Ontario First Nations (2008) Limited Partnership v. Ontario Lottery And Gaming Corporation, 2020 ONSC 1516

COURT FILE NO.: CV-19-00629065-00CL & CV-19-00629061-00CL

DATE: 20200331

SUPERIOR COURT OF JUSTICE – ONTARIO

(COMMERCIAL LIST)

IN THE MATTER OF AN ARBITRATION UNDER SECTION 9.2 AND SCHEDULE 9.2 OF THE GAMING REVENUE SHARING AND FINANCIAL AGREEMENT, DATED FEBRUARY 19, 2008

IN THE MATTER OF AN ARBITRATION UNDER THE ARBITRATION ACT, 1991, S.O. 1991, C. 17

RE: ONTARIO FIRST NATIONS (2008) LIMITED PARTNERSHIP, Claimant (Respondent)

AND:

ONTARIO LOTTERY AND GAMING CORPORATION AND HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO, as represented by the Minister of Aboriginal Affairs, Respondents (Appellants)

BEFORE: Hainey J.

COUNSEL: Sheila R. Block, David Outerbridge, Leora Jackson, Hannah Allen, and Nic Wall, for the Claimant (Respondent)

R. Paul Steep, Bryn Gray, Stephanie Sugar, for the Respondent (Appellant), Ontario Lottery and Gaming Corporation

Brent McPherson, Edmund Huang, Manizeh Fancy, and Insiyah Kanjee, for the Respondent (Appellant), Her Majesty in right of Ontario

HEARD at Toronto: November 21 and 22, 2019

REASONS FOR DECISION

Background

[1] These are appeals by Ontario Lottery and Gaming Corporation (“OLG”) and Her Majesty the Queen in Right of Ontario (“Ontario”) from an arbitration decision dated March 27, 2019.

[2] The decision under appeal was issued by the majority of a three-person arbitration panel pursuant to s. 9.2 of the Gaming Revenue Sharing and Financial Agreement (“GRSFA”), which was signed by the parties on February 19, 2008.

[3] The majority of the arbitration panel, retired Justice Stephen Goudge and Mr. Stan Fisher (“majority”), concluded that the GRSFA required Ontario and OLG to share 1.7% of the following three revenue streams that existed in 2008 when the GRSFA was entered into:

(a) gaming revenue from operations conducted and managed by OLG;

(b) ancillary non-gaming revenue from those operations; and

(c) a form of deemed revenue equal to the value of goods and services provided to gaming patrons on a complimentary basis.

[4] According to the majority, the GRSFA does not permit OLG to cease paying 1.7% of the NGR revenue stream diverted to third party private operators and of Comps provided by these private operators.

[5] The third arbitrator, Mr. John Campion, delivered Dissenting and Concurring Reasons in which he concluded that OLG had made a fundamental change to the revenue structures under the GRSFA and in doing so OLG had breached an implied contractual duty to disclose and consult with the respondent, Ontario First Nations (2008) Limited Partnership (“OFNLP”). However, Mr. Campion disagreed with the majority’s conclusion that OLG and Ontario had breached the GRSFA by failing to pay 1.7% of NGR earned and Comps provided by third party service providers. He concluded that OFNLP had no entitlement to a share of revenues that OLG did not receive and that the majority’s interpretation of the GRSFA relied upon inadmissible evidence. He also concluded that OFNLP had suffered no damages as a result of OLG’s alleged breach of the GRSFA.

Facts

[6] None of the facts are materially in dispute although there is a dispute about the admissibility and use made by the majority of certain of the evidence.

The Parties

[7] OLG is a Crown corporation that conducts and manages lottery schemes in Ontario on behalf of the provincial government. OLG operates pursuant to an exemption to the Criminal Code’s prohibition of gaming and betting in Canada. OLG’s profits are paid to Ontario and are the largest source of non-tax revenue for the Province.

[8] OFNLP is a limited partnership of 132 of the First Nations in Ontario. It was established in 2008 to receive revenue from OLG under the GRSFA and to distribute that revenue to First Nations in Ontario in order to advance their growth and capacity in respect of education, health, economic, cultural and community development.

The Previous Revenue Sharing Agreement

[9] Prior to the GRSFA, the Casino Rama Revenue Agreement (“CRRA”) provided for the sharing of certain of OLG’s revenues with Ontario’s First Nations. Numerous disputes arose in connection with the CRRA. The following three disputes are relevant to the arbitration:

(a) The 20% Litigation – During Mike Harris’ government, Ontario imposed a 20% “win tax” on Casino Rama’s gross revenues to be paid to Ontario in priority to First Nations’ entitlement. In 1998, First Nations commenced litigation against Ontario and OLG to recover the lost “win tax” amounts claiming more than $2 billion in damages. This litigation was settled through the GRSFA.

(b) The Casino Rama Expansion Loan – Cash Sweep – Casino Rama had taken out a bank loan to fund construction of a hotel and entertainment complex. Rama First Nations, the guarantor of the loan, attempted to sweep excess cash out of Casino Rama’s bank accounts to make an early repayment of the loan. OLG and OFNLP opposed this and the court concluded that Rama First Nations could not do so.

(c) The Residues Arbitration – Subsequently, in 2004, Rama First Nations advised OLG that it would not refinance the expansion loan when it came due in 2007. As a result, OLG had to implement the cash sweep it had previously opposed to avoid a default under the loan. OLG repaid the loan ahead of schedule and suspended payments to OFNLP under the CRRA in order to do so. This resulted in another dispute between OFNLP, OLG and Ontario known as the “Residues Arbitration” which was settled in February 2018.

[10] As a consequence of these disputes, First Nations had unpredictable and reduced revenue flows from the CRRA. In 2004, OLG proposed that the parties enter into a new revenue sharing agreement to replace the CRRA. OLG proposed that the new revenue sharing agreement should be based on a percentage of overall provincial gaming revenue.

Negotiations of the GRSFA

[11] In early 2005, former Ontario Premier David Peterson and a six-member First Nations team were chosen to lead their respective parties in the negotiation of a new revenue sharing agreement.

[12] Mr. Peterson was appointed as the Province’s representative by an Order-in-Council that expressed Ontario’s desire to “establish a new Ontario First Nations Gaming Revenue Sharing Agreement that provides more stable funding and strengthens the financial position of the Ontario First Nations”. The terms of reference for Mr. Peterson’s appointment stated that the revenue sharing agreement “should strengthen the financial position of the Ontario First Nations and provide a more stable source of funding for community development, health, education, economic development and cultural development.”

[13] At the outset of the negotiations, the parties agreed in writing to negotiate with “honour and good faith” and Ontario and OLG committed to provide comprehensive financial information to First Nations.

[14] The negotiations continued from 2005 until June 2007. The parties agreed upon certain key terms that would eventually become part of the GRSFA, including the “base” of provincial revenue from gaming operation that was to be shared with First Nations. This base, which was defined as “Gross Revenues”, was agreed to consist of the following:

(i) gaming revenues from lotteries, slots and table games (“GR”);

(ii) revenues from non-gaming activities ancillary to the conduct and management of this gaming (“NGR”); and

(iii) the retail value of accommodation, food and beverage services and other services provided to gaming patrons on a complimentary basis (“Comps”).

