Kings County (Municipality) v. Berwick (Town) et al., 2010 NSSC 128

• Judge: Warner, J.
• Court: Supreme Court of Nova Scotia (Canada)
• Case Date: April 12, 2010
• Jurisdiction: Nova Scotia
• Citations: 2010 NSSC 128;(2010), 290 N.S.R.(2d) 171 (SC)

Kings County v. Berwick (2010), 290 N.S.R.(2d) 171 (SC);

    920 A.P.R. 171

MLB headnote and full text

Temp. Cite: [2010] N.S.R.(2d) TBEd. AP.031

Municipality of the County of Kings (applicant) v. Town of Berwick, Town of Hantsport, Town of Kentville, Town of Wolfville, Annapolis Valley Regional School Board and Her Majesty the Queen in Right of the Province of Nova Scotia (respondents)

(Ken No. 318509; 2010 NSSC 128)

Indexed As: Kings County (Municipality) v. Berwick (Town) et al.

Nova Scotia Supreme Court

Warner, J.

April 12, 2010.

Summary:

The Municipality of Kings County applied for a declaration that effective April 1, 2010, its funding for the Annapolis Valley Regional School Board would be determined by reference to its share of uniform assessment pursuant to the Education Act, and not by reference to its share of student enrollment amongst the municipal units in the School Board which was the sharing in effect since 1982. The agreement was amended in 1989. The application required the court, inter alia, (1) to interpret agreements amongst the parties (i.e., the four other municipal governments who funded the School Board (the Towns of Berwick, Kentville, Hantsport and Wolfville), the Province of Nova Scotia and the School Board), and (2) if the court's interpretation was contrary to the Kings County's interpretation, to determine whether Kings County could unilaterally terminate the agreement(s), and if so, (3) what constituted reasonable notice for termination. If successful, Kings County's annual funding contribution to the School Board would be reduced by about $900,000, and the other municipal units' contribution would increase. Three of the Towns, Kentville, Hantsport and Wolfville, moved under Civil Procedure Rule 6 to convert the application to an action.

The Nova Scotia Supreme Court, in a decision reported 285 N.S.R.(2d) 168; 905 A.P.R. 168, dismissed the motion. The court held that the three Towns failed to establish that the factors in favour of the choice of Kings County to proceed by way of an application in court were outweighed by any factor supporting converting the proceeding to an action. The application proceeded.

The Nova Scotia Supreme Court interpreted the agreements, holding that the factual context or matrix overwhelmingly demonstrated that the clear intent of all of the parties to the 1982 agreement and the 1989 amendment was that all municipal contributions to the school board for the funding formula were to be on a per student basis and not on the basis of uniform assessment. The agreement as amended was not unilaterally terminable on reasonable notice.

Contracts - Topic 2052

Terms - Implied terms - Conditions precedent - The Municipality of Kings County had been party to a 1982 agreement, as amended in 1989, respecting funding for Annapolis Valley Regional School Board - The agreements contained no termination clauses - Kings County argued that the court should infer or imply a term in the agreement as amended that it was unilaterally terminable on reasonable notice - The Nova Scotia Supreme Court held that the agreement was not unilaterally terminable on reasonable notice - Absence of an express termination provision did not raise a presumption that the agreement was perpetual or that it was unilaterally terminable on reasonable notice - Whether the Court should imply a provision respecting duration was a matter of interpretation that involved: a) general contract law respecting implying a term where none expressly existed; and, b) examining the entire context of the contract and the parties' relationship in order to ascertain objectively and accurately the intentions of the parties - The court reviewed the principles applicable and approach to be applied respecting implication of contractual terms - Had the court found it necessary to imply a unilateral termination clause on reasonable notice, the reasonable notice would have been at least five years - See paragraphs 118 to 120 and 161 to 225.

Contracts - Topic 2058

Terms - Implied terms - Termination (incl. notice of) - [See Contracts - Topic 2052 ].

