COURT OF APPEAL FOR BRITISH COLUMBIA  
Citation:  
Interfor Corporation v. Mackenzie Sawmill Ltd.,  
2022 BCCA 228  
Date: 20220629  
Docket: CA47125  
Between:  
Interfor Corporation  
Respondent  
(Plaintiff)  
And  
Mackenzie Sawmill Ltd., Pacific Lumber Remanufacturing Inc.,  
Riverside Forest Products Inc., Riverside Forest Products (2018) Inc.,  
West Rim Fibre Corp., 0761979 BC Ltd., 1162183 BC Ltd., Avtar Sidhu,  
and Rajdeep Singh Sohi  
Appellants  
(Defendants)  
Before:  
The Honourable Mr. Justice Willcock  
The Honourable Madam Justice Fisher  
The Honourable Madam Justice DeWitt-Van Oosten  
On appeal from: An order of the Supreme Court of British Columbia, dated  
October 26, 2020 (Interfor Corporation v. Mackenzie Sawmill Ltd., 2020 BCSC 1572,  
Vancouver Docket S1812515).  
Counsel for the Appellants:  
C.J. Overholt, Q.C.  
K.Y. Chieh  
R. Milani, Articled Student  
Counsel for the Respondent:  
Place and Date of Hearing:  
R.J. Kaardal, Q.C.  
M.T. Dinh  
Vancouver, British Columbia  
February 17, 2022  
Written Submissions Received:  
Place and Date of Judgment:  
May 25, June 1, and June 7, 2022  
Vancouver, British Columbia  
June 29, 2022  
Written Reasons by:  
The Honourable Madam Justice Fisher  
Interfor Corporation v. Mackenzie Sawmill Ltd.  
Page 2  
Concurred in by:  
The Honourable Madam Justice DeWitt-Van Oosten  
Dissenting Reasons by:  
The Honourable Mr. Justice Willcock (Page 30; para. 86)  
Interfor Corporation v. Mackenzie Sawmill Ltd.  
Page 3  
Table of Contents  
Paragraph  
Range  
REASONS FOR JUDGMENT OF THE HONOURABLE  
MADAM JUSTICE FISHER  
[1]  
BACKGROUND  
[8]  
ON APPEAL  
[15]  
[18]  
[24]  
[33]  
SUITABILITY FOR SUMMARY TRIAL  
SUITABILITY OF DECLARATORY RELIEF  
STANDARD OF REVIEW OF THE PRINCIPAL  
QUESTIONS  
DISCUSSION  
[37]  
[37]  
[38]  
[41  
A. Force majeure  
The terms of the CSA  
The decision below  
Analysis  
[51]  
[64]  
[65]  
[67]  
[70]  
[75]  
[80]  
[85]  
[86]  
B. Frustration  
Legal principles  
The decision below  
Analysis  
1. Root, foundation or purpose of a contract  
2. Foreseeability  
CONCLUSION  
REASONS FOR JUDGMENT OF THE HONOURABLE  
MR. JUSTICE WILLCOCK  
APPENDIX A  
Interfor Corporation v. Mackenzie Sawmill Ltd.  
Page 4  
Summary:  
Majority (per Justice Fisher and Justice DeWitt-Van Oosten): The appellants,  
defendants in the court below, appeal the dismissal of an application for summary  
judgment in which they sought declaratory relief in respect of their obligations to the  
respondent under an agreement to supply wood chips from a mill. The mill was  
damaged and then destroyed after a series of fires. The appellant, Mackenzie  
Sawmill Ltd. (MSL), stopped supplying chips, as permitted under a force majeure  
clause in the agreement. A new mill was subsequently built on the same property,  
not by MSL but by one or more companies associated with MSL’s owners, which  
then sold chips to third parties at prices higher than those in the agreement. In  
dismissing the application, the summary trial judge also granted declarations  
favouring the respondent that, as a result of the fires that ruined the mill, MSL’s  
obligations under the agreement were not permanently discharged under the force  
majeure clause and the agreement was not frustrated. The appellants challenge the  
judge’s interpretation of the force majeure clause, and, alternatively, his frustration  
analysis.  
Held: Appeal dismissed, Justice Willcock dissenting. The judge made no error in his  
ultimate conclusion that the force majeure clause does not provide for the  
termination of MSL’s contractual obligations under the agreement or in his frustration  
analysis, both of which were limited to the result of the fires that ruined the mill. The  
ultimate determination of both issues will depend on whether the new mill that was  
later built is found to have revived MSL’s obligations under the CSA. Although the  
declarations granted in favour of the respondent were unusual, they clarified the  
issues that were not to be left for trial and had some practical utility.  
Dissent: Willcock J.A. would allow the appeal in part. The judge’s declaration that  
the CSA was not frustrated should be set aside. The declaration has no practical  
utility and does not resolve any significant aspect of the dispute; declaratory relief  
that has no practical effect should not be granted.  
Reasons for Judgment of the Honourable Madam Justice Fisher  
[1]  
The appellants are defendants in an action commenced by the respondent  
Interfor Corporation (Interfor), in which Interfor alleges that some or all of the  
corporate defendants are in breach of an agreement to supply wood chips. In the  
court below, the appellants sought, on a summary trial, declaratory relief and an  
order that the appellant, Mackenzie Sawmill Ltd. (MSL), was discharged from its  
obligations under the agreement, either under a force majeure provision or under the  
doctrine of frustration. Their application was dismissed. The appellants seek similar  
relief from this Court.  
Interfor Corporation v. Mackenzie Sawmill Ltd.  
Page 5  
[2] The agreement in issue is a Chip Supply Agreement made in September  
2006, in which MSL agreed to supply wood chips to Interfor from a mill in Surrey,  
B.C. (the CSA). The CSA followed an Asset Purchase Agreement made in June  
2006, in which MSL purchased from Interfor the mill and its related assets as well as  
the lumber manufacturing business conducted at that location (the APA). I will refer  
to the mill as the Mackenzie Mill.  
[3]  
The underlying action concerns the contractual obligations of the appellants  
after a series of fires between 2010 and 2014 that damaged and then destroyed the  
Mackenzie Mill. As a result, MSL stopped supplying chips to Interfor, as it was  
permitted to do under a force majeure clause in the CSA. Subsequently, a new mill  
was built on the same property, not by MSL, but by one or more other companies  
associated with MSL’s owners, some of the appellants herein. When the new mill  
began operations, its owners sold chips to third parties at prices higher than those in  
the CSA.  
[4]  
Interfor’s primary claim is in contract. It maintains that the obligations of MSL  
were not terminated under the CSA and that MSL, as well as the new owners as  
alter egos of MSL, are bound by the CSA to continue to supply wood chips.  
[5]  
It is in this context that the appellants sought orders in a summary trial that  
included:  
1) a declaration that the fires in 2010, 2011 and 2014, either individually or  
cumulatively, constituted frustration of the CSA;  
2) an order that the CSA was at an end following the frustrating event(s),  
discharging both parties from the obligations thereunder; or alternatively  
3) a declaration that the fires in 2010, 2011 and 2014, either individually or  
cumulatively, constituted a force majeure event as defined in art. 8.5 of the  
CSA;  
4) an order that MSL is entitled to force majeure relief under the CSA; and  
Interfor Corporation v. Mackenzie Sawmill Ltd.  
Page 6  
5) an order that MSL was discharged from any obligation to produce and  
deliver wood chips to Interfor under the CSA following the force majeure  
event(s).  
[6]  
The summary trial judge was satisfied that the application raised issues that  
were suitable for summary disposition by declaratory relief, defining those issues as:  
1.  
Were MSL’s obligations under the CSA permanently discharged  
pursuant to art. 8.5 by the fires that ruined the Mackenzie Mill?  
2. Was the CSA frustrated by the fires that ruined the Mackenzie Mill,  
bringing MSL’s obligations under the contract to an end?  
[7]  
The judge answered both questions in the negative, dismissed the  
application, and made declarations in favour of Interfor.  
Background  
[8]  
The Mackenzie Mill, originally built in 1938, has changed hands several times.  
Interfor (then known as International Forest Products Limited) purchased it in 1991  
from Fletcher Challenge Canada Limited (Fletcher Challenge). In exchange, Interfor  
agreed to sell to Fletcher Challenge all wood chips produced at its mills, including  
the Mackenzie Mill, under the terms of a Chip and Pulplog Supply Agreement dated  
December 30, 1991 (the CPSA). The CPSA required Interfor to make it a condition  
of any sale of the Mackenzie Mill that the purchaser agree to be bound by this  
obligation. Catalyst Paper Corporation (Catalyst) is the successor to Fletcher  
Challenge, so these obligations are now owed to Catalyst.  
[9]  
The CSA was therefore a necessary part of the 2006 transaction. The CSA  
recitals refer to the APA, the CPSA (referred to therein as the Catalyst Agreement)  
and the agreement to sell and supply chips “so that Interfor may sell and supply  
such Chips to Catalyst under the Catalyst Agreement”.  
[10] The first of the fires occurred on November 12, 2010. It rendered the  
Mackenzie Mill unusable and the mill stopped producing lumber and chips. A second  
fire broke out on January 25, 2011. It destroyed significant portions of the Mackenzie  
Mill.  
