



COURT OF APPEAL FOR ONTARIO

CITATION: CNH Canada Ltd. v. Chesterman Farm Equipment Ltd.,
    2018 ONCA 637

DATE: 20180713

DOCKET: C62823

Watt, Benotto and Miller JJ.A.

BETWEEN

CNH Canada Ltd.

Applicant (Appellant/

Respondent by way of cross-appeal)

and

Chesterman Farm Equipment Ltd.

Respondent (Respondent/

Appellant by way of
    cross-appeal)

Stuart R. Mackay, for the appellant

Eric K. Gillespie and John W. May, for the respondent

Heard: October 24, 2017

On appeal from the order of the Divisional Court (Justice
    Charles T. Hackland and Justice Peter B. Hambly, Justice Anne M. Molloy
    dissenting), dated March 7, 2016, with reasons reported at 2016 ONSC 698,
    allowing an application for judicial review in part from a decision of the
    Agriculture, Food and Rural Affairs Appeal Tribunal dated March 24, 2014 and a
    related costs decision dated June 9, 2014.

B.W. Miller J.A.:

A.

Overview

[1]

This appeal concerns a statutory appeal from a decision of the
Agriculture, Food and Rural Affairs Tribunal interpreting
the renewal
    provisions of a standard form farm equipment dealership agreement entered into
    between the parties.

[2]

The relevant provisions of the dealership agreement were changed retrospectively,
    when Ontario adopted O. Reg. 123/06, the
Dealership Agreements Regulation
,
    establishing new provisions prescribing a process for renewal and non-renewal that
    overrode the dealership agreement. When the appellant elected not to renew the
    dealership agreement, a dispute arose as to the respective rights of the
    parties, in light of the
Regulation
. A decision from the Tribunal, in
    favour of the respondent, was largely upheld by the Divisional Court. The
    appellant appeals that decision to this court. The respondent cross-appeals.

[3]

For the reasons given below, I would dismiss the appeal and the
    cross-appeal, except that I would allow the cross-appeal as to costs.

B.

Background

[4]

The appellant, CNH Canada Ltd., is a Canadian farm
    implement manufacturer and distributor, previously operating as Ford New
    Holland Inc.

[5]

The respondent, Chesterman Farm Equipment Ltd., is
    a family-owned business that sells farm implements and other goods. In 1987, Chesterman
    became a dealer with New Holland, selling goods supplied by New Holland to the
    public. In 1999, New Holland advised Chesterman that it would not be renewing
    the existing dealership agreement, and offered Chesterman the opportunity to
    continue as a dealer under a new standard form agreement.

[6]

This second agreement (the Dealership Agreement),
    effective January 1, 2000, was structured to provide for an initial term of two
    years, with automatic one-year extensions unless either party gave the other at
    least 90 days notice of its intention not to extend, as set out in the
    following provision:

22. DURATION

Unless terminated earlier in accordance with the
    terms hereof, this Agreement shall continue from the date first set forth above
    until
December 31, 2002
. This Agreement
    shall be extended for successive one-year terms unless at least ninety (90)
    days prior to the expiration date of the original term or any extension term
    either party notifies the other of its intention not to extend. Upon such
    notification, this Agreement shall expire on December 31, 2002 or at the end of
    any such extension period. Dealer understands that this Agreement is of a
    limited duration and agrees that it has not relied on any representation
    regarding the continuation of this Agreement or its benefits beyond the initial
    term or any subsequent term. [Emphasis in original.]

[7]

The Dealership Agreement was automatically renewed for
    each year from 2003 to 2006.

[8]

On September 30, 2006, CNH gave written notice that
    it would not be extending the Dealership Agreement beyond its expiration date
    of December 31, 2006. The reason given in the notice for CNHs failure to renew
    the Agreement was Chestermans serious breaches of the Dealership Agreement:
    failing to meet its sales obligations and achieve and maintain a reasonable
    market share in the four preceding years.

[9]

However, on April 25, 2006  five months before CNHs
    notice was provided  the
Dealership Agreements Regulation
came into force. The
Regulation
prescribes mandatory terms to be included in any farm implement dealership
    agreement, including terms dealing with renewal. Under the
Regulation,
any provision in a dealer agreement contrary to those prescribed
    mandatory terms is void: s. 1(3). Notably, s. 3 of the
Regulation
provides that a dealer under a dealership agreement has the right to
    renew the agreement, subject to the distributors approval, which cannot be
    unreasonably withheld: s. 3(1), (4). It is common ground that Chesterman is a
    dealer and CNH is a distributor for purposes of the
Regulation
.

[10]

Section 3(6) of the
Regulation
prescribes
    a process that must be followed should a distributor intend to refuse the dealers
    renewal, involving the following steps:

1.
The distributor must notify the dealer in
    writing of the reasons for the refusal, within 45 days of receiving the request
    for approval;

2.
If the distributor fails to notify the
    dealer within the 45-day period, the renewal is deemed to be approved;

3.
The dealer is allowed 15 days from receipt
    of the notice to address the concerns underlying the refusal; and

4.
After the 15-day period has passed, the
    distributor may refuse the renewal.

[11]

The
Regulation
is made under the
Farms
    Implements Act
, R.S.O. 1990, c. F.4 (the 
Farm
    Implements Act
 or the 
Act
).
    The
Farm Implements Act
regulates aspects of the
    buying and selling of farm implements, including the contractual relationship
    between farm implement dealers and distributors. The
Act
and the
Regulation
exist, in part, to
    remedy the contractual power imbalance between dealers and distributors otherwise
    favouring the distributor.

[12]

In the event of a dispute with respect to matters arising from the
    application of the
Farm Implements Act

or its
    regulations, s. 5 of the
Act
sets out procedures
    for resolving the dispute. If the parties are unable to resolve the dispute
    with the assistance of the Director or a mediator, they may apply to the Agriculture,
    Food and Rural Affairs Tribunal for a hearing:
Farm Implements Act
, s. 5(5). The parties have a further right of appeal from the
    Tribunals decision to the Divisional Court, but only on questions of law:
Farm
    Implements Act
, s. 5(7).

