
    conductivity, and static water level.

[13]

In 1976, Dryden Paper and Dryden Chemicals amalgamated to form Reed Ltd.
    (Reed).

[14]

Since 1977, the WDS has been subject to various certificates issued
    under the
Environmental Protection Act
, R.S.O. 1990, c. E.19, as
    amended (
EPA
). The initial Provisional Certificate of Approval required
    the monitoring of groundwater and surface water by the WDS owner.

[15]

In June 1977, the two First Nations bands sued Reed, Dryden Paper, and
    Dryden Chemicals for damages for personal injuries, loss of jobs, and loss of
    way of life caused by the mercury waste contamination of the river (the Grassy
    Narrows Litigation).

[16]

In 1978, the Ministry of the Environment (MOE) issued two further
    Provisional Certificates of Approval that required Reed to maintain the water
    monitoring program at the WDS.

B.

The 1979 sale from Reed to Great Lakes

[17]

Negotiations by Reed in 1979 to sell its Dryden pulp and paper operation
    encountered a problem. The interested purchaser, Great Lakes Forest Products
    Limited (Great Lakes), was reluctant to proceed in the face of the Grassy
    Narrows Litigation. On its part, Ontario was concerned that if the purchase did
    not proceed, the Dryden pulp and paper mill might close, hurting the local
    economy.

[18]

A deal was struck. Ontario agreed to limit the combined liability of Great
    Lakes and Reed for any environmental damages caused by Reed prior to Great
    Lakes purchase of the Dryden operations to $15 million. Great Lakes and Reed
    agreed to share the financial consequences of a settlement of, or judgment in,
    the Grassy Narrows Litigation up to that limit. Great Lakes also agreed to
    spend about $200 million to modernize and expand the Dryden facilities.

[19]

Ontarios promise to limit the environmental liabilities of Reed and
    Great Lakes was contained in a November 6, 1979 letter from the then Treasurer
    of Ontario, Frank Miller, to the President of Great Lakes (the 1979 Indemnity),
    which read, in part:

The continued viability of the Dryden facilities and the
    undertaking of major modernization expenditures with respect to them are of
    considerable importance to the people of this Province. The substantial and
    beneficial employment and economic effects that the operations of a modernized
    facility will have on the population and economy of Dryden is of real
    significance.

In the event that Great Lakes negotiations with the Reed group
    of companies are successful then in the event that Great Lakes is required to
    pay any monies as a result of any final decision of a court against Great
    Lakes, Reed Ltd. or any other person prior to the year 2010 in respect of
    pollution caused by Reed Ltd. or any of its predecessor companies in the Dryden
    area prior to the date upon which Great Lakes acquires the assets and
    undertaking of the Dryden complex of Reed Ltd. or in the event that any
    settlement with any claimant is made the amount of which settlement has been
    approved by the Attorney General of Ontario, I have been authorized by the
    Executive Council of Ontario to advise you that I will make a Recommendation to
    the Executive Council of Ontario that the Government of Ontario take effective
    steps to ensure that Great Lakes Forest Products Limited will not be required
    to pay any monies in excess of the maximum amount of $15 million referred to in
    paragraph 2 of this letter, provided that over the next three to four years
    Great Lakes expends in the order of $200 million for the modernization and expansion
    of the Dryden facilities.

[20]

In his statement to the Ontario Legislature on November 6, 1979
    announcing Reeds sale of the Dryden facility to Great Lakes, Treasurer Miller
    announced:

Members of this House are aware of the environmental problems
    of Reed Limited and its predecessors in the Dryden area. These have been a
    major impediment to the sale of the Dryden operation, because of possible
    liabilities for past environmental damages.

In order to resolve this matter, and to ensure the economic
    health of Dryden, the government has given an undertaking in the form of a
    letter to indemnify Great Lakes Forest Products Limited against possible
    liabilities over a stated amount.

[21]

On December 4, 1979 the MOE issued another Provisional Certificate of
    Approval, this one requiring Reed to register the certificate against title to
    the WDS.

[22]

The sale of the Dryden operations to Great Lakes closed in December 1979
    pursuant to a Memorandum of Agreement made as of the 7
th
day of December,
    1979 amongst Great Lakes, Reed, and Reed International Limited (the 1979
    Dryden Agreement).

C.

Events of 1980 through 1984

[23]

In January 1980, the MOE issued a further Provisional Certificate of
    Approval that required Great Lakes to maintain the groundwater monitoring and
    testing program at the WDS.

[24]

The Governments
of Canada and Ontario engaged in
    mediation with the Islington and Grassy Narrows First Nations to address the problems
    caused by the mercury discharge. The Grassy Narrows Litigation formed part of
    the discussions. Great Lakes was reluctant to contribute to any settlement
    payment unless it obtained releases from liability. The impasse in negotiations
    led the then Minister for Resources Development, R. H. Ramsay, to write Great
    Lakes on January 28, 1982 stating, in part:

The purpose of this letter is to facilitate a settlement of
    current negotiations

The Government of Ontario recognizes the distinct advantage of
    the Indian people obtaining a settlement in the very near future. Accordingly,
    the Government is prepared to indemnify Great Lakes Forest Products Limited
    against any claims related to mercury pollution such that the Companys total
    payments to all claimants in respect of damages awarded by any court or for any
    settlement approved by the Attorney General of Ontario attributable to the
    operations of Reed Paper Ltd. or any of its predecessor companies in the Dryden
    area will be limited to $15 million. The Government of Ontario will assume
    responsibility for any damages awarded by any court or for any settlement
    approved by the Attorney General of Ontario, after $15 million has been paid by
    the Great Lakes Forest Products Limited, Reed Ltd., Reed International Ltd.,
    Dryden Chemicals Ltd. and Dryden Paper Co. Ltd. in connection with the above
    mentioned mercury pollution claims. Such claims include personal injury,
    property damage and economic claims of any claimants, including adults, minors
    and those yet unborn, related to mercury pollution.

It must be understood that any legal proceedings which could
    result in the Government of Ontario becoming liable to make payments pursuant
    to this undertaking must be brought to the attention of the Government of
    Ontario immediately upon such proceedings being launched, and the Government of
    Ontario shall have the right either to take carriage of or to participate in
    the defence and/or settlement of the litigation. Failure to give such
    notification or to allow the Government of Ontario to either take carriage of
    or to participate in the defence and/or settlement of the litigation will
    preclude the making of any payments by the Province with regard to the action
    in question.

(the 1982 Indemnity)

D.

The 1985 Settlement

[25]

The Grassy Narrows Litigation settled in late 1985. The settlement terms
    were contained in a November 22, 1985 Memorandum of Agreement entered into
    amongst Canada, Ontario, the Islington and Grassy Narrows First Nations, Reed,
    and Great Lakes (MOA).

[26]

The issues addressed by the MOA were defined in its first recital as the
    fact that:

The discharge by Reed and its predecessors of mercury and any
    other pollutants into the English and Wabigoon and related river systems, and
    the continuing presence of any such pollutants discharged by Reed and its predecessors,
    including the continuing but now diminishing presence of methylmercury in the
    related ecosystems since its initial identification in 1969, and governmental
    actions taken in consequence thereof, may have had and may continue to have
    effects and raise concerns in respect of the social and economic circumstances
    and the health of the present and future members of the Bands.

[27]

Paragraph 1.1 of the MOA stated that the parties agree, without
    admission of liability by any party and subject to the terms of this Agreement,
    that the settlement is to settle all claims and causes of action, past, present
    and future, arising out of the issues.

[28]

The MOAs terms of settlement also included: (i) Great Lakes and Reed
    paying the First Nations $11.75 million; (ii) Canada and Ontario paying the
    First Nations $4.917 million; (iii) the creation of a mercury disability fund;
    (iv) the First Nations providing Canada and Ontario with covenants not to bring
    further suit for any claims in respect of the issues; and (v) the dismissal
    of the Grassy Narrows Litigation, with the Grassy Narrows First Nation
    providing releases to Great Lakes and Reed. As well, paragraph 2.4 of the MOA
    stated:

2.4 (a) Ontario shall provide to Great Lakes and Reed
    indemnities in respect of the issues.

(b) Great Lakes and Reed shall provide to Ontario releases in
    respect of the Indemnity.

[29]

The Indemnity referred to in para. 2.4(b) was defined as the 1979 and 1982
    Indemnities given by Ontario to Great Lakes.

E.

The 1985 Ontario Indemnity

[30]

The indemnities required by s. 2.4(a) of the MOA from Ontario to Great
    Lakes and Reed in respect of the issues were contained in a scheduled
    document to the settlements December 16, 1985 Escrow Agreement entitled, Ontario
    Indemnity, which was signed by Ontario, Great Lakes, Reed, and Reed
    International P.L.C. (Ontario Indemnity). The interpretation of this
    indemnity lies at the heart of this litigation.

[31]

The recitals and s. 1 of the Ontario Indemnity state:

WHEREAS Great Lakes and Reed Ltd., a predecessor of Reed, were
    two of the parties to a Memorandum of Agreement (the Dryden Agreement) made
    as of the 7th day of December, 1979 providing for the purchase and sale of the
    Dryden Business;

AND WHEREAS Her Majesty the Queen in Right of the Province of
    Ontario entered into an Indemnity Agreement indemnifying on certain specific
    terms Great Lakes and Reed for the purpose of facilitating the purchase and
    sale of a pulp and paper plant in Dryden and thereby enabling the modernization
    and upgrading of the plant in the community of Dryden as was deemed to be in
    the public interest;

AND WHEREAS both Great Lakes and Reed have agreed to contribute
    substantial sums of money toward the resolution of the issues which were the
    subject of the indemnity provided by Her Majesty the Queen in Right of the Province
    of Ontario.

NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration
    of the premises and other good and valuable consideration (the receipt whereof
    is hereby acknowledged) it is agreed by and between the parties hereto as
    follows:

1.       Ontario hereby
covenants
and agrees
to indemnify
Great Lakes, Reed,
    International and any company which was at the Closing Date [December 17, 1979]
[1]
a subsidiary or affiliate company (whether directly or indirectly) of
    International, harmless from and
against any obligation
,
    liability, damage, loss, costs or expenses incurred by any of them after the
    date hereof
as a result of any claim, action or
    proceeding, whether statutory or otherwise
, existing at December 17,
    1979 or which may arise or be asserted thereafter (including those arising or
    asserted after the date of this agreement),
whether by
    individuals, firms, companies, governments (including the Federal Government of
    Canada and any province
or municipality thereof or any agency, body or
    authority created by any statutory or other authority) or any group or groups
    of the foregoing, because of or
relating to any damage
,
    loss, event or circumstances,
caused or alleged to be
    caused by
or with respect to, either in whole or in part,
the discharge or escape or
presence of any
    pollutant
by Reed
or its predecessors,
including mercury
or any other substance, from or
in
    the plant or plants or lands or premises
forming part of the Dryden assets
sold by Reed Ltd. to Great Lakes under
    the Dryden Agreement (hereinafter referred to as Pollution Claims). It is
    hereby expressly acknowledged and agreed that in respect of Ontarios covenant
    and agreement hereunder to indemnify Great Lakes that the term Pollution
    Claims shall include any obligation, liability, damage, loss, costs or expense
    incurred by Great Lakes as a result of any claim, action or proceeding
    resulting from or in connection with the indemnity agreement of even date
    herewith made between Great Lakes, Reed and International. [Emphasis added]

[32]

Section 2 of the Ontario Indemnity requires Great Lakes or Reed to give
    Ontario prompt notice of their receipt of any notice of a Pollution Claim. It
    provides Ontario shall have the right to elect to either take carriage of the
    defence or to participate in the defence and/or settlement of the Pollution
    Claim Section 3 requires Great Lakes and Reed to cooperate with Ontario in
    the investigation and defence of any Pollution Claim.

[33]

Section 4 states: The foregoing indemnity shall be valid without
    limitation as to time.

[34]

Section 6 contains an enurement clause, which states: The indemnity
    shall be binding upon and enure to the benefit of the respective successors and
    assigns of Ontario, Reed, International and Great Lakes, provided however that
    Ontario shall not be entitled to assign this indemnity without the prior
    written consent of the other parties hereto.

[35]

As part of the settlement, both Reed and Great Lakes released Ontario
    from its obligations under the 1979 and 1982 Indemnities.

[36]

The settlement of the Grassy Narrows Litigation by the MOA was approved
    by the Supreme Court of Ontario by judgment dated June 26, 1986.

F.

Post-1985 events

Changes in corporate status

[37]

Subsequent to the 1985 MOA, Reed amalgamated with other corporations.
    The successor corporation was dissolved in 1993.

[38]

The post-1985 corporate history of Great Lakes is complex. For the
    purposes of this appeal, it suffices to note that in 1998 Great Lakes became
    Bowater, which in turn in 2010 became part of Abitibi-Consolidated Inc., which in 
    2012 became the respondent, Resolute.

Changes in ownership of the WDS and
    the Dryden paper plant

[39]

In August 1998, Weyerhaeuser entered into an agreement with Bowater to
    purchase certain assets used in the Dryden pulp and paper business. The
    agreement closed on September 30, 1998.

[40]

This transaction will be discussed in more detail later in these
    reasons. For present purposes, one need only observe that Weyerhaeuser initially
    sought to exclude the WDS from the purchased assets given the environmental
    liabilities associated with the site. Severance of the WDS property from the
    rest of the Dryden realty could not be obtained before closing of the
    agreement. As a result, Bowater conveyed title to the WDS to Weyerhaeuser, on
    certain terms, and Weyerhaeuser immediately leased it back to Bowater.

[41]

Severance of the WDS property ultimately was obtained about two years
    later, at which time Weyerhaeuser reconveyed the WDS to Bowater on August 25,
    2000. In the result, title to the WDS was registered in Weyerhaeusers name
    from September 30, 1998 to August 25, 2000.

[42]

Weyerhaeuser sold the Dryden paper plant to Domtar Inc. in 2007.

Bowaters 2009 financial difficulties

[43]

In April 2009, AbitibiBowater Inc. and certain related companies,
    including the owner of the WDS, Bowater (by then named Bowater Canadian Forest
    Products Inc.), filed for protection under the
Companies Creditors
    Arrangement Act
, R.S.C. 1985, c. C-36 (
CCAA
).

[44]

As part of the
CCAA
proceedings, in October 2010 the Québec
    Superior Court granted a vesting order approving the transfer of the WDS from
    Bowater to 4513541 Canada Inc. (451).

[45]

On April 21, 2011 the receiver of 451, with court approval, abandoned
    the WDS and was discharged from any associated liability. In the Directors Order,
    the MOE described the consequences of that court order: [T]he WDS is now an
    abandoned property that is owned by a company that is insolvent and that has no
    directors, officers, or employees.

G.

The 2011 Directors Order

Site activity in the years immediately
    preceding the Directors Order

[46]

As recounted in the Directors Order, in 2009 the MOE advised Abitibi of
    the need to install a new, tenth, ground water monitoring well at the WDS.
    Abitibi concurred and installed the well in August 2009.

[47]

A 2010 report prepared for Abitibi concluded there was a potential for
    off-site chloride impacts to groundwater. However, the results did not indicate
    off-site mercury impacts to either groundwater or surface water.

[48]

A 2011 report prepared for 451 concluded the contaminating lifespan of
    the WDS was 64 years from the date of its creation, leaving a remaining
    contaminating lifespan of 35 years. The report estimated the present value of
    continued ground and surface water monitoring work over the remaining
    contaminating lifespan of the WDS to be approximately $273,000.