Interfor Corporation v. Mackenzie Sawmill Ltd.  
Page 7  
[11] On February 11, 2011, MSL delivered a notice to Interfor that stated:  
As per Article 8 of the Chip Supply Agreement between MacKenzie Sawmill  
Ltd. and International Forest Products Limited dated the 29th day of  
September, 2006, please accept this letter as notification that MacKenzie  
Sawmill Ltd. will be curtailing their supply of wood chips to International  
Forest Products Limited for a yet to be determined period of time. This  
curtailment is due to MacKenzie Sawmill experiencing downtime due to a  
small fire at the mill on November 12, 2010 followed by a second fire at the  
mill on January 25, 2011 in which we suffered severe damage. As time and  
future events dictate, MacKenzie will continue to provide updates as to the  
time status of our chip supply curtailment.  
[12] MSL decided not to repair the Mackenzie Mill and took steps to have it  
demolished. The demolition was not yet complete when, on October 31, 2014, a  
third fire destroyed most of what remained of the Mill. MSL eventually received  
approximately $20.2 million from its insurer for the fire losses. Between 2015 and  
2017, a new mill was built at the same location. According to the response to civil  
claim, the new mill was built by the appellant Pacific Lumber Remanufacturing Inc.  
[13] Despite the February 11, 2011 notice, MSL did not give further notice to  
Interfor that it was permanently shutting down its operation of the mill, nor did MSL  
formally advise Interfor that another party was building a new mill. However, there is  
evidence in the record that individuals at Interfor continued to communicate with  
individuals at MSL throughout 2016 and 2017 about the rebuild of the mill and the  
delivery of chips, and that in September 2017, Interfor began receiving small  
deliveries of chips at prices consistent with the formula in the CSA.  
[14] Subsequently, there were discussions between the parties about MSL’s  
obligations under the CSA, and in May 2018, Interfor delivered an Arbitration Notice  
to MSL under the CSA. On July 20, 2018, MSL’s counsel formally advised Interfor of  
its position that the new mill was neither owned nor operated by MSL and that MSL  
was “entitled to shut down its operations without liability to Interfor” under art. 8.5 of  
the CSA. In November 2018, Interfor terminated the arbitration and commenced the  
underlying action.  
Interfor Corporation v. Mackenzie Sawmill Ltd.  
Page 8  
On appeal  
[15] The appellants raise two grounds of appeal. They submit that the summary  
trial judge erred  
a) in his interpretation of the force majeure provision in art. 8.5 of the CSA by  
deviating from the text and effectively creating a new agreement; and  
b) in his frustration analysis by disregarding the relevance of identifying the root  
or foundation of the parties’ contractual relations, and applying a requirement  
of strict or simple foreseeability.  
[16] The second ground is raised only in the event art. 8.5 does not permit MSL to  
terminate its obligations under the CSA.  
[17] Before I address the grounds of appeal, I consider it necessary to comment  
on two related issues: the suitability for summary trial and the suitability of  
declaratory relief.  
Suitability for summary trial  
[18] Whether this matter was suitable for a determination in a summary trial was  
not raised in this appeal but requires some comment. The order under appeal was  
made only after the judge dismissed an earlier application by the appellants in which  
they sought an order that MSL was discharged from its obligations under the CSA  
only on the basis of the force majeure art. 8.5. In the first application, the judge  
found that the issue of contractual interpretation was interwoven with the defence of  
frustration, pleaded by the appellants, and therefore it was not appropriate to  
determine the former and leave the latter to be resolved at trial.  
[19] In reasons indexed at 2020 BCSC 416, the judge addressed the conditions  
under which an application for judgment on a summary trial must be refused, as set  
out in R. 9-7(15)(a) of the Supreme Court Civil Rules:  
(i) the court is unable, on the whole of the evidence before the court on the  
application, to find the facts necessary to decide the issues of fact or law,  
or  
Interfor Corporation v. Mackenzie Sawmill Ltd.  
Page 9  
(ii) the court is of the opinion that it would be unjust to decide the issues on  
the application, …  
[20] The judge recognized the implications of determining only some issues in the  
litigation and the dangers of piecemeal decision-making, as reflected in cases such  
as Greater Vancouver Water District v. Bilfinger Berger AG, 2015 BCSC 485 and  
Ferrer v. 589557 B.C. Ltd., 2020 BCCA 83. He also recognized a number of  
considerations that favoured summary determination: (1) the contractual  
interpretation issue was confined in scope; (2) a decision either way would reduce  
uncertainty and improve the prospects for resolution (a position taken by Interfor);  
(3) the amounts involved were substantial and the issue was not particularly  
complex; and (4) the issue did not engage an important, rare or unsettled question of  
law, the record was documentary and there were no questions of credibility: at  
paras. 38–41.  
[21] It was clear that the actions of the appellants after the 2014 fire were  
contested and the parties agreed that the record did not permit findings of fact as to  
what the appellants did after the fire and the legal consequences of their actions. It  
was also clear that if the interpretive issue were decided in the appellants’ favour,  
their subsequent actions mattered little. The same could not be said if the issues  
were decided in Interfor’s favour, but, as noted above, Interfor’s position was that a  
decision either way would significantly reduce the uncertainty in the litigation and  
improve the prospects for resolution: at paras. 36, 39.  
[22] Because the judge considered “the interweaving of the frustration defence  
with the interpretive issue” to be decisive, he gave leave to the parties to pursue a  
further application for disposition of both issues: at paras. 47, 49.  
[23] When the matter came back before the summary trial judge in the appellants’  
second application, he found the same considerations equally favoured summary  
determination of the frustration issue: at para. 77, in reasons indexed as 2020  
BCSC 1572. Interfor, quite understandably, did not take a strong position on  
suitability. In exercising his discretion under R. 9-7(15), the judge was doing his best  
Interfor Corporation v. Mackenzie Sawmill Ltd.  
Page 10  
to assist the parties to reduce the issues in dispute by answering the questions  
raised. However, there is a difference between suitability for summary disposition  
and suitability of declaratory relief.  
Suitability of declaratory relief  
[24] This was an unusual summary trial application given the limited factual basis  
underlying the questions the appellants put before the judge and the declaratory  
relief they sought. Interfor’s alternative position to suitability was to seek declarations  
converse of those sought by the appellants. In answering both questions in the  
negative, the judge acceded to Interfor’s submission and granted declarations that  
reflected his conclusions. In doing so, he did not expressly consider whether these  
declarations were appropriate in the context of the summary trial.  
[25] Declaratory relief is a discretionary remedy that “may be appropriate where  
(a) the court has jurisdiction to hear the issue, (b) the dispute is real and not  
theoretical, (c) the party raising the issue has a genuine interest in its resolution, and  
(d) the responding party has an interest in opposing the declaration being sought”:  
S.A. v. Metro Vancouver Housing Corp., 2019 SCC 4 at para. 60. In addition, a  
declaration must have practical utility, in that it will settle a “live controversy”  
between the parties or clarify the rights of the parties, at least to some extent:  
Daniels v. Canada (Indian Affairs and Northern Development), 2016 SCC 12 at  
para. 11; West Moberly First Nations v. British Columbia, 2020 BCCA 138 at  
paras. 308–314, 331, leave to appeal ref’d [2020] S.C.C.A. No. 252. An  
interpretation of a contract and its application to a specific set of facts may be a  
proper case for declaratory relief, but a declaration of facts detached from the legal  
rights of the parties is not: see 1472292 Ontario Inc. (Rosen Express) v. Northbridge  
General Insurance Company, 2019 ONCA 753 at paras. 30–31.  
[26] Generally, an appellate court should not interfere with a judge’s exercise of  
discretion absent an error of law or principle, or a palpable and overriding error of  
fact. The criteria for the exercise of the discretion to grant declaratory relief are legal  
criteria, “and their definition as well as a failure to apply them or a misapplication of  
Interfor Corporation v. Mackenzie Sawmill Ltd.  
Page 11  
them raise questions of law which are subject to appellate review”: see British  
Columbia (Minister of Forests) v. Okanagan Indian Band, 2003 SCC 71 at para. 43,  
citing Pelech v. Pelech, [1987] 1 S.C.R. 801 at 814–15.  
[27] The declarations granted in this case were in many respects theoretical given  
the narrow basis of the questions put before the judge, which did not consider the  
full factual matrix of Interfor’s claims. The division therefore sought and received  
supplemental written submissions from the parties as to the legal effect or practical  
utility of the declarations.  
[28] In the appellants’ submission, the declarations it sought would have  
concluded most of the litigation and would clearly have had practical utility, but the  
declarations made in favour of Interfor do not. They point to the declaration  
regarding frustration and note that it remains open to the parties to argue frustration  
on other bases at trial. In the event the Court determines that this appeal should  
otherwise be dismissed, the appellants submit that the declarations should be set  
aside so as not to “further split the issues at trial” and to “permit the force majeure  
and frustration issues to be properly addressed in their full factual context”.  