[13]

Chesterman initiated proceedings against CNH for improperly ending the Dealership
    Agreement. The matter proceeded before the Tribunal in two phases. The first
    phase dealt with warranty and breach of contract issues. The Tribunals
    decision was appealed to the Divisional Court, which remitted the matter to the
    Tribunal with directions. The second phase addressed damages, as well as the
    matters relating to liability remitted from the first phase. It is this second
    phase of the Tribunals proceedings that is the subject of this appeal and
    cross-appeal.

(1)

The Tribunals decision on liability and damages

[14]

In a decision dated March 24, 2014, at the conclusion of the second
    phase of the proceedings, the Tribunal determined that CNH had improperly breached
    the Dealership Agreement and awarded Chesterman approximately $200,000 in
    damages.

[15]

The Tribunal was satisfied that CNH had provided Chesterman with the
    required 90-day contractual notice for non-renewal under the Dealership
    Agreement as originally drafted. The Tribunal held, however, that the
Regulation
applied retrospectively to the Dealership Agreement, and thereby
    amended it. Specifically, the Tribunal determined that the impact of the
Regulation

was not to void the renewal provision (set out in paragraph 22 of
    the Agreement), but to revise that provision to incorporate the
Regulation
s mandatory terms. The Tribunal found that s. 3(6) of the
Regulation

replaced CNHs contractual right not to renew the Dealership
    Agreement with a regulated renewal process. It accordingly revised paragraph
    22 of the Agreement to read as follows:

22. DURATION

Unless terminated earlier under the terms hereof,
    this Agreement shall continue form the date first set forth above until
    December 31, 2002.

The Agreement shall renew for successive one-year
    terms unless the Dealer or the Company gives notice:

For the Dealer, written notice to the Company
    prior to the end of the original term or any extension term that the Dealer
    will not renew.

For the Company, written notice to the Dealer at
    least forty-five (45) days prior to the end of the original term or any
    extension term setting out the Companys non renewal reasons.

Upon receipt of such non-renewal notice from the
    Company, the Dealer shall have fifteen (15) days from receipt of the Companys
    notice to address the concerns underlying the Companys non-renewal notice.

Upon expiry of the fifteen (15) days, the Company
    may not renew the Agreement; however, the Companys decision not to renew must
    not be unreasonable in the circumstances.

[16]

Based on the agreement of the parties, the automatic renewal clause in
    the pre-amendment Agreement was deemed to constitute the notice of intent to
    renew contemplated by the
Regulation
.

[17]

The Tribunal concluded that CNHs September 30, 2006 notice of
    non-renewal could not constitute a written refusal to this deemed notice under
    the revised Dealership Agreement because CNHs notice: (1) sought to exercise a
    right of non-renewal that no longer existed in its original format; (2) failed
    to set out CNHs reasons for non-renewal in full; and (3) did not give Chesterman
    an opportunity to address CNHs concerns animating the non-renewal.
    Accordingly, CNHs non-renewal breached the
Regulation

and the modified Dealer Agreement.

[18]

The Tribunal awarded Chesterman damages of $200,516.61, itemized as $59,536
    for lost profits, $80,310 for losses associated with obsolete assets, and
    $60,670.61 for pre-judgment interest.

(2)

The Tribunals costs decision

[19]

While acknowledging that costs are discretionary and it rarely makes
    cost awards, the Tribunal nonetheless awarded partial indemnity costs to Chesterman
    in the amount of $376,338.05.

[20]

The Tribunal began by considering the nature of its jurisdiction to
    award costs. The Tribunal held that s. 17.1 of the
Statutory Powers
    and Procedures Act
, R.S.O. 1990, c. S.22 (the 
SPPA
) gave it jurisdiction to award costs against a party whose conduct has
    been unreasonable, frivolous or vexatious or has acted in bad faith. It
    noted similar provisions in its own rules: the
Rules of Procedure
    for the Agriculture, Food and Rural Affairs Appeal Tribunal
(the
    
Tribunal Rules
). It also relied on s. 33 of the
Farm Implements Act
, which preserves common law
    rights and remedies, as authority to apply the common law principle of costs
    following the event.

[21]

In deciding to award costs, the Tribunal concluded that the
    unreasonable conduct requirement in s. 17.1 of the
SPPA
and the
Tribunal Rules
had been met based
    in part on its finding that CNHs conduct in ending the Dealership Agreement
    was unreasonable. It was also satisfied, however, that other conduct by CNH during
    the proceedings was sufficiently unreasonable to warrant costs being ordered
    against it, namely CNHs altering its position about the effect of the renewal
    provision in the Dealership Agreement mid-way through the proceedings, and
    failing to plead or argue against the retrospective application of the
Regulation

during the first phase of the proceeding.

(3)

The Divisional Courts decision

[22]

CNH appealed the Tribunals damages and costs awards to the Divisional
    Court. Chesterman cross-appealed from the damages award. On March 7, 2016, the
    Divisional Court allowed CNHs appeal in part and dismissed Chestermans
    cross-appeal.

[23]

An appeal lies to the Divisional Court from decisions of the Tribunal,
    but solely on questions of law:
Farm Implements Act
, s. 5(7). Accordingly, the preliminary question before the Divisional
    Court was whether the grounds of appeal advanced by CNH were questions of law
    or questions of mixed law and fact and questions of fact. Only after concluding
    an issue amounted to a question of law could the court go on to review the
    substantive decision of the Tribunal.

