Lake Louise Limited Partnership v. Canad Corp. of Manitoba Ltd. et al., 2014 MBCA 61

• Judge: Chartier, C.J.M., Beard and Mainella, JJ.A.
• Court: Court of Appeal (Manitoba)
• Case Date: January 13, 2014
• Jurisdiction: Manitoba
• Citations: 2014 MBCA 61;(2014), 306 Man.R.(2d) 205 (CA)

Lake Louise v. Canad Corp. (2014), 306 Man.R.(2d) 205 (CA);

      604 W.A.C. 205

MLB headnote and full text

Temp. Cite: [2014] Man.R.(2d) TBEd. JN.034

Lake Louise Limited Partnership (plaintiff/appellant) v. Canad Corporation of Manitoba Ltd. and Canad Inns-Club Regent Casino Hotel Ltd. (defendants/respondents)

Lake Louise Limited Partnership (plaintiff/appellant) v. Canad Corporation of Manitoba Ltd. and Canad Inns-Brandon Ltd. (defendants/respondents)

(AI 13-30-08004; 2014 MBCA 61)

Indexed As: Lake Louise Limited Partnership v. Canad Corp. of Manitoba Ltd. et al.

Manitoba Court of Appeal

Chartier, C.J.M., Beard and Mainella, JJ.A.

June 13, 2014.

Summary:

The plaintiff and the defendants were parties to co-ownership agreements regarding hotels. The plaintiff was entitled to 49% of the "cash surplus" arising from the hotels' operations. The cash surplus depended on the calculation of the hotels' gross revenues and the costs of running the hotels, which included the defendants' management fees calculated in an amount equal to 2% of the hotels' gross revenues. Manitoba Lotteries Corp. (MLC) owned video lottery terminals (VLTs) in the hotels. The defendants received, as commission from MLC, 20% of the net win. In 2007, the defendants changed the way that they calculated their management fee by including every dollar deposited in the VLTs ("coin-in"), rather than only the 20% commission. This drastically increased the management fee, reducing the cash surplus. The plaintiff sued, asserting that the calculation of gross revenues was to be based on 20% of the net win. The plaintiff moved for summary judgment under s. 20.03 of the Queen's Bench Rules. The defendants moved for summary judgment to dismiss the actions.

The Manitoba Court of Queen's Bench, in a decision reported at 269 Man.R.(2d) 174, denied the motions.

The Manitoba Court of Queen's Bench, in a decision reported at 290 Man.R.(2d) 37, held that: (1) the contracts, and more specifically section 11.10 (generally accepted accounting principles (GAPP)) applied unless otherwise expressly provided, the definition of gross revenues, section 5.01 (management fee provision), and section 8.01 (provision that if owner did not object within 30 days, the statement would be conclusively deemed to have been accepted by owner as true and correct) were not ambiguous, and thus the court should not consider extrinsic evidence in the interpretation of these provisions and contracts; (2) the phrase "all revenues and receipts of every kind" in the definition of gross revenues included the coin-in from the VLT machines as a receipt; (3) the calculation of the management fee was expressly excluded from the requirements of section 11.10; (4) the calculation of the management fee, including coin-in as a receipt, was neither prohibited by GAAP, nor in accordance with GAAP; and (5) the defendant management company was wrong to recalculate or restate the management fee respecting either hotel for fiscal year end 2006 and before. The court declined to award costs to either party, but considering that counsel did not specifically address costs, if there were settlement offers which the court should consider or some other material factor which it had omitted to consider, counsel could attend before the court and speak to the matter. The plaintiff appealed. The defendants cross-appealed.

The Manitoba Court of Appeal, Beard, J.A., dissenting, allowed the appeal and dismissed the cross-appeal as moot. The majority opined that, had it been necessary to decide the cross-appeal, it would have agreed with Beard, J.A.'s reasons on the cross-appeal. Beard, J.A., would have dismissed the appeal and the cross-appeal.

