Court of Appeal for Ontario
Date: June 11, 2018
Docket: C64026
Judges: Laskin, MacPherson and Fairburn JJ.A.
Between
The Corporation of the City of Thunder Bay Applicant (Appellant)
and
Canadian National Railway Company and Fort William First Nation Respondents (Respondent on Appeal)
Counsel
For the Appellant: Christopher Matthews and Sanj Sood
For the Respondent: Guy Pratte, Nadia Effendi and Duncan Ault
Heard: January 24, 2018
On appeal from: The judgment of Justice G. Patrick Smith of the Superior Court of Justice, dated June 9, 2017, with reasons reported at 2017 ONSC 3560.
Laskin J.A.:
A. Overview
[1] This appeal concerns the interpretation of an agreement made in 1906 for the construction of a bridge across the Kaministiquia River in Thunder Bay. The parties to the agreement were the Town of Fort William, now amalgamated into the appellant, the City of Thunder Bay, and the Grand Trunk Pacific Railway, now the respondent Canadian National Railway Company ("CN").
[2] Grand Trunk Pacific built the Bridge, completing it in 1909. The Bridge is a combined railway and roadway bridge: railway tracks run through the center; on each side of the railway tracks is a single lane for vehicles; on each side of the vehicle lanes is a sidewalk for pedestrians to cross the Bridge.
[3] The Bridge remained open for railway trains, cars, trucks, and people for over 100 years. However, in 2013, CN briefly closed the Bridge because of a fire. The fire caused only minor damage and CN reopened the Bridge three days later. But it reopened the Bridge only for railway trains and pedestrians, not for motor vehicles. It claimed that the Bridge could not safely be reopened for motor vehicles because of the risk an "errant" or wayward vehicle would leave the roadway, go across the sidewalk and into the river. In the over 100 year history of the Bridge, no vehicle has ever done so.
[4] When CN refused to reopen the Bridge for vehicles, Thunder Bay brought an application for a determination of its contractual rights under the 1906 Agreement. Two provisions of this Agreement are central to this appeal: s. 3, in which Grand Trunk Pacific agreed to give Fort William "the perpetual right to cross the said bridge for street railway, vehicle and foot traffic"; and s. 5, in which CN agreed to "maintain the bridge in perpetuity".
[5] Before the application judge, Thunder Bay took the position CN is in breach of its contractual obligation to keep the Bridge open perpetually for vehicles. CN took the position that it could not do so safely without making significant structural changes to the Bridge, which were beyond its obligation to "maintain" under s. 5 of the Agreement. The application judge sided with CN. He made three findings:
The parties intended that CN would maintain the Bridge for the type of traffic that existed at the time the 1906 Agreement was entered into: streetcars, horse, and cart traffic, not motor vehicle traffic.
Although CN had maintained the Bridge for motor vehicle traffic, it consistently took the position that it had no contractual obligation to make structural changes necessary to keep motor vehicle traffic flowing.
Thunder Bay had the onus to define clearly the relief it sought and the changes needed to make the Bridge safe for motor vehicles, and it failed to do so.
[6] On its appeal, Thunder Bay challenges these findings and contends that they are tainted by legal error or are unreasonable. It submits the parties intended that the citizens of Thunder Bay would have the perpetual right to cross the Bridge by any kind of vehicle, and that, to enable them to do so, CN would have the obligation to maintain the Bridge in perpetuity. CN contends that the application judge made no legal error, his findings are supported by the evidence, and so appellate intervention is not warranted. As I view the appeal, it raises two broad issues:
Is the application judge's finding on the parties' intent tainted by "extricable" errors of law or is it unreasonable?
Did the application judge err in law by holding that Thunder Bay had the onus to give the court a specific and detailed proposal to make the Bridge safe for motor vehicles?
[7] I would answer the questions raised by these two issues as follows:
Question 1: Yes, the application judge's finding is unreasonable and, in addition, is tainted by two extricable errors of law:
a. The application judge's finding is unreasonable because he failed to give proper effect to the words of the 1906 Agreement or to the context in which the Agreement was made.
b. In interpreting the 1906 Agreement, the application judge committed an extricable error of law by failing to give any effect to the words "perpetual" and "in perpetuity".
c. The application judge also committed an extricable error of law by taking into account the subsequent conduct of the parties, though the meaning of the 1906 Agreement is not ambiguous. Alternatively, even if its meaning is ambiguous, the application judge failed to consider the parties' relevant subsequent conduct.
Question 2: Yes, the application judge erred by placing an onus on Thunder Bay to provide a proposal to make the Bridge safe for motor vehicles. CN has a contractual obligation to maintain the Bridge for motor vehicles in perpetuity, an obligation it has breached. To rectify its breach, CN must reopen the Bridge; it therefore has the onus to determine what maintenance is needed to alleviate any safety concerns associated with the Bridge's reopening.
[8] For any of the reasons given in answer to question 1, the application judge erred in his interpretation of the 1906 Agreement. Under that Agreement, vehicle traffic means any kind of vehicle traffic, including car and truck traffic. The parties intended that Thunder Bay would have the right to cross the Bridge perpetually by using any kind of vehicle, and that CN would be obliged to maintain the Bridge in perpetuity for any kind of vehicle that used it.
[9] I would allow the appeal, issue a declaration that CN breached the 1906 Agreement, and order CN to reopen the Bridge for motor vehicle traffic. What repairs or upgrades the Bridge needs, if any, are for CN to decide.