The terms of the Directors Order

[49]

The August 25, 2011 Directors Order was addressed to the last owner of
    the WDS, 451, Weyerhaeuser, several companies in the Abitibi/Bowater group,
    including Bowater, and certain directors of Bowater. Weyerhaeuser was included
    in the Directors Order as a former owner or person who had control or
    management of the WDS.

[50]

The Directors Order imposed three main obligations on the named
    parties: (i) to repair certain site erosion, perform specified groundwater and
    surface water testing, and file annual reports containing specified
    information; (ii) to deliver to the MOE the sum of $273,063 as financial
    assurance in respect of the WDS; and (iii) to take all reasonable measures to
    ensure that any discharge of a contaminant to the natural environment is
    prevented and any adverse effect that may result from such a discharge is dealt
    with according to all legal requirements.

[51]

The Directors Order made clear that its requirements did not relieve
    the named parties from complying with any other applicable order or with future
    orders issued in accordance with the
EPA,
as circumstances might require.

[52]

Weyerhaeuser filed a notice of appeal to the Environmental Review
    Tribunal seeking to revoke or amend the Directors Order.

[53]

Weyerhaeuser commenced this action against Ontario in May 2013.

III.

THE STANDARD OF REVIEW

[54]

Ontario submits the motion judges interpretation of the Ontario
    Indemnity contains legal and factual errors concerning the types of costs and
    expenses covered by it, as well as who benefits from the indemnity.

[55]

The parties acknowledge the standard of review applicable to the contractual
    interpretation issues raised on this appeal is that set out by the Supreme
    Court of Canada in
Sattva Capital Corp. v. Creston Moly Corp.
, 2014
    SCC 53, and subsequent decisions. That standard holds the interpretation of
    non-standard form contracts involves issues of mixed fact and law that are
    subject to deferential review on appeal and in respect of which appellate
    courts may not intervene in the absence of a palpable and overriding error.
    Although it may be possible to identify an extricable question of law in a
    contractual interpretation dispute, courts should be cautious about identifying
    such questions because of the close relationship between the selection and
    application of principles of contractual interpretation. The construction
    ultimately given to the contract means that the circumstances in which a
    question of law can be extricated from the interpretation process will be rare:
Sattva
, paras. 50 to 55;
Ledcor Construction Ltd. v. Northbridge
    Indemnity Insurance Co.
, 2016 SCC 37, at para. 24;
Uniprix inc. v.
    Gestion Gosselin et Bé
rubé
inc.
, 2017 SCC 43, at para.
    41.

IV.

FIRST ISSUE: DOES THE ONTARIO INDEMNITY COVER THE COSTS OF COMPLYING
    WITH THE DIRECTORS ORDER?

A.

The reasons of the motion judge

[56]

The first contractual interpretation issue on this appeal concerns the
    meaning of the following language in s. 1 of the Ontario Indemnity:

Ontario  agrees to indemnify Great Lakes  harmless from and
    against any obligation  costs or expenses incurred  after the date hereof as
    a result of any claim, action or proceeding, whether statutory or otherwise 
    whether by  governments (including the Federal Government of Canada and any
    provincethereof or any agency, body or authority created by statutory or other
    authority)  because of  any damage  caused  by the discharge or  presence of
    any pollutant by Reed  from or in  lands or premises forming part of the
    Dryden assets sold by Reed Ltd. to Great Lakes

[57]

The motion judge concluded the Ontario Indemnity requires Ontario to
    indemnify the respondents for the costs, losses, expenses, liabilities or obligations
    they incurred and may incur as a result of the Directors Order.

[58]

In reaching that conclusion, the motion judge started his analysis by examining
    the actual words used by the parties in the Ontario Indemnity. He concluded the
    ordinary and grammatical meaning of s. 1 of the Ontario Indemnity made it
    clear that the Province agreed to indemnify Great Lakes for any costs or
    expenses resulting from any claim or proceeding, which may be asserted thereafter
    by a government, including any province or statutory agency with respect to the
    discharge or presence of any pollutant on the Dryden property: at para. 42.

[59]

The motion judge held that the Directors Order was a proceeding
    because it was a necessary procedural step for the MOE to assert its statutory
    rights under the [
EPA
]: at para. 44. He also found the Directors Order
    was a claim in that it is a legal demand by the MOE pursuant to its
    authority under the
EPA
to require monitoring and remediation of the
    disposal site by Weyerhaeuser and Resolute: at para. 45.

[60]

The motion judge held the wording of the Ontario Indemnity was clear and
    unambiguous, and the costs of complying with the Directors Order were covered
    by the plain and ordinary meaning of the words used in the Ontario Indemnity: at
    para. 46.

[61]

The motion judge considered and rejected Ontarios submissions that: (i)
    the Ontario Indemnity only covered third party claims, as supported by the
    surrounding factual matrix at the time the indemnity was executed and by the
    notice of claim requirements in s. 2; and (ii) the Ontario Indemnity did not
    cover regulatory costs, as supported by similar language used in the 1979
    Indemnity and the terms of Weyerhaeusers 1998 purchase agreement with Bowater.

B.

The issues stated

[62]

Ontario submits the motion judge erred in interpreting the Ontario
    Indemnity as covering the costs incurred by the indemnitees to comply with the
    Directors Order. Ontario contends the Indemnity can only be construed as
    covering costs resulting from third party claims, not from a first party claim,
    such as one by Ontario or its agencies. Ontario argues the motion judges
    interpretation to the contrary was marred by nine errors, which fall into three
    groups:

(i)

he made errors on extricable questions of law by ignoring the factual
    matrix, failing to acknowledge the nature of an indemnity, and reaching an unreasonable
    interpretation;

(ii)

he made palpable and overriding errors of fact relating to the factual
    matrix and the nature of the Directors Order; and

(iii)

he erred in law by interpreting the Ontario Indemnity in a manner that
    indirectly fettered Ontarios legislative powers.

C.

Governing legal principles

[63]

Before considering the specific grounds of appeal raised by Ontario, it
    is important to recall the objective of contractual interpretation and the role
    played by the factual matrix in the interpretative exercise.

[64]

The overriding objective of contractual interpretation is to determine
    the intent of the parties and the scope of their understanding:
Sattva
,
    at para. 47.

[65]

The general principles guiding adjudicators about how to interpret a
    commercial contract were summarized in
Sattva
, at para. 47, and by
    this court in two 2007 decisions -
Ventas, Inc. v. Sunrise Senior Living
    Real Estate Investment Trust
, 2007 ONCA 205, 85 O.R. (3d) 254, at para. 24,
    and
Dumbrell v. The Regional Group of Companies Inc.
, 2007 ONCA 59, 85
    O.R. (3d) 616, at paras. 52-56. When interpreting a contract, an adjudicator
    should:

(i)

determine the intention of the parties in accordance with the language
    they have used in the written document, based upon the "cardinal
    presumption" that they have intended what they have said;

(ii)

read the text of the written agreement as a whole, giving the words used
    their ordinary and grammatical meaning, 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;

(iii)

read the contract in the context of the surrounding circumstances known
    to the parties at the time of the formation of the contract. The surrounding
    circumstances, or factual matrix, include facts that were known or reasonably
    capable of being known by the parties when they entered into the written
    agreement, such as facts concerning the genesis of the agreement, its purpose,
    and the commercial context in which the agreement was made. However, the
    factual matrix cannot include evidence about the subjective intention of the
    parties; and

(iv)

read the text in a fashion that accords with sound commercial
    principles and good business sense, avoiding a commercially absurd result,
    objectively assessed.

[66]

Consideration of the background circumstances surrounding the formation
    of the contract  the factual matrix  is one of several tools available to
    help an adjudicator understand the deal reached between the parties as
    expressed by the words they choose for their contract. As stated in
Sattva
,
    at para. 57:

The goal of examining such evidence is to deepen a
    decision-makers understanding of the mutual and objective intentions of the
    parties as expressed in the words of the contract. The interpretation of a
    written contractual provision must always be grounded in the text and read in
    light of the entire contract.

[67]

But, there are limits to the use of evidence about the factual matrix. While
    such evidence assists in understanding the meaning of the words chosen by the
    parties, it is the written contract that expresses the parties deal. As the
    Supreme Court continued in
Sattva
, at para. 57:

While the surrounding circumstances will be considered in
    interpreting the terms of a contract, they must never be allowed to overwhelm
    the words of that agreement  While the surrounding circumstances are relied
    upon in the interpretive process, courts cannot use them to deviate from the
    text such that the court effectively creates a new agreement

[68]

There are also limits on the type of evidence about the factual matrix
    an adjudicator may consider. As stated in
Sattva
, at para. 58: It
    should consist only of objective evidence of the background facts at the time
    of the execution of the contract  that is, knowledge that was or reasonably
    ought to have been within the knowledge of both parties at or before the date
    of contracting.

[69]

Against the background of these general principles, I turn to consider each
    of the nine errors Ontario submits the motion judge made when interpreting the
    scope of the costs covered by the Ontario Indemnity.

D.

Analysis

(1)

Did the motion judge err in law by starting his analysis at the wrong
    place?

[70]

Ontario submits the motion judge committed a legal error when he stated:
    The first step must be to analyze the actual words used by the parties in the
    Ontario Indemnity: at para. 40. By starting with the language of the contract,
    Ontario argues, the motion judge failed to treat the factual matrix as an
    essential element in the interpretative process. Had he properly considered the
    factual matrix, he would have concluded the scope of the Ontario Indemnity
    should have been the same as the scope of the 1979 and 1982 Indemnities.

[71]

I see no legal error in the motion judges statement that the interpretation
    of a contract should start with the language of the contract.  That is the
    logical place to start, especially since the jurisprudence requires the
    interpreter of a contract to determine the parties intention in accordance
    with the language they used.

[72]

Ontario submits this courts decision in
Starcoll Inc. v. 2281927
    Ontario Ltd.
, 2016 ONCA 275 stands for the proposition that it is an error
    of law to consider the words of the agreement and the surrounding circumstances
    in two distinct stages. Ontario argues the motion judge committed such an
    error.

[73]

I do not agree, for two reasons.

[74]

First, in
Starcoll
the application judge had held a court may
    only consider the factual matrix to resolve an ambiguity in the contract. On
    appeal, this court stated such an approach was in error because the words of
    an agreement, and the context in which those words are used, cannot be
    separated and approached at different stages of the interpretative process: at
    para. 17. This court then re-iterated the proper approach to contractual interpretation
    is that enunciated in
Sattva
.

[75]

In the present case, the motion judge did not fall into the error made
    by the application judge in
Starcoll
. Instead, he began his analysis by
    reminding himself of the interpretative approach directed by
Sattva
. The
    motion judge correctly stated the law, and he included in his contractual interpretation
    analysis a consideration of the factual matrix: at paras. 7 to 12, and 48.

[76]

Second, I do not read
Starcoll
as telling motion judges they
    cannot start their contractual interpretation analysis by considering the plain
    meaning of the words chosen by the parties. To repeat: the plain meaning of the
    words in a contract is the logical place to start the contractual interpretation
    exercise.

[77]

What
Sattva
and
Starcoll
remind decision-makers is
    that while the interpretation of a written contract must be grounded in the
    text, an understanding of the circumstances surrounding the formation of the
    contract may well assist in interpreting the words in the contract. Sometimes
    the factual matrix will prove a valuable aid in interpreting the meaning of a
    contracts language; other times it will not. Regardless, the decision-maker
    must always turn his or her mind to the factual matrix when interpreting a
    contract.

[78]

The motion judges reasons disclose he did so. I therefore see no legal
    error in how he started his contractual interpretation analysis or where he
    placed the treatment of the factual matrix in his analysis.

(2)

Did the motion judge make palpable and overriding errors of fact
    regarding the factual matrix?

[79]

Ontario submits the motion judge made several palpable and overriding
    errors about the factual matrix. Specifically, the motion judge erred: (i) in
    finding the WDS discharged mercury into the nearby river system; (ii) in
    finding that in 1985 Great Lakes continued to spend significant amounts of
    money to modernize the pulp and paper mill in Dryden; and (iii) in describing
    the Directors Order as a remediation order. I would give no effect to these
    submissions.

[80]

A palpable and overriding error is one that is obvious and goes to the
    very core of the outcome of the case. As put by the Supreme Court of Canada,
    [w]hen arguing palpable and overriding error, it is not enough to pull at
    leaves and leave the tree standing. The entire tree must fall:
Benhaim v.
    St-Germain
, 2016 SCC 48, [2016] 2 S.C.R. 352, at para. 38, quoting
South
    Yukon Forest Corp. v. R.
, 2012 FCA 165, 4 B.L.R. (5th) 31, at para. 46
per
Stratas J.A. In the present case, to the extent the motion judge made any
    factual mistakes, they did not amount to palpable and overriding errors.

[81]

Discharges from the WDS:
In his reasons, the motion
    judge stated: The mercury-contaminated waste was buried at a disposal site,
    which discharged mercury waste into the nearby river system. Later, he wrote:
    It was well known that the disposal site posed a serious environmental
    liability. Ontario submits the motion judges first statement was wrong, which
    led him to erroneously conclude that ongoing mercury contamination from the
    WDS posed a serious environmental liability.

[82]

I accept the motion judge was mistaken when he stated the WDS discharged
    mercury into the river. The evidence indicates it was the chlor-alkali plant
    that discharged mercury into the river. However, that mistake did not undermine
    the motion judges unimpeachable finding that in 1985 it was known the WDS
    posed a serious environmental liability. The evidence disclosed all actors
    treated the WDS as such, both before and after the 1985 contract. I see no
    merit in this ground of appeal.

[83]

Great Lakes continued capital spend on modernization
: In
    his discussion of the surrounding circumstances at the time of the 1985
    contract, the motion judge stated: The Ontario Indemnity replaced the 1979
    Indemnity and was part of the settlement of the lawsuit in which Great Lakes
    agreed to pay millions of dollars, and also continued to spend significant
    amounts of money to modernize the pulp and paper operation in Dryden.

[84]

Ontario submits the motion judge made an unsupported finding of fact
    that Great Lakes agreement to continue to modernize the Dryden plant was part
    of the 1985 settlement. Ontario argues Great Lakes had fulfilled its
    modernization obligations by 1982. It contends this error by the motion judge
    improperly influenced his interpretation of the Ontario Indemnity.

[85]

I do not accept this submission. It constitutes a fine parsing by
    Ontario of the motion judges language while ignoring the big picture
    disclosed by the record, which supported the motion judges reasoning.

[86]

If one were to read the sentence in the way Ontario suggests, I
    acknowledge the motion judge would be mistaken to state post-1985 capital
    expenditures by Great Lakes on the Dryden plant constituted part of the consideration
    for the settlement. However, another reading of the passage is available when
    the broader record is considered. Great Lakes made capital expenditures on
    facility modernization from 1980 until 1985; the expenditures did not stop in
    1982, as Ontario suggests. The 1982 letter from Minister Ramsay sought to bring
    Great Lakes back to the negotiating table with the First Nations after talks
    had reached an impasse. It worked; Great Lakes came back. After rejoining the
    negotiations, Great Lakes continued to spend money on modernizing the Dryden
    plant, as disclosed in its 1983, 1984, and 1985 annual reports. When the record
    is viewed through this wider lens, an evidentiary basis existed to support the
    motion judges conclusion, at para. 48, that:

Under the circumstances, it would be commercially absurd to
    conclude that the parties contemplated that the Province could at any time
    withdraw its commitment to protect Great Lakes and its successors from
    environmental liability arising from the disposal site and issue an order
    requiring Great Lakes or its successors to incur substantial costs to remediate
    the site.

