COURT FILE NO.: CV-15-11032-00CL DATE: 20160719 ONTARIO SUPERIOR COURT OF JUSTICE COMMERCIAL LIST

BETWEEN:

WEYERHAEUSER COMPANY LIMITED Plaintiff – and – HER MAJESTY THE QUEEN AS REPRESENTED BY THE MINISTRY OF THE ATTORNEY GENERAL Defendant – and – RESOLUTE FP CANADA INC. Intervener

COUNSEL: Christopher D. Bredt and Markus Kremer, for the Plaintiff Leonard F. Marsello, Tamara D. Barclay and Nansy Ghobrial, for the Defendant Crawford Smith and Jeremy R. Opolsky, for the Intervener

HEARD: April 4 and 5, 2016

REASONS FOR JUDGMENT

HAINEY J.

Overview

[1] In 1977, two First Nations bands commenced an action against the owners of a property in Dryden, Ontario alleging that the owners had contaminated a river with mercury. In 1985, the litigation settled. As part of the settlement, the Province of Ontario granted an indemnity to the property owner, Great Lakes Forest Products Limited and its successors and assigns.

[2] The plaintiff, Weyerhaeuser Company Limited, purchased the property in 1998. The intervener, Resolute FP Canada Inc., is Great Lakes’ corporate successor.

[3] In August 2011, the Ontario Ministry of the Environment (“MOE”) made an environmental remediation order against Weyerhaeuser and Resolute in respect of a mercury disposal site on the property.

[4] The narrow issue before the court is whether the indemnity granted by the Province in 1985 (“Ontario Indemnity”) requires the Province to indemnify Weyerhaeuser and Resolute for their costs of complying with the remediation order.

[5] Weyerhaeuser and Resolute submit that the Ontario Indemnity is broadly worded, and expressly includes a statutory claim brought by an agency of the Province such as the remediation order. The Ontario Indemnity has no time limit, and Weyerhaeuser and Resolute submit that the Province is obligated to indemnify them for their costs of complying with it.

[6] The Province submits that it is not responsible for Weyerhaeuser’s and Resolute’s costs of complying with the remediation order under the Ontario Indemnity.

Facts

[7] Dryden Paper Company Limited operated a pulp and paper mill on the Dryden property in the 1960s and 1970s. Its affiliate, Dryden Chemicals Limited, also operated a plant on the Dryden property that produced sodium hydroxide and chlorine used to bleach the paper produced in the mill. The mercury-contaminated waste was buried at a disposal site, which discharged mercury waste into the nearby river system. The Province became aware of this contamination in the 1970s and began imposing environmental compliance conditions upon the owners of the Dryden property in 1977.

[8] In 1979, while the lawsuit was still pending, Great Lakes entered into negotiations to buy the Dryden property. Great Lakes was reluctant to purchase the property without protection from potential environmental liabilities arising from the disposal site.

[9] The Province became concerned when Great Lakes hesitated to complete the sale. If the transaction did not go forward, the pulp and paper operation in Dryden would close resulting in serious economic repercussions to the area. As a result, the Treasurer of Ontario provided assurances to Great Lakes that the Province would indemnify Great Lakes for any amounts over $15 million that Great Lakes was required to pay for damages arising from the pollution on the property. The Province’s assurance was provided on the condition that Great Lakes commit to expend $200 million for the modernization and expansion of the Dryden pulp and paper operation (“1979 Indemnity”).

[10] After it obtained the 1979 Indemnity, Great Lakes purchased the Dryden property in December 1979.

[11] In 1985, the First Nations bands settled the lawsuit with the Province, Reed and Great Lakes (“the 1985 Settlement”). The settlement documents executed by all parties at the time included a Memorandum of Agreement (“the 1985 Memorandum of Agreement”) and an Escrow Agreement (“the 1985 Escrow Agreement”).

[12] The 1985 Memorandum of Agreement, in its recitals, defines the “issues” that it addressed as follows:

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

[13] It also included the following provisions:

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

Great Lakes will pay $6,000,000 and Reed will pay $5,750,000 on the terms set forth below, to be allocated to Islington in the sum of $5,541,500 and to Grassy Narrows in the sum of $6,208,500.

Ontario shall provide to Great Lakes and Reed indemnities in respect of the issues.

[14] Pursuant to the 1985 Memorandum of Agreement, the Province provided Great Lakes and Reed with the Ontario Indemnity. The Ontario Indemnity was annexed as Schedule “F” to the 1985 Escrow Agreement.