[15] OLG gave financial projections to the First Nations’ negotiators that quantified the anticipated future Gross Revenues over the life of the GRSFA based upon past gross revenues generated by OLG from all three components of the Gross Revenues definition, GR, NGR and Comps.

[16] Before presenting the draft GRSFA to the First Nations’ Chiefs for approval in 2007, the First Nations’ negotiating team sought confirmation that Ontario would not in future try to “turn current revenues that are received to the final account of the Province into revenues that are not.”

[17] In response, Mr. Peterson gave his “unequivocal commitment” that “the Province has no intention of undermining a twenty year agreement with First Nations in Ontario by conducting itself in any manner that would thwart the terms of such agreement … while revenues from such gaming go to third parties. OFNLP will also have a full and equal member on the board of directors of OLG to protect and advance the interests of First Nations in Ontario.”

[18] The First Nations’ Chiefs did not approve the draft GRSFA brought to them in June 2007. Instead, they appointed a new negotiating team to continue negotiations with Ontario and OLG. The second phase of negotiations began where the previous negotiations left off, using the same definition of Gross Revenues.

[19] The second phase of negotiations was conducted on a government-to-government basis with the First Nations’ Chiefs negotiating directly with the Minister of Aboriginal Affairs, Mr. Michael Bryant. Mr. Peterson ceased to be involved. Minister Bryant emphasized repeatedly that the government could be trusted and would honour its promises to the First Nations.

[20] The negotiations with Minister Bryant were solemn and conducted in accordance with First Nations’ traditions. Smudge ceremonies were conducted at the start of negotiations. The meetings took place in the presence of objects sacred to First Nations’ people, including the pipe and the eagle feather. First Nations’ elders were present to guide the negotiators.

[21] First Nations’ negotiators and Minister Bryant reached agreement on the terms of the GRSFA in 2008.

[22] The GRSFA then had to be approved by the First Nations’ Chiefs. A special assembly of Chiefs was held for this purpose in February 2008. Minister Bryant attended the assembly personally. He explained to the Chiefs the nature of Ontario's commitment as follows:

It doesn't change, no matter who the Premier is, no matter who the Minister of Aboriginal Affairs is, no matter what colour the Government is... No matter what the Government is, this is an agreement and it provides stability of revenue for 25 years. …

[T]he government came to this decision, it is not just me, this is myself and the Premier and the Attorney General and all the ... the whole cabinet. And we talked about respect and autonomy. [I]n the commercial agreement, the old one, there wasn't the respect in that agreement that is deserved in a Nation-to-Nation relationship. So this is an important agreement as well because it's a clear indication, as clear an indication from the Government, not in words, but in deeds and in rights and in dollars, as to our commitment to a new relationship based upon respect and autonomy. ...

We also tried to clarify a lot of issues and spent a lot of time clarifying terms that – lawyers can hammer out and lawyers can hammer out and, at some point, your Negotiating Committee needed to be satisfied that what was on that paper reflects the understanding that we had at the negotiating table, Nation to Nation. ...

... [T]he agreement is what the agreement is: It doesn't matter if the Government changes on our side and if there's a change to the Chief and Council, the agreement is still the agreement and it's not changed by any change in positions on either side.

[23] The First Nations’ Chiefs approved the GRSFA after hearing from Minister Bryant. They established OFNLP to receive and distribute the funds to be received under the GRSFA and they discontinued the 20% Litigation.

Key Provisions of the GRSFA

(a) Purpose: The GRSFA states that its purpose is "advancing the growth and capacity of First Nations in Ontario in respect of community development, health, education, economic development and cultural development.”

(b) Term: The agreement has a 20-year initial term plus an automatic renewal term of five years (subject to any amendments that may be negotiated by the parties). It requires that Ontario continue to share revenue from gaming operations with First Nations indefinitely, for as long as Ontario is involved in conducting and managing lottery schemes.

(c) 1.7% Share: Under the agreement, First Nations are to receive 1.7% of annual Gross Revenues from all gaming revenue, NGR and Comps relating to lottery schemes conducted and managed by Ontario and its agents, starting in OLG's 2012 fiscal year. OLG is to make the revenue sharing payments in equal monthly installments known as Monthly Revenue Share Payments ("MRSPs”). Each MRSP is equivalent to one-twelfth of 1.7% of OLG’s prior fiscal year's Gross Revenues.

(d) Gross Revenues: "Gross Revenues" are defined in s. 1.1(nn) and Schedule 1.1(nn) of the GRSFA. The definition states as follows:

1. For purposes of this Agreement, "Gross Revenues" means, in respect of an Agent of the Province (including OLG), the revenues of that Agent of the Province, before the deduction of promotional allowances, as reported in the Segmented Information notes in the notes to, or as otherwise reported in, the audited Consolidated Financial Statements of that Agent of the Province and generated from the following:

(a) lotteries, including on-line games, sports games, instant games and bingo gaming;

(b) slot machines and table games at casinos and racetracks; and

(c) non-gaming activities ancillary to the conduct and management of Lottery Schemes, including hotel, food, beverage and other services, including the retail value of accommodation, food and beverage services and other services provided to gaming patrons on a complimentary basis.

(e) Accounting for Gross Revenues: Each year, OLG provides an Audited Gross Revenue Statement to OFNLP. In that statement, OLG sets out the Gross Revenues under the GRSFA for the prior fiscal year, determined in accordance with the terms of the GRSFA. The Gross Revenues for a given year are determined by first identifying OLG's current revenues as reported in OLG's financial statements in that year. Next, the GRSFA requires OLG to account for these revenues using the accounting practices and principles that OLG applied at the time the GRSFA was formed. Section 2.4(c) of the GRSFA is explicit. It requires OLG to calculate Gross Revenues for the purposes of revenue sharing with First Nations in accordance with the accounting practices and principles that it applied as of February 19, 2008. Because of this requirement, OLG must make, and has historically made, substantial reconciling adjustments to its own gross revenues when calculating the First Nations' revenue share. The amounts set out in each year's OLG financial statements are adjusted to reflect the amounts that would have been set out in OLG's financial statements for that year using the accounting practices and principles that governed in 2008.

(f) Mandatory Disclosure of Changes to OLG’s Accounting Principles or Practices: Section 2.4(a) of the GRSFA provides that OLG must provide written notice of changes to OLG’s accounting practices or principles relating to the recognition of its own gross revenues and must provide written and, if requested, in-person explanations of any change.

(g) Recalculation of Gross Revenues to Address Changes to Accounting Principles or Practices: Section 2.4(d) provides that in the event of an OLG accounting change in calculating its own revenue, OLG must continue to calculate Gross Revenues for the purposes of the GRSFA in accordance with the accounting practices and principles applied by OLG at the time the GRSFA was executed. OLG must deliver financial reporting on this reconciling adjustment, including an auditor's report.