B. Brief Background: The 1905 Agreement, the 1906 Agreement and the Bridge
[10] The application judge thoroughly reviewed the background giving rise to this litigation. In my reasons, I will discuss only those facts necessary to resolve the issues on the appeal. To put these issues in context, I will first discuss the 1905 Agreement, which preceded and gave rise to the 1906 Agreement. Then I will discuss the terms of the 1906 Agreement, and describe the Bridge itself.
(a) The 1905 Agreement
[11] At the turn of the 20th century, railways were being built to provide access to the various parts of our vast country. The National Transcontinental Railway was built to run from Moncton all the way to Winnipeg. Grand Trunk Pacific had already built a line running from Winnipeg, across the Prairies, to Prince Rupert, British Columbia.
[12] Grand Trunk Pacific also wanted to build a branch line to connect the National Transcontinental Railway with Lake Superior. It chose Fort William as the terminal port. The Lake Superior branch line would allow Grand Trunk Pacific to carry grain from the Prairies to Fort William, for shipment by boat to Southern Ontario and various points across the Great Lakes.
[13] In 1905, Grand Trunk Pacific and Fort William entered into an agreement for the construction of the Lake Superior branch line. Under this 1905 Agreement, Fort William agreed to pay Grand Trunk Pacific $300,000 "for lands, docks, yards, buildings or any improvements in connection with the purposes of the Company". The Lake Superior branch line brought benefits to both parties – Grand Trunk Pacific increased the profitability of its operations; and Fort William gained social and economic benefits through the development of a terminal infrastructure in the Town.
[14] In order for its Lake Superior branch line to be effective, Grand Trunk Pacific had to build a railway bridge over the Kaministiquia River. The 1905 Agreement did not provide for the building of a railway bridge over the river. But s. 6 of the Agreement gave Grand Trunk Pacific an option to build a bridge for railway traffic. If Grand Trunk built this bridge, Fort William agreed to pay it $50,000, and in return, its citizens would have the perpetual right to cross the bridge by street railway, vehicle, and foot traffic. Clause 6 provided:
The Municipal Corporation will pay to the Company an additional bonus of fifty thousand dollars if within one year from the signing of this agreement it obligates itself to construct within two and half years from date of this agreement, a Bridge, at a location to be agreed upon by the Company and the Municipal Corporation, and give the Municipal Corporation the perpetual right to cross same for street railway, vehicle and foot traffic, also street approach on the South side of the Kaministiquia River, over lands owned by the Company, it being understood that the Company reserves all right for railway traffic. The bonus will be payable on the completion of the bridge.
(b) The 1906 Agreement
[15] In 1906, Grand Trunk Pacific exercised its option under s. 6 of the 1905 Agreement, and entered into the 1906 Agreement with Fort William. In s. 1, Grand Trunk Pacific agreed to build a "combined railway and highway bridge", and in s. 6 Fort William agreed to pay $50,000 when the bridge was completed.
[16] Sections 3 and 5 are the key provisions of the 1906 Agreement. Under s. 3, Grand Trunk Pacific agreed to give the citizens of Fort William the "perpetual right" to cross the Bridge for street railway, vehicle, and foot traffic:
The Company will give the Municipal Corporation the perpetual right to cross said bridge for street railway, vehicle and foot traffic on roadways supported by brackets on each side of the railway bridge substantially as shown on Plate "C" and this portion of the bridge shall be for the Town and any person or corporation authorized by the Town.
[17] Section 5 is ancillary to s. 3. To ensure that Fort William had the "perpetual right" to cross the bridge, Grand Trunk Pacific agreed to "maintain the Bridge in perpetuity without costs to the Town":
The Company will maintain the bridge in perpetuity without costs to the Town except the cost and maintenance of street car rails and trolley wires which will be furnished by the Town or Electric Railway Company using the bridge; and that the space allowed for Town traffic on each side of the bridge, be sufficient to accommodate street car, vehicular traffic and separate passage for foot passengers.
[18] Grand Trunk Pacific completed construction of the Bridge in 1909 at a cost of approximately $230,000. Fort William paid the agreed on amount of $50,000.
(c) The Bridge
[19] In this court, CN suggested that the Bridge was, in fact, two separate bridges: a railway bridge and a "roadway bridge". The 1906 Agreement says otherwise. It provides for one Bridge, "a combined railway and roadway bridge".
[20] Most of Thunder Bay lies to the north of the Bridge; the Fort William First Nation lies to the south. The Bridge is known as the James Street Swing Bridge. It was originally designed to be a swing bridge to allow shipping on the river, but it is no longer used for that purpose.
[21] CN and its predecessors have used the Bridge continuously for railway traffic. But the use of the roadway portion of the Bridge has changed over time. Although the Bridge continued to be used by pedestrians and vehicles until the 2013 fire, after 1950 the roads were no longer used for street railway. Instead they were used exclusively for vehicular traffic. Up until 1968, the route over the Bridge was part of a major provincial highway, providing access to the city and to the Fort William First Nation. That year, however, the Lakehead Express (Highway 61) opened and the route over the Bridge became a minor arterial road.
[22] Still, the road over the Bridge remains a vital thoroughfare for the people of Thunder Bay and the Fort William First Nation. Its importance is borne out by traffic statistics, which show that in 2007 (the last year for which statistics are available) an average of 8,871 vehicles traversed the Bridge every day. Now that the Bridge is closed to cars and trucks, the only practical vehicle access for vehicles going to Fort William First Nation is along Highway 61, a ten kilometre detour.