[15] The Supreme Court of Ontario approved the 1985 Memorandum of Agreement in a judgment dated June 26, 1986 (“the 1986 Judgment”). The 1986 Judgment included the following paragraph:

1. THIS COURT ORDERS AND DECLARES that the settlement of the within action in accordance with the terms of the Memorandum of Agreement is hereby approved.

[16] The Ontario Indemnity formed part of the 1985 Settlement approved by the Supreme Court of Ontario in the 1986 Judgment.

[17] The recitals and s. 1 of the Ontario Indemnity provide as follows:

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

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

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

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

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

[18] Section 4 of the Ontario Indemnity provides as follows:

The foregoing indemnity shall be valid without limitation as to time.

[19] Section 6 of the Ontario Indemnity contains the following enurement clause:

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

[20] On August 4, 1998, Weyerhaeuser entered into an agreement to buy the Dryden property and the pulp and paper manufacturing assets from Great Lakes’ successor, Bowater Pulp and Paper Canada Inc. (“the 1998 Agreement”). The 1998 Agreement included the following description of the assets Weyerhaeuser purchased and the contractual rights and indemnities it received in relation to the Dryden property:

3.1 Property and Assets to be Purchased and Sold

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

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

(xiv) Warranty Rights - the full benefit of all representations, warranties, guarantees, indemnities, undertakings, certificates, covenants, agreements and the like and all security therefore received by the Vendor on the purchase or other acquisition of any part of the Purchased Assets or otherwise.

[21] Weyerhaeuser did not want to purchase the disposal site because of the environmental liabilities associated with it. As a result, the disposal site was expressly excluded from the property that Weyerhaeuser purchased from Bowater pursuant to the 1998 Agreement. Bowater’s retention of the disposal site required its severance from the Dryden property pursuant to the Province’s Planning Act [1]. This required the consent of the Province’s Minister of Municipal Affairs because the Dryden property was located in an organized municipality. The 1998 Agreement required Bowater to obtain a severance of the disposal site prior to, or as soon as possible after, the closing of the 1998 Agreement.

[22] The Province’s Minister of Municipal Affairs delayed in providing consent for the severance. Bowater was, therefore, not able to obtain a severance of the disposal site until August 2000. Consequently, Weyerhaeuser held title to the disposal site for a period of approximately two years. During this period, Weyerhaeuser did not have a beneficial interest in the disposal site, did not possess or exercise any control over it or contribute any waste to it. Throughout this period Weyerhaeuser leased back the disposal site to Bowater, which remained in control and possession of the site.

[23] In August 2000, Bowater obtained title to the disposal site when the Province granted severance.

[24] In 2007, Weyerhaeuser sold the Dryden property (not including the disposal site) to Domtar Inc.

[25] In 2009, Bowater’s successor sought and obtained protection under the Companies’ Creditors Arrangement Act [2], from the Superior Court of Quebec following which the disposal site was abandoned.

[26] On August 25, 2011, the MOE issued the remediation order requiring Weyerhaeuser, Resolute (as Great Lakes’ corporate successor) and others to conduct mandatory environmental monitoring and reporting with respect to the disposal site and to make substantial payments to the Province as financial assurances in respect of the site.

[27] Weyerhaeuser and Resolute have each filed a notice of appeal from the remediation order to the Environmental Review Tribunal (“ERT”). Those appeal proceedings are ongoing.

Issues

[28] The issues that I must determine are the following:

1. Should Resolute be granted leave to intervene as a party in this proceeding?
2. Is this an appropriate case to grant summary judgment?
3. Does the Ontario Indemnity cover Weyerhaeuser’s and Resolute’s costs of complying with the remediation order?
4. If it does cover these costs, does this result in impermissible fettering of statutory discretion by the Province?
5. Can Weyerhaeuser rely upon the Ontario Indemnity as a successor or an assignee?

Positions of the Parties

[29] Weyerhaeuser submits that the clear and unequivocal wording of the Ontario Indemnity demonstrates that the parties intended it to apply to statutory proceedings brought by agencies of the Province such as the MOE. As a result, Weyerhaeuser maintains that it is entitled to be indemnified by the Province for any costs it incurs responding to the remediation order. Further, Weyerhaeuser submits that the fettering doctrine only applies to agreements that restrict legislative functions and not to business agreements such as the Ontario Indemnity. According to Weyerhaeuser, its position that its costs of complying with the remediation order are covered under the Ontario Indemnity does not fetter the Province’s legislative discretion. Finally, Weyerhaeuser submits that under the enurement clause in para. 6 of the Ontario Indemnity it is entitled to rely upon it as either a successor or an assignee.