(h) No Wintax: Section 2.5 of the GRSFA provides for an explicit prohibition against Ontario imposing a wintax in order to reduce the First Nations' revenue share, to avoid a repeat of the events that led to the 20% Litigation.

(i) OLG Board of Directors Appointment: Section 2.6 of the GRSFA provides that First Nations are entitled to nominate a representative of OFNLP as a member of the Board of Directors of OLG, who can, at the governance level, monitor and represent First Nations' interests at OLG.

(j) Disclosure of Gross Revenues Calculation: Section 2.2 of the GRSFA provides that OFNLP is entitled to receive Unaudited and Audited Gross Revenues Statements in April and June each year, which set out the calculation of the Gross Revenues for the preceding fiscal year and the MRSPs payable in the current fiscal year. OFNLP has the right to require discussion of the statements with OLG's finance personnel and OLG's external auditors.

(k) Disclosure of Financial Statements: Section 2.3 of the GRSFA provides that OFNLP is entitled to receive copies of OLG's annual Consolidated Financial Statements and there is also a right for OFNLP to request a discussion of the statements with OLG's finance personnel and auditors.

(l) Right to Object: Section 2.2 of the GRSFA provides that OFNLP can object to any illegal diversion of its revenue share. It was because of the mandatory financial disclosure included in the GRSFA that OFNLP became aware of OLG’s modernization plan for NGR and Comps, through the June 2016 financial statement note. OFNLP then exercised its objection right under this section, leading to the arbitration from which these appeals are brought.

(m) Good Faith: The GRSFA identifies, in multiple provisions, the obligation of the parties to carry out the agreement in good faith. There are also several provisions that highlight the long-term, relational nature of the contract.

Events Leading up to this Dispute

[24] In 2010, OLG began a strategic business review of its operations and concluded that its revenues were threatened and declining and that significant changes in its business model and infrastructure were necessary. (“Modernization”) OLG made an operational decision to transfer the risk and responsibility for non-gaming amenities and revenues at land-based gaming sites to private sector operators. In exchange for assuming these risks and responsibilities, the private operators would keep 100% of NGR. This was in order to attract world-class private operators to invest in OLG’s non-gaming amenities. OLG anticipated that significantly greater Gross Revenues would be generated as a result of the private operators’ investment in non-gaming amenities. OLG projected that its net profits would increase by $1.3 billion annually once Modernization was implemented.

[25] In 2012, OFNLP sought information from OLG about its proposed Modernization, requesting copies of briefs, memoranda, impact assessments, revenue projections and similar documentation. OLG treated OFNLP's request as a freedom of information request and disclosed very little. None of the disclosed information made reference to the transfer of NGR and Comps to private operators.

[26] These events marked the beginning of what Mr. Campion, in his dissenting reasons, described as the "breathtaking" unilateral action of OLG and Ontario "in changing the GRSFA without notice.”

[27] As noted above, one of the key GRSFA clauses designed to prevent improper diversions of the First Nations' revenue share is the requirement for Ontario to appoint an OFNLP representative to OLG’s Board of Directors. From the execution of the GRSFA in February 2008 until 2015, despite OFNLP putting forward qualified candidates for appointment and repeated requests for a board appointment, Ontario declined to make the appointment.

[28] Ultimately, OFNLP initiated arbitration proceedings to compel Ontario to comply with its obligation under the GRSFA to appoint an OFNLP representative to OLG’s Board of Directors. (“Board Appointment Arbitration”) The arbitration panel, composed of three retired judges of the Ontario Superior Court of Justice (Justices Chadwick, Killeen and Lane), unanimously held that Ontario had breached the GRSFA in bad faith. According to the arbitration panel, the breach was "egregious" and exhibited "an odour of moral failure.” The breach was held by the arbitration panel to be inconsistent with the honour of the Crown doctrine.

[29] As the majority noted at para. 68 of their reasons, Ontario's breach of the GRSFA was ongoing throughout the period of OLG's strategic business review. According to the majority, Ontario's failure to make the board appointment "meant that OFNLP did not have a representative within OLG positioned to specifically consider the effect of OLG’s modernization on First Nations when the OLG Board voted to approve the strategic direction for modernization.”

[30] The result of OLG's Modernization was the reorganization of OLG's casino and slot locations using a new operational model.

[31] Under OLG's new operational model, each private operator entered into Casino Operating and Services Agreement (“COSA”) and operated OLG’s non-gaming amenities. This reorganization represented a wholesale reinterpretation by Ontario and OLG of OLG's mandate relating to non-gaming amenities under its enabling legislation. It was completely different from what the parties mutually understood to be legally possible during the negotiation of the GRSFA.

[32] In 2008 when the GRSFA was entered into, OLG did not contemplate that it could transfer responsibility for non-gaming amenities exclusively to private operators. It was only in 2011, as OLG conducted its strategic business review, that it concluded that OLG was permitted to fully outsource the provision of non-gaming amenities. This shift in OLG's operational model was presented to and approved by the provincial Cabinet.

[33] Under this new operational model, the private COSA operators, through their contracts with OLG, retain 100% of NGR and control Comps. OLG gave up its right to receive any share of NGR from the COSA operators and any control over Comps. Ontario and OLG take the position that, in doing so, they were able to shed their obligation to share with First Nations the 1.7% of NGR and Comps generated at these COSA gaming sites.

[34] OLG decided internally by early 2013 that it would cease sharing NGR and Comps from COSA gaming sites with First Nations. OLG recognized that the effect of turning off these "two taps" of revenue could result in a decrease in OFNLP's payments under the GRSFA. However, OLG did not disclose its plan to OFNLP.

[35] By the fall of 2015, the procurement process for the selection of COSA operators was underway. OFNLP reached out to OLG to propose a period of relationship-building between the parties, after the bad faith finding against Ontario in the Board Appointment Arbitration.

[36] OLG expressed its willingness to try to repair the relationship between the parties. OLG's senior executives attended a meeting with OFNLP's Board of Directors in December 2015. Internal OLG emails in preparation for the meeting disclose that OLG's CFO stated that the undisclosed decision to exclude NGR and Comps from future revenue sharing under the GRSFA would be a "hot button issue" for OFNLP.

[37] Around the same time, OLG disclosed internally to Ontario's Ministry of Finance, for the first time, its plan to stop sharing NGR and Comps under the GRSFA. This disclosure occurred on a conference call. Ontario's position is that, from the moment of that conference call, Ontario reasonably anticipated litigation with OFNLP.

[38] No one from the Ministry of Indigenous Relations and Reconciliation ("MIRR") was on the conference call. MIRR was the provincial Ministry responsible for administering the GRSFA at the time. After the call, despite the anticipation that OFNLP would be suing Ontario for breach of the GRSFA as a result of the NGR and Comps decision, no one within the Ontario government ever told MIRR about the decision. MIRR learned about it only after OFNLP triggered the dispute resolution process under the GRSFA in the summer of 2016.

