In our February 2020 newsletter, we commented on the Ontario Superior Court of Justice decision in Austin v. Bell Canada. In that case, an interpretation of a pension plan revolved around the placement of a comma. After a thorough review of grammatical rules of interpretation, the motion judge decided that the terms of one section, on its face, would indicate a construction that would result in a rounding to one decimal point, as set out in the Consumer Price Index. However, the judge then reviewed another provision of the plan and, based on the evidence he received, decided that a one-decimal rounding policy would render that section meaningless. He therefore decided that there should be 2-decimal rounding. This decision, deciding between a 1.49% or 1.5% interpretation, was not trivial. The plan went on to note that whatever the percentage, it would be rounded to the next whole number (i.e. 1% or 2%). A 1% difference in an annual increase of payments in a pension plan for 35,000 pensioners would, according to the Ontario Court of Appeal, result in an increase in the first year of over $10 million and, for the long term, over $100 million.
In our newsletter, setting out the facts, the interpretation, and the decision, our main complaint lay with the drafting of the pension plan and our contention “that many agreements are simply drafted improperly.” In this case, Bell Canada was successful at the motion level and disaster was averted.
Given the money at stake, the class action plaintiff appealed the motion judge’s decision. For the appeal to be successful, the plaintiff had to demonstrate either that the motion judge made a palpable and overriding error of fact or an extricable error of law.
The Court of Appeal agreed with the motion judge that the language of the main section, with the comma situated as it was, meant that the plan was to use the one decimal point methodology of the Consumer Price index. The Court differed with the motion judge when he reviewed the other section and noted that, based on the expert evidence, use of the one decimal point would render the section meaningless or partly meaningless. However, the evidence was only that the other section would not be relevant for approximately 96% of the pensioners; it would, however, be relevant for the other 4%. Accordingly, the section was not meaningless; it just did not have meaning for all of the pensioners. This was enough for the Court to conclude that the motion judge made a palpable and overriding error of fact.
How about the section being rendered “partly meaningless?” The Court asked, what does “partly meaningless” mean? A contractual provision either has meaning or it does not. This statement, the court said, was an extricable error of law.
The motion judge noted that the wording of the plan was “awkward,” but declined to use the contra preferentum principle (i.e. ambiguity must be resolved against the author if the choice is between the author and the other party to the contract who did not participate in its drafting). Although not necessary for its decision, because the Court held that the plan was not ambiguous, the Court noted that, had there been ambiguity, it would have been appropriate to use contra preferentum.
The Court allowed the appeal and disaster was not averted. Bad drafting cost Bell Canada over $100 million. Given the amount at stake, a motion for leave to appeal to the Supreme Court of Canada would not surprise us.
Image courtesy of geralt.
Written by Jonathan Speigel, the founding partner of Speigel Nichols Fox LLP, leads the litigation and construction practices.