Contracts - Topic 2101

Terms - Express terms - General - The plaintiff and the defendants were parties to co-ownership agreements regarding hotels - The plaintiff was entitled to 49% of the "cash surplus" arising from the hotels' operations - The cash surplus depended on the calculation of the hotels' gross revenues and the costs of running the hotels, which included the defendants' management fees calculated in an amount equal to 2% of the hotels' Gross Revenues - Manitoba Lotteries Corp. (MLC) owned video lottery terminals (VLTs) in the hotels - The defendants received, as commission from MLC, 20% of the net win - In 2007, the defendants changed the way that they calculated their management fee by including every dollar deposited in the VLTs ("coin-in"), rather than only the 20% commission - This drastically increased the management fee, reducing the cash surplus - The plaintiff sued, asserting that the calculation of gross revenues was to be based on 20% of the net win - At issue on an appeal by the plaintiff was, inter alia, whether the trial judge erred in finding that generally accepted accounting principles (GAAP) were "expressly" excluded from application to the definition of Gross Revenues and to the calculation of the management fee under the agreements - The Manitoba Court of Appeal held that the trial judge erred in finding that GAAP were "expressly" excluded from application to the definition of Gross Revenues and to the calculation of the management fee - The trial judge implied that the parties must have intended to exclude the applicability of GAAP to Gross Revenues when they agreed to such a detailed and specific definition of Gross Revenues - Implying that a term was "expressly" excluded led to a result that could not be upheld - The trial judge also erred when he continued to "infer" that the parties intended to "expressly" exclude the management fee calculation from the requirements of the GAAP because of other circumstances - See paragraphs 39 to 41.

Contracts - Topic 2101

Terms - Express terms - General - The plaintiff and the defendants were parties to co-ownership agreements regarding hotels - The plaintiff was entitled to 49% of the "cash surplus" arising from the hotels' operations - The cash surplus depended on the calculation of the hotels' gross revenues and the costs of running the hotels, which included the defendants' management fees calculated in an amount equal to 2% of the hotels' Gross Revenues - Manitoba Lotteries Corp. (MLC) owned video lottery terminals (VLTs) in the hotels - The defendants received, as commission from MLC, 20% of the net win - In 2007, the defendants changed the way that they calculated their management fee by including every dollar deposited in the VLTs ("coin-in"), rather than only the 20% commission - This drastically increased the management fee, reducing the cash surplus - The plaintiff sued, asserting that the calculation of gross revenues was to be based on 20% of the net win - The Manitoba Court of Appeal held that the agreements stated that generally accepted accounting principles (GAAP) would apply to all calculations unless an express exclusion was found within the agreements themselves - The court found no ambiguity - Applying GAAP, the court held that only the 20% MLC commission should be included in Gross Revenues as revenue for the purpose of calculating the management fee - See paragraphs 42 to 56.

Contracts - Topic 2126

Terms - Express terms - Exclusionary clauses - Interpretation - [See first Contracts - Topic 2101 and second Contracts - Topic 7430 ].

Contracts - Topic 2531

Variation or alteration - By parties - Variation of price - The Manitoba Court of Appeal, per Beard, J.A., dissenting, but not on this issue, held that the respondent could not avoid a limitation period in a contract by making what was effectively a retroactive adjustment and then including the full amount in the current year's statements - See paragraphs 187 to 192 - The majority, stated that, had it been necessary to decide this issue, it would have agreed with Beard, J.A'.s reasons on this issue - See paragraph 57.

Contracts - Topic 7400

Interpretation - General principles - General - [See second Contracts - Topic 7430 ].

Contracts - Topic 7401

Interpretation - General principles - Intention of parties (incl. reasonable expectations of parties) - [See first Contracts - Topic 2101 ].

Contracts - Topic 7426

Interpretation - Ambiguity - What constitutes ambiguity - [See first Contracts - Topic 7430 ].