[87]

Characterization of the Directors Order:
Throughout
    his reasons, the motion judge describes the Directors Order as a remediation
    order. Ontario submits that mischaracterizes the true nature of the order by
    implying the financial consequences of the order to Resolute and Weyerhaeuser
    might be greater than they actually are.

[88]

I fail to see how the motion judges characterization of the Directors
    Order as a remediation order could amount to a palpable and overriding error.
    As noted at
para. 50
above, the Directors Order contained several elements. One required the
    immediate remediation of certain slope erosion and fence defects. Another element,
    Item 13, contained a remediation component, requiring the named parties to
    take all reasonable measures to ensure that  any adverse effect that may
    result from such a discharge is dealt with according to all legal
    requirements. The motion judge correctly treated the Directors Order as one
    imposing costs or expenses on the named parties. It was this cost-imposing
    effect of the Directors Order that was central to the motion judges analysis.

(3)

Did the motion judge err in law in his consideration of the factual
    matrix?

[89]

Ontario submits the motion judge made a fundamental error in his
    treatment of the factual matrix  namely, he failed to interpret the scope of
    the costs covered by the Ontario Indemnity as similar in breadth to those
    contained in the earlier 1979 Indemnity, 1979 Dryden Agreement, and 1982 Indemnity.
    Had he done so, Ontario argues, it would be apparent the costs covered by Ontario
    Indemnity were those relating to third party claims, not regulatory orders.

[90]

Specifically, Ontario argues the language of s. 1 of the  Ontario Indemnity
    is virtually identical to that found in an environmental liabilities indemnity
    given by Great Lakes to Reed in s. 5.3(i) of the 1979 Dryden Agreement. Ontario
    argues that s. 5.3 of the Dryden Agreement must be interpreted in light of
    Ontarios 1979 Indemnity, which, by its terms, provided an indemnity in respect
    of amounts payable by reason of a court order or settlement. The 1982 Indemnity
    was limited in a similar manner. This factual matrix, according to Ontario, required
    the motion judge to interpret the scope of the Ontario Indemnity to cover only amounts
    payable as a result of court orders or settlements of court actions, not
    amounts payable by reason of regulatory orders.

[91]

In a related argument, Ontario submits the motion judge made a palpable
    and overriding error of fact by not referring in his analysis to the 1982 Indemnity
    because the letter supported the conclusion that the 1985 Indemnity was meant
    to address the potential risk posed by further third party actions and not against
    regulatory proceedings.

[92]

I do not persuaded by these submissions. The motion judge was tasked
    with interpreting the Ontario Indemnity. His interpretation took into account
    the key events that led the parties to sign the 1985 MOA and Ontario Indemnity.
    In his reasons, the motion judge specifically referred to the 1979 Indemnity.
    Although he did not refer to the 1982 Indemnity, that omission does not constitute
    a palpable and overriding error. The 1982 Indemnity simply replaced the 1979
    one, on similar terms. Accordingly, in his consideration of the factual matrix,
    the motion judge did not ignore Ontarios pre-1985 involvement in the issue of
    the pollution from the Dryden plants; he clearly took those background events into
    account.

[93]

The motion judge considered and rejected Ontarios argument that the
    language contained in 1979 and 1982 Indemnities should have driven the
    interpretation of the Ontario Indemnity. At para. 48 of his reasons he wrote:

The Provinces comparison of the language of the 1979 Indemnity
    and the Ontario Indemnity does not persuade me that Weyerhaeusers and
    Resolutes interpretation of the Ontario Indemnity is incorrect. The Ontario Indemnity
    is a separate agreement and must be interpreted by considering the words used
    by the parties in it, not a previous agreement.

[94]

I see no reversible error in that analysis.

[95]

Ontario argues that since the indemnity contained in the 1979 Dryden
    Agreement (to which Ontario was not a party) did not include costs caused by
    regulatory orders, nor did the 1979 and 1982 Indemnities (which were unilateral
    promises made by Ontario, not jointly executed agreements), it follows the
    scope of the Ontario Indemnity must be the same.

[96]

I would not accept this submission; it is based on an improper use of
    factual matrix evidence. By its terms, the Ontario Indemnity did not purport to
    amend the 1979 Dryden Agreement or the 1979 and 1982 Indemnities. Nor did it
    incorporate by reference the scope of the earlier indemnities.  The Ontario
    Indemnity was a distinct deal. As such, its interpretation required focusing on
    the language used in that contract. That is what the motion judge did. I see no
    error in his use of the factual matrix; he used the evidence of the surrounding
    circumstances for the limited purpose identified in
Sattva
.

[97]

Ontario also casts its submission too high by arguing the language of s.
    1 of the Ontario Indemnity was virtually identical to that in s. 5.3 of the
    1979 Dryden Agreement, which did not include an indemnity for regulatory costs.
    It was not. The language of the Ontario Indemnity differed in a critical
    respect, requiring indemnification of any costs incurred as a result of any
    claim, action or proceeding,
whether statutory or otherwise
 (emphasis
    added). The presence of the phrase statutory or otherwise strongly influenced
    the motion judges analysis, as is apparent from paras. 42, 46, and 47 of his
    reasons:

The ordinary and grammatical meaning of these words makes it
    clear that the Province agreed to indemnify Great Lakes for any costs or
    expenses resulting from any claim or proceeding, which may be asserted
    thereafter by a government, including any province or statutory agency with
    respect to the discharge or presence of any pollutant on the Dryden property.



I have concluded that the remediation order is covered by the
    plain and ordinary meaning of the words used in the Ontario Indemnity because
    of the following elements of its operative language:

·

The remediation order is a statutory claim or proceeding,

·

that imposes obligations, liabilities or future costs on Great
    Lakes successors,

·

which arise or were asserted by a statutory agency of a province,

·

because of or relating to events and circumstances,

·

caused by the presence of mercury deposited in the disposal site
    by Reed.

The wording of the Ontario Indemnity is clear and unambiguous.
    It can only mean that the parties intended it to apply to a statutory claim or
    proceeding brought by an agency of the Province such as the remediation order
    issued by the MOE.

[98]

To summarize, the motion judges reasons reveal he anchored his
    interpretative analysis in the language of the contract at issue, giving due
    consideration to the circumstances surrounding its formation. I see no
    reversible error in his treatment of the factual matrix.

(4)

Did the motion judge err in law by ignoring the true nature of an
    indemnity?

[99]

Ontario submits the motion judge erred in law by failing to acknowledge a
    general principle that an indemnity only compensates an indemnitee for losses
    caused by third party claims, unless specific language provides that it covers
    losses caused by the first party indemnitor. Ontario advances a related
    argument that the more plausible interpretation of the phrase statutory or
    otherwise in s. 1 of the Ontario Indemnity is that it covers statutory claims
    by the federal government and individuals, not by the Ontario government.

[100]

I do not accept
    either submission.

[101]

An indemnity may
    cover first party claims. Whether it does depends upon the language used in the
    indemnity. The law on this point was summarized by Lane J. in
TransCanada
    Pipelines Ltd. v. Potter Station Power Ltd. Partnership
(2002), 22 B.L.R.
    (3d) 210, [2002] O.J. No. 429 (Sup. Ct.), at para. 35:

[T]he case law does not establish a general principle that
    wherever words of indemnity are found, the obligation created is confined to
    responding to claims made against the indemnitee by third parties. Even where a
    provision is, in the words of Laskin J.A., in
[Powell Equipment Co. v. Lac
    Seul Land & Lumber Co.,
[1967] 1 O.R. 103], couched in language
    suggestive of indemnity, [it may be] more properly characterized as an
    exculpatory term of the overall transport agreement. Thus, the presence of
    words of indemnity is not decisive, they must still be construed in context. If
    such a clause may in one context be an exculpatory term, there is no reason
    why, given the proper words, it may not also in another context include
    liability for direct loss. The principle exemplified by every case cited is
    that the obligation is governed by the words chosen, when placed and read in
    their context.

[102]

This court
    affirmed Lane J.s conclusion that the language of the indemnity in that case
    was appropriately read more broadly than [covering] simply claims by third
    parties:
TransCanada Pipelines Ltd. v. Potter Station Power Limited
    Partnership
(2003), 35 B.L.R. (3d) 62, [2003] O.J. No. 1879 (C.A.), at
    para. 27.

[103]

In the present
    case, the motion judge held the Ontario Indemnity contained clear and
    unambiguous language covering losses caused by the first party indemnitor. Further,
    the motion judge squarely addressed both arguments advanced by Ontario on this
    issue, stating at para. 48:

The Province submits that the Ontario Indemnity is limited to
    claims asserted by third parties and cannot apply to it. The plain and ordinary
    meaning of the words used by the parties does not support such an
    interpretation. In particular, the specific reference to any province and
    statutory claim and proceeding in s. 1 must be taken to refer to the
    Province of Ontario and its agencies such as the MOE. The only statutory claim
    or proceeding that could be asserted by a province against Great Lakes in
    respect of the Dryden Property would be a claim or proceeding asserted by the
    Province of Ontario. All of the other provinces lack the constitutional
    authority to pursue a statutory claim in Ontario.

[104]

I see no
    palpable or overriding error in the motion judges analysis.

(5)

Did the motion judge err in law by failing to interpret s. 1 in light of
    all the terms of the Ontario Indemnity?

[105]

Ontario next submits
    the motion judge committed an extricable error of law by failing to interpret
    s. 1 of the Ontario Indemnity in accordance with the terms of the contract as a
    whole. Ontario argues the notice of claim provisions contained in s. 2 signify the
    indemnity contained in s. 1 is limited to third party claims.

[106]

I do not find
    this argument persuasive. The motion judge addressed the effect of s. 2 of the
    Ontario Indemnity at para. 48 of his reasons:

The Province submits that the notification provision in s. 2 of
    the Ontario Indemnity is inconsistent with Weyerhaeusers and Resolutes
    interpretation. In my view, the requirement to notify the Province of any
    pollution claims cannot override the clear, unambiguous and broad wording of s.
    1 of the Ontario Indemnity. This notification requirement is not inconsistent
    with the Provinces obligation to indemnify Weyerhaeuser and Resolute for their
    costs of complying with the remediation order.

[107]

I see no
    reversible error in that conclusion.

(6)

Did the motion judge err in law by failing to interpret the Ontario
    Indemnity as at the date of its execution?

[108]

Ontario submits
    the motion judge erred in law by failing to interpret the Ontario Indemnity as
    of the date of its execution. Had he done so, Ontario contends, he would not
    have interpreted the indemnity as covering statutory claims arising under future
    legislation, such as the 2011 Directors Order.

[109]

I do not accept
    this submission, for two reasons. First, the plain language of the Ontario Indemnity
    contradicts it. Section 1 describes the obligation to indemnify as one in
    respect of costs incurred as a result of any claim, action or proceeding,
    whether statutory or otherwise, existing at December 17, 1979
or which may arise or be asserted thereafter
 (emphasis
    added). In addition, s. 4 provides that the foregoing indemnity shall be valid
    without limitation as to time.

[110]

Second, at the
    time the parties executed the Ontario Indemnity, the
EPA
authorized
    the issuance of regulatory certificates and orders that could impose costs upon
    the owners of a site. For example, the certificates of approval issued in
    respect of the WDS prior to 1985 contained conditions requiring the site owner
    to install monitoring equipment and periodically sample ground and surface
    water. As well, amendments to the
EPA
that came into force in 1984
    authorized the issuance of preventative measures orders compelling site owners
    to take certain actions:
Environmental Protection Amendment Act, 1983
,
    S.O. 1983, c. 52, s. 6. These 1984 amendments were the genesis of the
    Directors powers, now found in s. 18(1) of the
EPA
, to issue
    preventative measures orders. The 2011 Directors Order was made, in part,
    pursuant to s. 18(1). Accordingly, preventative measures orders were a feature
    of the environmental legislative scheme at the time the parties entered into
    the Ontario Indemnity.

(7)

Did the motion judge err by failing to draw an inference about the
    parties 1985 negotiations?

[111]

On November 29,
    1985, after the parties had executed the MOA but before they signed the Ontario
    Indemnity, the Spills Bill, S.O. 1979, c. 91, was proclaimed into force. The
    bill amended the
EPA
to create a statutory right of action for the
    government and third parties against polluters. Ontario submits the motion
    judge erred by failing to consider whether the amendments caused the parties
    to insert the words statutory or otherwise when they executed the 1985
    Indemnity two weeks later, such that the indemnity would be limited only to third
    party claims for spills.

[112]

I do not accept
    this submission. Canadian common law generally treats evidence of the parties specific
    negotiations as inadmissible for purposes of interpreting a contract:
Primo
    Poloniato Grandchildrens Trust (Trustee of) v. Browne
, 2012 ONCA 862, 115
    O.R. (3d) 287, at para. 71. In light of that principle (and until that
    principle of contract interpretation is changed as a matter of policy),
    evidence of the factual matrix cannot operate as a kind of alternate means by
    which an adjudicator constructs a narrative about what the parties
must
    have
discussed or intended in their negotiations. In other words, evidence
    of the factual matrix cannot be used to do indirectly that which the principles
    of contract interpretation do not permit doing directly. Therefore, contrary to
    Ontarios submission, it was not open to the motion judge to consider evidence
    of the parties specific intentions or negotiations, including whether they discussed
    the Spills Bill during the negotiations that culminated in the execution of the
    Ontario Indemnity. (Here I must respectfully disagree with my colleagues
    analysis of this point set out in paras. 247 to 249 below.)

(8)

Did the motion judge err in his treatment of the parties post-execution
    conduct?

[113]

Ontario submits
    the motion judges interpretation of s. 1 of the Ontario Indemnity is in error because
    after 1985 neither Great Lakes, nor its successor Bowater, made any claims
    against Ontario for the costs of on-going surface and groundwater monitoring
    required by the various Certificates of Approval.

[114]

The motion judge
    dealt with that argument stating, at para. 48: The fact that Resolute and its
    predecessor did not seek indemnity under the Ontario Indemnity until now does
    not change the clear and unambiguous meaning of its words

[115]

I see no
    reversible error in that conclusion.

[116]

In
Shewchuck
    v. Blackmont Capital Inc.
, 2016 ONCA 912, 404 D.L.R. (4th) 512, at para.
    46, this court held that evidence of subsequent conduct should be admitted only
    if the contract remains ambiguous after considering its text and factual
    matrix. In arriving at that conclusion, this court stated, at para. 44:

Another danger is that evidence of subsequent conduct may
    itself be ambiguous. For example, as this court observed in
Canada Square
    Corp. v. Versafood Services Ltd.
(1981), 34 O.R. (2d) 250 (C.A.), at p. 261
    quoting from the writing of Professor Stephen Waddams, the fact that a party
    does not enforce his strict legal rights does not mean that he never had them.

[117]

In the present
    case, the motion judge found the language of the Ontario Indemnity was clear
    and unambiguous: at para. 47.  Further, in its statement of defence, Ontario
    did not plead the respondents had waived or were estopped by their
    post-execution conduct from asserting a claim for indemnity. Consequently,
    evidence of subsequent conduct was not admissible to determine the parties contractual
    obligations.

(9)

Did the motion judges interpretation of the Ontario Indemnity result in
    an unlawful fettering of legislative discretion?