[24]

All three members of the Divisional Court agreed
    that whether the
Regulation
applied
    retrospectively to the Dealership Agreement was a question of law and that the
    Tribunal correctly concluded the
Regulation
applied. All three members further agreed that the manner in which the Tribunal
    incorporated the
Regulation
into the Dealership
    Agreement was a question of mixed law and fact and thus not subject to review
    by the court.

[25]

The Divisional Court split, however, on the
    issue of the validity of CNHs non-renewal based on the requirements set out in
    the
Regulation
and incorporated into the
    amended Dealership Agreement. Hambly and Hackland JJ., writing for the
    majority, concluded that the issue did not engage a question of law. The nature
    and adequacy of the reasons for non-renewal provided by CNH were matters of
    fact arising from the parties dealings and therefore the Tribunals decision that
    the non-renewal was void was not reviewable by the court. Similarly, the
    majority concluded that there were no extricable questions of law in the
    Tribunals ruling as to the unreasonableness of CNHs decision not to renew.

[26]

In dissent, Molloy J. would have set aside the
    Tribunals finding of breach of contract and its damages award. In her view,
    the Tribunal made a number of legal errors, including:

·

holding that CNHs September 30, 2006 notice of
    non-renewal was an attempt to exercise a right of non-renewal that no longer
    existed under the Dealership Agreement and could not be considered a written
    refusal to approval Chestermans deemed notice to renew;

·

determining that CNH was required to set out
    every possible ground for refusing renewal in its notice;

·

finding that Chesterman was not given an
    opportunity to respond to the concerns underlying CNHs non-renewal;

·

failing to conclude that Chestermans failure to
    respond in some way to those concerns was fatal to its claim; and

·

inquiring into the reasonableness of CNHs
    refusal to renew given Chesterman did not even attempt to address those
    concerns.

[27]

Regarding the quantum of damages, the Divisional
    Court was unanimous that the Tribunal erred in law by awarding $80,
310

for losses associated
    with obsolete assets, and reduced the damages award accordingly. Chestermans
    cross-appeal regarding the quantum of damages for lost profits, however, was
    dismissed because the court unanimously concluded that it involved a question
    of mixed law and fact.

[28]

With respect to CNHs appeal of the Tribunals costs award, the
    Divisional Court was also unanimous that the Tribunal erred in law and exceeded
    its jurisdiction. Specifically, the Tribunal erred by relying on its previous
    finding that CNHs conduct in ending the Dealership Agreement was unreasonable.
    This was an error because, the Divisional Court reasoned, conduct that relates
    to the proceeding cannot be a basis for a costs award under the
Tribunal
    Rules
or the
SPPA
.
    Similarly, the Tribunal could not rely on CNHs change in position regarding
    the renewal clause or the retrospectivity issue as unreasonable conduct because,
    regardless of CNHs conduct, it was necessary for the Tribunal to address these
    issues as part of the second phase of proceedings. Moreover, the Divisional
    Court found that the Tribunal had failed to adhere to restrictions on costs
    awards set out in the
SPPA
and the
Tribunal
    Rules
, published commentary, and case authority. Finally,
    the Tribunals reliance on s. 33 of the
Farm Implements Act
to apply the common law principle of costs following the event
    was also an error because no such common law principle exists and the
    Tribunals jurisdiction to award costs is restricted by statute and the
Tribunal
    Rules
. As a result, the issue of costs was remitted to
    the Tribunal for redetermination in light of the decision.

[29]

The Divisional Court invited the parties to make written submissions
    on the issue of costs before that court, but none were provided.

C.

Issues

[30]

In
    its appeal, CNH raises four issues:

1.
Did the Tribunal err in law by concluding
    that the notice of non-renewal was not compliant with the
Regulation
because it sought to exercise a right that was void?

2.
Did the Tribunal err in law by concluding
    that the notice of non-renewal was not compliant with the
Regulation
because it failed to disclose all reasons for the refusal to renew?

3.
Did the Tribunal err in law by concluding
    that Chesterman was not afforded 15 days to address the concerns outlined in
    the notice of non-renewal?

4.
Did the Tribunal err in law by concluding
    that CNH failed to act reasonably when it did not renew the Dealership
    Agreement?

[31]

Chestermans cross-appeal raises two additional issues:

1.      Did the Divisional Court err in law by failing to consider the
    purpose of the
Regulation
in determining damages?

2.      Did the Divisional Court err in law by quashing the Tribunals
    cost award?

D.

Analysis

[32]

As
    a preliminary matter, before addressing these six grounds of appeal, it is
    necessary to consider the limits of the courts jurisdiction in reviewing
    decisions of the Tribunal, as well as the standard of review applicable to the
    review of those decisions.

(1)

Jurisdiction of the court on appeal

(i)

Legal principles
    governing jurisdiction

[33]

An important jurisdictional restriction animates this appeal. As
    noted above, an appeal from a decision of the Tribunal in a proceeding under s.
    5 of the
Farm Implements Act
is limited solely
    to questions of law. The Tribunals decisions on questions of mixed law and fact
    and questions of fact are not the proper subject of an appeal to the Divisional
    Court (or to this court on further appeal). It is accordingly necessary to
    consider whether the appeal gives rise to any question of law.

[34]

Distinguishing between questions of law,
    questions of fact, and questions of mixed law and fact is often difficult. In
Canada
    (Director of Investigation and Research) v. Southam Inc.
,
    [1997] 1 S.C.R. 748, at para. 35, the Supreme Court explained the distinction
    by stating that questions of law are questions about what the correct legal
    test is; questions of fact are questions about what actually took place between
    the parties; and questions of mixed law and fact are questions about whether
    the facts satisfy the legal tests.

[35]

The issues advanced on appeal by CNH concern the
    interpretation of the Dealership Agreement, a contract. Before considering the
    issues individually, however, it is helpful to review the general principles applicable
    to identifying questions of law in contractual interpretation.

