It’s been a while since I’ve done a blog post about or. Well, the drought is now over, thanks to readers who alerted me to the opinion of the Court of Appeal for Ontario in Rooney v. ArcelorMittal S.A. (here).
What was at issue was the language of a statute, not a contract. Specifically, section 131(1) of the Securities Act, which provides as follows (emphasis added):
a security holder may, without regard to whether the security holder relied on the misrepresentation, elect to exercise a right of action for rescission or damages against the offeror or a right of action for damages against [directors and signatories]
The appellants had sued the offerors in question and their respective directors and signatories. The respondent argued that the appellants were required to elect whether to sue the offerors or their respective directors and signatories. The Superior Court sided with the respondent.
The Court of Appeal reversed, of course. The semantics underlying the Court of Appeal’s decision are discussed at length in MSCD. (If I say so myself, chapter 11 of MSCD is the most thorough discussion in any literature of this kind of ambiguity, which I call “ambiguity of the part versus the whole.”)
But winning a fight on appeal is a pretty great example of a Pyrrhic victory. You don’t want such victories; instead, you want to avoid fights altogether. Obviously, in this case the litigants weren’t responsible for the wording of the Securities Act. But if in a contract you mean one or both of X and Y, then say that.
(For other posts about this kind of ambiguity, search on this blog for “ambiguity of the part versus the whole”.)
This case is an example of how court decisions can help drafters. It gives three texts:
(1) The disputed text: ‘may sue A or B’;
(2) The appellants’ interpretation of (1): ‘may sue A, B, or both’;
(3) The respondent’s interpretation of (1): ‘may sue A or B, but not both’.
The court held that the meaning of (1) was (2) and not (3).
The lesson is not ‘when you mean (2), use (1) because (1) is now “tested” language’. That verges on the barmy.
The better approach is twofold:
Never use formulation (1) — it is a ‘tested’ cause of dispute; and
If your meaning is (2), consider using (2), and if your meaning is (3), consider using (3), as each expresses its different meaning in a way that the contending parties and the court all accepted as clear.
The previous “or” (“rescission or damages”) does not mean “and/or” but creates an alternative where both options are available but mutually exclusive. This may explain why the court went with giving the same meaning to “or” when it comes up again immediately after in the same statutes.