[118]

Before the
    motion judge, Ontario argued it could not enter into an agreement that fettered
    its legislative discretion. Although Ontario did not challenge the validity of
    the 1985 MOA or its schedules, such as the Ontario Indemnity, it submitted the
    Ontario Indemnity could not be interpreted to require the province to indemnify
    Weyerhaeuser and Resolute for the costs resulting from subsequent environmental
    legislation because that would amount to fettering its legislative powers.

[119]

The motion judge
    rejected Ontarios argument, holding that the Ontario Indemnity did not offend
    the principle against fettering legislative powers because it was a business
    agreement that did not restrict the provinces legislative functions: at paras.
    51 to 53.

[120]

Ontario submits
    the motion judge erred in so concluding. It contends the respondents, in
    effect, asked the motion judge to imply a term into the Ontario Indemnity that
    would protect them against the impact of future legislative acts. By accepting
    the respondents argument, the motion judge departed from a principle Ontario
    submits was set down by the Supreme Court of Canada in
Pacific National
    Investments Ltd. v. Victoria (City)
, 2000 SCC 64, [2000] 2 S.C.R. 919,
    namely: a contractual obligation on the Crown to compensate for losses
    resulting from the exercise of a legislative power amounts to an impermissible
    indirect fetter on legislative power.

[121]

I do not persuaded
    by this submission for several reasons.

[122]

First, it is
    clear the motion judge did not imply any term into the Ontario Indemnity. His
    conclusion that the indemnity covers the costs of complying with regulatory directions
    was based on his reading of the express language of the contract.

[123]

Second, no language
    in the Ontario Indemnity purports to fetter, in any way, Ontarios legislative powers.

[124]

Third, I do not
    read
Pacific National Investments
as standing for the proposition
    advanced by Ontario. The issue in that case was not the provincial Crowns power
    to contract, but the contracting power of a municipality, a subordinate creature
    of provincial statute. The Supreme Court considered whether a municipality
    possessed the capacity to enter into a contract containing an implied term that
    it would compensate the counterparty in the event it changed municipal zoning
    by-laws. Since a municipality possesses only those powers granted to it by
    provincial legislation, the Supreme Court concluded the issue turned on the
    scope of the statutory powers possessed by the municipality at the time the
    contract was made. Based upon its review of the relevant provincial legislation
    in force at that time, the majority concluded, at para. 36, that the
    municipality did not have the capacity to make and be bound by the alleged
    implied contractual term.

[125]

A case involving
    provincial contracting powers is
Wells v. Newfoundland
, [1999] 3
    S.C.R. 199. Wells had been appointed to a provincial tribunal. Newfoundland
    subsequently passed legislation reducing the number of tribunal members. Wells
    lost his position. He sued for damages. The Supreme Court of Canada affirmed
    his right to sue for damages.

[126]

In
Wells
,
    at para. 37, the Supreme Court stated a minister of state cannot by means of
    contractual obligations entered into on behalf of the state fetter the freedom
    of the legislature to adopt legislation inconsistent with the contractual
    obligations. However, the Supreme Court emphasized that there was a crucial
    distinction between the Crown legislatively avoiding a contract and altogether
    escaping the legal consequences of doing so: at para. 41. The court further stated,
    at para. 46:

In a nation governed by the rule of law, we assume that the
    government will honour its obligations unless it explicitly exercises its power
    not to. In the absence of a clear express intent to abrogate rights and
    obligations  rights of the highest importance to the individual  those rights
    remain in force. To argue the opposite is to say that the government is bound
    only by its whim, not its word. In Canada this is unacceptable, and does not
    accord with the nations understanding of the relationship between the state
    and its citizens.

[127]

Since entering
    into the Ontario Indemnity, the Province has not sought by legislation to
    relieve itself from the financial obligations it assumed voluntarily in that
    contract. Absent such legislation, Ontario remains bound by the terms of the
    deal it struck.

E.

Summary on the First Issue

[128]

For the reasons
    set out above, I conclude the motion judge did not err in law, or commit a
    palpable and overriding error on any question of mixed fact and law or question
    of fact, in arriving at his interpretation of the scope of the Ontario Indemnity.
    Accordingly, I see no basis for appellate intervention with his conclusion that
    the Ontario Indemnity entitled an indemnitee to be indemnified for the costs,
    losses, expenses, liabilities, or obligations it incurred or might incur as a
    result of the Directors Order.

[129]

I turn now to
    the issue of whether the motion judge erred in concluding that both Weyerhaeuser
    and Resolute were indemnitees which enjoy the benefit of the Ontario Indemnity.

V.

SECOND ISSUE: DO THE RESPONDENTS ENJOY THE BENEFIT OF THE ONTARIO
    INDEMNITY?

A.

The issue stated

[130]

Whether
    Weyerhaeuser or Resolute enjoy the benefit of the Ontario Indemnity turns on
    the determination of the second issue of contractual interpretation raised in this
    appeal: the meaning of the enurement clause in s. 6 of the Ontario Indemnity. That
    section states:

The indemnity shall be binding upon and enure to the benefit of
    the respective successors and assigns of Ontario, Reed, International and Great
    Lakes, provided however that Ontario shall not be entitled to assign this
    indemnity without the prior written consent of the other parties hereto.

[131]

The motion judge
    stated there was no dispute that Resolute, as the corporate successor to Great
    Lakes, has the benefit of the Ontario Indemnity as a successor within the
    meaning of s. 6 of the Ontario Indemnity: at para. 55. He also found Weyerhaeuser
    was entitled to the benefit of the Ontario Indemnity, both as an assignee pursuant
    to its 1998 purchase of the Dryden facility from Bowater and as a successor-in-title
    to the WDS property.

[132]

Ontario appeals,
    arguing the motion judge erred in finding Weyerhaeuser was entitled to the
    benefit of the Ontario Indemnity. Alternatively, Ontario submits that if Weyerhaeuser
    is entitled to the benefit of the Ontario Indemnity, then Resolute is not as only
    one indemnitee can benefit at a time, not both.

[133]

I will first
    review the motion judges findings that Weyerhaeuser is entitled to the benefit
    of the Ontario Indemnity both as an assignee of the indemnity as a result of
    its 1998 acquisition of the Dryden business and as a successor to the title of
    the WDS. I conclude that: (i) Weyerhaeuser received an assignment of the full
    benefit of the indemnity in the 1998 acquisition, but I would remit to the
    court below the issue of what rights, if any, Weyerhaeuser possessed as an
    assignee of the Ontario Indemnity at the time the Directors Order was issued
    in 2011; and (ii) the motion judge erred in interpreting the word successor
    in s. 6 of the Ontario Indemnity to include Weyerhaeuser.

[134]

I will next
    consider the motion judges finding that Resolute enjoyed the benefit of the
    Ontario Indemnity as a successor. I conclude the motion judge erred in so
    finding. As a result of the 1998 assignment of the full benefit of the Ontario
    Indemnity from Resolutes corporate predecessor, Bowater, to Weyerhaeuser,
    Resolute has no legal interest in the Ontario Indemnity upon which it can
    assert a claim against Ontario.

B.

1998 sale of the Dryden facility from Bowater to Weyerhaeuser

[135]

I start by
    examining the 1998 sale of the Dryden facility from Bowater to Weyerhaeuser.

[136]

By 1998, Great
    Lakes had changed its name to Bowater. By Asset Purchase Agreement dated August
    4, 1998 (the August 1998 APA), as amended on September 30, 1998 (the
    September Amending Agreement), Bowater agreed to sell to Weyerhaeuser substantially
    all its property and assets used in connection with the Dryden pulp and paper
    business. (I shall refer to the August 1998 APA and September Amending
    Agreement collectively as the 1998 APA.)

[137]

The August 1998
    APA defined the WDS as the Mercury Parcel. Certain provisions of the August 1998
    APA made it clear Weyerhaeuser initially did not intend to include the WDS as
    one of the purchased properties or assets: (i) s. 3.2(v) identified the
    Mercury Parcel as an excluded asset, which remained the property of
    Bowater; and (ii) s. 3.1, which described purchased assets, removed from the
    purchased real property any excluded asset.

[138]

The parties
    agreed that prior to closing Bowater would seek the necessary approvals to
    sever the WDS from the other real property it was selling to Weyerhaeuser. If
    Bowater could not secure severance consents prior to closing, s. 13.1.9 of the August
    1998 APA provided that Bowater would transfer title to the WDS to Weyerhaeuser
    on closing but, after closing, would continue to seek severance consent. Once
    such consent was secured, Weyerhaeuser would re-convey the WDS to Bowater.

[139]

Bowater could
    not obtain consent to sever the WDS prior to the September 30, 1998 closing. As
    a result, the parties took three steps.

[140]

First, they
    entered into the September Amending Agreement, which amended several provisions
    of the August 1998 APA, including the identification of excluded assets. In
    further submissions requested by the panel,
[2]
Weyerhaeuser and Ontario agreed that one effect of the September Amending
    Agreement was to re-classify the WDS from an excluded asset to a purchased
    asset, except for certain purposes under Article 10 of the August 1998 APA
    dealing with environmental matters.

[141]

Second, Bowater
    and Weyerhaeuser executed a lease for the WDS under which Weyerhaeuser was the
    landlord and Bowater the tenant (the Lease). The term of the Lease was for
    the period until Weyerhaeuser could reconvey the WDS to Bowater in accordance
    with s. 13.1.9 of the 1998 APA. Section 9.01 of the Lease contained an
    indemnity from Bowater to Weyerhaeuser on the following terms:

The Tenant covenants to indemnify and save harmless the
    Landlord from all claims, actions, costs and losses of every nature arising
    during the Term or thereafter relating to or arising in any way from this lease
    of the [WDS] Lands and the Access Area except to the extent caused by the
    Landlords negligence or wilful misconduct. The foregoing indemnity extends
    without limitation to all claims, actions, costs or losses arising out of or relating
    to:

(1)

the presence or
    release of mercury and any other contaminant, substance or waste on or in the
    Lands;



The obligations of the Tenant to indemnify the Landlord under
    the provisions of this section are to survive the termination or expiry of this
    lease.

[142]

Third, Bowater
    conveyed title to the WDS to Weyerhaeuser on closing.

[143]

Almost two years
    after closing, Bowater obtained consent to sever the WDS. Weyerhaeuser thereupon
    re-conveyed the WDS to Bowater by deed of transfer registered August 25, 2000.

[144]

In the
    Abitibi/Bowater
CCAA
proceedings, Weyerhaeuser filed a proof of claim
    for the present value of the work required by the Directors Order ($273,063),
    together with estimated legal costs ($100,000). Weyerhaeuser based its claim on
    the tenants indemnity given by Bowater in the September 30, 1998 Lease of the
    WDS.

[145]

The
CCAA
Monitor accepted the claim, for which Weyerhaeuser received a distribution of
    shares in Resolute Forest Products Inc., which it later sold.

C.

The reasons of motion judge

[146]

The motion judge
    found Weyerhaeuser was entitled to be indemnified under the Ontario Indemnity for
    a combination of two reasons.

[147]

First, the
    motion judge was satisfied from the plain and ordinary meaning of the words
    used in the indemnity that the intention of the parties was that the Province
    would indemnify future owners of the disposal site for any environmental
    liability that might arise: at para. 63. In reaching this conclusion, the
    motion judge relied heavily on this courts decision in
Brown v. Belleville
    (City)
, 2013 ONCA 148, 114 O.R. (3d) 561.

[148]

Second, the
    motion judge found the Ontario Indemnity was assigned by Bowater to Weyerhaeuser
    under the 1998 APA. He then concluded, at para. 64: I am of the view that this
    assignment combined with the enurement clause in s. 6 of the Ontario Indemnity
    makes it clear that Weyerhaeuser can rely upon the Ontario Indemnity as Great
    Lakes assignee.

[149]

The motion judge
    held that both Resolute and Weyerhaeuser are entitled to be indemnified under
    the Ontario Indemnity for their costs of complying with the remediation order:
    at para. 65.

D.      Analysis

(i)

Did the motion judge err in holding Weyerhaeuser was an assignee of the
    Ontario Indemnity?

[150]

Ontario submits
    the motion judge erred in concluding Bowater assigned the Ontario Indemnity to
    Weyerhaeuser under the 1998 APA. I would not accept that submission.

[151]

The 1998 APA was
    an asset purchase agreement. Section 1.1 of the August 1998 APA defined
    Business as including the manufacturing and sale of product from the Dryden
    mill and Purchased Assets as the property and assets described in s. 3.1. In
    turn, that section identified the assets Bowater was selling to Weyerhaeuser
    stating, in part:

Subject to the terms and conditions hereof, the Vendor agrees
    to sell, assign and transfer to the Purchaser and the Purchaser agrees to
    purchase as, at and from the Effective Time the following property and assets
    of the Business:

(i)
Real Property
 all of the
    interests of the Vendorin and to real and immovable properties owned by the
    Vendor or leased by the Vendor (or an Affiliate) pursuant to Leases and used
    exclusively in connection with the Businessexcept to the extent that any of
    such real and immovable property is or relates to Excluded Assets



(vii)
Agreements, Contracts and
    Commitments
 the full benefit of all unfilled orders received by the
    Vendor relating to the Business and
all
    right, title and interest of the Vendor in, to and under all agreements,
    contracts and commitments and other rights of or relating to the Business
,
    whether written or oral, including, without limitation, the full benefit and
    advantage of all forward commitments by the Vendor for supplies or materials
    entered into in the Ordinary course of the Business which are exclusively for
    use in the Business whether or not there are any written agreements, contracts
    or commitments with respect thereto (individually a Contract and
    collectively, the Contracts);



(xiv)
Warranty Rights

the full benefit of all
representations,
    warranties, guarantees,
indemnities
,
    undertakings, certificates, covenants, agreements and the like and all security
    therefor
received by the Vendor on the
    purchase or other acquisition of any part of the Purchased Assets or otherwise
.

[Emphasis added]

[152]

The motion judge
    relied on ss. 3.1(vii) and (xiv) to find, at para. 64:

[U]nder the 1998 Agreement, Bowater expressly assigned to
    Weyerhaeuser the full benefit of all representations, warranties, guarantees,
    indemnities relating to the Dryden property. There was no restriction on Great
    Lakes ability to assign the benefit of the Ontario Indemnity. I find that the
    Ontario indemnity was assigned by Bowater to Weyerhaeuser under the 1998
    Agreement.

[153]

Ontario advances
    three arguments in support of its submission that the motion judge erred in
    reaching that conclusion.

[154]

First, Ontario
    contends that the absence of an express reference to an assignment of the
    Ontario Indemnity in the 1998 APA means no assignment took place. I see no
    merit in this argument. The degree of specificity used by parties to identify
    assigned assets is a matter of negotiation and choice. Here, the parties chose
    to use general language to describe the purchased assets, including assigned
    contracts. The wording of ss. 3.1(vii) and (xiv) of the August 1998 APA was
    sufficient to capture the Ontario Indemnity without specifying that contract by
    name.

[155]

Second, Ontario
    argues the motion judge misconstrued s. 3.1(xiv), which states that purchased
    assets include the full benefit of indemnities received by the Vendor on the
    purchase or other acquisition of any part of the Purchased Assets or otherwise.
    Ontario quite correctly points out that the Ontario Indemnity was not an
    indemnity
Great Lakes received on the purchase
    or other acquisition of the Purchased Assets 
i.e.
, when Great Lakes acquired the Dryden facility under
    the 1979 Dryden Agreement. Great Lakes received the Ontario Indemnity later, in
    1985, upon the settlement of the Grassy Narrows Litigation.