Contracts - Topic 5305

Impossibility or frustration of performance - Frustration - What constitutes frustration - To reduce its funding liability, the Municipality of Kings County applied for a declaration that its funding for the Annapolis Valley Regional School Board would be determined by reference to its share of uniform assessment pursuant to the Education Act, and not by reference to its share of student enrollment amongst the municipal units in the School Board which was the sharing formula in effect since a 1982 agreement, as amended in 1989 - Kings County argued that the agreement was discharged by frustration because the statutory dissolution of certain school boards and the loss of a fully elected board had radically changed the situation - The Nova Scotia Supreme Court held that while the consolidation of the school districts changed the landscape, it did not make the performance of the agreement either physically or legally impossible, nor totally different from what the parties contemplated and intended in 1982 and 1989 - Further, the move to a fully elected school board in 1991 did not constitute an unexpected event so outside the range of foreseeable risks as to tilt the scales of fairness toward the discharge of Kings County from its obligations under the agreement by reason of the principles of frustration - See paragraphs 118 to 160.

Contracts - Topic 7430

Interpretation - Ambiguity - Admissibility of extrinsic evidence - The Nova Scotia Supreme Court, per Warner, J., stated that "I have difficulty with the submission that extrinsic evidence is only admissible when interpretation of the written agreement within its four corners can support 'two reasonable alternative interpretations'. This view appears to have devolved from Justice Iacobucci's analysis in Eli Lilly ... [SCC 1998] ... I incorporate in this decision my analysis of the interpretative process set out in three recent decisions ... [Gates v. Croft, BC Rail v. Standard Car and Geophysical Services Inc. v. Sable Mary Seismic Inc. (NSSC 2009)] ... I agree with Geoff Hall's analysis, summarized in nine precepts, in Canadian Contractual Interpretation Law ... Interpretation involves consideration of the words in the contract in the context of the contract as a whole and the factual matrix of the agreement. As Lord Wilberforce stated in Prenn v. Simmonds [H.L. 1971] and Reardon Smith Line Ltd. v. Hansen-Tangen [H.L. 1976], contracts are not made in a vacuum, and cannot be properly interpreted without knowledge of the genesis and aim of the transaction. This approach does not negate the parol evidence rule, but rather describes circumstances in which the rule does not apply (Hall, section 2.8.2). The approach has been expressly endorsed and applied in Gallen v. Nunweiler [BCCA 1984] and Kentucky Fried Chicken v. Scott's Food Services [ONCA 1998]" - See paragraphs 29 to 31.

Contracts - Topic 7430

Interpretation - Ambiguity - Admissibility of extrinsic evidence - In a dispute involving the interpretation of a contract, both counsel argued, based on Eli Lilly (SCC 1998), that nothing outside the four corners of the agreement could be resorted to, in the interpretative process, unless an ambiguity arose from interpretation of the words within the four corners of the contract - The applicant argued that in accordance with that principle, the court could not consider Schedule B to be part of the agreement - The Nova Scotia Supreme Court disagreed, holding that the court was obligated to interpret all of the words of the agreement in the context of the agreement as a whole, inclusive of attached schedules - See paragraphs 34 and 35.

Contracts - Topic 7430

Interpretation - Ambiguity - Admissibility of extrinsic evidence - The Municipality of Kings County applied for a declaration that effective April 1, 2010, its funding for the Annapolis Valley Regional School Board would be determined by reference to its share of uniform assessment pursuant to s. 3(o) of the Education Act, and not by reference to its share of student enrollment amongst the municipal units in the School Board which was the sharing formula in effect since a 1982 agreement (as amended in 1989) - If successful, Kings County's annual funding contribution to the School Board would be reduced by about $900,000, and the contribution required of the other municipal units would increase by about the same amount - The Nova Scotia Supreme Court held that the amended agreement was ambiguous and, therefore, in interpreting the agreement, the court would have regard to extrinsic evidence, such as the correspondence and meetings amongst the parties and the records of their deliberations leading up to the execution of the agreements - The court held that the factual context or matrix overwhelmingly demonstrated that the clear intent of all of the parties to the 1982 agreement and the 1989 amendment was that all municipal contributions to the school board for the funding formula were to be on a per student basis and not on the basis of uniform assessment - See paragraphs 29 to 53.