[39] At the meeting with OFNLP’s Board of Directors in December 2015, the Chairman of OLG's Board of Directors stated that it was "time to enter an era of respect" between OLG and First Nations. But he failed to tell OFNLP’s Board about the plan to stop sharing NGR and Comps with First Nations.

[40] It was not until June 2016 that First Nations learned that OLG had stopped sharing NGR and Comps from COSA gaming sites, beginning in January of that year. The information was disclosed in a note to the 2016 audited Gross Revenues Statement required under the GRSFA. It was not drawn to OFNLP’s attention by OLG or Ontario.

[41] As a result of these events, OFNLP alleged that OLG and Ontario had breached the GRSFA and commenced these arbitration proceedings.

The Arbitration

[42] The dispute proceeded to arbitration in September and October 2018. As noted above, former Ontario Court of Appeal Justice Stephen Goudge chaired the panel of three arbitrators, with Mr. Stan Fisher and Mr. John Campion. In addition to affidavit evidence and expert reports, the panel heard seven days of viva voce evidence from ten witnesses.

[43] OFNLP called four witnesses, three of whom were direct participants in the negotiation of the GRSFA, on both sides of the negotiating table. Linda Commandant and Don Morrison were First Nations’ negotiators, and they sat on OFNLP's Board of Directors when the GRSFA was approved by the First Nations. Michael Bryant was Minister of Aboriginal Affairs at the time that the GRSFA was executed and was Ontario’s negotiator who personally concluded the agreement with First Nations. OFNLP's fourth witness, Peter Jewett, acted as legal counsel to First Nations during a significant portion of the negotiations. All of the arbitrators agreed that these witnesses were credible. Their evidence regarding the negotiation and execution of the GRSFA was largely uncontroverted.

[44] OLG and Ontario did not call any witnesses who were directly involved in negotiating the GRSFA, such as Mr. Peterson. OLG’s witnesses testified about Modernization and its benefits. Ontario called two witnesses who had served in advisory roles during the negotiation of the GRSFA.

[45] The central issue at the arbitration and on this appeal is whether OLG and Ontario breached the GRSFA when they ceased to share two of the three components of Gross Revenues, NGR and Comps.

[46] The evidence at the arbitration, from both First Nations’ negotiators and Ontario's negotiator, Michael Bryant, was that this diversion of revenues was inconsistent with the shared understanding of the parties at the time the GRSFA was entered into. Ontario and OLG argued at the arbitration that this evidence of the shared understanding of the parties was inadmissible, and that instead, the GRSFA should be interpreted without reference to this evidence that they argued was contrary to the parol evidence rule.

The Arbitration Decision

[47] The majority of the arbitration panel held that the appellants’ conduct was a breach of the GRSFA and ordered an accounting and payment by OLG of the 1.7% annual share of NGR and Comps from the time the first COSA site began operating in January 2016 through the duration of the term of the GRSFA.

[48] At paras. 226 and 227 of the majority’s reasons they stated as follows:

226. … In this arbitration, no one contests OLG's right to modernize. The resulting growth in GR benefits both OLG and First Nations. However, OFNLP's contractual rights concerning NGR and Comps remain. They were not traded for a share of the increased GR. In short, while OLG has the right to modernize the COSA sites, that does not give it the right to shed its obligations to OFNLP.

227. In summary, we reject the meaning of these provisions of the GRSFA advanced by OLG. Rather we conclude that the GRSFA requires Ontario to continue to pay or cause OLG to pay to OFNLP payments equal to 1.7% annually of GR, NGR and Comps generated from the gaming sites conducted and managed by OLG as Agent for Ontario. The context, the purpose, and the language of the GRSFA as understood by the parties when it was made compel this result. In our view, modernization does not displace this payment obligation. It coexists with it. By ceasing to pay amounts equal to 1.7% annually of NGR and Comps, OLG and Ontario have breached the ORSFA.

[49] Although the majority expressly did not rely upon the doctrine of the honour of the Crown in reaching its contractual interpretation of the GRSFA, they did conclude that it provided moral support for their conclusion as follows at para 234 of their reasons:

234. … Only the contractual interpretation that we have reached is consistent with the honour of the Crown. On the contrary, any interpretation that brings anything less to First Nations than was represented to them by representatives of the Crown would bring dishonour to the Crown in this very important manifestation of, as Michael Bryant said, government-to­government relations. While we reach our contractual interpretation without resort to the honour of the Crown, that doctrine provides clear moral support for the conclusion we have reached.

[50] Mr. Campion disagreed with the majority’s interpretation of the GRSFA. However, he described the arbitration as being based on “reasonable differences in the interpretation of the GRSFA”. He also stated that “OLG and Ontario failed in their government-to-government commitment with OFNLP” and “changed the GRSFA”. At para. 369 of his dissenting reasons Mr. Campion stated as follows:

369 … Any reasonable person with knowledge of the factual matrix leading to the negotiations of the GRSFA (with all of its attendant litigation and allegations of mistrust), the negotiations of the GRSFA (with all of its declarations of trust and government-to-government negotiations) and the statements of former Premier Peterson, former Minister Bryant and former Premier Wynne can only conclude that words of trust and reconciliation were meant to guide the affairs and relationships between the First Nations and Ontario forever. …

Issues

[51] The issues on this appeal as follows:

(a) Is the majority’s contractual interpretation of the GRSFA unreasonable?

(b) Did the majority err in concluding that the honour of the Crown doctrine applies to the GRSFA and in using it to support their contractual interpretation?

(c) Is the majority’s order for damages unreasonable?

Positions of the Parties

OLG’s and Ontario’s Position

[52] OLG and Ontario submit that the majority’s interpretation of the GRSFA is unreasonable because it is contrary to the following terms of the GRSFA:

(i) Schedule 1.1(nn) and the definition of “Agent of the Province”;

(ii) The entire agreement clause in s. 1.10;

(iii) Section 10(1)(a) and (b) that establish that the GRSFA does not create any interest in OLG’s assets and preserves OLG’s discretion to manage its own business;

(iv) The final account clause in s. 1(f) of Schedule 1.1 (nn) that excludes any revenue that is not retained to the final account of Ontario or OLG;

(v) Section 8.3 which provides that the parties will negotiate a new revenue sharing agreement at the end of the term of the GRSFA; and

(iv) Sections 2.2 to 2.4 that govern financial reporting and accounting.

[53] OLG and Ontario further submit that it is commercially absurd to require OLG to pay a share of revenue that it does not receive.

[54] They also submit that the majority relied upon inadmissible evidence contrary to the parol evidence rule and also relied upon inadmissible post-contract conduct evidence.

[55] According to OLG and Ontario, the majority also erred in applying the honour of the Crown doctrine to the GRSFA.

[56] Finally, OLG and Ontario submit that the majority erred by disregarding relevant damages principles.