[23] The Bridge itself is around 150 metres long. As I have said, the railway tracks run along the middle of the Bridge. The two driving lanes – one on either side of the railway tracks – are cantilevered on the outside of steel trusses, and rely on the railway structure for support. Wooden railings run between the railway tracks and the roadways. Wooden timbers on the wood deck on each side of the roadways form roughly six by six inch curbs. Although the pedestrian sidewalks are not separated from the roadways by a railing, they are raised from the roadways by the height of these wooden curbs, six inches. The sidewalks are between 1 metre and 1.7 metres wide, and have railings on the outside.
[24] The Bridge is structurally sound and can carry a heavier load than that required of a modern bridge. But each of the two driving lanes is narrow, 2.85 metres wide, which is 15 centimetres less than the minimum 3 metres required under current bridge design standards. To alleviate any safety concerns, the speed limit on the Bridge has been reduced from 40 kilometres per hour to 20 kilometres per hour, and three speed bumps have been installed.
[25] Over the years, CN has made numerous repairs and upgrades to the Bridge, including a major overhaul between 1984 and 1985. These repairs and upgrades are itemized at para. 70 of the application judge's reasons. Still, the expert evidence called on the application suggests that the sidewalks are too weak to support a vehicle that leaves the roadway, and in the absence of crashworthy barriers, a wayward vehicle might go in the river. No vehicle has done so for the entire lifespan of the Bridge, over 100 years.
C. The Issues
(1) Is the Application Judge's Finding on the Parties' Intent Tainted by Extricable Errors of Law or is it Unreasonable?
[26] The application judge gave thorough reasons for his decision, 30 single space pages. But his analysis of how he interpreted the 1906 Agreement is contained in one or at most two paragraphs, paras. 158 and 159:
With respect to the first issue, while it is difficult to ascertain the intention of the parties at the time they signed the 1906 Agreement, I find that by the words used in the agreement, the subsequent conduct of the parties and the context in which the agreement was signed, it was the intention of the parties that the CN would maintain the Bridge for the type of Bridge traffic that existed at the time, namely streetcar and horse and cart traffic. Use of motor vehicle and truck traffic was just beginning to take place with very few if any cars or trucks owned in the towns of Fort William and Port Arthur. As noted above, in 1909 when the Bridge was completed, there were only 1,176 motorized vehicles in all of the Province of Ontario.
While there is evidence that the GTP and CN continued to maintain the roadway Bridge for motorized vehicles until it was closed following the fire, the record does not support the City's position that the CN maintained the Bridge to the extent that it made structural changes necessary to comply with modern safety codes. There is considerable evidence that the CN took a consistent view that structural changes to the Bridge were beyond the scope of its contractual obligations and that it resisted any suggestion by the City that it was bound to make whatever changes were necessary to keep vehicular traffic flowing.
[27] The standard for appellate review of a trial judge's interpretation of a contract such as the 1906 Agreement, which is not a standard form contract, is now well established. The question of the proper interpretation of a contract is a question of mixed fact and law: the application of the legal principles for interpreting a contract to the words of the contract and the context in which those words were used. A trial judge's interpretation, like any finding on a question of mixed fact and law, is entitled to deference from an appellate court. An appellate court is justified in intervening only if the finding is tainted by a palpable and overriding error or is unreasonable, or if a question of law can be extricated from the trial judge's process of interpretation. And the Supreme Court of Canada has said "courts should be cautious in identifying extricable questions of law in disputes over contractual interpretation": see H.L. v. Canada (Attorney General), 2005 SCC 25, [2005] 1 S.C.R. 401, at paras. 4, 55-56, and 69-71; Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at para. 54; and Teal Cedar Products Ltd. v. British Columbia, 2017 SCC 32, [2017] 1 S.C.R. 688, at para. 45.
[28] Thunder Bay submits that the application judge's finding that the parties intended to maintain the Bridge solely for the type of traffic that existed in 1906 both reflects extricable errors of law and is unreasonable. CN submits that the application judge's interpretation is a finding of mixed fact in law, is supported by the evidence, reveals no error of law, and thus appellate intervention is not warranted.
[29] In my view, the application judge's finding that the parties intended to maintain the Bridge only for streetcar, horse, and cart traffic – in other words, the vehicle traffic that existed in 1906 – is both unreasonable and is tainted by two extricable errors of law, the first more important than the second. In summary:
a. The application judge's finding is unreasonable because it fails to take account of the full context in which the 1906 Agreement was made, is inconsistent with his earlier findings on the context for the Agreement, is contrary to the parties' reasonable expectations, and is at odds with the express words of the Agreement.
b. In interpreting the 1906 Agreement, the application judge committed an extricable error of law by failing to give any effect to the words "perpetual" and "in perpetuity".
c. The application judge also committed an extricable error of law by taking into account the subsequent conduct of the parties, though the meaning of the 1906 Agreement is not ambiguous. Alternatively, even if its meaning is ambiguous, the application judge failed to consider the parties' relevant subsequent conduct.