[29] Interfor submits that the declarations have legal and practical utility by  
providing certainty and clarity of the issues remaining in the litigation. It emphasizes  
that the summary trial judge’s findings and conclusions are binding on the parties in  
any event, in that they render the force majeure interpretation and the narrow  
frustration issues res judicata at a trial of the outstanding issues between the parties.  
Interfor disputes the appellants’ suggestion that the declarations may “further split  
the issues at trial” as this ignores the fact that the frustration question was framed  
narrowly to satisfy the threshold of suitability for summary disposition.  
[30] It is unusual to grant declaratory relief where an application for summary trial  
is dismissed. In this case, the appellants sought answers to narrowly framed  
questions that required the summary trial judge to make findings of mixed fact and  
law, removed from the full evidentiary context of the litigation. Despite the theoretical  
Interfor Corporation v. Mackenzie Sawmill Ltd.  
Page 12  
nature of the questions, the answers did effectively narrow the issues between these  
two parties, and it was implicit that they would be bound by the judge’s findings.  
[31] In this sense, the declarations were unnecessary. However, they also  
articulate the issues that are not to be left for trial and isolate the issues for trial to  
what occurred after the fires. It is therefore no longer open to the appellants to argue  
that MSL’s contractual obligations under the CSA were terminated under the force  
majeure clause or were otherwise frustrated solely as a result of the destruction of  
the Mackenzie Mill by the fires.  
[32] As I will explain, it is my view that the summary trial judge did not, for the  
most part, err in his interpretation of art. 8.5 or in his frustration analysis in the  
context of the issues that were put before him. However, this summary trial  
application was in many ways premature, especially in relation to the question of  
frustration. The judge made some comments regarding permanent suspensions and  
the nature of a revived obligation in the event a new mill was built and operated by  
MSL, which could not properly be decided given the narrow questions before him. In  
this context, the declarations have some practical utility in clarifying the issues that  
will not be left for trial. Although I share many of the concerns expressed by my  
colleague, Justice Willcock, in these rather unique circumstances, I would not set the  
declarations aside.  
Standard of review of the principal questions  
[33] Contractual interpretation involves questions of mixed fact and law that are  
subject to a standard of palpable and overriding error absent an extricable error of  
law. In most cases, the exercise involves applying the principles of contractual  
interpretation to the words of the written contract, considered in light of the factual  
matrix. It is only where legal errors are made in the course of contractual  
interpretation that the standard of correctness applies: Sattva Capital Corp. v.  
Creston Moly Corp., 2014 SCC 53 at paras. 50–53.  
[34] The appellants do not assert any extricable legal errors in respect of the  
judge’s interpretation of the force majeure provision in the CSA, and the errors they  
Interfor Corporation v. Mackenzie Sawmill Ltd.  
Page 13  
assert in respect of the judge’s analysis of the doctrine of frustration raise questions  
of law and mixed fact and law.  
[35] The exercise of contractual interpretation was succinctly described by  
MacKenzie J.A. in Blackmore Management Inc. v. Carmanah Management  
Corporation, 2022 BCCA 117:  
[32]  
Contractual interpretation is a practical, common-sense exercise to  
determine the objective intentions of the parties: Sattva at para. 47. Intentions  
are determined by reading the contract as a whole, giving words their  
ordinary and grammatical reading in light of the surrounding circumstances at  
the time of contracting: Sattva at para. 47. Surrounding circumstances can  
assist in ascertaining the meaning of the contract but cannot overwhelm the  
words: Sattva at para. 57.  
[36] Ultimately, the interpretation of a provision in a written contract must always  
be grounded in the text, supported by its plain language, and read in light of the  
entire contract: Sattva at para. 57; Canaccord Genuity Corp. v. Reservoir Minerals  
Inc., 2019 BCCA 278 a para. 21.  
Discussion  
A.  
Force majeure  
[37] The appellants’ primary submission is that the force majeure provision in  
art. 8.5 of the CSA entitles MSL to permanently discontinue its obligation to deliver  
chips to Interfor as a result of the fires. They equate a permanent discontinuance to  
a termination.  
The terms of the CSA  
[38] Article 8 of the CSA governs “Force majeure and curtailment”, protecting  
Interfor (in art. 8.1) and MSL (in art. 8.5):  
Affecting Catalyst  
8.1  
If, at any time while this Agreement is in force, Catalyst shuts down or  
curtails the operation of its pulp production facilities or Chip unloading  
facilities due to weather conditions, fire, strike or other labour disruptions,  
lockout, sabotage, shipwreck, riot, war, flood, extraordinary breakdown, laws  
or regulations, Court order, act of any government body or agency, act of  
God, blockade, civil commotion or disobedience (lawful or unlawful) or for any  
Interfor Corporation v. Mackenzie Sawmill Ltd.  
Page 14  
reason whether similar or dissimilar to the foregoing which Catalyst considers  
sufficient to justify curtailing or shutting down its operations, then Interfor,  
without liability, may discontinue or curtail the purchase and acceptance of  
deliveries of Chips from MSL for the period of such shutdown or curtailment.  
…
Affecting MSL  
8.5  
If, at any time while this Agreement is in force, MSL shuts down or  
curtails the operation of the Mill due to fire, strike or other labour disruptions,  
lockout, sabotage, shipwreck, riot, war, flood, extraordinary breakdown, laws  
or regulations, Court order, act of any government body or agency, act of  
God, blockade, civil commotion or disobedience (lawful or unlawful) or as a  
result of lnterfor reducing or discontinuing its purchases of Chips under this  
Agreement, or for any reason whether similar or dissimilar to the foregoing  
and which MSL considers sufficient to justify curtailing or shutting down its  
operations, then MSL, without liability, may discontinue or curtail the  
production and delivery of Chips to lnterfor.  
[Emphasis added.]  
[39] Article 9 of the CSA governs termination:  
Termination Date  
9.1  
(a)  
The Term of this Agreement will continue until the earlier of:  
the date on which MSL commences a voluntary or involuntary  
dissolution, or upon the winding-up, bankruptcy, liquidation or  
insolvency of MSL, as the case may be;  
(b)  
(c)  
the date of termination pursuant to section 9.2; and  
the date of termination pursuant to section 9.3,  
in any case, the “Termination Date”.  
Termination upon Default  
9.2  
At any time while an Event of Default exists with respect to a Party,  
the other Party may, in addition to any other rights that it may have under this  
Agreement or otherwise, give to that Party a notice specifying as the  
Termination Date a date not earlier than the date on which such notice is  
given.  
Termination by Interfor upon Notice  
9.3  
At any time during the Term, Interfor may terminate this Agreement  
upon giving at least twelve months’ notice in writing.  
[Emphasis added.]  
[40] For ease of reference, the text of the most relevant provisions of the CSA,  
APA and CPSA are set out in the Appendix attached to these reasons.  
Interfor Corporation v. Mackenzie Sawmill Ltd.  
The decision below  
Page 15  
[41] In considering whether MSL’s obligations under the CSA were permanently  
discharged pursuant to art. 8.5 by the fires that ruined the Mackenzie Mill, the  
summary trial judge applied the principles of contractual interpretation set out in  
Sattva, Water Street Pictures Ltd. v. Forefront Releasing Inc., 2006 BCCA 459 and  
Athwal v. Black Top Cabs Ltd., 2012 BCCA 107. He outlined the points he  
considered to be particularly important in this case, at para. 29:  
a) The contract must be read as a whole; Water Street at para. 24;  
b) The contract must be read in the light of the surrounding circumstances,  
known to the parties at the time of contracting; Sattva at para. 47;  
c) What must be determined is what the parties intended by the words they  
used. Contextual evidence must not be permitted to overwhelm the  
wording of the agreement; Water Street at para. 24, citing Black Swan  
Gold Mines Ltd. v. Goldbelt Resources Ltd. (1996), 25 B.C.L.R. (3d) 285  
(C.A.) at para. 19;  
d) However, words in isolation do not have an immutable or absolute  
meaning. They often take their meaning from the context; Sattva at  
paras. 47-48;  
e) It is important to consider the purpose of the agreement and the nature of  
the relationship established by the agreement; Sattva at para. 48; and  
f) What is required is a practical, common-sense approach not dominated  
by technical rules of construction; Sattva at para. 47.  
[42] The judge considered the recitals of the CSA that referred to the CPSA,  
Interfor’s obligation to supply chips to Catalyst under the CPSA, the termination  
provisions in the CSA that gave Interfor, but not MSL, a right to terminate by giving  
notice, and MSL’s obligation to require any assignee to agree to be bound by the  
CSA as a condition of any sale or transfer of the Mackenzie Mill. He found that the  
nature and purpose of the CSA were clear:  
[35]  
… It is an agreement of indefinite duration to secure for Interfor the  
supply of chips generated by the Mackenzie Mill’s operations, so that Interfor  
may fulfill its own obligation to supply chips to Catalyst under the CPSA.  
MSL’s obligation to supply chips to Interfor is limited to chips actually  
produced from the Mill and further qualified by art. 8.5.  
[43] The appellants maintained that art. 8.5 contemplated either a temporary or  
permanent cessation of MSL’s obligations to deliver chips, while Interfor maintained  
Interfor Corporation v. Mackenzie Sawmill Ltd.  