Contracts - Topic 7430

Interpretation - Ambiguity - Admissibility of extrinsic evidence - The plaintiff and the defendants were parties to co-ownership agreements regarding hotels - The plaintiff was entitled to 49% of the "cash surplus" arising from the hotels' operations - The cash surplus depended on the calculation of the hotels' gross revenues and the costs of running the hotels, which included the defendants' management fees calculated in an amount equal to 2% of the hotels' gross revenues - Manitoba Lotteries Corp. (MLC) owned video lottery terminals (VLTs) in the hotels - The defendants received, as commission from MLC, 20% of the net win - In 2007, the defendants changed the way that they calculated their management fee by including every dollar deposited in the VLTs ("coin-in"), rather than only the 20% commission - This drastically increased the management fee, reducing the cash surplus - The plaintiff sued, asserting that the calculation of gross revenues was to be based on 20% of the net win - On appeal, the Manitoba Court of Appeal held that the trial judge erred in principle by using extrinsic evidence to determine whether the agreements were clear and unambiguous - That said, his conclusion that the material terms were unambiguous was correct - See paragraphs 30 to 37.

Contracts - Topic 7430

Interpretation - Ambiguity - Admissibility of extrinsic evidence - The plaintiff and the defendants were parties to co-ownership agreements regarding hotels - The plaintiff was entitled to 49% of the "cash surplus" arising from the hotels' operations - The cash surplus depended on the calculation of the hotels' gross revenues and the costs of running the hotels, which included the defendants' management fees calculated in an amount equal to 2% of the hotels' gross revenues - Manitoba Lotteries Corp. (MLC) owned video lottery terminals (VLTs) in the hotels - The defendants received, as commission from MLC, 20% of the net win - In 2007, the defendants changed the way that they calculated their management fee by including every dollar deposited in the VLTs ("coin-in"), rather than only the 20% commission - This drastically increased the management fee, reducing the cash surplus - The plaintiff sued, asserting that the calculation of gross revenues was to be based on 20% of the net win - At issue on an appeal by the plaintiff was, inter alia, whether the trial judge erred in finding that generally accepted accounting principles (GAAP) were "expressly" excluded from application to the definition of Gross Revenues and to the calculation of the management fee under the agreements - The Manitoba Court of Appeal noted that the trial judge clearly took into account extrinsic evidence (accountants' expert evidence) to make that determination - Determining whether an exclusion was "expressly" found in the agreements was a core judicial function - It was improper to consider the accountants' evidence to assist in this determination - Either it was "expressly" excluded or it was not - Accountants' opinions on this determination were irrelevant - Expert evidence played a limited role in interpreting a contract - Generally, experts could not provide opinions on what a contract meant; courts did - Expert evidence was often limited to explaining technical terms of art - By considering extrinsic evidence (the accountants' expert testimony) to determine whether GAAP were "expressly" excluded, the trial judge erred in principle - See paragraph 38.

Contracts - Topic 7521

Interpretation - Surrounding circumstances - General - The Manitoba Court of Appeal stated that "...  even in the absence of ambiguity, evidence pertaining to the 'surrounding circumstances' or the 'factual matrix' is admissible to aid the court in understanding and interpreting the language and meaning of any agreement. Two points need be made. First, 'surrounding circumstances' and 'factual matrix' are terms that are similar in nature ... and so, for the rest of these reasons, I will only refer to the 'factual matrix'. Second, what constitutes the factual matrix must be properly understood. It is limited to objective contextual evidence known or reasonably capable of being known by the parties at the time of the execution of the agreements. It includes, among other things, evidence of the commercial purpose and objectives of the agreements, evidence of the nature or custom of the market or industry, and evidence of the objective intention of the parties. It does not include evidence of the subjective intention of the parties, evidence of the negotiations, or evidence of the subsequent conduct of the parties after the execution of the agreements  ..." - See paragraphs 33 and 34.

Evidence - Topic 7154

Opinion evidence - Prohibited opinions - Re basic or ultimate issue to be decided - [See second Contracts - Topic 7430 ].