OFNLP’s Position

[57] OFNLP submits that many of the grounds of appeal advanced by OLG and Ontario fall outside of this court’s jurisdiction because they relate to pure questions of fact from which there is no right of appeal under the GRSFA.

[58] OFNLP further submits that the remaining grounds of appeal relate to the majority’s interpretation of the GRSFA which was reasonable including the use made by the majority of the factual matrix evidence.

[59] OFNLP also submits that the majority properly analyzed the honour of the Crown doctrine.

[60] Finally, OFNLP submits that the majority’s determination of the appropriate remedy was reasonable as it puts OFNLP in the position it would have been in had the contract been performed.

Legal Principles

Standard of Review

[61] During the argument of this appeal the parties agreed that a reasonableness standard of review applies to the majority’s conclusions with respect to the contractual interpretation of the GRSFA and the damage award. OLG and Ontario submitted that the majority’s conclusion on the honour of the Crown doctrine is reviewable on a correctness standard. However, OFNLP submitted that since the majority did not rely upon the honour of the Crown doctrine in interpreting the GRSFA “their observations on this point are expressly identified as obiter”. OFNLP further submitted that because the honour of the Crown doctrine was not engaged by the majority as a constitutional principle, but only as an interpretive principle, “outside of the treaty and constitutional context”, the applicable standard of review is reasonableness.

[62] In December 2019, after this appeal was argued, the Supreme Court of Canada released its trilogy of decisions that changed the applicable standard of review for administrative decisions. In Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65 (“Vavilov”), the Supreme Court fundamentally revised the court’s approach to determining the standard of review that applies to administrative decisions. According to the Supreme Court, administrative decisions that are subject to a statutory right of appeal should now be reviewed using an appellate standard of review.

[63] Following the release of the decision in Vavilov, I requested that counsel provide me with further submissions as to it’s applicability to the standard of review that applies to the majority’s decision on this appeal.

[64] OLG and Ontario submit that the Supreme Court’s decision in Vavilov establishes that appeals of commercial arbitration decisions should now be reviewed using an appellate standard of review. They argue that because I am sitting as an appellate court under the Arbitration Act, an appellate standard of review applies to this appeal. In other words, according to OLG and Ontario, questions of law should be reviewed on a “correctness” standard and questions of fact and mixed fact and law should be reviewed on a “palpable and overriding error” standard of review.

[65] However, this appeal is not brought pursuant to a statutory right of appeal. It is brought pursuant to s. 9.2 of the GRSFA which provides as follows:

The award of any arbitration shall be appealable by the parties to the appropriate Ontario court on questions of law, or questions of mixed fact and law, including, without limitation, matters of process and procedure.

[66] Section 45 of the Arbitration Act does not mandate an appeal from an arbitration decision but provides for an appeal “If the arbitration agreement so provides”. This appeal is therefore not statutorily mandated.

[67] Ontario relies upon the decision of Davies J. in the case of Allstate Insurance Company v. Her Majesty the Queen, 2020 ONSC 830 (“Allstate”), in support of its position that the Vavilov case has changed the standard of review that is to be applied on an appeal from a commercial arbitration decision. In Allstate, Davies J. was dealing with an appeal from an insurance arbitration that was statutorily mandated. That is not the case on this appeal which arises because of the parties’ agreement to an appeal from the arbitration decision in the GRSFA. The decision in Allstate does not stand for the broad proposition advanced by Ontario that Vavilov has changed the standard of review that is to be applied generally to appeals from commercial arbitration decisions because the decision in Allstate only applies to statutorily mandated appeals from arbitration decisions.

[68] According to OFNLP, the Supreme Court of Canada’s decision in Vavilov does not alter the standard of review in an appeal from a commercial arbitration decision. OFNLP submits that the Vavilov decision only applies to administrative law and makes no reference to commercial arbitrations. OFNLP points out that the Supreme Court of Canada has recently issued two leading decisions confirming that the standard of review in an appeal from a commercial arbitration decision is reasonableness and that these decisions were not overturned by Vavilov.

[69] In Creston Moly Corp v. Sattva Capital Corp., 2014 SCC 53 (“Sattva”), Rothstein J. stated as follows at paras 104 and 106:

104. Appellate review of commercial arbitration awards takes place under a tightly defined regime specifically tailored to the objectives of commercial arbitrations and is different from judicial review of a decision of a statutory tribunal. For example, for the most part, parties engage in arbitration by mutual choice, not by way of statutory process. Additionally, unlike statutory tribunals, the parties to the arbitration select the number and identity of the arbitrators. …

105. … In the context of commercial arbitration, where appeals are restricted to questions of law, the standard of review will be reasonableness unless the question is one that would attract the correctness standard, such as constitutional questions or questions of law of central importance to the legal system as a whole and outside the adjudicators’ expertise. …

[70] In Teal Cedar Products Ltd. v. British Columbia, 2017 SCC 32 (“Teal Cedar”), Gascon J. held as follows at para. 74:

74. In an arbitral context like this one, where the decision under review is an award under the Arbitration Act, Sattva establishes that the standard of review is “almost always” reasonableness … This preference for a reasonableness standard dovetails with the key policy objectives of commercial arbitration, namely efficiency and finality.

[71] The Supreme Court of Canada’s comprehensive decision in Vavilov does not refer to the court’s previous decisions in either Sattva or Teal Cedar. It is not reasonable to conclude that the Supreme Court meant to overrule these important decisions without making any reference to them or to the area of law to which they relate.

[72] Further, as a matter of legal principle it is appropriate that Vavilov does not apply to commercial arbitrations. The administrative law standard of review established in Vavilov derives from constitutional considerations that justify deference by the judiciary to the legislature. This principle does not apply to commercial arbitrations. The standard of review for commercial arbitrations is guided by commercial considerations about respect for the decision-makers chosen by the parties. As a result, deference is justified by the parties’ contractual intent. It is for this reason that Rothstein J. identified the key differences between administrative decisions and arbitral awards in Sattva and concluded that the judicial review framework for administrative decisions is not applicable in the commercial arbitration context.

[73] It therefore follows that a change to the judicial review framework for administrative decisions does not result in an automatic change to the standard of review for arbitration decisions. This is the conclusion reached by G.S. Dunlop J. in Cove Contracting Ltd. v. Condominium Corporation No. 012 5598 (Ravine Park), 2020 ABQB 106, as follows at paras. 10-12:

10. … I read Vavilov as limited to administrative decision makers, because that is the context of Vavilov and it’s companion cases, and because … the majority in Vavilov provides guidance on the application of prior administrative law jurisprudence, but no guidance on the application of other jurisprudence. Teal and Creston Moly, are two recent Supreme Court of Canada decisions on the standard of review on commercial arbitration appeals. Vavilov says nothing about Teal and Creston Moly.

11. The Supreme Court’s earlier decisions in Teal and Creston Moly provide a compelling rationale for the reasonableness standard of review on a commercial arbitration appeal:

… In an arbitral context like this one, where the decision under review is an award under the Arbitration Act, Sattva establishes that the standard of review is ‘almost always’ reasonableness. …

12. Teal and Creston Moly have not been overruled by Vavilov. They are binding on me. The standard of review applicable to this case is reasonableness.