[156]

However, as
    Weyerhaeuser notes, s. 3.1(xiv) is not limited to indemnities received by
    Bowater/Great Lakes on the purchase or other acquisition of any part of the
    Purchased Assets; it also includes indemnities received or otherwise.
    Weyerhaeuser submits that Great Lakess acquisition of the Ontario Indemnity in
    1985 as part of the settlement of the Grassy Narrows Litigation falls within
    the language or otherwise. I accept Weyerhaeusers submission. It accords
    with the plain and unambiguous language of s. 3.1(xiv).

[157]

Third, Ontario
    submits the motion judges interpretation of ss. 3.1(vii) and (xiv) as
    encompassing the Ontario Indemnity would result in a commercial absurdity
    because Weyerhaeuser negotiated a specific indemnity in respect of the WDS as
    part of the Lease it entered into with Bowater on the closing of the 1998 APA.

[158]

I am not
    persuaded by that submission. The motion judge addressed the submission at
    para. 48 of his reasons:

[I]t makes commercial sense to obtain the maximum protection
    possible in respect of possible environmental liability. The fact that Weyerhaeuser
    wanted to obtain as much protection as it could from any liability arising from
    its acquisition of the Dryden property does not affect the clear and
    unambiguous wording of the Ontario Indemnity.

[159]

The documents
    constituting the 1998 transaction clearly demonstrate Weyerhaeusers reluctance
    to assume title to the WDS. Owning the WDS had no up-side; only down-sides,
    which included the expanded liability resulting from the 1990 amendment to the
EPA
making former owners of polluting sites liable under a variety of regulatory
    orders, such as preventative measures orders:
Environmental Protection
    Statute Law Amendment Act, 1990
, S.O. 1990, c. 18. That Weyerhaeuser would
    seek to maximize its protection against environmental liabilities associated
    with the WDS was commercially reasonable.

[160]

Moreover, the
    1998 APA made no provision for the benefit of any assigned indemnity to revert
    to Bowater upon the re-conveyance of the WDS once severance was obtained. Nor
    was the 2000 re-conveyance accompanied by any document purporting to re-assign
    the benefit of the Ontario Indemnity to Bowater.

[161]

Accordingly, I
    see no palpable and overriding error in the motion judges conclusion that the
    1998 APA operated to assign the full benefit of the Ontario Indemnity from
    Bowater to Weyerhaeuser.

(ii)

Is Weyerhaeuser entitled to claim indemnification under the Ontario
    Indemnity for the costs of complying with the Directors Order?

[162]

The conclusion
    that Bowater assigned the full benefit of the Ontario Indemnity to Weyerhaeuser
    under the 1998 APA is a necessary, but not sufficient, finding to determine
    whether Weyerhaeuser can claim, as assignee, indemnification under the indemnity
    for the costs of complying with the Directors Order. There is more to the
    inquiry.

[163]

In 2007, before
    the Directors Order was made, Weyerhaeuser sold the Dryden mill and other
    assets to Domtar. Consequently, Weyerhaeuser bears the burden of demonstrating
    that at the time the Directors Order was made in 2011, it possessed legal
    rights under the Ontario Indemnity entitling it to indemnification.

[164]

Unfortunately,
    the record concerning the effect, if any, of the 2007 sale to Domtar on Weyerhaeusers
    rights under the Ontario Indemnity is thin. The motion judge did not address
    the issue, no doubt because neither Weyerhaeuser nor Ontario dealt with the
    transaction in their pleadings. Weyerhaeusers affiant, Charles Douthwaite, did
    not refer to the transaction in his affidavit in support of the summary
    judgment motion. However, answers he gave on his cross-examination disclosed
    that: (i)  in the 2007 transaction, Weyerhaeuser transferred the Dryden assets
    that we had to Domtar; (ii) Weyerhaeuser posted the Ontario Indemnity and
    other documents about the 1985 settlement to its electronic due diligence data
    room for review by interested purchasers because they were relevant to the
    assets at the Dryden site; and (iii) the Domtar transaction documents were
    marked as an exhibit on Mr. Douthwaites cross-examination, but Weyerhaeuser
    took the position they were not relevant to the summary judgment motions.  The
    documents are not contained in the appeal record.

[165]

The motion judge
    recited the fact of Weyerhaeusers 2007 sale of the Dryden plant to Domtar, but
    he did not consider the effect, if any, of that transaction on the continuation
    of the legal rights Weyerhaeuser acquired under the 1998 APA concerning the
    Ontario Indemnity. Accordingly, without considering the effect of the 2007
    transaction, it is unclear how the motion judge moved from his finding that
    Bowater assigned the Ontario Indemnity to Weyerhaeuser under the 1998 APA to
    his ultimate order that Weyerhaeuser was entitled, as assignee, to be
    indemnified for costs incurred as a result of the 2011 Directors Order. If the
    2007 asset sale to Domtar involved Weyerhaeuser assigning the full benefit of
    all indemnities regarding the Dryden facility  and the Ontario Indemnity
    covered the Dryden facilities as a whole, not just the WDS  then an issue
    would arise about what rights Weyerhaeuser continued to enjoy as an assignee of
    the Ontario Indemnity when the 2011 Directors Order was made.

[166]

The incomplete
    appeal record regarding the 2007 Domtar transaction is insufficient to permit
    this court to exercise its fact-finding powers under ss. 134(1) and (4) of the
Courts
    of Justice Act
, R.S.O. 1990, c. C.43 to determine that issue. What follows
    from that state of affairs I will address after considering the motion judges
    additional finding that Weyerhaeuser was a successor within the meaning of s.
    6 of the Ontario Indemnity.

(iii)

Did the motion judge err in holding Weyerhaeuser was a successor under
    the Ontario Indemnity?

The parties positions

[167]

Weyerhaeuser is
    not a corporate successor to either of the contracting indemnitees to the
    Ontario Indemnity  Great Lakes and Reed. However, as a result of the 1998 APA,
    Weyerhaeuser held title to the WDS for a period of two years, until it was
    reconveyed to Bowater.

[168]

The motion judge
    interpreted the enurement clause in s. 6 of the Ontario Indemnity as evidencing
    the parties intention that the Province would indemnify future owners of the
    disposal site for any environmental liability that might arise. He reasoned as
    follows:

(i)       The
    enurement clause considered by this court in Brown v. Belleville (City) shared
    some of the language found in the Ontario Indemnity. In Brown, this court
    concluded the broad and unqualified language of the enurement clause
    constitutes an express stipulation by the contracting parties that they
    intended the benefit of the Agreement to be shared by future owners of Mr.
    Sills lands, as his successors or assigns:
Brown
, at para. 84;

(ii)      Then,
    drawing on
Brown
, the motion judge concluded, at para. 63 of his
    reasons:

The same reasoning applies to the
    enurement clause in the Ontario Indemnity. I am satisfied from the plain and
    ordinary meaning of the words used in the indemnity that the intention of the
    parties was that the Province would indemnify future owners of the disposal
    site for any environmental liability that might arise.

[169]

Ontario submits
    the motion judge erred in finding Weyerhaeuser was a successor because in the
    Ontario Indemnity that term referred only to the contracting indemnitees corporate
    successors. Weyerhaeuser argues the motion judges conclusion is entitled to
    deference and properly follows this courts decision in
Brown
.

The general principles

[170]

I start my
    analysis by recalling the general principle that the term successor, when
    used in reference to a corporation, generally denotes another corporation
    which, through merger, amalgamation or some other type of legal succession,
    assumes the burdens and becomes vested with the rights of the first
    corporation:
National Trust Co. v. Mead
, [1990] 2 S.C.R. 410 at 423;
Heritage
    Capital Corp. v. Equitable Trust Co.
, 2016 SCC 19, [2016] 1 S.C.R. 306, at
    para. 47.

[171]

The enurement
    clause in the Ontario Indemnity uses the term successor in reference to a
    corporation: The indemnity shall be binding upon and enure to the benefit of
    the respective successors  of  Great Lakes. Yet, in interpreting that
    clause, the motion judge departed from the general principle that successor,
    when used in reference to a corporation, means a successor corporation. Instead,
    he concluded it includes Weyerhaeuser as a successor-in-title to a specific
    piece of property  the WDS. Since the motion judge applied the reasoning in
Brown
to depart from the general principle and reach that result, a careful review of
    that case is required.

The decision in
Brown v.
    Belleville (City)

[172]

Brown
involved
    a 1953 agreement between a farmer, Mr. Sills, and the local municipality. The
    town had constructed a storm sewer drainage system along the frontage of the
    farmers lands. It required access to the farmers lands to maintain the storm
    sewer. In 1953, the town and Mr. Sills entered into an agreement under which he
    granted the town the necessary access. On its part, the town undertook to maintain
    the storm sewer in good working condition at all times and make good any and
    all damage caused the Owner either by virtue of the original construction of
    the said sewer interfering now or in the future with the Owners use and
    enjoyment of his land in any way or as a result of lack of repair or of acts
    done at any time by the [town] in maintaining and repairing the said sewer:
Brown
,
    at para. 11. The agreement further specified that it would inure to the
    benefit of and be binding upon the parties hereto and their respective heirs,
    administrators, successors and assigns:
Brown
, at para. 13.

[173]

At some point,
    the municipality stopped maintaining the sewer system. The Sills farm was sold
    in 1973. The subsequent owners called on the municipality to honour the
    agreement; it refused. In 2003, the farm was sold again to new owners, the
    Browns. They too asked the municipality to honour its maintenance agreement; it
    refused. The Browns sued the municipality for specific performance of the
    maintenance agreement. The municipality contended the Browns lacked the
    standing to sue because they were not parties to the 1953 agreement.

[174]

The 1953 agreement
    was not registered against title to the property. No express assignment of the
    maintenance agreement formed part of either the 1973 or 2003 sale of the farm.

[175]

This court
    interpreted the enurement clause as giving the new owners standing to sue to
    enforce the 1953 agreement stating, at para. 84:

[T]he broad and unqualified language of the enurement clause
    constitutes an express stipulation by the contracting parties that they
    intended the benefit of the Agreement to be shared by future owners of Mr.
    Sillss lands, as his successors or assigns or by way of inheritance. The
    language of the enurement clause unequivocally confirms that the contracting
    parties intended and agreed that the benefit of the Agreement would extend to
    an aggregation or class of persons that includes successor landowners of Mr.
    Sills. On the admitted findings of the motion judge, the Browns are Mr. Sillss
    successors. In this sense, the Browns are not strangers or third parties to
    the Agreement. Rather, they step into Mr. Sillss shoes and have standing to
    enforce the Agreement as against the City as if they were the original
    covenantee(s) to the Agreement: see Angela Swan and Jakub Adamski,
Canadian
    Contract Law
, at p. 169 and, generally, at pp. 163-226.

[176]

In reaching that
    conclusion, this court relied, in part, on the parties agreed interpretation
    of the 1953 agreement stating, at para. 87:

On the language of the enurement clause and the agreed proper
    interpretation of the Agreement as a whole, the City and Mr. Sills clearly
    understood that the continuing access sought by the City to the affected lands
    could only be provided by the property owner whoever that may be from time to
    time. In consideration for such continuing access, the City undertook to
    maintain and repair the drainage system, indefinitely, for the benefit of the
    property owner.

[177]

As is apparent,
    the circumstances in
Brown
differ from those in the present case in
    several material respects:

(i)

The present case requires interpreting the term successor in reference
    to a corporation.
Brown
, on the other hand, dealt with interpreting
    successor in reference to an individual;

(ii)

In
Brown
, the agreement contained language that led this court
    to conclude that the parties intended successors-in-title would benefit from
    it. Specifically, the litigants in that case agreed the towns obligation to make
    good damage was linked to future owners of the land  
to the property
    owner whoever that may be from time to time
:
Brown
, at para. 86
    (emphasis in original). Weyerhaeuser cannot point to any similar language in
    the Ontario Indemnity that links the obligation to indemnify to the future
    owners of the WDS property; and

(iii)

The subsequent owners of the property in
Brown
brought a claim
    under the contract for specific performance of the agreement at a time when
    they owned the property. In the present case, Weyerhaeuser did not own the WDS
    at the time it sought the benefit of the Ontario Indemnity; it had conveyed the
    WDS back to Bowater more than a decade before.

[178]

The motion judge
    did not address any of these material differences. Nor did he explain what
    language in the Ontario Indemnity, or what circumstances in that contracts
    factual matrix, would justify departing from the general principle that the
    term successor, when used in reference to a corporation, generally denotes a
    successor corporation that assumes the burdens and becomes vested with the
    rights of the prior corporation.

The decision in
Heritage Capital
    Corp. v. Equitable Trust Co.

[179]

Weyerhaeuser suggests
    that general principle did not survive the Supreme Court of Canadas decision
    in
Heritage Capital
. It submits that
Heritage Capital
stands
    for the proposition that the term successor, when referring to a corporation,
    includes successors-in-title to particular property owned by the corporation
    unless the contract states otherwise.

[180]

I do not accept
    this submission.

[181]

The
ratio
in
Heritage Capital
was that a positive covenant requiring a
    municipality to make payments to a building owner for heritage restoration work
    did not run with the land, based upon the interpretation of the statute at
    issue. In
obiter
, the Supreme Court considered whether the same result
    would follow, as a matter of contractual interpretation, if some way could be
    found to circumvent the common law rule that no affirmative covenant requiring
    the expenditure of money could be made to run with the land, apart from
    statute. The court concluded the result would be the same because the agreement
    obliging the municipality to make the payments did not evidence an intention
    the payments would run with the land: at paras. 43-49.

[182]

The Supreme
    Court also considered the agreements enurement clause, which provided that
    everything herein contained shall inure to the benefit of and be binding upon
    the parties hereto, their administrators, successors, and assigns
    respectively. The Supreme Court stated, at para. 47:

According to the masters interpretation, 604, which was merely
    a subsequent owner, cannot be considered an administrator, successor or assign
    of LBI. We agree. The term successor should be read to mean a corporate
    successor, considering that clause 8.3 refers to successors in title and
    subsequent owners, of which 604 clearly is one, while clause 8.8 refers to
    successors. Contracting parties are presumed to intend the legal
    consequences of their words (G. R. Hall,
Canadian Contractual
    Interpretation Law
(2nd ed. 2012), at p. 91). Meaning must be given to the
    choice to use one term in one clause and a different term in a different clause
    of the same agreement, and in this case, of the same section of an agreement
    (section 8 
General provisions
).

[183]

I do not read
    this portion of
Heritage Capital
as altering the general principle
    enunciated by the court in
National Trust
. Instead, I read it as
    identifying other language in the agreement that confirmed the application of
    the general principle stated in
National Trust
. In the present case, Weyerhaeuser
    cannot point to language in the Ontario Indemnity that would justify departing
    from the general principle.

Conclusion on the Weyerhaeuser as successor
    issue

[184]

I conclude the
    motion judge erred in his application of this courts decision in
Brown
to the interpretation of the enurement clause in the Ontario Indemnity. With
    respect, he failed to explain how the facts in this case, which differ so
    materially from those in
Brown
, could support an interpretation of the
    word successor in reference to a corporation as meaning something other than
    a corporate successor. I see nothing in the language of the Ontario Indemnity
    or in the circumstances surrounding the formation of the contract that could
    support such an interpretation. Accordingly, I conclude the motion judge made a
    palpable and overriding error in interpreting the word successor in s. 6 of
    the Ontario Indemnity to include Weyerhaeuser.