Page 16  
that art. 8.5 contemplated only a suspension of MSL’s obligation. The judge  
considered three points to be clear:  
[38]  
… First, the operation of art. 8.5 is triggered by a shutdown or  
curtailment of the Mackenzie Mill’s [sic] due to fire, as occurred here, or for  
other reasons such as a strike, labour disruption, or civil commotion. Second,  
the clause recognizes that it is up to MSL to decide whether to curtail or shut  
down its operations and, if it does, permits it to discontinue or curtail the  
production and deliver[y] of chips to Interfor. Third, the clause admits of the  
possibility that a shutdown or curtailment may be temporary or effectively  
permanent. This is so because the operation of the clause may be triggered  
by strikes, labour disruptions, and civil commotion, all of which are often  
temporary in nature. Other possible triggering events, such as legislation  
rendering the Mill’s operations illegal, would be permanent in nature.  
[44] From this, he found that a “discontinuance” under art. 8.5 may be temporary  
or permanent. He considered art. 8.8, which requires the parties to notify the other of  
scheduled or unanticipated shutdowns or curtailments and the anticipated duration  
and estimated effect, to confirm this interpretation: at paras. 39–40. He also  
compared art. 8.5 with art. 8.1:  
[41]  
… The wording of art. 8.1 parallels that of art. 8.5, except that (1) the  
protection is triggered by a shutdown or curtailment of operations by Catalyst,  
not Interfor, and (2) art. 8.1 expressly limits the protection afforded to Interfor  
to “the period of such shutdown or curtailment” …  
[45] The judge gave little weight to the appellants’ argument that the presence of  
the words “for the period of such shutdown or curtailment” in art. 8.1 indicates an  
intention that MSL’s right to discontinue or curtail production and delivery under  
art. 8.5 is not necessarily limited to the period of the shutdown or curtailment giving  
rise to the right. He noted the appellants’ concession that a discontinuance or  
curtailment of the Mackenzie Mill’s operations of a minor nature would not bring  
MSL’s obligations under the CSA to an end and found that this implied into art. 8.5  
the limiting words expressly contained in art. 8.1. He therefore found the difference  
in the wording of the two articles to be inconsequential: at para. 43. He also found  
the “triggers that engage the operation of the force majeure relief” under arts. 8.1  
and 8.5 to be different:  
[44]  
… Under art. 8.1, it is a shutdown or curtailment of operations by  
Catalyst, a third party to the CSA. Under art. 8.5, it is a shutdown or  
Interfor Corporation v. Mackenzie Sawmill Ltd.  
Page 17  
curtailment of operations by MSL. Where force majeure under art. 8.1 is  
invoked, art. 8.7(a) limits MSL’s ability to enter into agreements for the  
disposition of the chips it is not supplying to Interfor by reason of the force  
majeure. There is no corresponding obligation placed on Interfor in the event  
of a force majeure invoked by MSL under art. 8.5. Arguably, therefore, the  
effect on MSL of a force majeure event under art. 8.1 is more onerous than  
the effect on Interfor of a force majeure event under art. 8.5. This may be a  
reason for the inclusion in art. 8.1 of limiting language – “for the period of  
such shutdown or curtailment” – that is merely implicit in art. 8.5.  
[46] The judge also gave little weight to the appellants’ argument that the fires that  
ruined the Mackenzie Mill brought MSL’s business to an end, as he found that both  
the CSA and the APA distinguished between the “Mill” (as a lumber manufacturing  
facility located in Surrey) and the “Business” (of manufacturing lumber products and  
selling such products). He held that the Mill was an asset utilized in the conduct of  
the Business and the two terms were not synonymous:  
[48]  
… From the point of view of the agreements, the Mackenzie Mill might  
be ruined without bringing an end to the Business. If MSL were to promptly  
rebuild an identical mill from insurance proceeds, the Business would  
continue notwithstanding the destruction of the original mill. There would be a  
question as to whether the new mill should be considered as the “Mill” within  
the contemplation of the CSA, but there would be no doubt that the Business  
continued in existence.  
[47] The judge concluded that MSL’s obligations under the CSA were not  
permanently discharged under art. 8.5 by the fires that ruined the Mackenzie Mill: at  
para. 49. He summarized his findings at para. 50:  
a) The CSA is an agreement of indefinite duration to secure for Interfor a  
supply of chips generated by the Mackenzie Mill’s operations, so that  
Interfor may fulfill its own obligation to supply chips to Catalyst under the  
CPSA;  
b) Art. 8.5 is concerned with the operations of the Mackenzie Mill, not MSL’s  
business as a whole;  
c) Art. 8.5 contemplates temporary suspensions of operations and the  
delivery of chips by MSL to Interfor; and  
d) The CSA distinguishes between the suspension of the obligation to  
supply or purchase chips under arts. 8.5 and 8.1, and the termination of  
the agreement under art. 9.  
[48] The judge accepted that the CSA does not impose an obligation on MSL to  
rebuild the Mackenzie Mill. He acknowledged that the question of whether a new mill  
Interfor Corporation v. Mackenzie Sawmill Ltd.  
Page 18  
at the same address is one to which the CSA applies was not before him; rather the  
question was whether the contractual obligation persists “if there is or could be a  
new ‘Mackenzie Mill’ to which the CSA would apply”: at para. 51. He found nothing  
in the text of art. 8.5 to indicate that its legal effect would be different in the case of  
more and less serious fires and nothing in the CSA as a whole that indicated where  
such a line would be drawn: at para. 53.  
[49] The judge considered that the difference between the positions of the parties  
mattered only if the Mackenzie Mill could be rebuilt, or a new mill that would  
constitute the “Mill” under the CSA could be built in its place:  
[54]  
… On any view of the matter, MSL is only obliged to deliver Available  
Chips it has produced from the Mackenzie Mill. If the Mill cannot be rebuilt,  
MSL’s obligation to perform under the CSA is permanently suspended, and  
there is no practical difference between a permanent suspension and a  
termination of the contractual obligation. In the case where the Mill can be  
rebuilt and it does make a difference, it is difficult to see how the suspension  
of the obligation under art. 8.5 becomes a termination of the contract  
pursuant to art. 9.  
[50] In the final analysis, the judge concluded that art. 8.5 provides only for a  
suspension, and not for the termination, of MSL’s contractual obligations under the  
CSA: at para. 55.  
Analysis  
[51] The appellants submit that the summary trial judge erred by departing from  
the plain language of the CSA to effectively modify the agreement. More particularly,  
they submit that the judge added the words “for the period of such shutdown or  
curtailment” to art. 8.5 and substituting the word “suspend” for “discontinue”. They  
contend that the judge’s conclusion that the absence of the temporal limitation in  
art. 8.5 was inconsequential constitutes reversible error, as its inclusion in art. 8.1  
and absence in art. 8.5 must have a meaning.  
[52] The appellants also contend that the word “discontinue” in art. 8.5, combined  
with the lack of temporal limitation, creates a discretion for MSL to permanently  
terminate its chip obligations under the CSA.  
Interfor Corporation v. Mackenzie Sawmill Ltd.  
Page 19  
[53] Interfor submits that the summary trial judge made no palpable and overriding  
error in his interpretation of art. 8.5, as he properly applied the principles of  
contractual interpretation by considering the legal effect of art. 8.5 in the context of  
the entire agreement and its central purpose. Interfor points to important distinctions  
between arts. 8.1 and 8.5, which demonstrate that the two provisions are not  
functionally parallel, and contends that inclusion of the temporal language “for the  
period of such shutdown or curtailment” was unnecessary in art. 8.5.  
[54] Overall, I agree with Interfor’s submission. I find no error in the summary trial  
judge’s application of the principles of contractual interpretation and his findings as  
to the nature and purpose of the CSA as “an agreement of indefinite duration to  
secure for Interfor the supply of chips generated by the Mackenzie Mill’s operations,  
so that Interfor may fulfill its own obligation to supply chips to Catalyst under the  
CPSA”, with MSL’s obligation to supply chips to Interfor “limited to chips actually  
produced from the Mill and further qualified by art. 8.5”: at para. 35.  
[55] Nor do I find any error in the judge’s conclusion that the difference in the  
wording of arts. 8.1 and 8.5 was inconsequential. I do not see this as a case where  
the judge treated two differently defined concepts as interchangeable, as in  
Canaccord Genuity Corp. The judge clearly recognized the different triggers to the  
operation of each of these provisions: art. 8.1 arises from a shutdown or curtailment  
of Catalyst’s operations (a third party), while art. 8.5 arises from a shutdown or  
curtailment of MSL’s operation at the Mackenzie Mill. Neither MSL’s nor Interfor’s  
chip commitments under art. 2.1 are tied to Catalyst’s operations, except as they  
may be discontinued or curtailed under art. 8.1 (and art. 8.2, which provides similar  
protection due to market conditions affecting Catalyst). This can be contrasted with  
MSL’s obligation to sell and Interfor’s obligation to buy chips that are tied to the  
operation of the Mackenzie Mill. Article 8.5 also provides MSL with the discretion to  
decide whether to shut down or curtail its operation due to any of the force majeure  
events, which can also be contrasted with art. 8.1, in which Catalyst, not Interfor, has  
this discretion.  