[30] Resolute submits that it is entitled to rely upon the Ontario Indemnity as Great Lakes’ corporate successor. It adopts the same positions as Weyerhaeuser about whether its costs of complying with the remediation order are covered by the Ontario Indemnity.

[31] The Province submits that the Ontario Indemnity cannot be interpreted to cover the costs of regulatory compliance by Weyerhaeuser and Resolute because such an interpretation:

(i) ignores the factual matrix of the 1985 Settlement; (ii) cannot be reconciled with the language of the Ontario Indemnity when construed as a whole; (iii) does not accord with the other documents that form part of the settlement of the lawsuit in 1985; and (iv) is not supported by the subsequent conduct of the parties.

[32] The Province further submits that the Crown cannot enter into an agreement that directly fetters a Minister’s discretion. It argues that Weyerhaeuser’s and Resolute’s interpretation of the Ontario Indemnity improperly fetters the Province’s discretion.

[33] Finally, the Province submits that Weyerhaeuser cannot rely upon the enurement clause in the Ontario Indemnity because the Ontario Indemnity was not properly assigned to it.

Analysis

Issue # 1 Should Resolute be permitted to intervene as a party?

[34] In December 2014, Weyerhaeuser and the Province provided their consent for Resolute to intervene as a party in this proceeding pursuant to Rule 13.01 of the Rules of Civil Procedure.

[35] I am satisfied that Resolute should be granted leave to intervene as a party in this proceeding.

Issue # 2 Is summary judgment appropriate?

[36] Rule 20.04 (2)(b) of the Rules of Civil Procedure provides that the court shall grant summary judgment if the parties agree to have their claim determined by summary judgment and the court is satisfied that it is appropriate to grant summary judgment. The parties all agree that this is an appropriate case for summary judgment. There are no material facts in dispute and the determination of the dispute involves the interpretation of an agreement. I am, therefore, satisfied that this is an appropriate case to grant summary judgment.

Issue # 3 Does the Ontario Indemnity cover Weyerhaeuser’s and Resolute’s costs of complying with the remediation order?

Plain and Ordinary Meaning of the Words in the Ontario Indemnity

[37] To determine whether the Ontario Indemnity covers Weyerhaeuser’s and Resolute’s costs of complying with the remediation order, I must interpret the meaning of the words used in the Ontario Indemnity. In interpreting the Ontario Indemnity I am required to “read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract”: Sattva Capital Corp. v. Creston Moly Corp. [3].

[38] The Supreme Court emphasized in Sattva that the language of the contract remains preeminent. The surrounding circumstances “must never be allowed to overwhelm the words of the agreement.”

[39] In Eli Lily & Co. v. Novopharm Ltd. [4], the Supreme Court of Canada emphasized that a court should presume that the parties to a contract intended the legal consequences of the words they used as follows:

The contractual intent of the parties is to be determined by reference to the words they used in drafting the document, possibly read in light of the surrounding circumstances which were prevalent at the time. … Indeed, it is unnecessary to consider any extrinsic evidence at all when the document is clear and unambiguous on its face. … However, to interpret a plainly worded document in accordance with the true contractual intent of the parties is not difficult, if it is presumed that the parties intended the legal consequences of their words.

[40] The Province urges me to interpret the meaning of the Ontario Indemnity with particular reference to the factual matrix of the 1985 Settlement and the subsequent conduct of the parties. In my view, this is not the appropriate starting point for my analysis. The first step must be to analyze the actual words used by the parties in the Ontario Indemnity.

[41] In s. 1 of the Ontario Indemnity the parties used the following words to describe the scope and extent of the Province’s agreement to indemnify Great Lakes:

any obligation, liability, damage, loss, costs or expenses incurred by Great Lakes … as a result of any claim, action or proceeding whether statutory or otherwise, existing at December 17, 1979 or which may arise or be asserted thereafter … whether by individuals, firms, companies, governments (including the Federal Government of Canada and any province or municipality thereof or any agency, body, or authority created by statutory or other authority) … because of or relating to any … circumstances … with respect to, in either whole or in part, the discharge or escape or presence of any pollutant by Reed or its predecessors, including mercury or any other substance, from or in the plant or plants or lands or premises forming part of the Dryden assets sold by Reed Ltd. to Great Lakes under the Dryden Agreement … [Emphasis added.]