Although courts formerly treated questions of
    contractual interpretation as questions of law, the Supreme Court largely abandoned
    this approach in
Sattva

Capital Corp. v. Creston Moly Corp.
, 2014 SCC 53, [2014] 2 S.C.R. 633, holding, at para. 50, that
    contractual interpretation will usually involve questions of mixed law and
    fact.
Sattva
, however, recognized that in some
    circumstances, contractual interpretation may involve a question of law. Errors
    of law in the contractual context include
: (1) the
    application of an incorrect legal principle; (2) the failure to consider a
    required element of a legal test; and (3) the failure to consider a relevant
    factor:
Sattva
, at para. 53.

[36]

Bearing in mind these principles and the fact that the appeal from the
    Tribunals decision is limited to questions of law, I must analyze the various grounds
    of appeal advanced by the parties individually to determine whether they raise
    questions of law and, if so, whether the Tribunals decision concerning that
    issue was an error of law. Before doing so, however, I will set out the
    standard of review to be applied in that analysis.

(2)

Standard of review

[37]

As noted above, a party to a proceeding before the Tribunal under
    s. 5 of the
Farm Implements Act
has a statutory right of appeal to the
    Divisional Court: s. 5(7). This court must determine whether the Divisional
    Court identified the appropriate standard of review and applied it correctly:
Onyskiw
    v. CJM Property Management Ltd.
, 2016 ONCA 477, 349 O.A.C. 253,
    at para. 27; see also
Agraira v. Canada (Public Safety and Emergency
    Preparedness)
, 2013 SCC 36
,
[2013] 2 S.C.R. 559
, at
    paras. 46-47.

[38]

Based on the agreement of the parties, the
    Divisional Court applied a standard of review of correctness to all legal
    questions on appeal. However, the standard of review of a decision of an
    administrative tribunal  even in cases involving a statutory right of appeal 
    is decided under the administrative law framework associated with
Dunsmuir
    v. New Brunswick
, 2008 SCC 9,
    [2008] 1 S.C.R. 190, not the appellate framework set out in
Housen
    v. Nikolaisen
, 2002 SCC 33, [2002]
    2 S.C.R. 235. As the Supreme Court observed in
Mouvement
    laïque québécois v. Saguenay (City)
, 2015 SCC 16, [2015] 2 S.C.R. 3, at
    para.
38, regardless
of whether the review
    is conducted in the context of a statutory appeal or an application for
    judicial review, [w]here a
court reviews a decision of a specialized
    administrative tribunal, the standard of review must be determined on the basis
    of administrative law principles: see also
Edmonton (City) v.
    Edmonton East (Capilano) Shopping Centres Ltd.
, 2016 SCC 47,
    [2016] 2 S.C.R. 293, at para. 30.

[39]

Under
    the administrative law framework, a
tribunals interpretation of
    its home statute and statutes closely connected to its function is
    presumptively reviewed on a reasonableness standard, even where there is a
    statutory right of appeal on a question of law:
Edmonton (City)
, at paras. 22-23, 27-31;
e.g., Alberta (Information and
    Privacy Commissioner) v. Alberta Teachers Association
, 2011
    SCC 61
,
[2011] 3
    S.C.R. 654
,

at para. 30;
Onyskiw
, at para. 28.

[40]

The reasonableness standard of review recognizes that [t]ribunals have
    a margin of appreciation within the range of acceptable and rational
    solutions:
Dunsmuir
, at para. 47. On a
    reasonableness review, a court is charged with evaluating the justification,
    transparency and intelligibility of the tribunals decision-making process,
    and whether the decision falls within a range of possible, acceptable outcomes
    which are defensible in respect of the facts and law:
Dunsmuir
, at para. 47.

(3)

Substantive grounds of appeal

[41]

As
    stated above, the parties advance six grounds of appeal, which I consider in turn
    below. In keeping with the framework outlined above, I proceed by first
    identifying whether the issue engages a question of law, a question of fact, or
    a question of mixed law and fact. Where a question of law is engaged, I
    consider whether the Tribunals decision on that question was reasonable.

(i)

Exercise of a void right for non-renewal

[42]

CNH
    argues that the Tribunal erred in law by concluding that its notice of
    non-renewal was not compliant with the
Regulation
because it sought to
    exercise a right that was void. As I explain below, I would reject this ground
    of appeal. Although it does raise a question of law as to whether the parties unrestricted
    right not to renew the Dealership Agreement survived the amendment by the
Regulation
,
    I nonetheless conclude that the Tribunals determination that it did not so
    survive was reasonable.

[43]

Prior
    to its alteration through the
Regulation
, the Dealership Agreement
    included an unrestricted right for either party not to renew the Agreement. As
    set out above, paragraph 22 provided in part that the Agreement would be
    extended for successive one-year terms 
unless at least ninety
    (90) days prior to the expiration date of the original term or any extension
    term either party notifies the other of its intention not to extend.
Section
    3(6) of the
Regulation
, however, introduced a regulated renewal
    process.

[44]

The
    Tribunal reasoned that [t]he
practical impact of this regulated
    change to the Dealership Agreement [was] not to void the entire Duration
    paragraph 22 but, rather, to revise that language to incorporate the mandatory
    terms from the
Regulation
.

[45]

CNH
    does not contest this conclusion. It does, however, dispute the Tribunals conclusion
    that CNHs notice of non-renewal provided to Chesterman
sought
    to engage a non-renewal right that CNH no longer enjoyed and
communicated a non-renewal right that had become void. CNH asserts that the
    Tribunal could not find that paragraph 22 survived to the benefit of Chesterman
    with respect to automatic renewal rights, while at the same finding it void in
    relation to CNHs non-renewal rights. According to CNH, this inconsistency of
    application of a contractual provision is an extricable error of law.