Practice - Topic 8808

Appeals - General principles - Duty of appellate court respecting conclusions or interpretation of trial judge (incl. contractual interpretation) - The plaintiff and the defendants were parties to co-ownership agreements regarding hotels - The plaintiff was entitled to 49% of the "cash surplus" arising from the hotels' operations - The cash surplus depended on the calculation of the hotels' gross revenues and the costs of running the hotels, which included the defendants' management fees calculated in an amount equal to 2% of the hotels' gross revenues - Manitoba Lotteries Corp. (MLC) owned video lottery terminals (VLTs) in the hotels - The defendants received, as commission from MLC, 20% of the net win - In 2007, the defendants changed the way that they calculated their management fee by including every dollar deposited in the VLTs ("coin-in"), rather than only the 20% commission - This drastically increased the management fee, reducing the cash surplus - The plaintiff sued, asserting that the calculation of gross revenues was to be based on 20% of the net win - On appeal, the Manitoba Court of Appeal held that the plaintiff's appeal could be reduced to the following four questions of contractual interpretation: (1) did the trial judge err by taking into account extrinsic evidence (here, the expert testimony of accountants) to determine whether the agreements were clear and unambiguous; (2) did the trial judge err by taking into account extrinsic evidence (the accountants' expert testimony) to determine whether GAAP (generally accepted accounting principles) were "expressly" excluded; (3) did the trial judge err in finding that GAAP were "expressly" excluded from application to the definition of Gross Revenues and to the calculation of the management fee; and (4) did the trial judge err in finding that all of the coin-in from VLTs was to be included as Gross Revenues? - The court held that the first three issues were subject to a correctness standard of review, issue one because a pure question of law could be extricated from the facts and issues two and three because they could be determined based on the agreements' wording, without reference to the extrinsic evidence - The fourth was subject to a palpable and overriding error standard, as the trial judge was interpreting the agreements' language in the context of the expert testimony about accounting terminology and concepts - The court held that the trial judge erred on the first three issues - As a result of these errors, no deference was owed to the trial judge's decision and the court was entitled to review the agreements afresh - See paragraphs 10, 12, 13 and 42.

Cases Noticed:

Hopkins v. Ventura Custom Homes Ltd. (2013), 294 Man.R.(2d) 168; 581 W.A.C. 168; 2013 MBCA 67, refd to. [para. 12].

King v. Operating Engineers Training Institute of Manitoba Inc. (2011), 270 Man.R.(2d) 63; 524 W.A.C. 63; 2011 MBCA 80, refd to. [para. 12].

Bell Mobility Inc. v. MTS Allstream Inc. (2009), 236 Man.R.(2d) 167; 448 W.A.C. 167; 2009 MBCA 28, refd to. [para. 13].

Transcanada Pipelines Ltd. v. Northern & Central Gas Corp. Ltd. (1983), 41 O.R.(2d) 447, refd to. [para. 31].

Coventree Inc. v. Lloyds Syndicate 1221 (Millennium Syndicate) (2012), 291 O.A.C. 178; 2012 ONCA 341, refd to. [para. 34].

Eli Lilly & Co. et al. v. Novopharm Ltd. et al., [1998] 2 S.C.R. 129; 227 N.R. 201, refd to. [para. 35].

Moore (Geoffrey L.) Realty Inc. v. Manitoba Motor League (2003), 173 Man.R.(2d) 300; 293 W.A.C. 300; 2003 MBCA 71, refd to. [para. 35].

Dow Chemical Canada Inc. v. Shell Chemicals Canada Ltd. et al. (2010), 477 A.R. 112; 483 W.A.C. 112; 2010 ABCA 126, refd to. [para. 38].

Authors and Works Noticed:

Hall, Geoff R., Canadian Contractual Interpretation Law (2nd Ed. 2012), pp. 95, 96 [para. 143]; 125 to 131 [para. 12].

Sullivan, Ruth, Construction of Statutes (5th Ed. 2008), p. 62 [para. 143].

Brown, Donald J.M., Civil Appeals (2013) (Looseleaf), vol. 2, para. 14:2321 [para. 181].

Counsel:

T.J. Hansell and D.A. Ripley, for the appellant;

D.G. Hill, for the respondents.

This appeal was heard on January 13, 2014, by Chartier, C.J.M., Beard and Mainella, JJ.A., of the Manitoba Court of Appeal. The court delivered the following decision on June 13, 2014, which was comprised of the following opinions:

Chartier, C.J.M. (Mainella, J.A., concurring) - see paragraphs 1 to 57;

Beard, J.A., dissenting - see paragraphs 58 to 193.