Executive Summary: Key Legal and Evidentiary Issues

• Interpretation of a forgivable loan agreement and whether returned bond funds needed to be re-disbursed.

• Assessment of amendments to the loan agreement that altered funding obligations and disbursement terms.

• Determination of whether the Province of Nova Scotia breached contractual obligations to Nova Star Cruises Ltd.

• Analysis of the role of surrounding circumstances in interpreting commercial contracts under Canadian law.

• Consideration of whether bankruptcy status affected the Province’s funding obligations under the contract.

• Finding that all contractual funding obligations were fulfilled and no breach occurred by the Province.

Facts and outcome of the case

The case concerned a dispute over a forgivable loan agreement made between the Province of Nova Scotia and Nova Star Cruises Ltd., a joint venture partially owned by Singapore Technologies Marine Ltd. (ST Marine). The Province agreed to provide up to $21 million in forgivable loans to help establish a ferry service between Yarmouth, Nova Scotia, and Portland, Maine. Part of the funds advanced ($1.87 million) was used as cash collateral for a surety bond required by U.S. authorities to obtain certification to operate the ferry. After the ferry company went bankrupt, ST Marine, as a creditor authorized under section 38 of the Bankruptcy and Insolvency Act, sued the Province, arguing that the $1.87 million should have been re-disbursed back to Nova Star when the surety bond funds were returned to the Province.

The case centered on interpreting the loan agreement and its many amendments, particularly whether the Province was obligated to re-disburse the returned bond funds. The evidence showed that although the bond funds were initially intended to be temporary, later amendments to the loan agreement categorized the $2 million bond allocation as a long-term commitment throughout the seven-year term of the loan. By August 2014, all funds under the $21 million forgivable loan were disbursed or committed, and the parties agreed that the Province had no further financial obligations under the agreement. The judge found that the language of the agreement, particularly the amendments, clearly indicated that the Province was not required to re-disburse the bond funds once returned.

The Supreme Court of Nova Scotia concluded that there was no breach of contract by the Province. Justice Darlene Jamieson emphasized that contractual interpretation must focus on the actual words of the agreement read in the context of the factual circumstances known to both parties at the time. The court ruled that ST Marine was not entitled to the $1.87 million and dismissed the claim with costs awarded to the Province. The case reinforced principles of commercial reasonableness and objective contractual interpretation, particularly in government funding agreements linked to business development projects.