[46]

I
    agree that whether the Dealership Agreement, as amended by the
Regulation
,
    provided CNH with a right of non-renewal is a question of law. The renewal
    provisions in the
Regulation
are mandatory statutory terms that must
    be included in dealership agreements. In my view, the interpretation of a
    contract incorporating statutory terms by operation of law is of precedential
    value and transcends the particular factual circumstances of the parties in
    this dispute.

[47]

However,
    whether CNH properly exercised any right of non-renewal is better characterized
    as a question of mixed law and fact. It requires assessing whether CNH complied
    with any requirements under the Dealership Agreement, as amended by the
Regulation
,
    to exercise that right.

[48]

In
    any event, I do not agree with CNHs characterization of the Tribunals reasons
    for concluding the notice of non-renewal was not compliant with the
Regulation
.
    It did not reach this conclusion by determining that CNH sought to exercise a
    right that had been extinguished. The Tribunal merely found that CNH 
sought to exercise a right
that no longer existed in its
    original format
 (emphasis added). In other words, CNH still
    had a right not to renew, but this right was now restricted and conditional. In
    my view, this was a reasonable interpretation open to the Tribunal.

[49]

As the Tribunal explained, under the original Dealership Agreement each
    party had an unrestricted right not to renew, exercisable by giving the other
    party at least 90 days written notice. Section 3(6) of the
Regulation
, however, replaced this unrestricted right with a regulated approval
    process for non-renewal. Given that the application of the
Regulation

was mandatory, and the Dealership Agreement contained a provision
    allowing for modification of the Agreement to comply with the law, the Tribunal
    chose to revise the Dealership Agreement to include a regulated renewal
    approval process consistent with the
Regulation
.
    It did not void CNHs right of non-renewal, but modified it to render it
    consistent with the mandatory terms of the
Regulation
.

[50]

I
    would not give effect to this ground of appeal.

(ii)

CNHs failure to provide all its reasons for non-renewal

[51]

The
    second issue CNH raises is that the Tribunal erred in law by concluding that
    its notice of non-renewal was not compliant with the
Regulation
because it failed to disclose all of its reasons for the refusal to renew. Once
    again, although I agree that whether CNH was required to set out all of its reasons
    for non-renewal pursuant to the Dealership Agreement, as amended by the
Regulation
,
    was a question of law, I conclude that the Tribunal reasonably determined that CNH
    was not compliant.

[52]

Section
    3(6)(1) of the
Regulation
requires a distributor to notify the dealer in
    writing of the reasons for the refusal. The Tribunal incorporated this
    requirement into the Dealership Agreement by requiring that the notice of
    non-renewal se[t] out the Companys [non-renewal] reasons. Applying that
    requirement to this case, it found that CNHs notice of non-renewal did not
    accurately or completely set out the reasons behind CNHs decision not to
    renew. More specifically, while the notice focused on Chestermans purported
    failure to achieve a reasonable market share as required under the Dealership
    Agreement, there were several other reasons for the non-renewal that were not
    stated in the notice. Since CNH had not set out all the reasons for the
    non-renewal, the Tribunal concluded that the notice was invalid.

[53]

In
    my view, whether a distributor is required to set out all the reasons for
    non-renewal is a question of law, but whether a distributor has met that
    requirement in any particular case is a question of mixed law and fact
.

[54]

In
    this case, it was reasonably open to the Tribunal to interpret the
Regulation
and Dealership Agreement to require CNH set out all the reasons for
    non-renewal in its notice to Chesterman. As the Tribunal explained, given that
    the
Regulation
contemplates providing a dealer with the opportunity to
    address the distributors concerns, the dealer must be fully informed of
all
the reasons for non-renewal for the process to be meaningful. While CNHs
    submission  that a distributor should instead simply be foreclosed from
    relying on any undisclosed reasons to contest the non-renewal  has its
    attractions, reasonableness review recognizes that there may be more than one
    possible and acceptable interpretation in any given case. In this case, the
    Tribunals interpretation is justified, transparent and intelligible. There is
    no basis on which this court could interfere. I would accordingly dismiss this
    ground of appeal.

(iii)

CNHs
    failure to provide Chesterman with an opportunity to address its concerns

[55]

CNH argues that the Tribunal erred in law by
concluding that Chesterman was not provided with 15 days to address the
    concerns outlined in the notice of non-renewal, as required by the
Regulation
, and by speculating that CNH would have rejected Chestermans attempts
    to address the concerns in any event.

[56]

Given
my conclusion that
    the Tribunal did not err in
interpreting the
Regulation
and Dealership Agreement to require CNH to set out all
    the reasons for non-renewal in its notice to Chesterman, it is not necessary to
    address this argument. If CNH breached the Dealership Agreement, as amended by
    the
Regulation
, by failing to provide all the
    reasons for its non-renewal, whether it further breached the Agreement by not
    affording Chesterman 15 days to address its concerns is inconsequential.

(iv)

The reasonableness of CNHs non-renewal

[57]

CNH
    submits that the
Tribunal erred in law by concluding that CNH acted
    unreasonably when it failed to renew the Dealership Agreement.
As a
    preliminary note, I recognize that, again, given
my earlier
    conclusions about CNHs breach, it is
not strictly necessary to address
    this argument. Nevertheless, I consider the issue below as it may be of
    assistance in other adjudications under this provision.

[58]

Section
    3(4) of the
Regulation
provides in part that a distributors approval
    of a renewal of a dealership agreement shall not be unreasonably withheld.
    The Tribunal incorporated this requirement into the Dealership Agreement by
    mandating that CNHs decision not to renew not be unreasonable in the
    circumstances.

[59]

The
    Tribunal explained that the
Regulation
did not remove CNHs power to
    withhold approval, but introduced a regulated renewal process. After setting
    out sixteen findings of fact on matters such as the parties relationship and
    CNHs failure to comply with the
Regulation
, the Tribunal concluded
    that CNH had, in fact, unreasonably withheld renewal and breached the
Regulation
.