Interfor Corporation v. Mackenzie Sawmill Ltd.  
Page 20  
[56] Therefore, as Interfor points out, art. 8.1 expressly includes the qualifier “for  
the period of such shutdown or curtailment” in order to ensure that Interfor would  
recommence accepting chips from the Mackenzie Mill after the period of shutdown  
or curtailment by Catalyst. Moreover, where force majeure under art. 8.1 is invoked,  
art. 8.7 permits MSL to dispose of chips only under certain conditions. The temporal  
limiting language is needed in this circumstance in order to clearly set out when  
Interfor’s purchasing obligations under the CSA would be revived. As the judge  
noted:  
[44]  
… There is no corresponding obligation placed on Interfor in the event  
of a force majeure invoked by MSL under art. 8.5. Arguably, therefore, the  
effect on MSL of a force majeure event under art. 8.1 is more onerous than  
the effect on Interfor of a force majeure event under art. 8.5. This may be a  
reason for the inclusion in art. 8.1 of limiting language – “for the period of  
such shutdown or curtailment” – that is merely implicit in art. 8.5.  
[57] I agree with Interfor’s submission that the temporal language is unnecessary  
in art. 8.5 because MSL’s obligation under art. 2.1 to supply “all Available Chips” to  
Interfor—that is all chips produced by the Mackenzie Mill—is an ongoing obligation.  
While Interfor has a corresponding ongoing obligation to purchase “all Available  
Chips”, it also has the right to terminate on notice, and MSL’s obligation to supply  
chips resumes if and when, at MSL’s discretion, the Mackenzie Mill becomes  
operational again and produces chips.  
[58] In my view, the judge did not err in his conclusion that art. 8.5 does not  
provide for the termination of MSL’s contractual obligations under the CSA.  
However, his interpretation of art. 8.5 as permitting permanent shutdowns or  
curtailments that fall short of termination is not one that was open to him in light of  
the dispute between the parties—which was not before him— regarding the new mill  
that was subsequently built at the same location. Interfor’s position, which is set out  
in its application response, is that the CSA must be read to apply to the Mackenzie  
Mill and any substitutions for it. The parties disagree on this point, and they also  
disagree as to whether the new mill was built by MSL, an alter ego, assignee or  
successor. Those key issues were left for trial. The judge therefore considered the  
question before him to be whether the contractual obligation persists “if there is or  
Interfor Corporation v. Mackenzie Sawmill Ltd.  
Page 21  
could be a new ‘Mackenzie Mill’ to which the CSA would apply”: at para. 51  
(emphasis added). This hypothetical created an analytical dilemma, which led the  
judge to conclude that MSL’s obligation to supply chips would only be permanently  
suspended if the Mackenzie Mill could not be rebuilt. The fact is, a new mill was  
built. Whether or not MSL’s obligation was “permanently suspended” or whether the  
new mill constitutes a substitution contemplated in the CSA, are matters that can  
only be determined at trial.  
[59] In any event, it is my opinion that the words “discontinue or curtail” as used in  
art. 8.5 of the CSA do not connote termination. The plain meaning of “discontinue” is  
“to stop doing, providing, or making”: Catherine Soanes et al., eds., Concise Oxford  
English Dictionary, 11th ed. (New York: Oxford University Press, 2008). The plain  
meaning of “curtail” is “to place a restriction on”: Oxford English Dictionary. Neither  
of these words can be equated to a termination of the contract when used in the  
same context. Moreover, the legal implications of a discontinuance or curtailment  
are expressly stated in art. 8.5 as allowing either to occur “without liability” to MSL.  
This falls far short of allowing MSL to terminate its obligations under the CSA.  
[60] The examples provided by the appellants to support the opposite proposition  
are not convincing. In Flieger v. New Brunswick, [1993] 2 S.C.R. 651, the court was  
assessing whether contracting out the duties formerly carried out by the highway  
patrol to the RCMP constituted a “discontinuance of a function” within the meaning  
of the provincial Civil Service Act, S.N.B. 1984, c. C-5.1. In that context, the court  
defined “discontinuance” to refer to “the termination of something that is termed a  
function”, and a “function” as “the bundle of responsibilities, duties and activities that  
are carried out by a particular employee or group of employees”. In DLC Holdings  
Corp. v. Payne, 2021 BCCA 31, the issue involved the jurisdiction of a chambers  
judge to make orders after a plaintiff discontinues an action without leave. In that  
context, the Court noted that a discontinued action is “forever at an end” but subject  
to the inherent jurisdiction of the court to set aside a notice of discontinuance in  
certain circumstances. Neither of these examples provides any assistance in  
Interfor Corporation v. Mackenzie Sawmill Ltd.  
Page 22  
interpreting the ordinary and grammatical meaning of the word “discontinuance” as it  
is used in art. 8.5.  
[61] There is no dispute that art. 8.5 provides MSL with the discretion to decide  
whether to shut down or curtail its operation due to any of the force majeure events,  
and the CSA does not impose an obligation on MSL to rebuild the Mackenzie Mill  
after the fires. This discretion provides substantial protection to MSL short of the  
right of termination. This is important given art. 9.3, which gives only Interfor the right  
to terminate by giving notice.  
[62] The summary trial judge found that the CSA distinguishes between the  
suspension of the obligation to supply or purchase chips under arts. 8.5 and 8.1, and  
the termination of the agreement under art. 9. The word “suspension” is consistent  
with a “discontinuance or curtailment”, but I consider it more precise to say that the  
CSA distinguishes between a discontinuance or curtailment of the obligation to  
supply chips under art. 8 and a termination under art. 9. A discontinuance may be  
short or long term, and it may be indeterminate. This is consistent with MSL’s  
continuing obligation to supply chips and its limited right of termination. It is also  
consistent with the notion that the legal effect of any discontinuance or curtailment  
due to a force majeure event, regardless of its length, would be the same.  
[63] I see no error in the judge’s ultimate determination that art. 8.5 does not  
provide for the termination of MSL’s contractual obligations under the CSA as a  
result of the destruction of the Mackenzie Mill by the fires. It provides only for MSL to  
discontinue the supply of chips to Interfor as a result of the fires, without liability, for  
as long as MSL determines is necessary. On these facts, which do not consider  
what occurred after the fires, it is not possible to determine whether MSL’s  
discontinuance of supply was permanent, nor is it possible to determine the legal  
consequence under the CSA of either a permanent discontinuance or the  
subsequent construction of a new mill. These matters must be left for trial.  
Interfor Corporation v. Mackenzie Sawmill Ltd.  
B. Frustration  
Page 23  
[64] The appellants’ alternative submission is that if art. 8.5 does not allow MSL to  
effect a termination of the CSA, the CSA was frustrated by the destruction of the  
Mackenzie Mill by the fires.  
Legal principles  
[65] Frustration occurs when a situation has arisen for which the parties made no  
provision in the contract and performance of the contract becomes “a thing radically  
different from that which was undertaken by the contract”: Naylor Group Inc. v. Ellis-  
Don Construction Ltd., 2001 SCC 58 at para. 53 [Ellis-Don], citing Peter Kiewit Sons’  
Co. of Canada v. Eakins Construction Ltd., [1960] S.C.R. 361 at 368 [Peter Kiewit],  
quoting Davis Contractors Ltd. v. Fareham Urban District Council, [1956] A.C. 696  
(H.L.) at 729. In Ellis-Don, Binnie J., writing for the Court, explained that an “implied  
term” theory relied on in earlier cases of frustration had been overtaken by “a more  
candid approach”:  
55  
… The court is asked to intervene, not to enforce some fictional  
intention imputed to the parties, but to relieve the parties of their bargain  
because a supervening event … has occurred without the fault of either party.  
For instance, in the present case, the supervening event would have had to  
alter the nature of the appellant’s obligation to contract with the respondent to  
such an extent that to compel performance despite the new and changed  
circumstances would be to order the appellant to do something radically  
different from what the parties agreed to under the tendering contract.  
[Citations omitted.]  
[66] In Blackmore Management Inc., MacKenzie J.A. reiterated the principle in  
Ellis-Don as a two-part test to establish frustration:  
[59]  
… There must be (1) a qualifying supervening event that was outside  
the parties’ contemplation at the time of contracting and not the fault of either  
party, which (2) renders performance of the contract “a thing radically  
different from that which was undertaken by the contract”: Naylor Group Inc.  
v. Ellis-Don Construction Ltd., 2001 SCC 58 at para. 53; Wilkie v.  
Jeong, 2017 BCSC 2131 at para.18. …  
Interfor Corporation v. Mackenzie Sawmill Ltd.  
The decision below  
Page 24  
[67] The summary trial judge relied on Ellis-Don as a leading modern decision on  
the law of frustration. He also relied on statements from Braidwood J.A. for this  
Court in KBK No. 138 Ventures Ltd. v. Canada Safeway Limited, 2000 BCCA 295,  
which applied the “radical change in obligation” test established in Davis Contractors  
Ltd. and adopted the following summary from Folia v. Trelinski (1997), 14 R.P.R.  
