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Tag: Contra Proferentem

Contra Proferentem To The Rescue

Contra Proferentem is a legal principle that is used to interpret ambiguous clauses in a contract against the party responsible for drafting the clause.  Reasons for judgement were released this week by the BC Court of Appeal using this principle to reinstate an insurance death benefit following a fatal plane crash.  (note of disclosure- my firm, MacIsaac & Company was involved in the prosecution of this case)
In this week’s case (McLean v. Canadian Premier Life Insurance Company) the Plaintiff’s spouse was killed when a chartered aircraft in which he was travelling crashed.
He had a $1 million Common Carrier Accidental Death Benefit Rider through the Defendant.  When the Plaintiff applied for payment the Defendant refused to pay arguing that the insurance did not cover crashes while on a Chartered flight.  The BC Court of Appeal disagreed and ordered that the Defendant pay the $1 million insurance benefit.  In finding that this flight was not excluded from coverage the BC Court of Appeal invoked the contra proferentem principle and provided the following reasons:
[14]         The court should give effect to the clear language of the contract, interpreted in the context of the agreement as a whole. It should also endeavour to interpret similar insurance contracts consistently. Where the language of the agreement reveals two possible interpretations, the court should seek to resolve this ambiguity by searching for an interpretation that reflects the true intent and reasonable expectations of the parties when they entered the contract, and achieves a result consistent with commercial reality and good sense. Considerations of reasonableness and fairness inform this exercise. An implied term should not be added to the contract unless it “goes without saying”, or is necessary to provide business efficacy. Nor should the court imply terms that render the express words of the contract meaningless, or contradict them. The onus to establish an implied term rests on the party seeking to rely on it: Perrin at para. 27; Wingtat Game Bird Packers (1993) Ltd. v. Aviva Insurance Company of Canada, 2009 BCCA 343 at para. 23, 96 B.C.L.R. (4th) 109.
[15]         If these principles do not resolve the ambiguity, the principle of contra proferentem will operate to favour construction against the insurer. This principle may not be used, however, to create or magnify an ambiguity…
[35]         I am satisfied it is therefore necessary and appropriate to invoke the doctrine of contra proferentem. While the coverage provision clearly requires that the insured be riding in a Common Carrier at the time of the crash, the words used to define a Common Carrier fall short of creating a clear temporal requirement for each of the definitional elements. Nor does the Rider create a clear exclusion for charter flights.
[36]         I agree with the appellant that the respondent could have easily remedied these deficiencies with clear language if it intended to exclude coverage for charter flights. It must bear the consequences of its failure to do so, and the temporal ambiguity must be resolved in favour of the appellant.
[37]         I conclude the trial judge erred in finding that, to be a Common Carrier, the aircraft had to be operating on a regular scheduled passenger service between defined points at the time of the accident.

Contra Proferentem Rule Applied to Court Order Interpretation

Contra Proferentem” is a rule courts use when interpreting contracts.  In plain English it means that if there is an ambiguous clause in a contract it will be interpreted against the party responsible for drafting the clause.   In an interesting use of this rule reasons for judgement were released today by the BC Supreme Court, Victoria Registry, applying this rule to a Court order.
Today’s case (Horne Coupar v. Velletta & Company) involved a dispute between two Victoria lawfirms.  A lawyer left the first firm (Velletta & Company) and joined the second (Horne Coupar).  A few months prior to leaving the first firm the lawyer renegotiated compensation terms with her employer from a salaried position to one which entitled her to a percentage of her “collected professional fees” on the files that she worked on.
Upon joining the second firm “a dispute arose as to what files and clients (the lawyer) would take with her and how (the first firm) would be reimbursed for loss of those files“.    Ultimately a Court motion was brought and the parties entered into a consent order with the direction that “(the second firm is) to pay over professional fees to (the first firm), on a proportionate basis for those hours which had accrued while the matter was under (the first firm’s) conduct“.  This consent order was prepared by the lawyer who left the first firm and joined the second.
The lawyer then “deducted 50% from the payments made by (the second firm) to (the first firm)” as money owing to her under the percentage clause she negotiated prior to parting company with the first firm.  The first firm disputed the propriety of this deduction arguing that the Court order that was agreed to left no such option.
Mr. Justice Romilly agreed with the first firm and ordered that money be paid to the first firm without this deduction.  In coming to this decision the Court used the Contra Proterentem doctrine.  Specifically the Court reasoned as follows:
[10] Contra proferentem is a rule of contractual interpretation which provides that an ambiguous term will be construed against the party responsible for its inclusion in the contract.  This interpretation will therefore favour the party who did not draft the term presumably because that party is not responsible for the ambiguity therein and should not be made to suffer for it.  This rule endeavours to encourage the drafter to be as clear as possible when crafting an agreement upon which the parties will rely.  This rule also encourages a party drafting a contract to turn their mind to foreseeable contingencies as failure to do so will result in terms being construed against them.  That there is ambiguity in the contract is a requisite of the application of this rule, however, once ambiguity is established, the rule is fairly straightforward in application.

[11] In my view the contra proferentem rule clearly applies in this case.  It was Ms. Newman who prepared the consent order signed by herself and Velletta.  As quoted above, that consent order directs inter alia:

…Horne Coupar to pay over professional fees to Velletta & Company, on a proportionate basis for those hours which had accrued while the matter was under Velletta & Company’s conduct…

[12] This provision provides only for payment, not for deduction of “fees” to which Ms. Newman feels she is entitled (and has since deducted).  Ms. Newman’s failure to include a provision or stipulation for deduction of her own fees has resulted in an ambiguity which is to be construed against her by application of the rule of contra proferentem.  Therefore, the clear interpretation of this provision (as against the drafter) is that fees are not deductible.  Horne Coupar is bound by the consent order to pay the professional fees to Velletta in accordance with this order and without deduction for work done by Ms. Newman.