[60]

On
    appeal, CNH advances two purported legal errors in the Tribunals analysis said
    to give rise to questions of law.

[61]

First,
    CNH argues that the Tribunal erred in law by even considering the
    reasonableness of the non-renewal, because Chesterman did not address its
    failure to maintain the required market share under the Dealership Agreement,
    an issue explicitly raised in the notice of non-renewal. In effect, CNH submits
    that before the Tribunal could analyze whether the non-renewal was
    unreasonable, it had to be satisfied that Chesterman had attempted to address
    CNHs concerns.

[62]

I
    agree that this raises a question of law. It involves the interpretation of the
Regulation
and its incorporation into the standard form dealer
    agreement. This issue is of precedential value and does not engage the factual
    matrix. That said, the Tribunals conclusion is reasonable. Section 3(4) of the
Regulation
clearly states that a distributor may not unreasonably
    with[o]ld renewal approval. This requirement is separate from a dealers
    right, under s. 3(6)(3), to address concerns underlying the refusal to renew
    once notified by the distributor. I see no basis to interfere with the
    Tribunals decision to consider whether CNH unreasonably withheld renewal.

[63]

The
    second purported error of law CNH identifies is in the Tribunals conclusion that
    because CNH did not comply with the
Regulation
, its non-renewal was
    unreasonable. In fact, CNH argues, it was fully compliant with the
Regulation
.

[64]

In
    my view, this issue raises a question of mixed law and fact. The Tribunal had
    to consider whether the evidence supported a conclusion that CNHs non-renewal
    was unreasonable. This is not a question of law and is thus outside the scope
    of review. In any event, given my conclusions above, there is no merit to this
    argument.

[65]

As
    a result, I would dismiss this ground of appeal.

(v)

Cross-appeal: the Tribunals assessment of damages

[66]

On
    its cross-appeal, Chesterman argues that
the Divisional Court
    erred in law by failing to consider the purpose of the
Regulation

in determining damages. More specifically, Chesterman submits
    that the Tribunals acceptance of the discounted cash flow model for damages
    and its finding of a two-year reasonable notice period for termination of the
    contract, aspects of its decision not disturbed by the Divisional Court, is
    inconsistent with the remedial purpose of both the
Regulation

and the
Act
:

levelling the commercial playing field between farm equipment
    distributors and dealers. While much of this ground of appeal engages questions
    of mixed law and fact, to the extent there is an extricable question of law
    concerning the Tribunals assessment of damages, I would dismiss this ground of
    the cross-appeal.

[67]

Before the Tribunal, the parties presented competing models of assessing
    Chestermans damages. The Tribunal rejected Chestermans proposed business
    valuation model, which treated Chestermans loss arising from CNHs non-renewal
    as the loss of a business line that would have continued indefinitely. The
    Tribunal accepted CNHs discounted cash flow model, based on lost cash flows over
    a finite time period. The Tribunal recognized that determining the appropriate
    model for calculating damages depends on the circumstances of each case,
    including the terms of the dealer agreement at issue and the applicable
    legislation. In this case, the Dealer Agreement did not indicate that it was
    intended to operate in perpetuity. Nor did the
Regulation
introduce such a requirement.
The Tribunal rejected
    Chestermans argument that there could be no basis for termination except as
    provided in seven circumstances listed in s. 2 of the
Regulation
. In
    so concluding, the Tribunal relied in part on s. 33 of the
Farm Implements
    Act
, which provides:

The rights, duties and remedies provided by this
    Act are in addition to the rights, duties and remedies under any other Act and
    the common law.

[68]

The Tribunal reasoned that contracts at common law are terminable under
    their written terms or, if there are no applicable written terms, on notice
    that is reasonable in the circumstances. In the Tribunals view, a two-year
    notice period was reasonable in this case and damages for lost profits were
    calculated on that basis.

[69]

On
    appeal to t
he Divisional Court, all three judges found that the
    quantum of damages did not engage any question of law and thus was not properly
    the subject of review. Molloy J., writing for the court on this issue, noted
    that the Tribunal made findings of fact as to the appropriate model for damages
    in the circumstances and on the expert evidence it found was best supported by
    the evidence. Moreover, she noted the Tribunals findings as to the
    unreliability of the basis of Chestermans experts calculations of the losses.
    The Divisional Court held that the Tribunal made no legal error in basing its
    damages award for lost profits on the theory that the Dealer Agreement could be
    terminated upon reasonable notice, which the Tribunal found in the
    circumstances to be two years.

[70]

At
    its core, Chestermans cross-appeal to this court is a challenge as to how the
    Tribunal calculated damages for lost profits. Although framed somewhat differently,
    Chesterman essentially argues that
the legislation precluded the
    Tribunal from interpreting the Dealer Agreement in accordance with principles
    of contract termination at common law, as this is at odds with the
    legislations purpose. In Chestermans view, the Tribunal wrongly incorporated
    a common law right to terminate the Agreement on reasonable notice, which in
    turn led it to erroneously adopt and calculate damages under the discounted
    cash flow model.

[71]

The question of whether it was open to the Tribunal to find that the common
    law provides a right to terminate the Dealer Agreement on reasonable notice is
    an extricable question of law: in this case, the application of an incorrect
    principle:
Sattva
, at para. 53; see also
Deslaurier
    Custom Cabinets Inc. v. 1728106 Ontario Inc.
, 2016 ONCA 246,
    130 O.R. (3d) 418, at para. 41.

[72]

Chesterman
    submits that the Tribunal erred by interpreting s. 33 to preserve rights
    incompatible with the legislations remedial purpose. I disagree. It is a
    well-established principle that to displace the common law, the legislation
    must show a clear intention to do so:
Demers v. Monty
,
    2012 ONCA 384, 111 O.R. (3d) 42, at paras. 32-33;
Parry Sound
    (District) Social Services Administration Board v. O.P.S.E.U., Local 324
, 2003 SCC 42
,
[2003] 2 S.C.R. 157
, at
    para. 39
.