(iv)

Conclusion on whether Weyerhaeuser can claim the costs of complying with
    the Directors Order under the Ontario Indemnity

[185]

The record does
    not permit a final determination of whether at the time of the 2011 Directors
    Order Weyerhaeuser possessed rights as an assignee of the Ontario Indemnity
    entitling it to claim indemnification for compliance costs. Given that state of
    affairs, I would (i) allow Ontarios appeal from the summary judgment in favour
    of Weyerhaeuser to the extent of setting aside the order that Weyerhaeuser is
    entitled to be indemnified its costs resulting from the 2011 Directors Order,
    (ii) substitute a declaration that Bowater assigned the full benefit of the
    Ontario Indemnity to Weyerhaeuser under the 1998 APA, and (iii) remit to the
    court below the adjudication of what rights, if any, Weyerhaeuser possessed as
    assignee of the Ontario Indemnity at the time the Directors Order was made in
    2011.

(v)

Does Resolute enjoy the benefit of the Ontario Indemnity?

The issue stated

[186]

The motion judge
    found that Bowater assigned the Ontario Indemnity to Weyerhaeuser under the 1998
    APA. Given that finding, Ontario submits it was not open to the motion judge to
    hold that Resolute could also claim the benefit of the Ontario Indemnity as a
    successor.

[187]

Resolute
    advances two arguments in response. First, Resolute submits Ontario cannot raise
    that issue on appeal in light of the motion judges finding that: There is no
    dispute that Resolute, as the corporate successor of Great Lakes, has the
    benefit of the Ontario Indemnity: at para. 55. Resolute does not contend
    Ontario conceded that point below; instead, it submits the issue Ontario now
    advances was not argued below, with the result that Ontario cannot contest Resolutes
    right to access the indemnity.

[188]

Second, Resolute
    argues that, in any event, by its terms the Ontario Indemnity enures to the
    benefit of both successors
and
assigns of Great Lakes. Since the
    parties agree Resolute is a corporate successor of Great Lakes, Resolute
    contends it follows that it enjoys the benefit of the indemnity regardless of
    whether Bowater assigned the Ontario Indemnity to Weyerhaeuser.

Analysis

[189]

As a general
    rule, appellate courts will not entertain entirely new issues on appeal:
Kaiman
    v. Graham
, 2009 ONCA 77, at para. 18. The rationale for, and the
    application of, this general rule were summarized in
Kaiman
, at para.
    18:

The rationale for the rule is that it is unfair to spring a new
    argument upon a party at the hearing of an appeal in circumstances in which
    evidence might have been led at trial if it had been known that the matter would
    be an issue on appeal The burden is on the appellant to persuade the appellate
    court that all the facts necessary to address the point are before the court
    as fully as if the issue had been raised at trial This burden may be more
    easily discharged where the issue sought to be raised involves a question of
    pure law In the end, however, the decision of whether to grant leave to allow
    a new argument is a discretionary decision to be guided by the balancing of the
    interests of justice as they affect all parties [citations omitted]

[190]

Does fairness
    require, as Resolute submits, that this court not entertain Ontarios argument
    that once the motion judge found Bowater assigned the full benefit of the
    Ontario Indemnity to Weyerhaeuser, it was not open to him to then find Resolute
    enjoyed the benefit of the indemnity as a successor to Bowater? In my view
    fairness does not so require, for three reasons.

[191]

First, Resolute candidly
    acknowledged in oral argument that before the motion judge Ontario did not formally
    concede that the company, as the corporate successor of Great Lakes, had the
    benefit of the Ontario Indemnity. Resolute puts the matter no higher than that
    the point Ontario now advances was not argued below.

[192]

Second, I am
    satisfied that all the facts necessary to address the issue are before this
    court as fully as if the matter had been raised before the motion judge. The
    appeal record contains the Ontario Indemnity, the 1998 APA transaction
    documents, and the evidence Resolute filed below, including its corporate
    history. Resolute does not suggest that any additional evidence is required to
    consider the issue Ontario now raises.

[193]

Third, the facts
    and the law support Ontarios submission that in light of the motion judges
    finding that Bowater assigned the full benefit of the Ontario Indemnity to
    Weyerhaeuser, Bowater had no remaining legal interest in the indemnity that
    could be transmitted to a corporate successor.

[194]

As a general
    principle, an absolute assignment of a chose in action, which leaves no
    interest in the assignor, extinguishes the assignors right to later call on
    the obligor to perform the contract as the assignee has acquired the right to
    such performance:
Milo Candy Co. v. Browns Ltd.
(1915), 8 O.W.N. 99
    (Ont. C.A.), at para. 10;
Conveyancing and Law of Property Act
, R.S.O.
    1990, c. C.34, s. 53(1);
Restatement (Second) of Contracts
, §317
    (1981);
Aaron Ferer & Sons Ltd. v. Chase Manhattan Bank, Nat. Assn
,
    731 F.2d 112, 125 (2d Cir. 1984). The assignee steps into the shoes of the
    assignor and has standing to enforce the contract as against the obligor as if
    it was the original convenantee:
Brown
, at para. 84.

[195]

Sections 3.1(vii)
    and (xiv) of the August 1998 APA provided that Bowater sold and transferred to Weyerhaeuser
    the full benefit of contracts and indemnities, which included the Ontario
    Indemnity. The assignment was absolute and unequivocal. As a result, Bowaters
    right to call on Ontario to perform the Ontario Indemnity was extinguished upon
    the closing of the 1998 APA.

[196]

An enurement
    clause typically signifies the consent of the contracting parties to the
    transmittal of contractual rights  benefits and burdens  to designated third
    parties by any of the listed modes of transfer, such as corporate succession or
    assignment. In the present case, the parties to the Ontario Indemnity agreed in
    s. 6 that The indemnity shall be binding upon and enure to the benefit of the
    respective successors and assigns of Ontario, Reed, International and Great
    Lakes... However, this consent to transfer did not operate in a symmetrical
    fashion, for s. 6 went on to state that provided however that Ontario shall
    not be entitled to assign this indemnity without the prior written consent of
    the other parties hereto.

[197]

As mentioned, in
National Trust Co. v. Mead
the Supreme Court stated, at p. 423, that a
    reference to a successor corporation generally denotes another corporation
    which, through merger, amalgamation or some other type of legal succession,
    assumes the burdens and becomes vested with the rights of the first
    corporation. It follows that if the first corporation has relinquished certain
    rights before a merger, amalgamation or some other mode of legal succession,
    then it has no interest left in those rights to pass on to its successor
    corporation.

[198]

In the present
    case, Resolute bases its right to claim under the Ontario Indemnity solely on its
    status as a corporate successor to Great Lakes and Bowater. However, when
    Bowater assigned the full benefit of the Ontario Indemnity to Weyerhaeuser
    under the 1998 APA, it did not retain any right relating to the indemnity that it
    could pass on down the corporate family tree to a successor corporation by
    merger, amalgamation or some other type of legal succession. Nor can the word
    and in s. 6 of the Ontario Indemnity  successors and assigns  somehow
    operate to retain in Bowater rights it absolutely transferred to Weyerhaeuser
    under the 1998 APA, as Resolute contends. The assignment to Weyerhaeuser was
    absolute and complete. Accordingly, Resolute has no legal interest in the
    Ontario Indemnity upon which it can assert a claim against Ontario. As a
    result, the motion judges order that Resolute is entitled to be indemnified
    for the costs, losses, expenses, liabilities or obligations it has incurred or
    may incur as a result of the Directors Order must be set aside.


VI.

COSTS APPEAL

[199]

In light of
    those dispositions, I would grant Ontario leave to appeal the motion judges
    award of full indemnity costs to the respondents: $275,000, in the case of
    Weyerhaeuser; and $223,000, in the case of Resolute.

[200]

I would set
    aside the award of costs in favour of Resolute and substitute an award of costs
    from Resolute in favour of Ontario for the summary judgment motion and the
    appeal. If Ontario and Resolute are unable to agree on the amounts, they may
    file very brief written cost submissions within 20 days.

[201]

As to the costs
    relating to Weyerhaeusers claim, Ontario has partially succeeded in this
    appeal but it remains to be determined which party will succeed in the cause.
    In those circumstances, I would fix the costs of this appeal, but make them
    payable in the cause. If Ontario and Weyerhaeuser are unable to agree on the
    amount of the appeal costs, they may file very brief written cost submissions
    within 20 days. In respect of the costs below, I would set aside the award in
    favour of Weyerhaeuser and leave the issue of all costs below to the judge who
    adjudicates the issue directed.


VII.

DISPOSITION

[202]

For the reasons
    set out above, I would set aside the motion judges order.

[203]

As to Resolutes
    claim under the Ontario Indemnity, I would grant Ontario summary judgment
    dismissing that claim.

[204]

As to Weyerhaeusers
    claim, in the place of the order I would (i) substitute a declaration that
    Bowater assigned the full benefit of the Ontario Indemnity to Weyerhaeuser
    under the 1998 APA and (ii) direct a final adjudication by the court below on
    the issue of what, if any, rights Weyerhaeuser possessed as assignee of the
    Ontario Indemnity at the time the Directors Order was made in 2011.

David Brown J.A.
I agree. P. Lauwers J.A.






Laskin J.A. (Dissenting):

A.      INTRODUCTION

[205]

I have read the
    thorough reasons of my colleague, Justice Brown. We differ on the first and
    most important question on the appeal: does the 1985 Indemnity cover
    Weyerhaeusers and Resolutes costs of complying with the Directors August 25,
    2011 Order? That Order is preventive. It requires the two respondents to do
    maintenance, monitoring, and testing on the Waste Disposal Site (WDS) near
    Dryden, which Great Lakes had done for years without objection. Justice Brown
    agrees with the motion judge and answers this question yes. My answer is
    no.

[206]

Under the 1985
    Indemnity, Ontario agrees to indemnify Reed and Great Lakes, and their successors
    and assigns, for pollution claims. I need not decide whether the respondents
    are successors or assignees. I will assume that they are.

[207]

Even so, to
    succeed on this appeal, the respondents have to overcome two hurdles: i) they
    have to show that the 1985 Indemnity covers first party claims, that is claims
    between the parties themselves, the two respondents on one hand and Ontario on
    the other; and ii) they have to show that the Directors Order gives rise to a
    pollution claim, that is a claim for damages caused by the discharge of
    mercury or other pollutants. In my opinion they cannot overcome either hurdle.

[208]

Typically,
    indemnity provisions cover only third party claims: see
Stetson Oil &
    Gas Ltd. v. Stifel Nicolaus Canada Inc.
[3]
Undoubtedly, the 1985 Indemnity covers third party claims  pollution claims
    brought against the respondents by strangers to the Indemnity.

[209]

An indemnity
    contract can, however, cover first party claims depending on the language of
    the document. The claim in dispute  the costs of compliance with the
    Directors order  is a first party claim. But both the context in which the
    1985 Indemnity was given, and the words of the entire document, show that it
    was intended to cover and does cover only pollution claims brought by third
    parties. It does not cover first party claims. And even if does, the Directors
    order is not a pollution claim.

[210]

As the 1985
    Indemnity is a contract, ordinary principles of contract interpretation apply.
    My colleague has summarized those principles. And, as the 1985 Indemnity is not
    a standard form contract, the motion judges interpretation of its scope is
    entitled to deference on appeal. Appellate intervention, however, is justified
    if the motion judges interpretation is tainted by errors of law or is unreasonable.
    I have concluded that his interpretation reflects both errors of law and is
    unreasonable.

[211]

Respectfully, in
    interpreting the scope of the 1985 Indemnity to apply to the costs of complying
    with the Directors Order, the motion judge erred in the following three ways:

1.       He made two significant errors of fact in his
    consideration of the circumstances surrounding the granting of the 1985
    Indemnity;

2.       He erred in law by reading the words of the 1985
    Indemnity without properly, accurately, and fully considering the context in
    which the Indemnity was given. This context included the 1979 Indemnity, the
    1979 Dryden Agreement by which Great Lakes purchased the assets of the Dryden
    operations from Reed, Minister Ramsays 1982 letter, the 1985 Spills Bill, and
    the 1985 Memorandum of Agreement (1985 MOA); and

3.       He erred in law by failing to consider the 1985
    Indemnity as a whole. In particular he focused on the Indemnity itself in s. 1
    but did not give effect to s. 2, which contained notification and control of
    defence clauses, and s. 3, which contained a cooperation clause. Notification,
    control of defence, and cooperation clauses are typical in indemnity contracts
    covering third party claims.

[212]

Properly
    interpreted, the 1985 Indemnity covers only pollution claims brought by third
    parties against the respondents. It does not indemnify the respondents for the
    costs of complying with the Directors order.

B.      FACTUAL OVERVIEW

[213]

My colleague has
    summarized, with admirable clarity, the rather complicated chronology and key
    documents that gave rise to this litigation. I do not propose to repeat his
    summary. Instead, I will provide a brief overview to give some context to my
    analysis. My overview covers the period from 1976, when Reed acquired the pulp
    and paper mill and chemical plant near Dryden, until late 1985, when all
    parties  Ontario, Canada, Reed, Great Lakes, and the two Indian Bands that had
    started pollution claims  settled their disputes arising out of the discharge
    of contaminated mercury waste into the English and Wabigoon river systems.

[214]

This discharge
    of contaminated mercury waste and other pollutants into the river systems
    raised social, economic, and health concerns among the members of the two
    affected Indian Bands, Grassy Narrows and Islington. In 1977, these two Bands
    started an action against Reed and its predecessors for damages caused by the
    pollution.

[215]

The
    contamination of the English and Wabigoon rivers also became a matter of public
    interest and concern. In 1979, Ontario stepped in and issued a control order
    against Reed under the 1971
Environmental Protection Act
.
[4]
The control order required Reed to do a number of things, including the
    following three:

·

Modernize its operations to eliminate pollutants;

·

Cease dumping existing mercury waste water into the river
    systems; and

·

Use the WDS, which had been established on the Dryden property in
    1971, to contain the existing waste and all mercury-contaminated equipment.

[216]

Later in 1979,
    Reed decided to sell its Dryden operations to Great Lakes. But it faced the
    Bands pollution claims litigation and Ontarios control order. Negotiations
    stalled. Ontario again stepped in and, to facilitate the sale, offered to cap
    Great Lakes exposure for pollution claims at $15,000,000; any amounts over
    $15,000,000 would be Ontarios responsibility. Ontarios offer was set out in a
    letter from its Treasurer at the time, Frank Miller. This letter is the 1979
    Indemnity. As I will discuss, the 1979 Indemnity is important context for the
    interpretation of the 1985 Indemnity.

[217]

As consideration
    for Ontarios 1979 Indemnity, Great Lakes agreed to complete the purchase from
    Reed and to modernize the operations it was acquiring from Reed. The asset
    purchase agreement between Reed and Great Lakes  the Dryden Agreement  was
    signed in late 1979. Great Lakes completed its modernization of its operations
    in 1982.

[218]

Under the terms
    of the Dryden Agreement, which I will also discuss in more detail later, Great
    Lakes agreed to indemnify Reed for any damages from pollution claims and to share
    the cost of any settlement of or judgment for pollution claims, to a maximum of
    $15,000,000. That maximum was consistent with Ontarios promise in the 1979
    Indemnity. In 1982, in a letter, Minister R.H. Ramsay, the Provincial Secretary
    for Resources Development, reaffirmed Ontarios commitment under the 1979
    Indemnity.