(a) The Application Judge's Finding on the Parties' Intent is Unreasonable
[30] The principles of contract interpretation are also well established. They were summarized by Doherty J.A. in Dumbrell v. Regional Group of Companies Inc., 2007 ONCA 59, 85 O.R. (3d) 616, by Winkler C.J.O. in Salah v. Timothy's Coffees of the Worlds Inc., 2010 ONCA 673, 268 O.A.C. 279, and recently by Brown J.A. in Weyerhaeuser Company Limited v. Ontario (Attorney General), 2017 ONCA 1007, 13 C.E.L.R. (4th) 28. The overriding principle is that the meaning of an agreement and the intent of the parties in entering into it must be derived from the words the parties used and the context in which they used those words. In Dumbrell, at paras. 52 and 53, Doherty J.A. quoted an important paragraph from Professor Swan's text on contract law, and then concisely summarized the principle in his own words:
Professor Swan puts it well in Canadian Contract Law (Markham, Ont.: Butterworths, 2006) at 493:
There are a number of inherent features of language that need to be noted. Few, if any words, can be understood apart from their context and no contractual language can be understood without some knowledge of its context and the purpose of the contract. Words, taken individually, have an inherent vagueness that will often require courts to determine their meaning by looking at their context and the expectations that the parties may have had.
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. [Citations omitted.]
In short, context – also described in the case law as "the surrounding circumstances" or "the factual matrix" – almost always matters because words rarely have meaning apart from their context.
[31] In this case, the central debate was over the meaning of the words "vehicle traffic" or "vehicular traffic" in the 1906 Agreement, and the parties' intent in using these words. The application judge interpreted the words narrowly to mean only the vehicle traffic that existed in 1906 – streetcars, horses, and carts. CN asks this court to uphold his interpretation. Thunder Bay argues for a broad meaning and submits that the parties intended vehicle or vehicular traffic to include any kind of vehicle, including the vehicles that now almost exclusively use the Bridge: cars and trucks. I agree with Thunder Bay's argument.
[32] I begin with the words of the 1906 Agreement. Under it, the citizens of Thunder Bay have the right to cross the Bridge by vehicle traffic, and CN has the obligation to maintain the Bridge for vehicular traffic. The Agreement does not define vehicle or vehicular traffic, nor does it limit vehicle traffic to carts and horses; instead the phrases vehicle traffic and vehicular traffic are open ended. And the right and obligation are not time limited; instead they are said to be perpetual or last in perpetuity. Inevitably, the way people get from point A to point B will change over time, as indeed did the way the citizens of Thunder Bay have used the Bridge. The text alone of the 1906 Agreement is inconsistent with the application judge's narrow interpretation, which freezes vehicle traffic to the vehicle traffic used to cross the Bridge over 100 years ago.
[33] The full context in which the 1906 Agreement was signed unquestionably supports the broad interpretation of vehicle traffic put forward by Thunder Bay. The application judge referred to much of this context early in his reasons but did not seem to consider it at all when, later in his reasons, he made his finding on the parties' intent. His conclusory statement that he considered the "context" is unsupported.
[34] Three contextual considerations are important in interpreting the meaning of vehicle or vehicular traffic in the 1906 Agreement: the purpose of both the 1905 and the 1906 Agreements; the reasonable expectations of the parties in entering into the 1906 Agreement; and the coming of the automobile era. Each of these considerations was known or reasonably capable of being known at the time. Even apart from the words of the Agreement, by failing to take these contextual considerations into account, the application judge made a finding on the parties' intent that was unreasonable and that justifies the intervention of this court.
(i) The Purpose of the 1905 and 1906 Agreements
[35] The purpose of any agreement is always an important contextual consideration: see Dumbrell, at para. 55. Here, in my view, the purpose of the 1906 Agreement has to be looked at together with the purpose of the 1905 Agreement – collectively, as a package. CN contends this court cannot do so as the application judge made a "core finding" that the two Agreements were distinct. At para. 65 of his reasons, the application judge did say that the two Agreements "are separate and distinct" because the 1905 Agreement gave no contractual rights or imposed any obligations concerning the Bridge. Literally, the application judge was correct. But commercially these two agreements, made one year apart, were intertwined: the 1905 Agreement included a clause that gave Grand Truck Pacific the option to construct the Bridge, which, when exercised, gave rise to both the 1906 Agreement and ultimately the Bridge itself.
[36] And five paragraphs earlier in his reasons, at para. 60, when considering their purpose, the application judge sensibly viewed the two Agreements together. He found that the Agreements were intended to promote long term growth and prosperity and expand industrial activity in Fort William:
There is no serious dispute about the historical context within which the Agreements were negotiated. The preamble of the 1905 Agreement makes it clear that it was not just anticipated, but expected, that the building of the railroad would fuel growth and economic prosperity in the long term. The parties to the Agreements contemplated that such growth would include a larger population and expanding industry, particularly given that a central purpose of the Agreements was to expand industrial activity of the Town.
[37] The application judge's finding about an expected larger population was supported by the statistics. Between 1902 and 1906 the population of Fort William more than doubled from 4,799 to 10,032. By the time the Bridge was built in 1909, the population had nearly doubled again to 18,003. Yet the application judge's overall finding on the purpose of the Agreements sits uncomfortably with his later narrow interpretation of the meaning of vehicle traffic in the 1906 Agreement.
(ii) The Reasonable Expectations of the Parties
[38] As Professor Swan wrote in the paragraph quoted in Dumbrell, the reasonable expectations of the parties in entering into an agreement are also an important contextual consideration. Both parties expected great gains from these two Agreements. The application judge referred generally to these expectations in the paragraph of his reasons just quoted above. More specifically, Grand Trunk Pacific expected the Lake Superior branch line to be an important source of revenue – a "mighty grain chute", transporting millions of bushels of wheat from rail to water transport at Fort Williams. In turn, Fort William was expected to be "the greatest port on the lakes", offering "great promise for the future", and expecting "great commercial and industrial activity".