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

[43] I must, therefore, consider whether the remediation order is a claim or proceeding within the meaning of this section of the Ontario Indemnity. In Markevich v. Canada [5], the Supreme Court of Canada gave the term “proceeding” a very wide meaning as follows:

Although the word “proceeding” is often used in the context of an action in court, its definition is more expansive. The Manitoba Court of Appeal stated in Royce v. MacDonald (1909), 12 W.L.R. 347 (Man. C.A.), at page 350, that the “word ‘proceeding’ has a very wide meaning and include steps or measures which are not in any way connected with actions or suits”. In Black’s Law Dictionary … the definition of “proceeding” includes, inter alia, “an act necessary to be done in order to obtain a given end; a prescribed mode of action for carrying into effect a legal right”.

[44] Because the remediation order is a necessary procedural step for the MOE to assert its statutory rights under the Environmental Protection Act [6] (“EPA”), I am satisfied that it is a “proceeding” within the meaning of s. 1 of the Ontario Indemnity.

[45] The term “claim” also has a broad meaning. The Ontario Court of Appeal made this clear in Prudential Assurance Co. v. Walwyn, Stodgell, Cochran, Murray Ltd. [7] when the court interpreted the word “claim” in an indemnity to cover the costs of an order to comply issued to a landlord by the City of Toronto. The remediation order is a similar order. It is a legal demand by the MOE pursuant to its authority under the EPA to require monitoring and remediation of the disposal site by Weyerhaeuser and Resolute. I am satisfied that it is a claim against them within the meaning of the Ontario Indemnity.

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

• The remediation order is a statutory claim or proceeding, • that imposes obligations, liabilities or future costs on Great Lakes’ successors, • which arise or were asserted by a statutory agency of a province, • because of or relating to events and circumstances, • caused by the presence of mercury deposited in the disposal site by Reed.

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

The Province’s Submissions

[48] I do not accept the Province’s submissions for the following reasons:

• The Province submits that the Ontario Indemnity is limited to claims asserted by third parties and cannot apply to it. The plain and ordinary meaning of the words used by the parties does not support such an interpretation. In particular, the specific reference to “any province” and “statutory” claim and “proceeding” in s. 1 must be taken to refer to the Province of Ontario and its agencies such as the MOE. The only statutory claim or proceeding that could be asserted by a province against Great Lakes in respect of the Dryden Property would be a claim or proceeding asserted by the Province of Ontario. All of the other provinces lack the constitutional authority to pursue a statutory claim in Ontario. This would have been known to the parties in 1985 because of the Supreme Court of Canada’s decision in Interprovincial Co-operative Ltd. v. R. [8], in which the court held that provinces lack constitutional authority to enact environmental legislation with extra-territorial effect. • The Province submits that the notification provision in s. 2 of the Ontario Indemnity is inconsistent with Weyerhaeuser’s and Resolute’s interpretation. In my view, the requirement to notify the Province of any pollution claims cannot override the clear, unambiguous and broad wording of s. 1 of the Ontario Indemnity. This notification requirement is not inconsistent with the Province’s obligation to indemnify Weyerhaeuser and Resolute for their costs of complying with the remediation order. • The Province submits that Weyerhaeuser obtained environmental indemnities from Bowater in the 1998 Agreement because it did not believe that the Ontario Indemnity covered the cost of complying with environmental regulation. However, it makes commercial sense to obtain the maximum protection possible in respect of possible environmental liability. The fact that Weyerhaeuser wanted to obtain as much protection as it could from any liability arising from its acquisition of the Dryden property does not affect the clear and unambiguous wording of the Ontario Indemnity. • The Province’s comparison of the language of the 1979 Indemnity and the Ontario Indemnity does not persuade me that Weyerhaeuser’s and Resolute’s interpretation of the Ontario Indemnity is incorrect. The Ontario Indemnity is a separate agreement and must be interpreted by considering the words used by the parties in it, not a previous agreement. Further, the fact that the 1979 Indemnity contained a specific provision that excluded the cost of regulatory compliance supports the conclusion that the Ontario Indemnity includes these costs because it does not contain a similar provision. • The fact that Resolute and its predecessor did not seek indemnity under the Ontario Indemnity until now does not change the clear and unambiguous meaning of its words and cannot affect Weyerhaeuser’s rights under it. • Finally, the surrounding circumstances at the time the Province granted the Ontario Indemnity does not support its position. The Province wanted to protect Dryden’s economy and encouraged Great Lakes to continue the pulp and paper operation in Dryden and to invest a great deal of money in upgrading the operation. It was well known that the disposal site posed a serious environmental liability. The Province offered Great Lakes and its successors future protection from environmental liability to encourage it to acquire the Dryden pulp and paper operation under the 1979 Indemnity. The Ontario Indemnity replaced the 1979 Indemnity and was part of the settlement of the lawsuit in which Great Lakes agreed to pay millions of dollars, and also continued to spend significant amounts of money to modernize the pulp and paper operation in Dryden. Under the circumstances, it would be commercially absurd to conclude that the parties contemplated that the Province could at any time withdraw its commitment to protect Great Lakes and its successors from environmental liability arising from the disposal site and issue an order requiring Great Lakes or its successors to incur substantial costs to remediate the site.