[74] I agree with and adopt G.S. Dunlop J.’s conclusion in this case. The standard of review applicable to the majority’s contractual interpretation of the GRSFA and to the damage award is reasonableness. Although OFNLP makes a strong case for the application of a reasonableness standard to the appeal relating to the honour of the Crown doctrine, I have decided that the standard of review I will apply to the majority’s approach to the honour of the Crown doctrine is correctness in light of its constitutional implications.

[75] In the event that my conclusion is incorrect that the applicable standard of review is reasonableness, I will also consider the appeals of the majority’s conclusions with respect to the interpretation of the GRSFA and the damage award applying an appellate standard of review of correctness as OLG and Ontario submit I should.

Contractual Interpretation

[76] The parties agree that the goal of contractual interpretation is to ascertain the objective intent of the parties, which is a fact specific goal, through the applicable principles of interpretation. In order to do so, a decision-maker must 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 the formation of the contract. Contractual interpretation must be grounded in the words of the contract and must give effect to all provisions in the contract. The interpretation must also be commercially reasonable.

[77] It is also agreed that the primary source of the parties’ objective intent is the written contract and what the reasonable reader would understand the text to mean. The factual matrix and surrounding circumstances can be a secondary source of objective intent but it consists only of objective evidence of facts the parties were aware of or ought to have been aware of at the time of contracting. However, the factual matrix cannot be used to overwhelm the words of the contract to effectively create a new agreement.

Analysis

Issue #1 – Is the majority’s contractual interpretation of the GRSFA unreasonable?

The Reasonableness Test

[78] According to the Supreme Court of Canada’s decision in Dunsmuir v. New Brunswick, 2008 SCC 9, at para. 47, in order to determine whether the majority’s interpretation is unreasonable I must assess the “existence of justification, transparency and intelligibility within the decision-making process” and determine whether the decision falls within a range of defensible outcomes, meaning “acceptable outcomes which are defensible in respect of the facts and law”. In Vavilov, the Supreme Court reiterated this test at para. 86 of its decision and added that a court conducting a reasonableness review should be concerned with the qualities that make a decision reasonable, “referring both to the process of articulating the reasons and to outcomes.”

[79] I must also defer to the specialized expertise of the three experienced arbitrators who decided the case because the parties’ agreement to arbitrate this dispute demonstrates their preference for the outcome arrived at in the arbitration proceeding with a limited role for judicial oversight of the award made by the arbitration panel. See Popack v. Lipszyc, 2016 ONCA 135, at para. 26.

Questions of Fact

[80] It is important to note that s. 9.2 of the GRSFA restricts this appeal to “questions of law, or questions of mixed fact and law”. Accordingly, I have no jurisdiction to entertain an appeal by OLG or Ontario on a question of fact.

[81] In Sattva, the Supreme Court of Canada held at para. 127 of their decision that the following types of issues are pure questions of fact:

(a) whether evidence forms part of the factual matrix,

(b) whether findings of fact were based on a misapprehension of the evidence,

(c) whether something was, or ought reasonably to have been, within the common knowledge of the parties at the time of contract formation,

(d) the weight to be given to evidence, including whether to rely upon certain evidence.

[82] The following issues raised by OLG and Ontario amount to an appeal on a question of fact over which I have no jurisdiction:

(a) The majority ignored the contrary evidence of Mr. Mahmood Nanji who assisted Mr. Peterson with drafting a response to a concern expressed by OFNLP about the possibility that funds would be “carved out” from Gross Revenues if not received to the final account of the Province.

(b) The majority made a fundamental misapprehension of the evidence concerning the pre-modernization gaming market in Ontario which was contrary to the evidence of Ms. Bell-Murray and Mr. Pridmore.

(c) The majority misapprehended or ignored Mr. Bryant’s evidence and allowed him to make statements that were not evidence at all. Further, the majority drew an incorrect inference from Mr. Bryant’s evidence that was refuted by two of Ontario’s witnesses.

(d) The majority’s factual determination of the shared understanding between the parties is refuted by other evidence and is inconsistent with OFNLP’s unsuccessful attempts to amend the final account clause in January 2008.

(e) Mr. Bryant’s testimony about the negotiations is contrary to the majority’s contractual interpretation.

(f) The majority misapprehended OLG’s accounting evidence about its revenue recognition policy.

(g) The majority erroneously found as a fact that OLG’s treatment of Gross Revenues is inconsistent with its treatment of Third-Party Gross Revenues.

(h) The majority erroneously found as a fact that Ms. Bell-Murray justified the treatment of NGR based upon ownership of assets.

(i) The majority failed to properly construe the evidence of Ms. Bell-Murray concerning how she calculated MRSP payments.

[83] All of these issues are complaints about factual determinations made by the majority and are therefore outside of my jurisdiction on this appeal. Accordingly, I do not intend to consider these grounds of appeal.

The Majority’s Contractual Interpretation

[84] The central issue on this appeal is whether the majority’s interpretation of the GRSFA, in which they concluded that OLG and Ontario had breached the agreement by ceasing to share two of the three components of Gross Revenues, is unreasonable.

[85] The appellants do not argue that the majority either misunderstood or incorrectly stated the legal principles of contractual interpretation. The majority correctly set out the principles of contractual interpretation relevant to their interpretation of the GRSFA at paras. 129 – 132 of their reasons.

[86] The thrust of the appellants’ complaint about the majority’s interpretation of the GRSFA is that they effectively re-created key terms of the contract because they allowed the evidence of the surrounding circumstances to “overwhelm and contradict” the words of the contract.

[87] However, the majority was alert to this contractual interpretation pitfall and stated unequivocally at para. 131 of their reasons that “while surrounding circumstances are an important interpretative aid to determine the meaning of the words in the contract and the intention of the parties, they cannot be used to overwhelm the words or to deviate from the words so that a new contract is effectively created.” I do not agree with the appellants’ submissions that the majority allowed the surrounding circumstances to overwhelm or contradict the words of the GRSFA for the following reasons.

[88] The appellants argue that the majority’s interpretation is contrary to the clear terms of the GRSFA and contradicts the express language of the contract. However, the majority specifically referred to and analyzed the key provisions of the GRSFA at paras. 134 – 157 of their reasons. Having done so, the majority correctly stated at para. 159 of their reasons that “the interpretation of these provisions of the GRSFA … requires 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.” The majority did exactly that and their interpretation of the express language of the GRSFA was reasonable.