Deeds and Documents - Topic 5051

Rectification - When available - General - The Nova Scotia Supreme Court (Warner, J.) noted that in Sylvan Lake Gold and Tennis Club v. Performance Industries (2002), the Supreme Court of Canada per Justice Binnie enumerated the four hurdles to rectification as: "i) A prior agreement; ii) Fraud or equivalent conduct; iii) Precisely curable; iv) Provable beyond a reasonable doubt" - Warner, J., stated that while it was not clear that Justice Binnie intended to restrict the second hurdle or condition to cases of unilateral mistake, he agreed without reservation with the observations and analysis of Justice Laskin in Royal Bank of Canada v. El-Bris Ltd. (Ont. C.A. 2008), where Laskin, J.A., effectively held that the second prerequisite in Sylvan Lake did not apply in cases of common or mutual mistake - See paragraphs 71 to 87.

Deeds and Documents - Topic 5057

Rectification - When available - Mistake - Mutual - To reduce its funding liability, the Municipality of Kings County applied for a declaration that its funding for the Annapolis Valley Regional School Board would be determined by reference to its share of uniform assessment pursuant to the Education Act, and not by reference to its share of student enrollment amongst the municipal units in the School Board which was the sharing formula in effect since a 1982 agreement, as amended in 1989 - Three of the interested municipal units argued that if the court interpreted the agreement as not providing for per student funding, then the agreement should be rectified - Kings County submitted that the second of the four prerequisites for the application of rectification as laid out by Justice Binnie in Sylvan Lake v. Performance Industries (SCC 2002), i.e., fraud or equivalent conduct, did not exist in this case so rectification was not available - The Nova Scotia Supreme Court interpreted the agreement as amended as providing for per student funding and in any event Kings County was estopped from asserting its interpretation - The court opined, however, that if it was in error on the interpretation or estoppel issues, it would have granted the remedy of rectification - The court held that the second prerequisite in Sylvan Lake did not apply in cases of common or mutual mistake - See paragraphs 71 to 87.

Deeds and Documents - Topic 5058

Rectification - When available - Mistake - Unilateral - [See Deeds and Documents - Topic 5057 ].

Deeds and Documents - Topic 5059

Rectification - When available - Mistake - Common - [See Deeds and Documents - Topic 5057 ].

Education - Topic 716.1

Education authorities - School commissions or boards - Municipal funding agreements - To reduce its funding liability, the Municipality of Kings County applied for a declaration that effective April 1, 2010, its funding for the Annapolis Valley Regional School Board would be determined by reference to its share of uniform assessment pursuant to the default formula in the Education Act, and not by reference to its share of student enrollment amongst the municipal units in the School Board which was the sharing formula in effect since a 1982 agreement (as amended in 1989) - Kings County argued that the parties did not have legal authority to enter agreements that provided an education funding formula other than the default formula legislated in the Act (uniform assessment) unless the alternate formula was authorized in the Act - It argued that the Act did not provide for the formula contained in the 1982 agreement as amended - The Nova Scotia Supreme Court held that the agreements were intra vires the statutory authority of the Minister and the municipalities - See paragraphs 88 to 117.

Education - Topic 716.1

Education authorities - School commissions or boards - Municipal funding agreements - [See Contracts - Topic 5305 , third Contracts - Topic 7430 , Deeds and Documents - Topic 5057 and Estoppel - Topic 1163 ].

Equity - Topic 1108

Equitable relief - Contracts - Rectification - [See Deeds and Documents - Topic 5057 ].

Estoppel - Topic 1163

Estoppel in pais (by conduct) - Representation - By conduct - Practice or course of conduct - The Municipality of Kings County applied for a declaration that effective April 1, 2010, its funding for the Annapolis Valley Regional School Board would be determined by reference to its share of uniform assessment pursuant to the Education Act, and not by reference to its share of student enrollment amongst the municipal units in the School Board which was the sharing formula in effect since a 1982 agreement - The agreement was amended in 1989 to, inter alia, permit the Town of Hantsport to join - If successful in its application, Kings County's annual funding contribution would decrease while the contribution from the other municipal units would increase - Hanstport argued that estoppel applied - The Nova Scotia Supreme Court interpreted the agreement as amended as requiring municipal contributions on a per student basis - The court opined that, in any event, Kings County was estopped from withdrawing its representation, promise or assurance respecting the funding formula - See paragraphs 54 to 70.

