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Project Freeway Inc (“PF”) sold its shares in a group of companies to ABC Technologies Inc. (“ABC”) for 165 million dollars. US26 million dollars of the purchase price was to be paid by way of an earn out if ABC hit certain performance targets.
A dispute arose between PF and ABC whether the earn out provision had been triggered.
PF asserted that a sale-leaseback arrangement entered into by ABC with a third-party meant the earn out was immediately payable because ABC had sold a “material portion of the assets” of the business purchased. ABC disagreed. ABC asserted that the impugned transaction did not constitute such a sale.
The issue was tried by Justice Jana Steele of the Superior Court of Justice. Justice Steele dismissed PF’s claim. PF appealed to the Ontario Court of Appeal (“OCA”).
In December 2025, the OCA dismissed PF’s appeal (Project Freeway Inc. v. ABC Technologies Inc., 2025 ONCA 855).
In doing so, the OCA , agreed with what Justice Steele described as her practical, common sense approach to contractual interpretation.
Her Honour had concluded that a plain reading of the language of the PF/ABC share purchase agreement did not answer the question of whether the earn out had been triggered by the sale-leaseback arrangement.
Her Honour went further to indicate that further interpretive tools were required to resolve the ambiguity: not to overwhelm the language in the contract but rather to properly inform the court as to the objective intention of the parties by the words they used in the agreement.
In adopting this approach, Her Honour applied the guiding principles to contract interpretation established by the Supreme Court of Canada in 2014 in a seminal case, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53.
Accounting for the reality contracts are not entered into in a vacuum, Justice Steele analyzed the “factual matrix” at the time the share purchase agreement between PF and ABC was entered into - being the relevant facts surrounding the agreement that spoke to what the parties intended by the contract and how that intent informed the clause in issue.
Consistent with Sattva, Her Honour also adopted a “purposive” approach to contractual interpretation rather than an approach “dominated by technical rules of construction”. The OCA endorsed this approach as enabling Justice Steele to best understands the purpose of the sale purchase agreement between PF and ABC as a whole.
Finally, as part of her practical and common sense approach, Justice Steele preferred ABC’s submission as yielding a commercially reasonable interpretation of what was meant by the language in dispute rather than that put forward by PF. The OCA saw no reason to interfere with such finding.
In doing so, Justice Steele concluded that there was nothing in the sale-leaseback arrangement that affected or triggered the earn out.
Ultimately, the OCA concluded in properly accounting for the factual matrix, adopting a purposive approach and seeking to reach a commercially reasonable interpretation, Justice Steele had correctly applied Sattva and there was no basis to overturn or interfere with her decision.
As is the generally the case in the business world, the OCA’s decision in PF v ABC is an endorsement of the benefits of good, practical, common sense.
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