(3d) 5 (B.C.S.C.):  
In order to find that the contract at issue has been frustrated the following  
criteria would have to be satisfied. The event in question must have occurred  
after the formation of the contract and cannot be self-induced. The contract  
must, as a result, be totally different from what the parties had intended. This  
difference must take into account the distinction between complete  
fruitlessness and mere inconvenience. The disruption must be permanent,  
not temporary or transient. The change must totally affect the nature,  
meaning, purpose, effect and consequences of the contract so far as  
concerns either or both parties. Finally, the act or event that brought about  
such radical change must not have been foreseeable.  
[Emphasis by Braidwood J.A.]  
[68] The judge concluded that MSL’s obligations under the CSA were not  
frustrated by the fires for the following reasons:  
a) The destruction of the Mackenzie Mill by fire did not totally affect the  
nature, meaning, purpose, effect, and consequences of the CSA. MSL’s  
obligations were only suspended while the Mill was shut down and there  
remained the possibility that it might be rebuilt: at para. 66;  
b) The possibility of fires damaging the Mackenzie Mill was foreseeable and  
expressly contemplated in art. 8.5, and what happened in this case was  
not a different kind of event from that expressly contemplated in art. 8.5: at  
para. 67;  
c) If MSL chose to rebuild the Mackenzie Mill, the revival of the obligation to  
supply chips to Interfor from the restored operation would not impose on  
MSL an obligation that is radically different from that in the CSA, or  
Interfor Corporation v. Mackenzie Sawmill Ltd.  
Page 25  
“fundamentally more onerous” due to the rebuild. The revived obligation  
would be the same as before: at para. 68.  
[69] The judge rejected the appellants’ arguments that were grounded in the  
premise, mistaken in his view, that the Mill was synonymous with the Business, as  
well as their focus on the asset purchase under the APA rather than the chip supply  
under the CSA. He held that the inquiry “mandated by the modern law of frustration”  
is not a search for the root or foundation of the parties’ contractual relations but  
rather asks whether the result of the fires is a radical change in MSL’s obligations  
under the CSA: at para. 70.  
Analysis  
[70] The appellants challenge the summary trial judge’s frustration analysis on two  
bases. They submit that the judge (1) disregarded the relevance of identifying the  
root or foundation of the parties’ contractual relations, and (2) applied a requirement  
of strict or simple foreseeability.  
[71] With respect to the first, the appellants submit that identifying the root or  
foundation of the contractual relations is a necessary part of determining whether a  
supervening event resulted in a radical change in obligations. They characterize the  
root of the parties’ contractual relations as the purchase of the Mackenzie Mill under  
the APA, and related to that, to provide Interfor with chips produced from that asset.  
They submit that the proper approach is to recognize the Mill as the foundation of  
both the CSA and the APA, and that its destruction by the fires frustrated further  
performance of the CSA.  
[72] On the second point of foreseeability, the appellants submit that the correct  
approach is a contextual one that flows from the terms of the contract and asks  
whether the supervening event is a risk that has been allocated by the contract, or  
whether the contract is wide enough to apply to the new situation created by the  
supervening event. They further submit that the presence of a force majeure clause  
in a contract does not necessarily exclude the operation of the doctrine of frustration.  
Interfor Corporation v. Mackenzie Sawmill Ltd.  
Page 26  
[73] Interfor submits that the nature and purpose of the CSA was the core focus of  
the summary trial judge’s analysis under both force majeure and frustration, and his  
frustration analysis did not exhibit any palpable and overriding error or extricable  
error of law. It says that the fact that the CSA was entered into as part of a broader  
asset purchase does not impact the fundamental purpose and obligations of the  
parties under the CSA, which is the agreement that defines and qualifies the  
obligation to supply chips. Interfor points to the judge’s finding that the Mill and the  
Business were not synonymous terms, and the Business could continue if an  
identical mill was rebuilt, which, it says, undermines the appellants’ submission that  
the Mill was the root of the APA.  
[74] Interfor further submits that the fires were foreseeable events that the parties  
contemplated in art 8 of the CSA, which allocates the risk of the supervening event  
of fire. It relies on the judge’s finding that if the Mackenzie Mill was rebuilt, the  
revived obligations would be the same as before: MSL would only be required to sell  
chips to Interfor to the extent that chips were actually produced by the Mill.  
1. Root, foundation or purpose of a contract  
[75] The appellants acknowledge that the “radical change in obligation” test from  
Davis Contractors Ltd. that was later approved in Peter Kiewit and Ellis-Don is the  
correct approach in cases of frustration. They contend, though, that this analysis  
includes consideration of the root or foundation of the parties’ contractual relations  
as part of determining whether the nature of the obligation has changed.  
[76] As an example of the correct approach, the appellants rely on Wilkie v.  
Jeong, 2017 BCSC 2131. In that case, Warren J., after reviewing differing results in  
a number of frustration cases, noted “how fact-specific the analysis must be and how  
crucial it is to make findings concerning the foundation or fundamental purpose of  
the contract”:  
[30]  
… This is because frustration arises where the supervening event  
alters the parties’ obligations such that performance of the contract would  
result in something different from that contracted for.  
Interfor Corporation v. Mackenzie Sawmill Ltd.  
[31] Accordingly, I start by determining the foundation or purpose of the  
Page 27  
Contact in issue here from a consideration of its terms and the factual matrix  
in which it was agreed to. …  
[77] I accept that this approach is consistent with the analysis that is required  
under the “radical change in obligation test” as it begins with a determination of the  
fundamental purpose of the contract in question. Although couched in different  
language, the summary trial judge here took a similar approach in his frustration  
analysis, finding the purpose of the CSA was “to secure for Interfor a supply of chips  
generated by the Mackenzie Mill’s operations, to the extent that chips were  
generated”: at para. 66. Whether one describes the exercise as a determination of  
the purpose, fundamental purpose, root or foundation, the question must be focused  
on the contract that is alleged to have been frustrated.  
[78] I see no error in the judge’s rejection of the appellants’ argument that the  
modern approach requires a search for the root or foundation of the parties’  
contractual relations, as this suggests a much broader inquiry. While the CSA and  
the APA were related contracts, the judge’s frustration analysis properly focused on  
the “nature, purpose, meaning, and effect of the CSA”: at para. 70.  
[79] Moreover, it is evident that determining the purpose of a contract is a highly  
fact-driven exercise and the appellants do not challenge the judge’s findings  
regarding the purpose of the CSA or the distinction he drew between the “Mill” and  
the “Business”. The “Mill” may have been the central asset purchased by MSL under  
the APA, but given the judge’s findings that (1) the purpose of the CSA was to  
secure for Interfor a supply of chips generated by the Mackenzie Mill to the extent  
that chips were generated, and (2) the destruction of the Mill might not bring the  
Business to an end if the Mill were to be rebuilt, its existence in and of itself was not  
the fundamental purpose, root or foundation of the CSA.  
2. Foreseeability  
[80] The appellants submit that the summary trial judge erred by reducing the  
“supervening event” analysis to one of simple foreseeability. As I understand it, this  
Interfor Corporation v. Mackenzie Sawmill Ltd.  
Page 28  
submission is based primarily on the following paragraph from the reasons for  
judgment:  
[67]  
The possibility of fires damaging the Mackenzie Mill was foreseeable  
in this case, and was expressly contemplated in art. 8.5. The possibility that  
fires might not only damage the Mill but completely ruin or destroy it was  
obviously foreseeable. What happened in this case is not a different kind of  
event from that expressly contemplated by art. 8.5.  
[81] I accept the appellants’ submission that the presence of a force majeure  
clause in the contract does not necessarily displace the operation of the doctrine of  
frustration. The mere fact that the contract addresses events of the same nature as  
the alleged frustrating event does not mean that the contract addresses every event  
in that class: see Ewan McKendrick, ed., Force Majeure and Frustration of Contract,  
2d ed. (London: Lloyd’s of London Press, 1995) at 35. In my view, the question of  
foreseeability in the application of the doctrine of frustration relates to the question of  
whether the parties made provision in the contract for the alleged frustrating event.  
The inquiry asks whether the supervening event itself was contemplated, or  
foreseen, by the parties (i.e., fire), and if so, whether the contract encompasses the  
specific type of event within the class (i.e., complete destruction by fire).  
[82] Here, the fires as supervening events were foreseen by the parties, as fire  
was expressly contemplated in the force majeure art. 8.5. On this finding the judge  
made no error. The question is whether he erred in finding that art. 8.5  
encompassed fires that completely destroyed the Mill, and in my view he did not.  
This is because he also found that MSL’s obligation to supply chips would be revived  
if MSL rebuilt the Mill (assuming that the new mill is one to which the CSA applies).  
Therefore, the question of frustration could not apply where the fires alone were  
considered.  
[83] This does not mean that the doctrine of frustration cannot apply in this case. It  
simply means that it does not apply to the limited question of whether the destruction  
of the Mill by the fires alone frustrated the CSA. The determination of the frustration  
question will depend on whether the new mill that was later built is found to have  
revived MSL’s obligations under the CSA. On this point, I would not endorse the  
Interfor Corporation v. Mackenzie Sawmill Ltd.  
Page 29  
summary trial judge’s finding that “the revived obligation would be the same as  
before” as such a conclusion cannot be made in the absence of the full factual  
matrix involving the new mill that was in fact built at the same site.  