[49] For all of these reasons, I am satisfied that the Ontario Indemnity covers the costs incurred by Weyerhaeuser and Resolute in complying with the remediation order.

Issue # 4 Does the Ontario Indemnity result in the fettering of the Province’s discretion?

[50] The Province submits that it cannot enter into an agreement that directly fetters a Minister’s discretion. It argues as follows at paras. 78-79 of its factum:

78. Agreements to pay compensation to those affected by the exercise of statutory discretion may act as an impermissible indirect fetter. While this indirect fettering rule does not apply to “business agreements”, the 1985 Memorandum of Agreement does not fall into this category.

79. An obligation to pay compensation for the costs of environmental regulatory efforts would act as a significant disincentive to the exercising of those powers by government officials. It would amount to Ontario absorbing the cost of environmental regulation in response to its own orders. This creates an absurdity and is contrary to the regulatory scheme of the EPA which does not envision the MOE as a principal remediator as distinct from a regulator.

[51] The fettering doctrine only applies to agreements that purport to limit the way in which a government exercises its legislative discretion. It does not apply to the Ontario Indemnity for the following reasons:

• The fettering doctrine only applies to agreements that restrict legislative functions, not to business agreements. The Ontario Indemnity is a business agreement that does not restrict the Province’s legislative functions; • The Supreme Court of Ontario approved the Ontario Indemnity in the 1986 Judgment. The Province did not challenge the 1986 Judgment. It cannot now engage in a collateral attack on the 1986 Judgment by arguing that it could not enter into the court-approved indemnity agreement; and • When the Province enters into contracts it is governed by the private law of contract and should be bound by its contracts in the same way as a private person. The Province is presumed to have acted in good faith when it granted the Ontario Indemnity. Accordingly, it must have believed that it was fully enforceable and not restricted by the fettering doctrine. The Province should be held to the business agreement it entered into.

[52] My conclusion is supported by the decisions in Wells v. Newfoundland [9], Pacific National Investments Ltd. v. Victoria (City) [10], Rio Algom Ltd. v. Canada [11], and Ontario First Nations (2008) Limited Partnership v. Ontario (Minister of Aboriginal Affairs) [12] in which Lederer J. stated as follows at paras. 58-59:

The Revenue Sharing Agreement is a business agreement and not a legislative act, such as the down-zoning in Pacific National Investments Ltd. v. Victoria (City).

To go back to where these reasons begin, it should not be a common or simple matter for the Crown to breach its agreements with impunity. We should be able to expect more than that …

[53] The same comments apply to the Province’s position in this case. The Province entered into a business agreement designed to save the pulp and paper industry in Dryden and to settle the lawsuit. In doing so, it provided very broad protection to Great Lakes and its successors from future environmental liability from a known environmental hazard. On the strength of this commitment by the Province, Great Lakes acquired the Dryden Property, contributed to the settlement of the lawsuit and invested heavily in the pulp and paper operation in Dryden. The Province should not be permitted to withdraw this protection from future environmental liability and breach its indemnification agreement with impunity. It should be held to the bargain it made.

[54] For these reasons, I am satisfied that the Ontario Indemnity does not improperly fetter the Province’s discretion.

Issue # 5 Can Weyerhaeuser rely upon the Ontario Indemnity as a successor or an assignee?

[55] There is no dispute that Resolute, as the corporate successor of Great Lakes, has the benefit of the Ontario Indemnity. However, the Province submits that Weyerhaeuser cannot rely upon the indemnity.