[39] The application judge made a key finding at para. 61 of his reasons about the parties' expectations for the Bridge itself:
Clearly, both parties contemplated using the Bridge for many years in the future—the City for "street railway, vehicle and foot traffic" and the CN for rail traffic.
[40] That finding echoes the language of the 1906 Agreement, in which the right to use the Bridge and the obligation to maintain it are to be in perpetuity. But this finding is quite inconsistent with the application judge's narrow interpretation of the 1906 Agreement. It makes little sense to acknowledge on one hand that the parties expected a long term increase in growth, industrial activity, and population, and expected the Bridge to be used "for many years", while concluding on the other hand that the Bridge was only to be maintained for what amounts to horse and buggy carriage. This inconsistency is even more glaring when the third contextual factor is taken into account: the coming of the automobile era.
(iii) The Coming of the Automobile Era
[41] CN seeks to support the application judge's finding on the parties' intent in two ways: by relying on the motion passed by the Municipal Council of Fort William authorizing the 1906 Agreement; and by relying on the near absence of cars and trucks on the streets of Fort William in 1906. Neither assists CN.
[42] Fort William Council did pass an authorizing motion, and the motion said that the roadways should "be sufficient to accommodate streetcar, horse traffic and foot traffic". The motion is a piece of extrinsic or external evidence, which might reveal Fort Williams' "subjective intention" in entering into the 1906 Agreement. But extrinsic evidence of a party's subjective intent in entering into a contract has no place in contract interpretation for at least two reasons: first, resort to a party's subjective intent undermines the goal of certainty, a prime goal of a written contract; and second, the parties may not have a common subjective intention because one party's subjective intention may not be shared by the other party: see Dumbrell at para. 50. Thus, the parties' intent and the meaning of their contract must be ascertained by looking at the actual words they used and the context in which they used them, but not by their subjective intention in using them.
[43] CN is on firmer ground in relying on the near absence of cars and trucks when the 1906 Agreement was made. This near absence was relied on by the application judge. Back then, streetcars, horses, and carts were the predominant means of vehicle travel. But, as I have said, the meaning of vehicle traffic was not so limited in the Agreement itself; it was unlimited. And Thunder Bay's citizens had the right to cross the Bridge by vehicle not for just a few years, but well into the future, in fact perpetually. Back in 1906, the parties can reasonably have been taken to know that soon, not even many years in the future, automobiles would become the predominant mode of road travel.
[44] Indeed, even earlier, in 1887, in its official report, the Ontario authority responsible for roads had observed: "[M]otor carriages may be seen on the streets of the larger cities, and present indications are that they will soon become an important means of travel and transportation". By 1906, the Ontario Government had already passed the second version of the An Act to regulate Speed of Operating Motor Vehicles on Highways, S.O. 1906 c. 46, which licensed automobiles and drivers, and regulated speed and traffic.
[45] Though admittedly with the benefit of now knowing the pervasive use of cars and trucks in our society, I cannot conceive why we should limit the meaning of vehicle traffic on the roadways of the Bridge to carts and horses. I regard the application judge's finding on the parties' intent in entering into the 1906 Agreement to be unreasonable. On this basis alone, I would allow the appeal on the first issue. But I would also allow the appeal for a second and related reason: the application judge's failure to give any effect to the words "perpetual" and "in perpetuity".
(b) The Application Judge Committed an Extricable Error of Law by Failing to Give Any Effect to the Words "Perpetual" and "In Perpetuity"
[46] Another important principle of contract interpretation is that the court should interpret the contract as a whole, and avoid an interpretation that does not give effect to all of its terms or that renders one or more of its terms ineffective. A failure to apply this principle is an error of law: see Salah, at para. 16; and Teal Cedar, at para. 44. Thunder Bay submits that in interpreting the 1906 Agreement, the application judge failed to apply this principle because he failed to give effect to the important words "perpetual" and "in perpetuity" in the 1906 Agreement. He therefore committed an extricable error of law. I agree with Thunder Bay's submission.
[47] Grand Trunk Pacific received what it bargained for in the 1906 Agreement: a bridge over the river for its rail traffic. That Bridge was important to its operation of the Lake Superior branch line. And CN continues to use the Bridge for its rail traffic to this day.
[48] In exchange, the fundamental right Fort William bargained for in the 1906 Agreement was the right of its citizens to cross the Bridge perpetually, either by using their vehicles or on foot. To ensure that this right was protected, CN was obliged to maintain the Bridge in perpetuity.
[49] Early in his reasons, the application judge recognized two critical points: first, an agreement that imposes a perpetual obligation will be enforced and cannot be terminated unilaterally; and second, the 1906 Agreement does not have an expiry date or a provision giving either party a right to terminate its obligations. To these two points, I would add a third: the words of the Agreement do not in any way qualify Thunder Bay's right under s. 3 or CN's obligation under s. 5 – as I have said, the word "vehicle" is not defined or limited to any particular kind of vehicle.
[50] When, however, the application judge came to interpret the 1906 Agreement, he failed to take into account the points he had made earlier: that the right of the people of Thunder Bay to use their vehicles to cross the bridge did not expire, but continued perpetually, in other words permanently or forever; and that CN cannot unilaterally terminate its obligation to maintain that right in perpetuity.