[84] With that proviso, I see no error in the judge’s conclusion that the CSA was  
not frustrated by the fires that ruined the Mackenzie Mill.  
Conclusion  
[85] For all these reasons, I would dismiss the appeal.  
“The Honourable Madam Justice Fisher”  
I AGREE:  
“The Honourable Madam Justice DeWitt-Van Oosten”  
Interfor Corporation v. Mackenzie Sawmill Ltd.  
Page 30  
Reasons for Judgment of the Honourable Mr. Justice Willcock  
[86] I have had the privilege of reading the opinion of Justice Fisher. I agree with  
and adopt her description of the facts and the issues on appeal. I also agree with my  
colleague’s conclusions that the trial judge did not err:  
a) in his interpretation of the contract in question;  
b) in holding that MSL’s obligations under the CSA were not permanently  
discharged under art. 8.5 by the fires that ruined the Mackenzie Mill because  
that provision suspends, rather than terminates MSL’s contractual obligations  
under the CSA; or  
c) in dismissing the appellant’s application.  
[87] With respect, however, I cannot reconcile the judge’s declaration with respect  
to the applicability of the doctrine of frustration with the express limitation of his  
enquiry. For reasons set out below, I would allow the appeal to the extent that I  
would set aside the second declaratory order made by the summary trial judge.  
[88] The judge made two orders, described at para. 78 of his reasons:  
a) MSL’s obligations under the CSA were not permanently discharged  
under art. 8.5 by the fires that ruined the Mackenzie Mill;  
b) The CSA was not frustrated by the fires that ruined the Mackenzie Mill.  
[89] As my colleague notes, the parties attempted to isolate discrete contractual  
interpretation issues, the summary adjudication of which might have more efficiently  
resolved their dispute. The summary trial judge proceeded on the basis that he  
would respect the restrictions imposed upon him by the parties. He noted that he  
had been asked to adjudicate the issue whether fires which had totally destroyed the  
Mackenzie Mill frustrated the CSA and brought an end to the appellant’s contractual  
obligations, without determining whether a new mill on the site, even one that  
Interfor Corporation v. Mackenzie Sawmill Ltd.  
Page 31  
replicated the Mackenzie Mill, could be considered to be the lumber manufacturing  
facility referred to in the CSA. He described the limited scope of his task as follows:  
[51]  
The defendants submit that the CSA does not impose on MSL an  
obligation to rebuild the Mackenzie Mill and start producing chips again,  
following the fires. I agree. That is not the question at hand. The question is  
whether the contractual obligation persists if there is or could be a new  
“Mackenzie Mill” to which the CSA would apply.  
[52]  
The question of whether a new mill at the same address as that of the  
former Mackenzie Mill is one to which the CSA applies is not before me on  
this application. …  
[Emphasis added.]  
[90] In light of that limited enquiry, I agree with my colleague’s conclusion (at  
para. 32) that it is premature to decide whether the doctrine of frustration has any  
application on the facts of this case. The summary trial judge was not asked to  
answer critical questions that have to be answered before finally addressing  
frustration, including:  
a) whether a rebuilt mill can be said to be the “Mill” referred to in the CSA;  
b) whether it might have been possible to rebuild a new mill that replicated or  
closely resembled the Mackenzie Mill after the fires (bearing in mind modern  
building codes, zoning etc.); and  
c) whether the mill that has now been built on the site so closely resembles the  
Mackenzie Mill as to revive the contractual obligation.  
[91] The first question is not easy to answer. The CSA requires MSL to sell to  
Interfor all “Available Chips”. “Chips” are defined as chips suitable for use in  
manufacturing pulp produced by coniferous wood processing operations at the “Mill”.  
The “Mill” is defined as the lumber manufacturing facility at 11732 – 130th Street,  
Surrey described in an asset purchase agreement. That agreement, in turn,  
describes the Mill as the lumber manufacturing facility known as the Mackenzie  
Sezai Mill. The judge was not asked to determine whether chips produced at a  
newly-built facility at the 130th Street site, even a mill closely resembling the historic  
Mackenzie Sezai Mill, would fit that definition of “Available Chips”.  
Interfor Corporation v. Mackenzie Sawmill Ltd.  
Page 32  
[92] Given the express limitations on the scope of his inquiry, the most the trial  
judge could say was that the appellant’s obligations under the CSA would not be  
frustrated by the destruction of the Mackenzie Mill if MSL could have rebuilt a new  
“Mill” to which the CSA would apply. In my opinion, therefore, the judge was not in a  
position to determine whether the result of the fire was a radical change in the  
obligation imposed on MSL under the CSA—an obligation to sell the chips produced  
by a fundamentally different facility.  
[93] For that reason, the declaration made has no practical utility. It does not  
resolve any significant aspect of the dispute. It remains open to the appellants to  
argue that once the fire destroyed so much of the Mackenzie Mill that it would have  
to be replaced entirely, they could not recreate the “Mill” or revive their obligation.  
[94] Declaratory relief that has no practical effect should not be granted. Such  
relief is to be granted sparingly, and is directed to real and not hypothetical disputes:  
see, in addition to the authorities my colleague has cited, Solosky v. The Queen,  
[1980] 1 S.C.R. 821, and Heller v. Greater Vancouver Regional District (1992), 94  
D.L.R. (4th) 718, (B.C.C.A.), leave to appeal to ref’d [1993] 2 S.C.R. viii.  
[95] Declarations of uncertain effect, such as those made in this case, may be  
particularly problematic where they are made on an application in an action that will  
continue to trial. In my opinion, the fact that the second declaratory order is of  
uncertain effect is reflected in the parties’ inability to describe the practical effect of  
the order or the issues it has resolved, in response to our request for additional  
submissions. That difficulty may be problematic at trial.  
[96] I would allow the appeal to the limited extent I have described.  
“The Honourable Mr. Justice Willcock”  
Interfor Corporation v. Mackenzie Sawmill Ltd.  
Page 33  
Appendix A  
Asset Purchase Agreement  
International Forest Products Limited  
And  
Mackenzie Sawmill Ltd.  
June 23, 2006  
Recitals:  
A. Seller owns a lumber manufacturing facility (the “Mill'”) known as  
MacKenzie Sezai Mill and located at 11732 - 130th Street, Surrey, British  
Columbia, and certain related assets more fully described herein, and  
carries on the business (the “Business”) of manufacturing lumber  
products and selling such products.  
B. Seller wishes to sell the Business, including the Mill and such related  
assets, and Buyer wishes to purchase the Business, the Mill and such  
related Assets from Seller, in each case on the terms and conditions set  
forth herein.  
…
Chip Supply Agreement  
Mackenzie Sawmill Ltd.  
And  
International Forest Products Limited  
September 29, 2006  
WHEREAS:  
A. Interfor and MSL are the parties to that certain agreement (the “Asset  
Purchase Agreement”) made as of June 23, 2006, as amended, under  
which MSL has agreed to purchase from Interfor a lumber manufacturing  
facility located at 11732 – 130th Street, Surrey, British Columbia (the  
“Mill”) and certain related assets more particularly described therein;  
B. Following completion of the sale and purchase of the Mill, MSL will  
conduct certain timber processing operations at the Mill and, in respect of  
such operations, will produce coniferous wood chips suitable for use in  
manufacturing pulp (”Chips”);  
C. Interfor is a party to that certain chip and pulplog supply agreement (the  
"Catalyst Agreement") dated December 30, 1991, as amended, between  
Catalyst Paper Corporation (“Catalyst”) (formerly Fletcher Challenge  
Canada Limited), both in its own right and as a successor to the interest  
of Crown Forest Industries Limited, and Interfor, under which Interfor has  
agreed, inter alia, to sell Chips produced at the Mill to Catalyst; and  
Interfor Corporation v. Mackenzie Sawmill Ltd.  
Page 34  
D. As a condition of completion of the sale and purchase of the Purchased  
Assets under the Purchase Agreement, Interfor has requested and MSL  
has agreed to enter into this Agreement to sell and supply Chips  
produced at the Mill or from the Logs to Interfor, on the basis herein  
provided, so that Interfor may sell and supply such Chips to Catalyst  
under the Catalyst Agreement.  
…
ARTICLE 1  
INTERPRETATION  
Definitions  
1.1  
…
In this Agreement:  
(d)  
“Available Chips”, for a Contract Year, means:  
(i)  
all Chips produced by MSL during such Contract Year from the  
MilI; and  
(ii)  
not less than 95% of all Chips produced during such Contract  
Year as a result of cutting of Interfor Logs by or at the request  
of MSL at a facility other than the Mill;  
…
(r)  
…
“Mill” has the meaning provided in Recital A;  
ARTICLE 2  
CHIP SALES COMMITMENT  
Chip Commitment  
2.1  
MSL will sell to Interfor and Interfor will purchase and take, for sale to  
Catalyst under the Catalyst Agreement, all Available Chips up to a volume of  
Chips equal to:  
(a)  
(b)  
all Units in the First Contract Year; and  
the Annual Chip Commitment in each subsequent Contract Year.  
Any Chips delivered by MSL that do not comply with the applicable Chip  
Specifications shall not apply to the Annual Chip Commitment.  