Mistake - Topic 4005

Relief - General - Circumstances when granted - [See Deeds and Documents - Topic 5057 ].

Cases Noticed:

Tufenkjian v. 1078385 Ontario Ltd. et al. (1999), 102 O.T.C. 161 (Gen. Div.), refd to. [para. 24].

Key Equipment Finance Canada Ltd. v. Jacques Whitford Ltd. (2006), 241 N.S.R.(2d) 258; 767 A.P.R. 258; 2006 NSSC 68, refd to. [para. 24].

Van Enterprises Inc. v. Avemco Insurance Co.; HCC Benefits Inc. (2002), 231 F. Supp.2d 1071 (Dist. Ct. Kansas), refd to. [para. 24].

Morse/Diesel Inc. v. Fidelity and Deposit Co. of Maryland, 1990 U.S. Dist. LEXIS 6548 (Dist. Ct. Southern N.Y.), refd to. [para. 24].

Eli Lilly & Co. et al. v. Novopharm Ltd. et al., [1998] 2 S.C.R. 129; 227 N.R. 201, refd to. [para. 29].

Lampson v. Québec (City) (1920), 54 D.L.R. 344 (P.C.), refd to. [para. 29].

Gates v. Croft (2009), 279 N.S.R.(2d) 175; 887 A.P.R. 175; 2009 NSSC 184, refd to. [para. 29].

B.C. Rail Partnership v. Standard Car Truck Co. et al. (2009), 282 N.S.R.(2d) 112; 895 A.P.R. 112; 2009 NSSC 240, refd to. [para. 30].

Geophysical Services Inc. v. Sable Mary Seismic Inc. et al. (2009), 287 N.S.R.(2d) 50; 912 A.P.R. 50; 2009 NSSC 404, refd to. [para. 30].

Prenn v. Simmonds, [1971] 3 All E.R. 237 (H.L.), refd to. [para. 31].

Reardon Smith Line Ltd. v. Hansen-Tangen, [1976] 3 All E.R. 570 (H.L.), refd to. [para. 31].

Gallen v. Butterley, Nunweiler and Allstate Grain Co., 1984 CarswellBC 104 (C.A.), refd to. [para. 31].

Kentucky Fried Chicken Canada v. Scott's Food Services Inc. et al. (1998), 114 O.A.C. 357; 1998 CarswellOnt 4170 (C.A.), refd to. [para. 31].

Dunn v. Vicars et al. (2009), 277 B.C.A.C. 213; 469 W.A.C. 213; 2009 BCCA 477, refd to. [para. 55].

Erickson v. Jones et al. (2008), 259 B.C.A.C. 292; 436 W.A.C. 292; 2008 BCCA 379, refd to. [para. 55].

Trethewey-Edge (Dyking District) v. Coniagas Ranches Ltd. et al. (2003), 180 B.C.A.C. 258; 297 W.A.C. 258; 2003 BCCA 197, refd to. [para. 55].

Crabb v. Arun District Council, [1975] 3 All E.R. 865 (C.A.), refd to. [para. 55].

Amalgamated Investment & Property Co. v. Texas Commerce International Bank Ltd., [1981] 3 All E.R. 577 (C.A.), refd to. [para. 55].

Ford et al. v. Kennie et al. (2002), 210 N.S.R.(2d) 50; 659 A.P.R. 50; 2002 NSCA 140, refd to. [para. 56].

Sylvan Lake Golf & Tennis Club Ltd. v. Performance Industries Ltd. and O'Connor (No. 2), [2002] 1 S.C.R. 678; 283 N.R. 233; 299 A.R. 201; 266 W.A.C. 201; 2002 SCC 19, refd to. [para. 73].

Royal Bank of Canada v. El-Bris Ltd., 2008 ONCA 601, refd to. [para. 79].