[51] In 1906, motor vehicle traffic was admittedly limited in this province. But it was increasing, and was being regulated. As I have already suggested, back in 1906, it would not have taken much imagination to realize that in the future, cars and trucks would become a far more common way than horses and carts to get from one place to another. Yet, on the application judge's finding, the use of the Bridge for vehicular traffic was to be static, frozen in time, limited to the traffic that then mainly existed: streetcars, horses, and carts. That finding gives no effect whatsoever to the right of the people of Thunder Bay to use the Bridge for their vehicles perpetually or to CN's obligation to maintain the Bridge in perpetuity.
[52] CN's answer to Thunder Bay's submission is essentially twofold. Its first answer is that interpreting the 1906 Agreement to give a perpetual right to cross the Bridge when Fort William paid only $50,000 produces a "commercial absurdity". I do not accept this argument. The words of the Agreement are clear. The right to cross and the obligation to maintain are to continue in perpetuity. $50,000 in 1906 dollars is what the parties agreed to. Grand Trunk Pacific got its rail crossing; Fort William got its perpetual right to cross the Bridge by vehicles or on foot. That bargain is not at all commercially absurd.
[53] CN's second and main answer focuses on its obligation to maintain. CN draws a distinction between maintaining the Bridge and making structural changes to the Bridge. The former, it says, is its obligation under the Agreement; the latter is not. Then, drawing on the expert evidence it led before the application judge, CN contends that making the Bridge safe for cars and trucks would require structural changes to the Bridge, changes that exceed its maintenance obligation.
[54] The jurisprudence lends some support to the distinction CN has drawn. As the application judge noted, a requirement to "maintain" imposes:
[A]n obligation on a party to take the measures necessary to cause a thing to remain in existence; to keep vigorous, effective or unimpaired; to guard from loss or derogation; to cause to continue in a specified state; to care for property for purposes of operational productivity.
[55] This maintenance obligation is limited. On some of the authorities it does not include changing the structure of a bridge, making it, for example, stronger or more durable: see Attorney General v. Great Northern Rail Co., [1916-17] All. E.R. Rep. 272 (U.K. H.L.).
[56] But I view the distinction between maintenance and structural changes to be of little practical consequence. As the application judge found, CN consistently took the position that the many repairs and upgrades it has made to the Bridge over the years were matters of maintenance, not structural changes. Yet those repairs and upgrades, all falling within CN's maintenance obligation, have been sufficient to allow cars and trucks to drive safely across the Bridge. The "errant" vehicle CN claims to be concerned about has never manifested itself. Virtually no activity is risk free. But the risk of an errant vehicle going into the river must be minimal with three speed bumps and a speed limit of 20 kilometres per hour on the Bridge. One might have thought that, having repaired the minor damage caused by the fire, CN could simply have reopened the Bridge, and maintained it for vehicular traffic as it and its predecessors have done, without incident, for over 100 years.
[57] Even more significant, the distinction CN draws between its maintenance obligation and making structural changes to the Bridge is irrelevant in these proceedings. CN's argument that the Bridge cannot be reopened safely for vehicular traffic without altering the structure of the Bridge is, in substance, an argument that it should be relieved of its contractual obligation under the 1906 Agreement to maintain the Bridge. CN sought this very relief even before Thunder Bay started its application. However, its action for an order that it not be required to reopen the roadway portion of the Bridge was stayed by the order of Fregeau J.: see Thunder Bay (City) v. CN Rail, 2016 ONSC 469, 49 M.P.L.R. (5th) 148.
[58] Faced with a stay, CN still seeks in this proceeding to avoid what is otherwise a clear breach of its contractual obligation by claiming it cannot open the Bridge safely for vehicles unless it exceeds its maintenance obligation. In other words, CN seeks to achieve indirectly what Fregeau J. already held it cannot do directly.
[59] But as Thunder Bay has pointed out, CN's position is tantamount to relying on the doctrine of frustration of contract to excuse its breach. CN is seeking to show that the 1906 Agreement, at least for vehicle traffic, has become "incapable of being performed". That argument, however, is not available to it in this proceeding, especially in this court. The application judge made no finding that the 1906 Agreement was at an end, nor could he. He did not even make a finding that CN was incapable of performing its contractual obligation. CN must therefore comply with the 1906 Agreement and reopen the Bridge for cars and trucks. Presumably it will make whatever maintenance repairs and upgrades it thinks necessary to maintain the risk to public safety at an acceptable level.
[60] Because the application judge committed an extricable error of law by failing to give effect to all the terms of the 1906 Agreement, he adopted an interpretation of the parties' intent not supported by the text of the document. The right to cross the Bridge perpetually, and the obligation to maintain the Bridge in perpetuity, can only mean that the parties intended the Bridge to be open for any kind of vehicle, not just horses and carts.
[61] In addition to what I have already discussed, the trial judge made a second extricable error of law in his interpretation of the contract: he rested his interpretation on the subsequent conduct of the parties, even though the text of the 1906 Agreement was not ambiguous. This error also warrants appellate intervention.
(c) The Application Judge Committed an Extricable Error of Law by Taking Into Account the Subsequent Conduct of the Parties
[62] In his interpretation of the 1906 Agreement, the application judge said that he took into account the subsequent conduct of the parties. The rationale for considering the parties' subsequent conduct when interpreting an agreement is that "it may be helpful in showing what meaning the parties attached to the document after its execution, and this in turn may suggest that they took the same view at an earlier date": see S.M. Waddam's, The Law of Contracts, 3rd ed (Toronto: Canada Law Book, 1993), para. 323; and Montreal Trust Co. of Canada v. Birmingham Lodge Ltd. (1995), 24 O.R. 3rd 97 (C.A.).
