Contractual interpretation would seem to be a question of law, thus meaning that decisions interpreting contracts should be reviewed on a correctness standard. Sometimes, however, contractual interpretation becomes inextricably tied up with a case’s facts, resulting in appellate courts’ applying a more deferential standard of review. Where should the line be drawn in this respect?

The Ontario Court of Appeal’s February 12, 2014 decision in Exchange Corporation Canada Inc. v. Mississauga (City), 2014 ONCA 113, considered this issue. The case concerned whether a business (Exchange) that exchanges currency (among other travel-related services) at Pearson International Airport was a “licensee” or a “tenant” within the meaning of the Assessments Act. The application judge held that it was a licensee. The Divisional Court, applying a correctness standard of review, concluded that it was a tenant. Exchange argued before the Court of Appeal that the Divisional Court erred in applying the correctness standard of review. Sharpe J.A. disagreed, holding:

[21] I am unable to accept the submission that the Divisional Court should have deferred to the application judge’s finding that Exchange is a licensee and not a tenant and that it erred by applying the standard of correctness to the issue of whether the Agreement was a lease.

[22] It is not necessary to engage in a lengthy examination of this court’s jurisprudence on the standard of review that applies to the interpretation of a contract: see Bell Canada v. The Plan Group (2009), 96 O.R. (3d) 81 (C.A.); MacDougall v. MacDougall (2005), 262 D.L.R. (4th) 120 (Ont. C.A.). As the Divisional Court observed, at para. 18, this was not a case involving disputed facts, nor was it a case where the interpretation of the contract required consideration of and findings as to the underlying factual matrix. The issue of whether Exchange is a tenant turned solely on the interpretation of the language of the Agreement and on an assessment of the legal character of the relationship it created: did the Agreement, in law, constitute Exchange as a tenant or as a licensee?

[23] In my view, the Divisional Court identified clear legal errors on the part of the application judge. He failed to consider the Agreement as a whole and he failed to consider provisions in the Agreement which on application of the proper legal test, as we review below, made the Agreement a lease and Exchange a tenant.

[24] The Divisional Court did not err in the standard of review.

[Emphasis added.]