[219]

In November
    1985, all parties  Ontario, Canada, Reed, Great Lakes, and the two Indian
    Bands  entered into the 1985 MOA. This Agreement, too, is critical to
    understanding the scope of the 1985 Indemnity. The 1985 MOA settled the
    pollution claims litigation brought by the Bands. But it did much more. It
    created a Provincial and Federal legislative program to address health and
    social issues in the First Nations communities. This program included the
    creation of a Mercury Disability Fund and a Mercury Disability Board. The Fund
    and the Board continue to exist.

[220]

The 1985 MOA
    also required Ontario to grant an indemnity pertaining to the issues, a term
    defined in s. 1 of the Agreement. The 1985 Indemnity itself is contained in
    Schedule F of the Escrow Agreement to the 1985 MOA. The 1985 Indemnity and the
    Escrow Agreement were both signed in December 1985, about a month after the
    1985 MOA. The Escrow Agreement released Ontario from its commitment under the
    1979 Indemnity, but required the province to give an indemnity for potential
    pollution claims after 1985. This indemnity is the 1985 Indemnity. Its scope is
    the subject of this appeal.

C.      THE 1985 INDEMNITY
    AND THE MOTION JUDGES REASONS FOR REJECTING ONTARIOS POSITION

(a)

The 1985 Indemnity

[221]

The parties to
    the 1985 Indemnity are Ontario, Reed, and Great Lakes. Ontario was required to
    give this indemnity by Section 2.4(a) of the 1985 MOA, which states that:
    Ontario shall provide indemnities to Great Lakes and Reed in respect of the
issues
 (emphasis added).

[222]

As I have said,
    the issues is a defined term in the 1985 MOA. The issues focus on the
    discharge and continuing presence of mercury and other pollutants into the
    English and Wabigoon rivers. The definition is in s. 1 of the 1985 MOA, and
    states:

The discharge by Reed and its predecessors of mercury and any
    other pollutants into the English and Wabigoon and related river systems, and
    the continuing presence of any such pollutants discharged by Reed and its
    predecessors, including the continuing but now diminishing presence of
    methylmercury in the related ecosystems since its initial identification in
    1969, and governmental action taken in consequence thereof, may have had and
    may continue to have effects and raise concerns in respect of the social and
    economic circumstances and the health of the present and future members of the
    Bands (the issues).

[223]

The actual
    indemnity given by Ontario to Reed and Great Lakes is contained in s. 1 of the
    1985 Indemnity. It is a lengthy clause, but I have underlined those words
    especially important to the interpretation of its scope. These words give rise
    to two questions: Does the Indemnity cover first party claims against Ontario?
    And do the costs of compliance with the Directors order fall within the ambit
    of pollution claims? Section 1 reads as follows:

Ontario hereby covenants and agrees to
    indemnify Great

Lakes, Reed
, International
    and any company which was at the Closing Date a subsidiary or affiliate company
    (whether directly or indirectly) of International, harmless
from and against any obligation, liability, damage, loss, costs
    or expenses incurred by any of them after the date hereof as a result of any
    claim, action or proceeding, whether statutory or otherwise, existing at
    December 17, 1979 or which may arise or be asserted thereafter
(including those arising or asserted after the date of this agreement),
whether by individuals, firms, companies, governments
    (including the Federal Government of Canada and any province
or
    municipality thereof or any agency, body or authority created by statutory or
    other authority) or any group or groups of the foregoing,
because of or relating to any damage, loss
, event or
    circumstances, caused or alleged to be
caused by or with
    respect to, either in whole or in part, the discharge or escape or presence of
    any pollutant by Reed or its predecessors, including mercury or any other
    substance
,
from or in the plant or plants or lands
    or premises forming part of the Dryden assets sold by Reed Ltd. to Great

Lakes under the Dryden Agreement
(hereinafter
    referred to as
Pollution Claims
). It is hereby
    expressly acknowledged and agreed that in respect of Ontarios covenant and
    agreement hereunder to indemnify Great Lakes that the term
Pollution Claims shall include any obligation, liability,
    damage, loss, costs or expenses incurred by Great Lakes as a result of any
    claim, action or proceeding resulting from or in connection with the indemnity
    agreement
of even date herewith made between Great Lakes, Reed and
    International. [Emphasis added.]

(b)

The motion judges reasons

[224]

The motion judge
    thoroughly analyzed the live issues before him. At para. 48 of his reasons, he
    gave six reasons why he rejected Ontarios position that the 1985 Indemnity did
    not cover the respondents costs of complying with the Directors order. The
    motion judges six reasons are as follows:

1.       The plain and ordinary meeting of the words used
    does not support Ontarios position: In particular, the specific reference to
    any province and statutory claim and proceeding in s. 1 must be taken to
    refer to the province of Ontario and its agencies such as the [Ministry of the
    Environment].

2.       The requirement in s. 2 for Great Lakes to notify
    the province of any pollution claims cannot override the clear, unambiguous
    and broad wording of s. 1.

3.       Weyerhaeuser obtained environmental indemnities
    from Great Lakes successor, Bowater, in 1988 because it wanted as much
    protection as possible, not because it thought the 1985 Indemnity was limited
    to third party claims.

4.       A comparison with the wording of the 1979
    Indemnity is unhelpful; the 1985 Indemnity is a separate agreement and must be
    interpreted by considering the words used  in it.

5.       The failure of Resolute and its predecessors,
    Bowater and Great Lakes, to seek indemnification until this litigation does not
    change the clear and unambiguous meeting of the words of the 1985 Indemnity or
    Weyerhaeusers rights under it.

6.       The surrounding circumstances do not support
    Ontarios position: It was well known that the disposal site posed a serious
    environmental liability. The 1985 Indemnity was part of a settlement in which
    Great Lakes agreed to pay millions of dollars, and also continued to spend
    significant amounts of money to modernize the pulp and paper operation in
    Dryden. Thus it would be commercially absurd to conclude that Ontario could
    withdraw its commitment to protect Great Lakes and its successors from
    environmental liability arising from the disposal site, and then issue an
    order requiring Great Lakes or its successors to incur substantial costs to
    remediate the site.

[225]

In my view,
    reasons one, four, five, and six fail to give effect to the context in which
    the 1985 Indemnity was given. Moreover, reason six contains two significant
    factual errors, which undoubtedly affected the motion judges interpretation of
    the 1985 Indemnity. Reason two fails to consider the 1985 Indemnity as a whole.
    Reason three has no bearing on the interpretation of the document.

[226]

I will first
    discuss the two factual errors, then consider the context in which the 1985
    Indemnity was given, and finally consider the 1985 Indemnity as a whole.

D.      DISCUSSION

(a)

The two significant factual errors

[227]

In his sixth
    reason for rejecting Ontarios position, the motion judge held that the
    surrounding circumstances to the giving of the 1985 Indemnity did not support
    Ontarios position. But his holding is based on two significant factual errors.

[228]

The first error
    is the motion judges finding that, as part of the 1985 settlement in which
    Ontario gave the Indemnity, Great Lakes agreed to pay significant amounts of
    money to continue to modernize its operations in Dryden. That finding is wrong.
    Great Lakes agreed to modernize its operation as consideration for the 1979
    Indemnity. Its modernization was completed in 1982, three years before the 1985
    Indemnity was given. Great Lakes gave no new or additional commitment to
    modernize the Dryden operations in the 1985 MOA.

[229]

The motion
    judges misunderstanding of the consideration given by Great Lakes to Ontario
    seems to have influenced his view of why the parties entered into the 1985
    Indemnity. This factual error, relating to Great Lakes end of the bargain,
    likely led him to conclude that Ontario should not be allowed to withdraw from
    what he understood to be the other end of the bargain  that is, Ontarios
    commitment to provide very broad protection to Great Lakes and its successors
    from future environmental liability.

[230]

The second error
    is even more significant. The motion judge found at para. 7 of his reasons that
    the Indian Bands 1977 action, which was the impetus for the 1985 Indemnity,
    was prompted by mercury discharge from the WDS. Specifically, the motion judge
    found that the mercury-contaminated waste was buried at a disposal site, which
    discharged mercury waste into the nearby river system. Relying on this
    finding, he concluded at para. 48 that the WDS posed a serious environmental
    liability, and that it would therefore be commercially absurd to think
    Ontario could withdraw its commitment to protect Great Lakes from environmental
    liability arising from the WDS.

[231]

The motion judge
    was mistaken in stating that the WDS discharged mercury into the river. There
    was no evidence before him that the WDS was a source of mercury discharge, or
    the discharge of any other pollutant. The evidence indicates that the
    discharges of mercury, which prompted the 1977 litigation, came from the
    chemical plant located near the paper mill and operated by Reeds predecessor,
    Dryden Chemicals.

[232]

My colleague
    concedes the motion judge was mistaken, but says his error was minor. I
    disagree.

[233]

The motion
    judges mistaken finding that discharges of mercury from the WDS were an
    ongoing source of serious environmental liability undoubtedly drove his
    conclusion that these discharges could give rise to pollution claims, and
    that unless the 1985 Indemnity covered first party claims, the respondents
    would be exposed to significant financial liability. His conclusion is wrong.

[234]

The motion judge
    misconstrued the purpose and effect of the WDS. The WDS was not a source of
    ongoing mercury contamination or environmental liability. Its creation would
    not give rise to a pollution claim. Quite the opposite. The WDS was created and
    used as a solution to the mercury pollution problem, effectively as a burial
    site for mercury-contaminated waste. Again, there was no evidence of
    mercury-contaminated waste being discharged from the WDS. Neither respondent
    submitted otherwise.

[235]

Moreover, the
    WDS could not in any sense pose a serious environmental liability. It has been
    subject to regular monitoring, maintenance, testing, and reporting prescribed
    by certificates of approval issued by the Ministry of the Environment. Great
    Lakes its successor, Bowater, and Bowaters successor, Resolute, have
    continually fulfilled their regulatory requirements.

(b)

The context in which the 1985 Indemnity was given

[236]

The scope of the
    1985 Indemnity must be assessed not only from the words the parties used, but
    as well from the context in which they used those words. In
Dumbrell v.
    Regional Group of Companies Inc
.
[5]
,
    my colleague Doherty J.A. concisely stated the cardinal principle of contract
    interpretation:

The text of the written agreement must be read as a whole and
    in the context of the circumstances as they existed when the agreement was
    created. The circumstances include facts that were known or reasonably capable
    of being known by the parties when they entered into the written agreement.

See also:
Sattva Capital Corp. v. Creston Molly
    Corp.
[6]

[237]

Although the
    motion judge stated this principle, I do not agree with my colleague that he
    correctly applied it. The motion judges starting point for interpreting the
    1985 Indemnity was to look at the words of the document in isolation, and then
    only secondarily at the surrounding circumstances. His two-stage approach to
    the interpretation of the 1985 Indemnity is not the proper approach. Context
    controls meaning. Rarely can the words of an agreement be understood without
    some knowledge of their context. Thus, as Doherty J.A. said in
Starrcoll
    Inc. v. 2281927 Ontario Ltd
.
[7]
:
    The words of an agreement, and the context in which those words are used,
    cannot be separated and approached at different stages of the interpretative
    process.

[238]

Under s. 1 of
    the 1985 Indemnity, Ontario agreed to indemnify Great Lakes for damages as a
    result of any claim, action or proceeding. Instead of interpreting those
    words against the relevant context, the motion judge relied on the broad
    meaning of those words  specifically claim and proceeding  in unrelated
    court decisions. Only then did he consider the surrounding circumstances (his
    sixth reason for rejecting Ontarios position), and in doing so, as I have
    already discussed, he made two significant factual errors. Additionally, he
    held that the language of the 1979 Indemnity  in my view, another surrounding
    circumstance  had no bearing on the interpretation of the 1985 Indemnity (his
    second reason). The earlier Indemnity between the parties, as well as other
    earlier documents not referred to by the motion judge, are highly relevant
    context for the interpretation of the later Indemnity.

[239]

I agree that,
    looked at in isolation, the words claim and proceeding might lend support
    to the respondents position. But interpreted in their context, they provide no
    support at all. They are limited to pollution claims and proceedings brought by
    third parties, not claims for the costs of complying with the Directors order,
    which are first party claims and are not pollution claims.

[240]

The relevant
    context for interpreting the 1985 Indemnity includes the 1979 Indemnity, the
    1982 letter from Minister Ramsay, the 1985 Spills Bill
[8]
,
    the 1979 Dryden Agreement, and the 1985 MOA. Even if the motion judge did not
    engage in a two-stage approach to the interpretation of the 1985 Indemnity, he
    did not fully and accurately consider its relevant context.

(i)

The 1979 Indemnity, the 1982 letter from Minister Ramsey, and the 1985
    Spills Bill

[241]

The 1985
    Indemnity had its genesis in the 1979 Indemnity. Under the 1985 Indemnity,
    Ontario agreed to indemnify Great Lakes and Reed for pollution claims. The
    1979 Indemnity gives meaning to what was meant by pollution claims. As
    discussed in the factual overview, the 1979 Indemnity was contained in a letter
    from Ontarios Treasurer at the time, Frank Miller. The 1979 Indemnity, capping
    Great Lakes exposure for pollution claims at $15,000,000, was given to
    facilitate Great Lakes purchase of the Dryden operations from Reed. The material
    parts of the 1979 Indemnity state as follows:

I am aware  of [Great Lakes] concern over potential
    liabilities for environmental damages caused by Reed Ltd. in the Dryden area 
    I further understand that  Reed  and Great Lakes are willing to assume, on an
    equal basis, responsibility, up to a maximum of $15 million, for any
environmental damages
attributable to the operations of
    Reed  in the Dryden area prior to this acquisition by Great Lakes

The continued viability of the Dryden facilities and the undertaking
    of major modernization expenditures with respect to them are of considerable
    importance to the people of this Province. The substantial and beneficial
    employment and economic effects that the operation of a modernized facility
    will have on the population and economy of Dryden is of real significance.

In the event that Great Lakes negotiations with  Reed  are
    successful then
in the event that Great Lakes is required
    to pay any monies as a result of any final decision of a court against Great Lakes
    [or] Reed  in respect of pollution caused by Reed  in  Dryden  or in the
    event that any settlement with any claimant is made the amount of which
    settlement has been approved by [Ontario],
I have been authorized  to
    advise you that  Ontario  [will] ensure that Great Lakes  will not be
    required to pay any monies in excess of the maximum amount of $15 million 
    provided that over the next three to four years Great Lakes expends in the
    order of $200 million for the modernization and expansion of the Dryden
    facilities. [Emphasis added.]

[242]

The key point
    about the 1979 Indemnity is that it is limited to indemnification for court
    orders or settlements resulting from environmental damages caused by Reeds
    pollution. The use of the words damages, court, and settlement shows that
    the 1979 Indemnity was not meant to cover the costs of regulatory compliance.
    The 1985 Indemnity, in substance, did no more than replace the 1979 Indemnity
    for future damages from pollution claims.

[243]

Minister
    Ramsays 1982 letter  which the motion judge did not refer to  restated
    Ontarios 1979 agreement to indemnify Great Lakes against damages arising from
    claims of mercury pollution:

The Government of Ontario recognizes the distinct advantage of
    the Indian people obtaining a settlement in the very near future. Accordingly,
    the Government is prepared to indemnify Great Lakes Forest Products Limited
against any claims related to mercury pollution
such
    that the Companys total payments to all claimants in respect of
damages awarded by any court
or for any settlement
    approved by the Attorney General of Ontario attributable to the operations of
    Reed Paper Ltd.  will be limited to $15 million.  Ontario will assume
    responsibility for any damages awarded by any court or for any settlement
    approved by the Attorney General of Ontario, after $15 million has been paid by
    the Great Lakes Forest Products Limited [or] Reed
in
    connection with the above mentioned mercury pollution claims. Such claims
    include personal injury, property damage and economic claims of any claimants,
    including adults, minors and those yet unborn, related to mercury pollution
.
    [Emphasis added].