[89] Most of the arguments advanced by the appellants on this appeal are arguments that they made before the arbitration panel that were considered and rejected by the majority who provided reasonable reasons for rejecting these arguments. For example, the appellants submit that the majority ignored or read down Schedule 1.1.(nn) and s. 2.2(a) of the GRSFA, which the appellants submit establish that the parties intended to limit Gross Revenues to the revenues of OLG. However, the majority specifically rejected this argument and concluded as follows at para. 193 of their reasons:

193. Schedule 1.1(nn) provides that for the purposes of the GRSFA, Gross Revenues of OLG are made up of the GR as well as ancillary NGR and Comps generated by the gaming conducted and managed by OLG as Agent of Ontario in 2008. These three components are the base on which the OFNLP share of 1.7% annually is calculated for the term of the GRSFA. Comps are included in the base, although they are not revenues received by OLG. That was the shared understanding of the parties in 2008.

[90] I find this conclusion by the majority to be reasonable. It is justified, transparent and intelligible and clearly falls within a range of defensible outcomes.

[91] The appellants submit that the majority’s interpretation of the GRSFA is “commercially absurd” because OLG would never agree “to pay a share of third-party revenues that they do not receive.” However, this submission ignores the historical and relationship factors that underpinned the GRSFA. The majority recognized at para. 135 of their reasons that the GRSFA’s objective is “to provide the First Nations in Ontario with resources derived from Lottery Schemes in Ontario conducted and managed by Ontario directly or indirectly in order to advance their growth and capacity in respect of community development, health, education, economic development and cultural development”. In light of this objective, the majority’s interpretation that provides First Nations with the resources they were promised by a fellow government is, in my view, commercially reasonable. It would not be commercially reasonable to interpret the GRSFA in a manner that allows OLG to turn off two of three revenue “taps” because it can make a better deal with the private sector.

[92] The majority took a purposive approach to their interpretation of the GRSFA. The appellants’ interpretation is non-purposive and technical. The preamble to the GRSFA underlines its objective of providing OFNLP with a stable source of funds generated from the gaming and ancillary activities conducted and managed by Ontario through OLG. The payment obligation is set out in article 2.2 of the GRSFA, which requires Ontario to share 1.7% of aggregate gross revenues (as understood in 2008) each year. Schedule 1.1(nn) defines Gross Revenues as including GR, NGR and Comps generated by the gaming conducted and managed by OLG as agent of Ontario in 2008. The majority explained it’s reasoning on this issue at paras.194 and 195 as follows:

194. The reference in Schedule 1.1(nn) to what is reported in the ‘Segmented Information notes in the notes to, or as otherwise reported in, the audited Consolidated Financial Statements of that Agent of the Province’ is a statement about the “snapshot” at the time the GRSFA was made. That “snapshot” simply describes the components on which the payments owed to OFNLP are to be based. The words reflect the shared understanding of the parties in 2008, when the GRSFA was made, of the sources of revenue to be shared with the First Nations.

195. There is no language in Schedule 1.1(nn) nor any evidence of a shared intention of the parties in 2008, that this reference referred to what might appear in the audited Consolidated Financial Statements as they might be from time to time in future years.

[93] While the majority considered the surrounding circumstances, its interpretation of the GRSFA was firmly rooted in the actual wording of the agreement. I find that the majority’s reasoning on this issue was reasonable because it is justified, transparent, intelligible and defensible in respect of the facts and law.

[94] The appellants further submit that the majority’s reliance upon evidence of discussions amongst individuals who negotiated the GRSFA at various stages to reach a conclusion regarding the shared understanding of the parties was unreasonable because the evidence was precluded by the entire agreement clause in the GRSFA and was inadmissible parol evidence and subjective intention evidence.

[95] In particular, the appellants complain about the majority’s reliance upon the evidence of Minister Bryant as constituting “objective evidence of the shared understanding of already settled contract language“.

[96] I agree with the majority’s conclusion that Mr. Bryant’s evidence about the shared understanding of the parties is admissible as part of the surrounding circumstances. In Fontaine v. Canada, 2013 ONSC 684, Perrell J. admitted similar evidence and the Supreme Court of Canada confirmed that it was appropriate for him to have done so. See Canada (Attorney General) v. Fontaine, 2017 SCC 47.

[97] The majority was explicit in its reasons that it was not using Mr. Bryant’s evidence of, or any of the other witnesses who testified about, the negotiations of the GRSFA as parol evidence but rather to identify the parties’ “shared objective understanding“ of the contract language.

[98] This evidence was relevant to the factual matrix leading up to the execution of the GRSFA and was properly considered by the majority in interpreting it. These witnesses were not relied upon by the majority for what their subjective intention was but rather their evidence was relied upon by the majority to establish the statements made to each other during the negotiations of the GRSFA and their mutual understanding based upon those statements.

[99] I am satisfied that this evidence was admissible to demonstrate the objective mutual intent of the parties and the background facts at the time the GRSFA was executed.

[100] The majority was clearly attuned to the inadmissibility of the evidence of a party’s subjective intention and determined that this evidence was admissible as evidence of the shared intention of the parties. It was reasonable for the majority to do so

[101] For these reasons I have concluded that the majority’s contractual interpretation of the GRSFA was not unreasonable. Further, I am satisfied that their interpretation was correct for the same reasons.

[102] This ground of appeal therefore fails.

Issue # 2 – Did the majority err in concluding that the honour of the Crown doctrine applies to the GRSFA and in using it to support their contractual interpretation?

[103] In Manitoba Metis Federation Inc. v. Canada, 2013 SCC 14 (“Manitoba Metis”), the Supreme Court of Canada held at paras 65–66 that the honour of the Crown doctrine “refers to the principle that servants of the Crown must conduct themselves with honour when acting on behalf of the sovereign” with Aboriginal peoples. The court explained that the ultimate purpose of the honour of the Crown doctrine is “the reconciliation of pre-existing Aboriginal societies with the assertion of Crown sovereignty”.

[104] The majority stated at para. 228 of their reasons that, “the Crown must act honourably in all of its dealings with Aboriginal peoples, ‘in accordance with its historical and future relationship with the Aboriginal peoples in question’”. This is a correct explanation of the honour of the Crown doctrine.

[105] OLG and Ontario submit that the majority erred in applying the honour of the Crown doctrine to the GRSFA because it is a commercial contract that does not fit within any of the recognized situations that give rise to this doctrine. At para. 88 of OLG’s factum it submits as follows:

88. None of these situations arise here. The parties expressly agreed that the GRSFA is not a treaty and that it does not create a treaty, fiduciary, or similar relationship. Ontario and OLG have not assumed control over any specific or cognizable Aboriginal interest and the agreement does not affect asserted or established s. 35 rights.

[106] The majority recognized that the GRSFA is expressly not a treaty but that the honour of the Crown doctrine is nonetheless engaged for the following reasons set out at paragraphs 230 and 231 of their reasons:

230. While it is expressly not a treaty within the meaning of s. 35 of the Constitution Act, there is no doubt among any of the parties that the GRSFA is an important and historic document. For the first time, it provides a long term stream of funding with the express objective of ‘advancing the growth and capacities of First Nations in Ontario in respect of community development, health, education, economic development and cultural development.’ This objective can properly be seen as an important element in reconciliation between First Nations and Ontario and a significant commitment to amelioration of the historic injustices suffered by First Nations. …

231. Moreover, in the Board Appointment Arbitration the panel of retired judges expressly found that the doctrine applies to the GRSFA.