R. v. Greenbaum (M.), [1993] 1 S.C.R. 674; 149 N.R. 114; 61 O.A.C. 241, refd to. [para. 89].

Bell ExpressVu Limited Partnership v. Rex et al., [2002] 2 S.C.R. 559; 287 N.R. 248; 166 B.C.A.C. 1; 271 W.A.C. 1; 2002 SCC 42, refd to. [para. 90].

R. v. Ulybel Enterprises Ltd., [2001] 2 S.C.R. 867; 275 N.R. 201; 206 Nfld. & P.E.I.R. 304; 618 A.P.R. 304; 2001 SCC 56, refd to. [para. 90].

Vancouver Oral Centre for Deaf Children Inc. v. Assessor of Area No. 09 - Vancouver et al. (2002), 175 B.C.A.C. 49; 289 W.A.C. 49; 2002 BCCA 667, refd to. [para. 90].

Halifax (Regional Municipality) v. DeWolfe (E.) Trucking Ltd. et al. (2007), 257 N.S.R.(2d) 276; 820 A.P.R. 276; 2007 NSCA 89, refd to. [para. 91].

Pacific National Investments Ltd. v. Victoria (City) et al., [2000] 2 S.C.R. 919; 263 N.R. 1; 144 B.C.A.C. 203; 236 W.A.C. 203; 2000 SCC 64, refd to. [para. 92].

Montreal (City) v. 2952-1366 Québec Inc., [2005] 3 S.C.R. 141; 340 N.R. 305; 2005 SCC 62, refd to. [para. 93].

Rizzo & Rizzo Shoes Ltd. (Bankrupt), Re, [1998] 1 S.C.R. 27; 221 N.R. 241; 106 O.A.C. 1, refd to. [para. 95].

Myers v. Windsor - see Myers v. Mannette.

Myers et al. v. Mannette et al. (2003), 216 N.S.R.(2d) 106; 680 A.P.R. 106; 2003 NSCA 64, refd to. [para. 95].

Staffordshire Area Health Authority v. South Staffordshire Waterworks Co., [1978] 3 All E.R. 769 (C.A.), refd to. [para. 121].

A & K Lick-A-Chick Franchise Ltd. v. Cordiv Enterprises Ltd., Divito and Cordeau (1981), 44 N.S.R.(2d) 159; 83 A.P.R. 159; 1981 CarswellNS 113 (T.D.), refd to. [para. 162].

Martin-Baker Aircraft Co. v. Canadian Flight Equipment Ltd.; Martin-Baker Aircraft Co. v. Murison, [1955] 2 Q.B. 556, refd to. [para. 162].

Rapatax (1987) Inc. v. Cantax Corp. (1997), 196 A.R. 200; 141 W.A.C. 200; 145 D.L.R.(4th) 419 (C.A.), refd to. [para. 162].

Imperial Oil Ltd. v. Young et al. (1998), 167 Nfld. & P.E.I.R. 280; 513 A.P.R. 280; 1998 CarswellNfld 224 (Nfld. C.A.), refd to. [para. 162].

Credit Security Insurance Agency v. CIBC Mortgages, 2006 CarswellOnt 2441 (C.J.), refd to. [para. 162].

Fort Frances (Town) v. Boise Cascade Canada Ltd. et al., [1983] 1 S.C.R. 171; 46 N.R. 108, refd to. [para. 164].

Shaw Cablesystems (Manitoba) Ltd. v. Canadian Legion Memorial Housing Foundation (Manitoba) (1997), 115 Man.R.(2d) 85; 139 W.A.C. 85 (C.A.), refd to. [para. 171].

Cooke v. CKOY, [1963] O.J. No. 719 (H.C.), refd to. [para. 172].

Green Tree Village Community Centre v. Strata Plan NW 194, [1980] B.C.J. No. 52 (S.C.), refd to. [para. 174].

Luxor (Eastbourne) Ltd. v. Cooper, [1941] A.C. 108 (H.L.), refd to. [para. 175].

Shergar Developments Inc. v. Windsor (City), [2005] O.T.C. 130 (Sup. Ct.), refd to. [para. 177].

