In RBC Dominion Securities Inc. v. Crew Gold Corporation, 2017 ONCA 648, the Plaintiffs (“RBC”) sued the Defendant (“Crew”) for a success fee (the “Success Fee,”) that RBC alleged it was owed under an agreement for the provision of investment banking services (the “Agreement”). The Agreement provided, among other things, that RBC was entitled to the Success Fee “if a Transaction [was] completed involving any party, whether or not solicited by RBC, pursuant to an agreement to effect or otherwise complete a Transaction entered into during the term of its engagement […]”. RBC provided certain services under the Agreement. During the course of the Agreement, Crew was subject to a takeover. The takeover was not anticipated by either party. RBC was not involved in the takeover transaction.
The issue at trial was whether RBC was entitled to the Success Fee for its services. The trial judge found that the takeover was not connected to RBC’s services. As a result, the trial judge held that RBC was not entitled to the Service Fee.
On appeal, RBC argued that the trial judge 1) failed to consider the plain words of the Agreement in the context of the contract as a whole, 2) failed to correctly consider the objective evidence of the surrounding circumstances, and 3) failed to consider the commercial reasonableness of RBC’s interpretation.
In respect of 1), RBC argued that “Transaction” was broadly defined in the Agreement, and that the definition contained no express requirement for the involvement of RBC in the Transaction. The Court stated that RBC’s interpretation failed to consider the nature and substance of the Agreement as a whole. The Court considered that all of the fees payable under the Agreement were “for its services hereunder”. The Court found that this required a connection between the services provided by RBC and the Transaction.
In respect of 2), the Court reiterated that the purpose of contractual interpretation is not to discover how the parties understood the language of the contract, but to determine the meaning of the contract against its objective contextual scheme. The Court found that the trial judge had not improperly relied upon the parties’ subjective intention.
In respect of 3), the Court stated that the construction of contracts in accordance with commercial reasonableness must be done objectively rather than from the perspective of the contracting parties. The Court acknowledged that the Agreement could be interpreted as alleged by RBC. However, the Court found that such an interpretation would have been commercially unreasonable, as it would have resulted in a significant windfall to RBC without a connection to the services it provided.
The lawyers at Gilbertson Davis LLP have experience with breach of contract claims, as well as claims for success fees. Please contact us for an initial consultation.
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