[244]

Again, the
    Ministers letter does not include indemnification for the costs of regulatory
    compliance; it instead repeatedly limits indemnification to damages relating to
    mercury pollution. And, like the 1979 Indemnity, the Ministers letter refers
    to damages, court, and settlement, further signalling that the costs of
    regulatory compliance are outside its scope.

[245]

In support of
    his decision, the motion judge pointed to language in the 1985 Indemnity that
    is not contained in Ontarios commitment in 1979 and 1982. On appeal, the
    respondents also rely on this language. Under s. 1 of the 1985 Indemnity,
    Ontario agreed to indemnify Great Lakes and Reed from:

[A]ny obligation, liability, damage, loss, costs or expenses 
    incurred  as a result of any claim, action or proceeding, whether
statutory or otherwise
whether by individuals, firms,
    companies, governments (including the Federal Government of Canada and any
    provinces )  [Emphasis added.]

[246]

Ontarios
    agreement to indemnify Great Lakes and Reed for statutory claims brought by the
    Federal Government or a province was not contained in the 1979 Indemnity or the
    1982 letter. Relying on these additional words, the motion judge held that the
    1985 Indemnity must have been intended to cover the costs of regulatory
    compliance because only Ontario or one of its agencies, such as the Ministry of
    the Environment, could assert a statutory claim.

[247]

But the motion
    judges analysis failed to take into account the Spills Bill, which was
    proclaimed in force on November 29, 1985, over two weeks before the parties
    signed the 1985 Indemnity. This legislation created a broad, new statutory
    cause of action against polluters. The statutory cause of action was available
    to governments as well as individuals.

[248]

My colleague and
    I disagree on whether the trial judge could consider the Spills Bill. In my
    view, evidence of the Spills Bill is not evidence of the parties specific
    negotiations or subjective intentions during those negotiations  which, as my
    colleague correctly points out, is inadmissible. Instead, the introduction of
    the Spills Bill, and the statutory right of action it created, is an objective
    fact that would have or reasonably ought to have been known to the parties
    around the time the 1985 Indemnity was entered into. Evidence of such a fact is
    admissible to help determine the parties meaning in using specific words  in
    this case the phrase statutory or otherwise. As the Supreme Court explained
    at para. 60 of
Sattva Capital Corp. v. Creston Moly Corp
, 2014 SCC 53,
    [2014] 2 S.C.R. 633:

The parol evidence rule does not apply to preclude evidence of
    the surrounding circumstances. Such evidence is consistent with the objectives
    of finality and certainty because it is used as an interpretive aid for
    determining the meaning of the written words chosen by the parties, not to
    change or overrule the meaning of those words. The surrounding circumstances
    are facts known or facts that reasonably ought to have been known to both
    parties at or before the date of contracting; therefore, the concern of
    unreliability does not arise.

[249]

The timing of
    the Spills Bill relative to the 1985 Indemnity demonstrates that the Spills
    Bills was undoubtedly the reason why the 1985 Indemnity contained the added
    words relied on by the motion judge and the respondents

(ii)

The 1979 Dryden Agreement

[250]

Under the Dryden
    Agreement, Great Lakes bought the assets of Reed. Under s. 5.3 of that
    Agreement, Great Lakes agreed to indemnify Reed for damages caused by the
    discharge of mercury and other pollutants.

[251]

The language
    used in s. 5.3 of the Dryden Agreement is virtually identical to language used
    in s. 1 of the 1985 Indemnity, save for the addition of the phrase statutory
    or otherwise. As the two parties to the Dryden Agreement  Great Lakes and
    Reed  were also two of the three parties to the 1985 Indemnity, it is likely
    that the language of s. 1 of the 1985 Indemnity was intended to track that of
    s. 5.3 of the Agreement. But the Dryden Agreement, unlike the 1985 Indemnity,
    preceded the Spills Bill, explaining why the phrase statutory or otherwise
    was omitted from the Agreement, but included in the Indemnity.

[252]

In s. 5.3 of the
    Dryden Agreement, Great Lakes and Reed agreed to share responsibility for the
    damages caused by mercury and other pollutants, up to an amount of $7,500,000
    each. This amount was consistent with Ontarios 1979 agreement to indemnify
    Great Lakes for damages from pollution claims exceeding $15,000,000. Section
    5.3 says nothing about indemnification for the costs of regulatory compliance.

[253]

Although s. 5.3
    of the Dryden Agreement does not address the costs of regulatory compliance, s.
    11.4 of the Agreement does. In 1979, Ontario issued a control order against
    Reed. Section 11.4 is a response to that control order. Under s. 11.4, the
    parties expressly agreed that the indemnity in s. 5.3 did not cover the costs
    of compliance with the control order. Section 11.4 states:

The Vendor and the Purchaser acknowledge and agree that
    notwithstanding anything herein contained the Vendor shall have no obligation
    under the indemnity provided for in clause 5.3 hereof to the extent of any
    action taken or performed by the Purchaser after the Closing Date in compliance
    with the existing Control Order dated September 5, 1979 against the Vendor or
    in compliance with any Control Order which may be issued in substitution
    therefor following the sale of the Dryden Business to the extent that such substituted
    Control Order requires substantially the same action to be taken or performed
    by the Purchaser. It is further acknowledged and agreed that obligations of the
    Vendor under such Control Order constitute commitments of the Vendor which are
    to be assumed by the Purchaser hereunder without adjustment to the purchase
    price.

[254]

Neither the 1979
    Indemnity nor the 1985 Indemnity contains a specific carve out for regulatory
    costs. The respondents therefore submit that s. 11.4 is evidence that the costs
    of regulatory compliance fell within the definition of pollution claims, and were
    covered by the 1985 Indemnity. The motion judge, too, relied on this carve out,
    although he mistakenly held it was in the 1979 Indemnity. It was not. It was in
    the Dryden Agreement, to which Ontario was not a party.

[255]

I take a
    different view of the purpose and effect of s. 11.4. After the sale to Great
    Lakes, the only environmental matter that would bind Reed was the control
    order. To ensure that Reed would have no ongoing responsibility for the Dryden
    operations after 1979, the parties included s. 11.4 in the Dryden Agreement.
    This provision exempted the control order from the cost sharing in s. 5.3.

[256]

In 1985, similar
    carve out language was not needed. By then, Reed had no obligations for the
    Dryden operations. And by 1982, Great Lakes had discharged its obligations
    under the control order. Thus responsibility for the control order did not need
    to be addressed in the 1985 Indemnity. The absence of any exemption for
    regulatory costs in the 1985 Indemnity does not mean that regulatory matters
    were included within the umbrella of pollution claims. Such an inference is
    unreasonable.

(iii)

The 1985 Memorandum of Agreement

[257]

The 1985 MOA
    settled the dispute between the companies, the two affected Indian Bands, and
    the two governments, Ontario and Canada. As I have said, a term of the
    settlement required Ontario to give the 1985 Indemnity. Section 2.4 of the 1985
    MOA specified that the 1985 Indemnity was to be given in respect of the
    issues. The issues were defined in s. 1 of the 1985 MOA. For convenience I
    reproduce the definition:

The
discharge
by Reed and its
    predecessors of
mercury and any other pollutants into the
    English and Wabigoon and related river systems,
and the
continuing presence of any such pollutants discharged

by Reed and
    its predecessors, including the continuing but now diminishing
presence of methylmercury
in the related ecosystems
    since its initial identification in 1969, and governmental action taken in
    consequence thereof, may have had and may continue to have effects and raise
    concerns in respect of the social and economic circumstances and the health of
    the present and future members of the Bands (the issues). [Emphasis added.]

[258]

As is evident
    from the wording of s. 1, the issues are limited to matters related to the
    discharge of mercury and other pollutants into the English and Wabigoon river
    systems.

[259]

The 1985
    Indemnity is limited to pollution claims, which s. 1 of the 1985 Indemnity
    describes as relating to the discharge or escape or presence of any pollutant
    by Reed  including mercury or any other substance, from or in the plant or
    plants or lands or premises forming part of the Dryden assets.

[260]

Because the
    motion judge read s. 1 of the 1985 Indemnity in isolation, he erroneously
    concluded at para. 42 that s. 1 was intended to indemnify the respondents with
    respect to the discharge or presence of any pollutant on the Dryden property.
    But the interpretation of the scope of the 1985 Indemnity must take account of
    the context provided by the 1985 MOA. And s. 1 of the 1985 MOA shows that it 
    and the Indemnity given under it  were not intended to address the mere
    presence of a pollutant on Dryden property, but rather the discharge of
    pollutants into the surrounding rivers, and their continuing presence in the
    related ecosystems.

[261]

The Directors
    Order requires the respondents to pay for the costs of maintaining, monitoring,
    and testing the WDS. The WDS does not cause the discharge of mercury and other
    pollutants into the river systems. It prevents their discharge. The Order
    itself states that: [T]he requirements specified in this Order are necessary
    or advisable so as to
prevent or reduce the risk of a
    discharge
of mercury and other contaminants into the natural
    environment (emphasis) added. And, as counsel to Bowater, Great Lakes
    successor (and Resolutes predecessor), advised the Ministry of the Environment
    in 2010, [t]he encapsulation and closure of the Dryden landfill  has been
    effective in containing substances including mercury and chloride, making the
    potential risk of failure highly unlikely.

[262]

Thus the costs
    of complying with the Order do not relate to the clean-up of any discharge, as
    there is none. They relate to the maintenance, monitoring, and testing of the
    WDS, which are necessary to prevent any discharge in the first place. These
    maintenance, monitoring, monitoring, and testing costs do not give rise to a
    pollution claim under the 1985 Indemnity. The motion judge erred by holding
    otherwise, an error that was compounded by his factual finding erroneously
    identifying the WDS as the source of mercury discharge.

(iv)

Conclusion

[263]

The context in
    which the 1985 Indemnity was given is essential to interpreting its scope. To
    summarize, this context includes:

·

The 1979 Indemnity, which was the precursor for the 1985
    Indemnity, and which provides indemnity not for the costs of regulatory
    compliance, but instead for court orders or settlements resulting from
    environmental damages caused by Reed;

·

Minister Ramsays 1982 letter, which reiterates the 1979
    Indemnity and similarly limits indemnification to damages arising from court
    orders or settlements relating to mercury pollution;

·

The 1985 Spills Bill, which created a new statutory cause of
    action available not just to governments but also to individuals, and which explains
    why the later 1985 Indemnity includes a reference to statutory claims;

·

The 1979 Dryden Agreement, which in s. 5.3 uses language
    virtually identical to that in s. 1 of the 1985 Indemnity. Although s.11.4 of
    the Dryden agreement exempts the 1979 control order from s. 5.3, by 1985 all
    obligations under the control order had been satisfied, making a similar
    exemption in the 1985 Indemnity unnecessary;

·

The 1985 MOA, which in s. 1 makes clear that the pollution claims
    indemnified by s. 1 of the 1985 Indemnity relate to the discharge and continued
    presence of pollutants in the rivers and ecosystems, not to maintenance,
    monitoring, and testing costs related to the WDS.

[264]

This context
    shows that the 1985 Indemnity covers third party pollution claims, but not
    first party claims for the costs of complying with the Directors order.

(c)

The 1985 Indemnity as a whole

[265]

The text of [a]
    written agreement must be read as a whole:
Dumbrell
, at para 53. If
    the correct factual and contextual underpinnings of the 1985 Indemnity do not
    conclusively show that it covers only third party pollution claims, any doubt
    is resolved by looking at the 1985 Indemnity as a whole. Although the indemnity
    itself is in s. 1 of the 1985 Indemnity, ss. 2 and 3 are import indicators of
    its scope. Both sections contain clauses that are typical in indemnity
    contracts covering third party claims.

[266]

Section 2
    requires Great Lakes and Reed to notify Ontario if either receives a pollution
    claim, and entitles Ontario to take control of the defence of any claim.
    Section 2 states:

Upon receipt of notice of any
    Pollution Claim directed to Great Lakes or Reed or any predecessor in titled of
    Reed, Great Lakes or Reed or failing Reed, International, as the case may be,
    shall promptly notify Ontario in writing of receipt of such notice giving
    reasonable particulars thereof, and Ontario shall have the right to elect to
    either take carriage of the defence or to participate in the defence and/or
    settlement of the Pollution Claim and any proceeding relating thereto as
    Ontario deems appropriate.

[267]

Section 3 requires Great Lakes and Reed to cooperate with Ontario in the
    investigation, defence, and settlement of any pollution claim. It states:

Where a Pollution Claim is brought
    against any of the companies referred to in paragraph 1 hereof, the said companies
    shall fully cooperate with Ontario in the investigation and defence and
    settlement of any such Pollution Claim and shall use their best efforts to
    obtain the cooperation of all personnel having any knowledge or information
    relevant to any such Pollution Claim and shall make available to Ontario all
    information.

[268]

These mandatory notification and cooperation clauses, and the control of
    defence clause are meaningful only for third party claims against the
    respondents. They are utterly meaningless for first party claims for the costs
    of complying with the Directors order, which have now been brought by the
    respondents against Ontario. Contrary to the motion judges view, I consider
    these clauses inconsistent with the respondents claim.

[269]

The motion judge did not refer at all to s. 3. He did refer to s. 2 in
    his second reason for rejecting Ontarios position. He held that s. 2 cannot
    override the broad wording of s. 1. In my view all three sections have to be
    read together. Sections 2 and 3 help define the scope of the indemnity in s. 1,
    and show that its scope is limited to indemnifying the respondents for third
    party pollution claims brought against them.

E.       CONCLUSION

[270]

I would allow
    Ontarios appeal and set aside the judgments granted by the motion judge. I
    would dismiss the respondents motions for summary judgment and grant Ontarios
    motion for summary judgment.

Released: JL
    Dec 20, 2017

John Laskin J.A.





[1]
Paragraph
    7 of the Ontario Indemnity stated capitalized terms bore the meaning ascribed
    to them in the 1979 Dryden Agreement, which defined Closing Date as December
    17, 1979.



[2]
The panel requested further submissions because s. 3.2 of the September
    Amending Agreement deleted s. 3.2(v) of the August 1998 APA, which identified
    certain assets as excluded assets. However, the August 1998 APA contained two
    sections 3.2(v), one of which named the WDS as an excluded asset. In their
    further submissions, Ontario and Weyerhaeuser agreed the two s. 3.2(v)s in the
    August 1998 APA resulted from a typographical error, and that the September
    Amending Agreement operated to delete the WDS from the list of excluded
    assets.



[3]
2013 ONSC 1300, at para. 145.



[4]
S.O. 1971, c. 86.



[5]

2007 ONCA 59, 85 O.R. (3d) 616, at para. 53.



[6]

2014 SCC 53, [2014] 2 S.C.R. 633, at para. 47.



[7]

2016 ONCA 275, 68 R.P.R. (5th) 173, at para. 17.



[8]

Environmental Protection Act
, R.S.O. 1980, c. 141, Part IX  Spills, ss.
    79-112.