[107] It is significant that the majority did not rely upon the honour of the Crown doctrine to arrive at their contractual interpretation of the GRSFA. Rather, they concluded that the doctrine provides “clear moral support for the conclusion we have reached”.

[108] I agree with the majority’s approach to the honour of the Crown doctrine as summarized as follows at para. 234 of their reasons:

234. Applied to assist in giving meaning to the GRSFA, only one conclusion is possible. Only the contractual interpretation that we have reached is consistent with the honour of the Crown. On the contrary, any interpretation that brings anything less to First Nations than was represented to them by representatives of the Crown would bring dishonour to the Crown in this important manifestation of, as Michael Bryant said, government-to-government relations. While we reach our contractual interpretation without resort to the honour of the Crown, that doctrine provides clear moral support for the conclusion we have reached.

[109] I do not accept OLG’s and Ontario’s submission that the GRSFA is merely a commercial contract that should be interpreted “using only ordinary contractual principles”. The GRSFA is a government-to-government agreement, forged in partnership, that was negotiated in meetings between the Crown and First Nations that began with a smudge ceremony and continued in the presence of sacred First Nations’ objects. According to Mr. Bryant’s evidence, these negotiations were about “establishing trust and respect” in order to promote First Nations’ dignity empowerment and self-reliance.

[110] In Manitoba Metis, the Supreme Court of Canada held at para. 71 that the honour of the Crown doctrine is engaged by s. 35 (1) of the Constitution Act, 1982, as well as by treaty promises, because these are promises that have been made “for the overarching purpose of reconciling Aboriginal interests with the Crown sovereignty”. The GRSFA falls within this purpose because it represents the reconciliation of the constitutionally protected Aboriginal right of self-government, which includes jurisdiction over gaming, with the Crown’s sovereignty over gaming under the Criminal Code. Under the GRSFA Ontario and OLG agreed to share 1.7% of Gross Revenues from gaming in Ontario in exchange for First Nations not pursuing gaming options of their own. The majority correctly recognized at para 230 of their reasons that the GRSFA is expressly an agreement intended to advance First Nations’ growth and capacity and should be seen as an important element in reconciliation between First Nations and Ontario.

[111] The majority also correctly relied upon Perell J.’s decision in Fontaine v. Canada (Attorney General), 2013 ONSC 684, in which he concluded that the Indian Residential Schools Settlement Agreement (“IRSSA”) engaged the honour of the Crown doctrine even though the IRSSA is not a treaty. The IRSSA, like the GRSFA, involves an assertion of Aboriginal rights, the settlement of major litigation between the Crown and First Nations and contains an entire agreement clause. The Supreme Court of Canada upheld Perell J.’s decision and confirmed at para.14 of its decision that the interpretation of the IRSSA “must be informed by the honour of the Crown”.

[112] For these reasons, I have concluded that the majority did not err in deciding that the GRSFA engaged the honour of the Crown doctrine and their conclusion was correct. However, in any event, the majority made it clear in its reasons that the honour of the Crown doctrine did not impact their ultimate interpretation of the GRSFA, which they reached without resort to this doctrine. Consequently, even if the GRSFA does not engage the honour of the Crown doctrine, the majority’s contractual interpretation of the GRSFA is still reasonable and the reference to the doctrine was obiter dictum.

[113] This ground of appeal therefore fails.

Issue # 3 – Is the Majority’s Order for Damages Unreasonable?

[114] All of the appellants’ complaints about the majority’s order for damages were argued before the arbitration panel and reasonably rejected by the majority. The majority awarded the only available remedy in contract damages. The damage award was based on the contractual right that was breached and was measured by the value of that right.

[115] The majority reasonably concluded that OLG and Ontario had breached the GRSFA by failing to pay an amount equal to 1.7% of GR, NGR and Comps generated from gaming sites conducted and managed by OLG. The majority’s award requires Ontario and OLG to pay this amount. As a result, the majority’s damage award puts OFNLP in the same position it would have been in had the contract been performed.

[116] At the arbitration hearing OLG argued that even if the GRSFA was breached OFNLP suffered no damages. OLG makes the same argument on this appeal. The majority concluded that whether or not GR will increase “is not what matters for the purposes of this dispute. What matters is whether OLG and Ontario have breached the GRSFA by no longer sharing NGR and Comps with OFNLP and, as we have found, they did so.” This was a reasonable conclusion.

[117] At the arbitration hearing OLG argued that OFNLP’s position violated the minimum performance principle. OLG makes the same argument on this appeal. The majority concluded that OFNLP “is entitled under the GRSFA to a percentage of GR, NGR, and Comps and there is only one way to perform that obligation, which is by paying the percentage owing to OFNLP.” This was a reasonable conclusion.

[118] At the arbitration hearing OLG argued that the majority’s damage award would result in double recovery because OFNLP was claiming the benefit of Modernization without accounting for it’s detriment. OLG makes the same argument on this appeal. The majority concluded that OFNLP had bargained for a percentage of GR, NGR, and Comps and if “the value of any of those ‘streams’ goes up or down, OFNLP is entitled to the increased benefit or required to suffer the loss that results. This is not a net benefit exercise.” This was a reasonable conclusion.

[119] At the arbitration hearing OLG argued that the majority’s damage award would put OFNLP in a better position than before the alleged breach of the GRSFA. OLG makes the same argument on this appeal. The majority concluded that “the deal reached between OFNLP, OLG and Ontario was that OFNLP would receive a percentage of GR, NGR, and Comps and OFNLP is entitled to that amount” as a remedy. This was a reasonable conclusion.

[120] At para 257 of the majority’s reasons they concluded as follows:

We cannot accede to OLG’s argument that OFNLP has suffered no loss and is not entitled to the remedy that flows from our findings above. On our contractual interpretation a remedy is required. We have found that the definition of Gross Revenues includes all three streams of revenue, GR, NGR, and Comps. OFNLP bargained for all three streams of revenue. Even if one of the contractually guaranteed revenue streams is growing, as OLG projects, this does not create a contractual entitlement to stop paying the other two. Compensatory damages for breach of contract entitle OFNLP to be put in the position it would have been had the contract been performed, which in this case is the payment of 1.7% of GR, NGR and Comps for the term of the GRSFA.

[121] This conclusion is reasonable. It is justified, transparent and intelligible and it clearly falls within a range of defensible outcomes. The majority’s order for damages is therefore not unreasonable. Further, for the same reasons, the majority did not err in coming to this conclusion on damages which I have concluded was a correct interpretation.

[122] This ground of appeal therefore fails.

CONCLUSION

[123] For these reasons the appeals are dismissed.

COSTS

[124] I urge the parties to settle the issue of the costs of the appeal. If they cannot resolve costs, they may schedule a 9:30 a.m. attendance with me to finalize costs.

[125] I thank all parties for their helpful submissions.

Hainey J.

Date: March 31, 2020