[56] As indicated above, s. 6 of the Ontario Indemnity provides as follows:

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

[57] The Province submits that Weyerhaeuser cannot rely on this clause because the Ontario Indemnity was not assigned to it under the 1998 Agreement and there is no reference to it in that agreement. Further, because the 1998 Agreement contains other specific environmental indemnities the Province argues that Weyerhaeuser cannot rely on the enurement clause in the Ontario Indemnity. Finally, the Province submits that the enurement clause “is not a covenant which runs with the land” and therefore Weyerhaeuser cannot rely upon it for the two-year period when it held title to the disposal site.

[58] Under s. 6 Weyerhaeuser is entitled to rely upon the Ontario Indemnity if it is either a “successor” or an “assignee” of Great Lakes.

[59] There is no dispute that Weyerhaeuser was a successor in title to the disposal site for a period of approximately two years from September 30, 1998 to August 25, 2000. This is the basis upon which the remediation order was made by the MOE against Weyerhaeuser.

[60] It is Weyerhaeuser’s position that the Ontario Indemnity applies to any party who owned the disposal site after Great Lakes with respect to any claims or proceedings that arise out of that ownership regardless of when the claim was made. According to Weyerhaeuser, both Resolute and it can rely upon the Ontario Indemnity with respect to claims relating to the time period that they owned the disposal site.

[61] The Ontario Court of Appeal considered a similar enurement clause in Brown v. Belleville (City) [13], which provided as follows:

THIS INDENTURE Shall [sic] inure to the benefit of and be binding upon the parties hereto and their respective heirs, administrators successors and assigns.

[62] At paras. 80 and 84-85 of Brown, E.A. Cronk J.A. stated as follows:

The analysis of the City’s standing challenge must begin with consideration of the intentions of the parties at the time the Agreement was entered into, as reflected in the provisions of the Agreement.

… the broad and unqualified language of the enurement clause constitutes an express stipulation by the contracting parties that they intended the benefit of the Agreement to be shared by future owners of Mr. Sills’s lands, as his successors or assigns or by way of inheritance. The language of the enurement clause unequivocally confirms that the contracting parties intended and agreed that the benefit of the Agreement would extend to an aggregation or class of persons that includes successor landowners of Mr. Sills. On the admitted findings of the motion judge, the Browns are Mr. Sills’s successors. In this sense, the Browns are not strangers or ‘third parties’ to the Agreement. Rather, they step into Mr. Sills’s shoes and have standing to enforce the Agreement as against the City as if they were the original covenantee(s) to the Agreement …

In these circumstances, given the intention of the contracting parties stipulated in the Agreement under the enurement clause, I conclude that ‘relaxing’ the doctrine of privity in this case does not frustrate the reasonable expectations of the parties at the time the Agreement was formed. To the contrary, it gives effect to them.

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

[64] As indicated above, under the 1998 Agreement, Bowater expressly assigned to Weyerhaeuser “the full benefit of all representations, warranties, guarantees, indemnities” relating to the Dryden property. There was no restriction on Great Lakes’ ability to assign the benefit of the Ontario Indemnity. I find that the Ontario indemnity was assigned by Bowater to Weyerhaeuser under the 1998 Agreement. I am of the view that this assignment combined with the enurement clause in s. 6 of the Ontario Indemnity makes it clear that Weyerhaeuser can rely upon the Ontario Indemnity as Great Lakes’ assignee.

Conclusion

[65] For the reasons outlined above, I am satisfied that Resolute and Weyerhaeuser are entitled to be indemnified under the Ontario Indemnity for their costs of complying with the remediation order. Their motions are, therefore, granted. The Province’s motion is dismissed.

Costs

[66] Resolute and Weyerhaeuser are entitled to their costs of these motions. I urge counsel to settle the issue of costs. If they cannot, they may provide me with written submissions on costs of no longer than three double-spaced pages with costs outlines attached within 30 days.

[67] I thank counsel for the efficient and professional manner in which they conducted these proceedings.

HAINEY J.

Released: July 19, 2016

Footnotes

[1] R.S.O. 1990, c. P.13. [2] R.S.C. 1985, c. C-36. [3] 2014 SCC 53, [2014] S.C.J. No. 53 at para. 47. [4] 1998 SCC 791, [1998] 2 S.C.R. 129 at paras. 54-56. [5] 2003 SCC 9 at para. 24. [6] R.S.O. 1990, c. E.19. [7] (1985), 50 O.R. (2d) 609 at paras. 14 and 15. [8] 1975 SCC 212, [1976] 1 S.C.R. 477. [9] 1999 SCC 657, [1999] 3 S.C.R. 199. [10] 2004 SCC 75. [11] 2012 ONSC 550. [12] 2013 ONSC 7141. [13] 2013 ONCA 148.