[73]

The
    Tribunal, after reviewing the relevant legislation, reasonably determined that
    the Dealer Agreement, as amended by the
Regulation
, did not eliminate
    a common law right of termination. While the issue of whether a party has a
    common law right to terminate a contract will depend on the surrounding
    circumstances of each case, some types of contracts  including dealership or
    distribution agreements  will often naturally give rise to an implied right to
    terminate on reasonable notice: see e.g.,
Hillis Oil & Sales v. Wynns
    Canada
, [1986] 1 S.C.R. 57, at p. 67;
1193430
    Ontario Inc. v. Boa-Franc Inc.
(2005), 78 O.R. (3d) 81
    (C.A.), at paras. 45, 59-60;
Robinson v. Galt Chemical Products Ltd.
,
[1933] O.W.N. 502 (C.A.), at p. 504.

Here, in the absence of clear and direct language to the
    contrary, the Tribunal reasonably determined that the
Regulation
did
    not exclude a common law right to terminate the Dealer Agreement.

[74]

As
    a result, in my view, the Tribunal committed no error in assessing damages for
    lost profits on the basis that the Dealer Agreement could be terminated upon
    reasonable notice. Although Chesterman also takes issue with other aspects of
    the Tribunals damages award  such as how it weighed and considered the expert
    evidence  these issues do not raise extricable questions of law. I would
    accordingly dismiss Chestermans cross-appeal from the Tribunals damages
    award.

(vi)

Cross-appeal: the Tribunals costs award

[75]

Chesterman also cross-appeals the Divisional
    Courts decision to quash the Tribunals costs award and remit the matter to
    the Tribunal for reconsideration. It argues that a fair reading of the
    Tribunals reasons demonstrates that its costs award was fully within its
    jurisdiction. In my view, whether the Tribunal
failed to
    make a costs award in accordance with its jurisdiction and the law is a
    question of law.
Finding no reviewable error in the
    Tribunals analysis, however, I would restore the Tribunals costs award.

[76]

The Tribunal awarded costs to Chesterman in the
    amount of $376,338.05. It explained that r. 28 of the
Tribunal Rules
incorporates the
SPPA
provisions
    concerning the costs of a proceeding. Section 17.1 of the
SPPA
imposes two prerequisites to making a costs award, both of which
    were satisfied in this case. First, the Tribunal had to make rules about
    ordering costs, which it had in the
Tribunal Rules
. Second, the party against whom costs were ordered had to engage in
    unreasonable, frivolous or vexatious conduct or act in bad faith.

[77]

In the Tribunals view, CNHs conduct in ending
    the Dealer Agreement was unreasonable. Moreover, CNH had changed its theory of
    part of the case mid-way through the process by altering its position about the
    effect of the renewal provision in the Dealer Agreement and by raising the
    issue of retroactive versus retrospective application of the
Regulation
. The Tribunal determined that this constituted unreasonable conduct
    and warranted a costs award against CNH. In addition, the Tribunal further
    relied on s. 33 of the
Farm Implements Act
,
    which preserves common law rights and remedies, and reasoned there is a common
    law principle of costs following the event.

[78]

On appeal, the Divisional Court unanimously reversed
    the Tribunals costs decision and remitted the matter for redetermination. It
    found that the Tribunal had erred in law and exceeded its jurisdiction.

[79]

On further appeal to this court, Chesterman
    argues that the Divisional Court erred in disturbing the Tribunals costs
    award. I agree.

[80]

As explained above, an appeal from a Tribunal
    decision under s. 5 of the
Farm Implements Act
is limited to questions of law. As with all discretionary decisions, the
    Tribunals discretion to award costs must be exercised in accordance with the
    law: see generally,
Baker v. Canada (Minister of Citizenship and
    Immigration)
, [1999] 2 S.C.R. 817, at paras. 53, 56;
John
    Doe v. Ontario (Finance)
, 2014 SCC 36, [2014] 2 S.C.R. 3,
    at para. 52. If the Tribunal makes an error in principle or the award is
    clearly wrong, appellate intervention may be warranted: see
Hamilton
    v. Open Window Bakery Ltd.
, 2004 SCC 9, [2004] 1 S.C.R. 303,
    at para. 27;
Kerry (Canada) Inc. v. DCA Employees Pension
    Committee
, 2007 ONCA 416, at paras. 170-71, affd
Nolan
    v. Kerry (Canada) Inc.
, 2009 SCC 39, [2009] 2 S.C.R. 678.

[81]

Tribunal decisions concerning costs are reviewed on
    the reasonableness standard, absent a question that falls into one of the existing
    categories for which correctness review applies:
Smith v. Alliance
    Pipeline Ltd.,
2011 SCC 7, [2011] 1 S.C.R. 160, at paras. 36-40;
Nolan
, at para. 35;
Canada (Canadian
    Human Rights Commission) v. Canada (Attorney General)
, 2011
    SCC 53, [2011] 3 S.C.R. 471, at para. 27. There is no justification in this
    case to depart from the presumption that reasonableness governs the costs
    decision.

[82]

Applying the reasonableness standard of review, I conclude
    that the Tribunals costs award was reasonable and ought not to have been
    disturbed.

[83]

First, the Tribunal did not err in law by
    failing to adhere to the restrictions for awarding costs set out in the
SPPA
, the
Tribunal Rules
and associated
    commentary, and the Tribunals case law.

[84]

As identified by the Tribunal, s. 17.1 of the
SPPA
and the
Tribunal Rules
govern the
    Tribunals authority to award costs. Section 17.1(2)(a) of the
SPPA
, which is incorporated into r. 28 of the
Tribunal Rules
, provides that costs may only be ordered where 
the conduct or course of conduct of a party has been unreasonable,
    frivolous or vexatious or a party has acted in bad faith. Rule 28.04 of the
Tribunal
    Rules
includes a non-exhaustive list of unreasonable,
    frivolous, vexatious or bad faith conduct. As the Divisional Court identified,
    the conduct outlined relates to actions within the course of the proceedings
    themselves.