[63] Subsequent conduct, however, can be an unreliable guide to parties' intent at the time they entered into an agreement. The dangers of reliance on the parties' subsequent conduct were thoroughly canvassed by Strathy C.J.O. in Shewchuk v. Blackmont Inc., 2016 ONCA 912, 404 D.L.R. (4th) 512, at paras. 39-46. Because of the dangers he averted to, "evidence of subsequent conduct should be admitted only if the contract remains ambiguous after considering its text and its factual matrix".
[64] Even if admitted to resolve ambiguity in the parties' intent when they entered into an agreement, the cogency or reliability of the evidence will vary depending on its nature. As Strathy C.J.O. wrote at para. 53 of Shewchuk:
Evidence of subsequent conduct will be more reliable if the acts it considers are the acts of both parties, are intentional, are consistent over time, and are acts of individuals rather than agents of corporations.
And he noted at para. 54:
Evidence of subsequent conduct will have greater weight if it is unequivocal in the sense of being consistent with only one of the two alternative interpretations of the contract that generated the ambiguity triggering its admissibility.
[65] In the present case, although the application judge said that "it is difficult to ascertain the intention of the parties at the time they signed the 1906 agreement", he made no express finding that the meaning of the Agreement was ambiguous. If its meaning and the parties' intent were not ambiguous, as in my view they were not, then the application judge made an extricable error of law in relying on the parties' subsequent conduct.
[66] If, however, the meaning of the 1906 Agreement was ambiguous, the application judge failed to consider the relevant subsequent conduct of the parties. The only subsequent conduct he seemed to consider was CN's "consistent view the structural changes to the Bridge were beyond the scope of its contractual obligation". CN's own view of how it categorized its work of repairing and upgrading the Bridge hardly deserves much weight. Its views are not the acts of both parties, and furthermore are the views of the corporation, not of the individuals who carried out the repairs and upgrades.
[67] At best, CN's view of the work it did could shed some light on the question whether the obligation to maintain includes the obligation to make structural changes to the Bridge to ensure its safe operation. For the reasons I have already expressed, the scope of CN's maintenance obligation has no relevance in these proceedings. Even so, CN's views of its maintenance obligation combined with the undisputed fact that not a single vehicle has ever gone into the river, show that CN can comply with the 1906 Agreement and still ensure the safety of motor vehicle traffic on the Bridge.
[68] Moreover, if any relevant ambiguity exists in the meaning of the 1906 Agreement, that ambiguity relates not to the scope of CN's maintenance obligation, but to the meaning of vehicle traffic. Does it mean only vehicles that mainly existed in 1906, streetcars, horses, and carts? Or does it also includes cars and trucks? On this question, the subsequent conduct of the parties, especially CN itself, resolves any ambiguity. The subsequent conduct of CN in maintaining the safe operation of the roadways on the Bridge for the exclusive use of cars and trucks supports Thunder Bay's position that vehicle traffic in the 1906 Agreement was meant to include the advent of motor vehicle traffic. CN's subsequent conduct has been intentional, consistent over time, and unequivocally supportive of the interpretation of the Agreement put forward by Thunder Bay. It is thus a highly reliable indicator that under the 1906 Agreement motor vehicle traffic, as well as streetcars, carts, and horses, would have the perpetual right to cross the Bridge, and CN would have the perpetual obligation to maintain the Bridge for that purpose.
[69] For these reasons, I conclude that the application judge erred in his interpretation of the 1906 Agreement. Under the Agreement cars and trucks have a perpetual right to cross the Bridge, and to ensure that right is preserved, CN has a corresponding obligation to keep open and maintain the Bridge in perpetuity. To terminate its obligation CN would have to seek a court order that its obligation to maintain is incapable of being performed.
(2) Did the Application Judge Err in Law by Holding that Thunder Bay Had the Onus to Give the Court a Specific and Detailed Proposal to Make the Bridge Safe for Motor Vehicles?
[70] The application judge found that under the 1906 Agreement, CN was only obliged to maintain the Bridge for the vehicle traffic existing at the time. His finding seems to suggest that CN has no obligation to maintain the Bridge for cars and trucks, even though CN has done so since motor vehicles started crossing the Bridge.
[71] Yet the application judge went on to consider whether the Bridge could be made safe for motor vehicles, implicitly suggesting that if he was satisfied that it could, he would grant the relief Thunder Bay sought. But he held that Thunder Bay had the onus to provide him with a specific and detailed proposal for the changes needed to make the Bridge safe for motor vehicles, and further that Thunder Bay failed to meet its onus. Thus, he dismissed Thunder Bay's application. He wrote at paras. 162-163 of his reasons:
This is an application commenced by the City and the City has the onus of clearly defining the relief it is seeking and of providing cogent evidence of what changes are required to make the Bridge safe for motorized traffic. It has failed to do so despite having its experts examine the Bridge. These reasons have set out in detail the expert evidence that has been provided to illustrate that the court has not been provided with a clear and detailed proposal.
Without a specific and detailed proposal from the City – one that has been tested and approved as structurally safe for public traffic, this Court is left without reliable evidence upon which to formulate the orders that the City is seeking. This Court cannot make an order based upon conjecture, speculation or the possibility that an "idea" may be workable. This is all the more critical when the safety of the public is at risk. Without evidence, it is not possible to determine whether the work required to open the Bridge safely is within the scope of what was intended by the parties signing the 1906 Agreement.