Canadian Pacific Hotels Ltd. v. Bank of Montreal, [1987] 1 S.C.R. 711; 77 N.R. 161; 21 O.A.C. 321, refd to. [para. 184].

Liverpool City Council v. Irwin, [1976] Q.B. 319 (C.A.), overturned [1976] 2 All E.R. 39 (H.L.), refd to. [para. 185].

Shell United Kingdom Ltd. v. Lostock Garage Ltd., [1977] 1 All E.R. 481 (C.A.), refd to. [para. 186].

Scapillati v. Potvin (A.) Construction Ltd. (1999), 122 O.A.C. 327; 1999 CarswellOnt 1844 (C.A.), refd to. [para. 190].

Cumberland Trust v. Maritime Electric Co. (2000), 184 Nfld. & P.E.I.R. 217; 559 A.P.R. 217; 2000 PEISCTD 1, refd to. [para. 208].

Hopper Estate v. Salisbury - see Perry v. Salisbury (Village).

Perry v. Salisbury (Village) (2005), 292 N.B.R.(2d) 124; 761 A.P.R. 124; 2005 NBQB 448 (T.D.), refd to. [para. 208].

Statutes Noticed:

Education Act, R.S.N.S. 1989, c. 136, sect. 2(h) [para. 100]; sect. 27(4), sect. 27(6), sect. 27(7) [para. 98]; sect. 46(2) [para. 99].

Education Act, S.N.S. 1995-96, c. 1, sect. 76 [para. 117].

Authors and Works Noticed:

Driedger, Elmer A., Construction of Statutes (2nd Ed. 1983), p. 87 [paras. 94, 95].

Driedger, Elmer A., Construction of Statutes (3rd Ed. 1994), Foreword [para. 95]; p. 131 [paras. 95, 104].

Fridman, Gerald Henry Louis, The Law of Contract in Canada (5th Ed. 2006), c. 17 [para. 208]; pp. 465 to 481 [para. 184]; 469 [para. 202]; 646 to 648 [para. 127]; 825 to 840 [para. 78].

Hall, Geoff R., Canadian Contractual Interpretation Law (1st Ed. 2007), c. 2, s. 2.8.2 [para. 31]; c. 3.17 [para. 162]; c. 6.1.3 [para. 74]; p. 115 [para. 179].

Rogers, Ian MacF., The Law of Canadian Municipal Corporations (2nd Ed.) (Looseleaf), para. 64.1 [para. 89].

Spencer-Bower, George S., and Turner, Alexander Kingcome, The Law Relating to Estoppel by Representation (3rd Ed. 1977), c. 14 [para. 57].

Spencer-Bower, George S., and Turner, Alexander Kingcome, The Law Relating to Estoppel by Representation (4th Ed. 2004), pp. 448, 455 [para. 58]; 489, 491 [para. 59].

Sullivan, Ruth, Sullivan and Driedger on the Construction of Statutes (4th Ed. 2002), generally [para. 104].

Swan, Angela, Canadian Contract Law (2nd Ed. 2009), c. 8, §§ 8.297, 8.298 to 8.336 [para. 121]; 8.320 [para. 124].

Swan, John, Canadian Contract Law (1st Ed. 2006), c. 8.1.3, p. 531 [para. 189].

Waddams, Stephen M., The Law of Contracts (5th Ed. 2005), paras. 360 to 380 [paras. 121, 208]; 363 [paras. 121, 123, 126].

Counsel:

Peter M. Rogers, Q.C. and Daniel Wallace, for the applicant, Municipality of the County of Kings ("Kings");

John T. Shanks and Jessica White, for the respondents, Town of Hantsport, Town of Kentville and Town of Wolfville ("Three Towns");

Stephen McGrath, for the respondent, Her Majesty the Queen in Right of the Province of Nova Scotia ("Province");

Peter McInroy, watching brief for the respondent, Town of Berwick.

This matter was heard on March 9 and 16, 2010, at Kentville, Nova Scotia, before Warner, J., of the Nova Scotia Supreme Court, who delivered the following decision on April 12, 2010.