[85]

The commentary on r. 28 of the
Tribunal
    Rules
explains that [a]n order for costs is very rare
    and that [i]t is only where the Tribunal finds that a party wrongly brought
    the appeal or participated unacceptably in preparation or hearing events, that
    an award of cost[s] will be made. The commentary further provides that the
    test for clearly unreasonable conduct is whether a reasonable person,
    having looked at all of the circumstances of the case, the conduct or course of
    conduct of a party proven at the hearing and the extent of his or her
    familiarity with the Tribunals procedure, [would] exclaim, thats not right;
    thats not fair; that person ought to be obligated to another in some way for
    that kind of conduct.

[86]

The Divisional Court reasoned that the
SPPA
and the
Tribunal Rules
contemplate
    awarding costs only for unreasonable conduct within the proceeding itself, not
    conduct relating to the subject matter of the proceeding. With respect, there
    is nothing in the
SPPA

or the
Tribunal
    Rules
mandating this narrow interpretation of the
    Tribunals jurisdiction to award costs. In any event, the Tribunal concluded
    that other conduct of CNH during the proceedings  such as CNHs changing the
    theory of part of its case midway through the process  was sufficiently
    unreasonable to warrant a cost award.

[87]

Similarly, there is no merit to the argument
    that the Tribunal erred in law by failing to
adhere to
    its own case authority. First, I do not read this case law identified by CNH as
    standing for the proposition that the Tribunal cannot consider conduct outside
    of the proceeding itself in awarding costs. Second, even if such a notion has
    emerged in Tribunal jurisprudence, a tribunal is not bound by its previous
    decisions: see
Weber v. Ontario Hydro
, [1995] 2
    S.C.R. 929, at para. 14, per Iacobucci J., dissenting, but not on this point;
Ontario
    (Provincial Police) v. Favretto
(2004), 72 O.R. (3d) 681
    (C.A.), at para. 48. Provided a decision remains within a tribunals
    jurisdiction and the bounds of rationality, an alleged inconsistency with
    another decision of the tribunal is not reason for this court to intervene:
Ellis-Don
    Ltd. v. Ontario (Labour Relations Board)
, 2001 SCC 4, [2001]
    1 S.C.R. 221, at para.
28 (citing
Domtar
    Inc. v. Quebec (Commission dappel en matière de lésions professionnelles)
, [1993] 2 S.C.R. 756).

[88]

Second, notwithstanding the Tribunals musing about
    the existence of a common law principle that costs follow the event, and that
    it is open to debate whether the common law principle of costs following the
    event ha[d] been elevated to a common law right, duty or remedy, the
    Tribunal understood that its decision to award costs was discretionary and had
    to be made in accordance with statutory requirements.

[89]

Third, the Tribunal did not err in law by failing
    to take into account the principle of proportionality when awarding costs. The
    principle of proportionality is an overarching consideration in determining the
    appropriate quantum of costs:
Barbour v. Bailey
,
    2016 ONCA 334, at para. 9. It requires a decision-maker to consider whether the
    costs incurred were justified in light of the circumstances of the case. The
    fact that a costs award exceeds a damages award does not necessarily mean that
    appellate intervention is warranted: e.g.
The British Society of
    Audiology v. B. C. Decker Inc.
, 2010 ONCA 543, 268 O.A.C.
    135, at paras. 25-31
. Ultimately, the question is
    whether the costs award, in all the circumstances, is fair and reasonable.

[90]

In this case, the Tribunal ordered CNH to pay
    costs on a partial indemnity scale of approximately $375,000. Chesterman had
    sought costs of almost $640,000 on a substantial indemnity scale. CNHs partial
    indemnity costs reflected fees of approximately $190,000.

[91]

The Tribunal noted that the proceeding had
    spanned several years and involved several interlocutory procedural hearings,
    seventeen hearing days, and an appeal to the Divisional Court. Notably, the
    Tribunal explicitly acknowledged the proportionality principle in its reasons,
    noting:

The amount claimed by Chesterman was
    approximately $1 million while the amount recovered was approximately $200,000.
    Proportionality is something to be considered. An unfortunate reality of modern
    litigation is that frequently the cost of litigating can exceed the amount
    claimed or the amount recovered. However, the Tribunal is not bound to any
    proportionality formula. It would be unfair to use the proportionality
    principle to deny a successful party of a cost award.

[92]

While the Tribunals costs award may be high, in
    my view it did not err in law by failing to consider proportionality in its reasoning.

[93]

In summary, the Tribunals costs award reflects no error on any
    identified question of law and there was accordingly no basis for the
    Divisional Court to interfere with it. I would therefore grant the cross-appeal
    in part and restore the costs award of the Tribunal.

E.

Disposition:

[94]

I
    would dismiss the appeal, as well as the cross-appeal on damages. I would allow
    the cross-appeal on costs, and restore the costs award made by the Tribunal.

[95]

Chesterman
    has been largely successful on both the appeal and cross-appeal and is entitled
    to its costs in this court. I would award costs in the amount of $25,000
    inclusive of HST and disbursements. Chesterman now also seeks an award of costs
    from this court for proceedings in the Divisional Court, despite no costs award
    having been sought or awarded below. CNH takes the position that costs in the
    Divisional Court should be remitted back to the Divisional Court for its
    consideration. In my view, as there was no costs ordered by the Divisional
    Court, that is the end of the matter and I would neither make a costs order for
    those proceedings, nor refer the matter back to the Divisional Court.

Released: DW JUL 13 2018

B.W. Miller J.A.

I agree. David Watt
    J.A.

I agree. M.L.
    Benotto J.A.


