Interpretation of contracts under Canadian law
Under Canadian law, in interpreting a contract so-called post-contractual (or subsequent) conduct only plays a role when the contract is ambiguous.
Lloyd Arthur Wade had two children from his first marriage: Robena Louise Wade and Geoffrey Lloyd Wade. Following the marriage, from 1993 until his death in 2011 Mr. Wade and Francesca Mary Duck lived together as ‘common-law spouses’. In accordance with Mr. Wade’s will, Ms. Duck became the executrix (administrator) of Mr. Wade’s estate. In 2013, Robena Louise Wade asked the court that Ms. Duck be replaced as executrix on the argument that Ms. Duck had used money from the estate instead of her own money to pay back a loan under a contract concluded in 2005 to buy a ‘Dutch Star motorhome’. In 2014, by court order, Ms. Duck was replaced as executrix of Mr. Wade’s estate by Robena Louise Wade. Robena Louise Wade then sought to recover from Ms. Duck the money that Ms. Duck had paid out of the estate to pay back the loan under the contract. The Supreme Court of British Columbia (the court in first instance) dismissed Robena Louise Wade’s claim. Robena Louise Wade appealed to the Court of Appeal for British Columbia. In its decision of 8 May 2018, the Court of Appeal allowed the appeal (but only partially because Mr. Wade was also a party to the contact and therefore obliged to contribute to pay off the loan).
The Court of Appeal based its decision on an interpretation of the contact to buy the ‘Dutch Star motorhome’. The contract identified Mr. Wade as the vehicle’s buyer, and Ms. Duck and a company controlled by Mr. Wade (Spring Cove Enterprises Ltd.) as the vehicle’s ‘second buyer’, the buyer and ‘second buyer’ being jointly and severally liable. The Supreme Court of British Columbia had considered: ‘I am satisfied that at the relevant times the debt for the Motorhome was intended to be the Deceased’s. Accordingly, it was appropriate for Ms. Duck to use funds from the accounts of Spring Cove to make the loan payments and eventually to use estate proceeds to pay out the balance of the loan to Laurentian Bank’. Especially important in this decision was what had happened after the conclusion of the contract (so-called post-contractual or subsequent conduct): ‘Payments were made from the accounts of Spring Cove, the Deceased’s company, at all relevant times before the Deceased’s death’.
The Court of Appeal considered as follows:
‘In contractual interpretation, Canadian law draws a distinction between the consideration of the circumstances surrounding contractual formation and the parties’ post-contractual (or subsequent) conduct’, and ‘There is no question that judges are entitled to consider surrounding circumstances in interpreting the written terms of a contract, regardless of whether those terms disclose any ambiguity’.
‘In contrast, evidence of subsequent conduct should only be admitted if the contract is found to be ambiguous after one has considered its text and the factual matrix surrounding the creation of the contract’. In this case, this led to the conclusion that in the contract ‘there was no ambiguity that would justify an examination of the parties’ subsequent conduct, and a fortiori not one that justified entirely overwhelming the express terms of the Contract’.
The decision of the Court of Appeal for British Columbia, 8 May 2018 (Justices Newbury, Kirkpatrick and Fisher), in the case between Robena Louise Wade v. Francesca Mary Duck and Geoffrey Lloyd Wade can be found at: www.canlii.org, English, British Columbia, BCCA Court of Appeal 1990 –, 2018, May, 2018-05-08 Wade v. Duck 2018 BCCA 176 (CanLII).