He also held that Thunder Bay's pleading was deficient and could not support the relief it requested.
[72] Thunder Bay submits that the application judge erred in placing the onus on it to show how the Bridge could be made safe for cars and trucks and that misplacing the onus is an error of law. CN submits that the application judge correctly placed the onus on Thunder Bay, as the City was asking for what amounted to an order for specific performance, and any order for specific performance must be clear and specific.
[73] I agree with Thunder Bay's submission. Thunder Bay was entitled to two heads of relief: a declaration that by refusing to reopen the Bridge for motor vehicles, CN had breached the 1906 Agreement; and an order that CN reopen and maintain the Bridge for motor vehicle traffic. It had no onus to show the court how the Bridge could be reopened safely for motor vehicles. If the onus lay anywhere, it lay with CN, which maintains over 7,000 bridges across Canada, and which under its Bridge Maintenance Program, is required to ensure the safe operation of all of its bridges, including this Bridge.
[74] On the application, each side provided expert evidence from three witnesses. This expert evidence was extensively reviewed by the application judge. The experts on both sides agreed that, though the Bridge is structurally sound, the pedestrian walkways cannot support the weight of a wayward vehicle and the existing curbs and railings would not prevent a wayward vehicle from going into the river.
[75] CN's experts gave the opinion, implicitly accepted by the application judge, that the risk of an errant vehicle going into the river was sufficiently high to warrant closing the Bridge to vehicular traffic until this risk could be addressed by improvements or modifications to the Bridge. According to CN's experts, these improvements or modifications would require structural changes to the Bridge. And as I have said, CN contends that structural changes are beyond its maintenance obligation in s. 5 of the 1906 Agreement.
[76] I question the credibility of CN's expert opinion. Since the Bridge's inception, CN has maintained it for all types of vehicular traffic, and for nearly 70 years exclusively for motor vehicle traffic. In all this time, CN never claimed that the Bridge posed a safety hazard. It has not claimed that the fire in 2013, which caused only minor damage, in any way damaged the roadways over the Bridge or impaired their safety. And yet not once has a car or truck gone off either roadway and into the river. Somehow, a Bridge that was seemingly entirely safe for motor vehicle traffic up until the time of the fire – and especially so after the speed limit was reduced and speed bumps were installed – has now become unsafe and cannot be reopened unless the Bridge is structurally altered. I find it hard to fathom how CN can claim that a safety hazard now exists and can only be alleviated by structural changes to the Bridge.
[77] But neither the credibility nor the reliability of the expert evidence needs to be addressed in this appeal because the expert evidence is essentially irrelevant. The citizens of Thunder Bay had a contractual right to cross the Bridge by motor vehicle and CN has a contractual obligation to maintain the Bridge for that purpose in perpetuity. By refusing to reopen the Bridge to cars and trucks, CN has breached the 1906 Agreement. To rectify the breach, it must reopen the Bridge and maintain the roadways for motor vehicle traffic. How it chooses to do so is for it to decide. CN, not Thunder Bay, is the expert in bridge maintenance. As I have said, it maintains over 7,000 bridges. The Bridge Maintenance Program, referred to by the application judge early in his reasons, but not in his analysis, governs its maintenance obligation for all its bridges.
[78] That program, mandated by the Railway Safety Act, R.S.C., 1985, c. 32 (4th Supp.) and Transport Canada, takes precedence over any agreement. Under it, CN assumes responsibility for the condition of bridges over which CN and other railway companies operate trains. CN has admitted that its Bridge Maintenance Program applies to this Bridge, and not just to the railway tracks but as well to the roadways and pedestrian walkways, as it is a combined Bridge. CN has also admitted that because a bridge does not comply with modern design standards, as this Bridge does not, is not a reason to close a bridge. Under the Bridge Maintenance Program, CN maintains many bridges that do not meet current standards. It does so by making any repairs and upgrades needed to mitigate any safety risk from outdated designs. If any doubt exists about onus, the Bridge Maintenance Program resolves that doubt.
[79] Through its experts, Thunder Bay did put forward at least one suggestion for how to alleviate the safety concerns raised by CN's experts. But it had no obligation to do so. It is entitled simply to an order that CN reopen the Bridge for cars and trucks and maintain it in accordance with its contractual obligation under the 1906 Agreement. To repeat what I said earlier, at bottom, CN wants this court to relieve it of its contractual obligation on the premise that the Bridge cannot be used safely by cars and trucks without structural changes, which are beyond CN's maintenance obligation. I doubt the validity of the premise of CN's request. But whether valid or not, the relief underlying it was not sought by CN in this litigation, nor ordered by the application judge, and is precluded by the 2016 stay order of Fregeau J.
D. Conclusion
[80] I would allow the appeal, set aside the order of the application judge and in its place:
a) Declare that CN has breached the 1906 Agreement; and
b) Order CN to reopen the Bridge for vehicle traffic and maintain the Bridge in accordance with the 1906 Agreement.
[81] Thunder Bay is entitled to its costs of the appeal and the application in the agreed on amounts of $40,000 and $250,000, each amount inclusive of disbursements and applicable taxes.
Released: June 11, 2018
"John Laskin J.A."
"I agree. J.C. MacPherson J.A."
"I agree. Fairburn J.A."