…
Interfor Corporation v. Mackenzie Sawmill Ltd.  
Page 35  
ARTICLE 8  
FORCE MAJEURE AND CURTAILMENT  
Affecting Catalyst  
8.1  
If, at any time while this Agreement is in force, Catalyst shuts down or  
curtails the operation of its pulp production facilities or Chip unloading  
facilities due to weather conditions, fire, strike or other labour disruptions,  
lockout, sabotage, shipwreck, riot, war, flood, extraordinary breakdown, laws  
or regulations, Court order, act of any government body or agency, act of  
God, blockade, civil commotion or disobedience (lawful or unlawful) or for any  
reason whether similar or dissimilar to the foregoing which Catalyst considers  
sufficient to justify curtailing or shutting down its operations, then Interfor,  
without liability, may discontinue or curtail the purchase and acceptance of  
deliveries of Chips from MSL for the period of such shutdown or curtailment.  
Market Conditions  
8.2  
If, at any time while this Agreement is in force, market conditions in  
respect of the sale by Catalyst of its pulp or paper are such that Catalyst  
shuts down or curtails the operation of its pulp production facilities or Chip  
unloading facilities, lnterfor, without liability, may discontinue or curtail the  
purchase and acceptance of deliveries of Chips from MSL for the period of  
such shutdown or curtailment.  
Proportionate Curtailment  
8.3  
If Interfor curtails its purchases pursuant to section 8.1 or section 8.2,  
it will do so on a proportionate basis, so that the volume of Chips purchased  
by Interfor from MSL in any month during such curtailment will be not less  
than a volume equal to the result obtained when:  
(a)  
the actual volume of Chips that will be consumed by Catalyst at its  
Crofton and Elk Falls pulp production facilities in such month is  
divided by  
(b)  
the total volume of Chips that Catalyst estimates would have been  
consumed by Catalyst at its Crofton and Elk Falls pulp production  
facilities in such month if no curtailment had occurred,  
multiplied by  
(c) the average monthly volume of Chips purchased by Interfor from MSL  
during each of the six months preceding the period of curtailment,  
excluding any previous period of curtailment.  
No Cumulative Obligation  
8.4  
Where, as a result of a shutdown or curtailment pursuant to section  
8.1 or section 8.2, Interfor reduces or discontinues its purchases, lnterfor will  
not be obliged, upon resuming its purchases to purchase any additional  
volumes to make up for such discontinuance or curtailment of purchases.  
Interfor’s determination of its proportionate reduction or curtailment of its  
purchases of Chips during any period will be final and binding on MSL.  
Interfor Corporation v. Mackenzie Sawmill Ltd.  
Page 36  
Affecting MSL  
8.5  
If, at any time while this Agreement is in force, MSL shuts down or  
curtails the operation of the Mill due to fire, strike or other labour disruptions,  
lockout, sabotage, shipwreck, riot, war, flood, extraordinary breakdown, laws  
or regulations, Court order, act of any government body or agency, act of  
God, blockade, civil commotion or disobedience (lawful or unlawful) or as a  
result of lnterfor reducing or discontinuing its purchases of Chips under this  
Agreement, or for any reason whether similar or dissimilar to the foregoing  
and which MSL considers sufficient to justify curtailing or shutting down its  
operations, then MSL, without liability, may discontinue or curtail the  
production and delivery of Chips to lnterfor.  
Credit to Volume Commitments  
8.6  
For the purpose of calculating volumes of Chips sold by MSL to  
Interfor hereunder and, in particular, for the purpose of determining  
compliance with the volume commitments made herein, MSL will be credited  
with having sold to Interfor hereunder a volume of Chips that is determined by  
mutual agreement of the Parties, on an equitable basis, having regard to the  
discontinuance or curtailment of the production or delivery of Chips to  
Interfor, as contemplated by section 8.5. If the Parties do not mutually agree  
on any matter under this section 8.6, the matter may be referred by either  
Party for determination by arbitration under this Agreement.  
Alternative Disposition  
8.7  
If, as provided in section 8.1 or 8.2, Interfor discontinues or curtails  
the purchase of Chips produced by MSL, MSL may dispose of such Chips as  
it sees fit except that:  
(a)  
MSL wilI not enter into any agreement concerning the disposition of  
Chips that would conflict with Interfor’s right to resume the purchase  
of Chips under this Agreement; and  
(b)  
lnterfor may, after such discontinuation or curtailment, purchase any  
Chips that have not been disposed of and which are stockpiled, by  
delivering not less than 5 Business Day's notice to MSL of the quantity  
of such stockpiled Chips that it wishes to purchase under this  
Agreement stipulating a rate of delivery of Chips that will not impair  
the quality of Chips or interfere with the efficiency of the Mill.  
Advance Warning  
8.8  
MSL and Interior will give to each other as much advance notice as it  
reasonably possible of scheduled shutdowns or curtailments and prompt  
notice of unexpected shutdowns or curtailments affecting the delivery or  
acceptance of Chips hereunder, stating the nature, date or commencement  
anticipated, duration and estimated effect of the event.  
Prompt Notice  
8.9  
A Party that becomes aware of any fact or circumstance that could  
reasonably result in such Party invoking its rights under this Article 8 will  
promptly notify the other Party to the extent reasonably necessary to permit  
the Party receiving such notice to minimize any disruption to its operation that  
may result but the inadvertent failure to give notice under this section 8.9 will  
Interfor Corporation v. Mackenzie Sawmill Ltd.  
Page 37  
not preclude the Party from receiving any relief or credit provided for this  
Article 8.  
ARTICLE 9  
TERMINATION  
Termination Date  
9.1  
(a)  
The Term of this Agreement will continue until the earlier of:  
the date on which MSL commences a voluntary or involuntary  
dissolution, or upon the winding-up, bankruptcy, liquidation or  
insolvency of MSL, as the case may be;  
(b)  
(c)  
the date of termination pursuant to section 9.2; and  
the date of termination pursuant to section 9.3,  
in any case, the “Termination Date”.  
Termination upon Default  
9.2  
At any lime while an Event of Default exists with respect to a Party,  
the other Party may, in addition to any other rights that it may have under this  
Agreement or otherwise, give to that Party a notice specifying as the  
Termination Date a date not earlier than the date on which such notice is  
given.  
Termination by Interfor upon Notice  
9.3  
At any time during the Term, Interfor may terminate this Agreement  
upon giving at least twelve months’ notice in writing.  
…
ARTICLE 11  
DISPOSITIONS AND ACQUISITIONS  
Disposition by MSL  
11.1 MSL will not sell, transfer or otherwise dispose of the Mill to a Person  
(“Assignee”) except:  
(a)  
to an Assignee that has agreed, as a condition of such purchase, to  
be bound by the terms of this Agreement. and to a covenant in  
substantially the same form as this Article 11, such agreement to be  
evidenced by the Assignee's entering into such formal agreements as  
Interfor may reasonably require and which will give effect to an  
assignment by MSL to the Assignee of an interest in this Agreement  
to the extent required by such assignment, or  
(b)  
by way of granting an Encumbrance in compliance with section 11.2,  
and MSL will not otherwise assign any part of its interest in this Agreement  
except by way of an assignment of proceeds payable to MSL under this  
Agreement.  
Interfor Corporation v. Mackenzie Sawmill Ltd.  
Chip and Pulplog Supply Agreement  
Page 38  
Fletcher Challenge Canada Limited  
Crown Forest Industries Limited  
and  
International Forest Products Limited  
December 30, 1991  
PART 20  
FORCE MAJEURE AND CURTAILMENT  
Affecting FCC  
20.1 If, at any time while this Agreement is in force, FCC shuts down or  
curtails the operation of the pulp production facilities or Chip unloading  
facilities at either or both of the Pulp Mills due to weather conditions, fire,  
strike or other labour disruptions, lockout, sabotage, shipwreck, riot, war,  
flood, extraordinary breakdown, laws or regulations, Court order, act of any  
government body or agency, act of God, blockade, civil commotion or  
disobedience (lawful or unlawful) or for any reason whether similar or  
dissimilar to the foregoing which FCC considers sufficient to justify curtailing  
or shutting down its operations, then FCC, without liability, may discontinue or  
curtail the purchase and acceptance of deliveries from Interfor for the period  
of such shutdown or curtailment.  
…
Affecting Interfor  
20.5 If, at any time while this Agreement is in force,  
(a)  
Interfor shuts down or curtails the operation of any or all of the Interfor  
Facilities due to fire, strike or other labour disruptions, lockout,  
sabotage, shipwreck, riot, war, flood, extraordinary breakdown, laws  
or regulations, Court order, act of any government body or agency,  
act of God, blockade, civil commotion or disobedience (lawful or  
unlawful) or as a result of FCC reducing or discontinuing its purchases  
of Chips or Pulplogs under this Agreement, or for any reason whether  
similar or dissimilar to the foregoing and which Interfor considers  
sufficient to justify curtailing or shutting down its operation, then  
lnterfor, without liability, may discontinue or curtail the production and  
delivery of Chips to FCC in a proportion not to exceed that applicable  
to any Existing Chip Commitment…  


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