S.C.C. File No. 38463 IN THE SUPREME COURT OF CANADA (ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO)
BETWEEN: C.M. CALLOW INC.
Appellant (Respondent)
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TAMMY ZOLLINGER, CONDOMINIUM MANAGEMENT GROUP, CARLETON CONDOMINIUM CORPORATION NO. 703, CARLETON CONDOMINIUM CORPORATION NO.726, CARLETON CONDOMINIUM CORPORATION NO. 742, CARLETON CONDOMINIUM CORPORATION NO. 765, CARLETON CONDOMINIUM CORPORATION NO. 783, CARLETON CONDOMINIUM CORPORATION NO. 791, CARLETON CONDOMINIUM CORPORATION NO. 806, CARLETON CONDOMINIUM CORPORATION NO. 826, CARLETON CONDOMINIUM CORPORATION NO. 839, CARLETON CONDOMINIUM CORPORATION NO. 877
Respondents (Appellants)
FACTUM OF THE APPELLANT, C.M. CALLOW INC. (MODIFIED) (Pursuant to Rule 42 of the Rules of the Supreme Court of Canada, S.O.R./2002-156)
McCARTHY TÉTRAULT LLP KMH LAWYERS TD Bank Tower, Suite 5300 2323 Riverside Dr., Suite B0001 Toronto, ON M5K 1E6 Ottawa, ON K1H 8L5 Brandon Kain ([email protected]) Miriam Vale Peters ([email protected]) Adam Goldenberg ([email protected]) Tel.: (613) 733-3000 (ext. 107) Vivian Ntiri ([email protected]) Fax: (613) 523-2924 Tel.: (416) 362-1812
Fax: (416) 868-0673 Ottawa Agent for Counsel to the Appellant, C.M. Callow Inc. KMH LAWYERS 2323 Riverside Dr. Suite B0001 Ottawa, ON K1H 8L5 Miriam Vale Peters ([email protected]) Tel.: (613) 733-3000 (ext. 107) Fax: (613) 523-2924
Counsel to the Appellant, C.M. Callow Inc. ORIGINAL TO: THE REGISTRAR Supreme Court of Canada 301 Wellington Street Ottawa, ON K1A 0J1
COPIES TO:
GOWLING WLG (CANADA) LLP 160 Elgin Street, Suite 2600 Ottawa, ON K1P 1C3 Anne Tardif ([email protected]) Jocelyn Duquette ([email protected]) Rodrigue Escayola ([email protected]) Tel.: (613) 233-1781 Fax: (613) 563-9869
Counsel for the Respondents
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TABLE OF CONTENTS
PART I— OVERVIEW AND FACTS ...... 1 1. Overview ...... 1 2. The Facts ...... 2 A. The Winter Agreement Between Callow and the Condos ...... 2 B. The Condos Decided to Terminate the Winter Agreement ...... 4 C. The Condos Were Actively Dishonest About the Termination ...... 5 D. The Trial Judge Found the Duty of Honest Performance Was Breached ...... 10 E. The Court of Appeal Erroneously Overturned the Trial Judge ...... 11 PART II— ISSUES ...... 12 PART III— ARGUMENT ...... 12 1. The Condos Breached Duties of Good Faith Under the Winter Agreement ...... 12 A. Introduction and Standard of Review ...... 12 B. What Bhasin Decided ...... 13 C. The Condos Breached the Duty of Honest Performance ...... 18 i. Bhasin Prohibits Active Non-Disclosure ...... 18 ii. This Case Goes Well Beyond Passive Non-Disclosure of Material Facts .... 21 iii. Active Non-Disclosure Liability Is Desirable, Incremental and Principled .. 26 D. The Condos Breached the Duty Not to Abuse Discretionary Contractual Rights 29 E. Alternatively, A New Duty of Good Faith Should Be Recognized In this Case .. 33 2. Callow Is Entitled to Damages ...... 34 A. Introduction and Standard of Review ...... 34 B. Callow Is Entitled to Damages for Its Lost Profits ...... 34 C. Callow Is Entitled to Damages for Its Wasted Expenditures ...... 38 D. Callow Is Entitled to Damages for Its Unpaid Invoice ...... 39 E. Callow Did Not Fail to Mitigate Its Damages ...... 39 F. Callow Is Entitled to Pre-Judgment and Post-Judgment Interest ...... 40 PART IV— COSTS ...... 40 PART V— ORDERS SOUGHT ...... 40 PART VI— SUBMISSIONS ON CONFIDENTIALITY ...... 40 PART VII— TABLE OF AUTHORITIES ...... 42
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PART I—OVERVIEW AND FACTS 1. Overview 1. The controlling idea in this appeal is that it is dishonest for a person to deliberately withhold information from their contracting partner when they know that this silence, when coupled with their active misstatements and conduct, will mislead the latter about issues of contractual performance.
2. The Court should confirm that such “active non-disclosure”1 breaches the duty of honest performance, the duty not to abuse discretionary powers or a new duty under the organizing principle of good faith designed to prohibit it. This will make Canada’s contracts regime more just, coherent and in tune with reasonable commercial expectations, and will require at most an incremental change in the law that is entirely consistent with the principles of private ordering and commercial certainty.
3. The facts of this case demonstrate why liming the duty of honest performance to only express and direct “lies” undermines the core teaching of Bhasin v. Hrynew,2 and produces unjust results that fly in the face of reasonable commercial expectations. The Appellant, C.M. Callow Inc. (“Callow”), had an agreement with the Respondents to remove snow at their properties from 2012-2014. It gave the Respondents a unilateral termination right. During the spring of 2013, the Respondents decided to exercise that right later that year. They purposefully withheld this decision from Callow until the fall of 2013 – when they invoked it with nearly immediate effect – to avoid jeopardizing Callow’s performance of a related landscaping contract with them that summer. The Trial Judge found that they “intentionally withheld the information in bad faith”.3
4. During the entire period from spring to fall, 2013, the Respondents “actively deceived”4 Callow by misrepresenting that matters were so satisfactory that the agreement was likely to be renewed in 2014. They even accepted free work that Callow offered to secure a renewal. The Respondents knew that, by their positive misstatements and conduct, they had led Callow to believe
1 The term “active non-disclosure” is taken from Lavrijsen Campgrounds Ltd. v. Reville, 2015 ONSC 103, ¶16 (“Lavrijsen (ONSC 2015)”): “Any hesitation this court may have had concerning a distinction… between active non-disclosure and intentional misrepresentation is eliminated by the decision of the Supreme Court of Canada released recently, Bhasin v. Hrynew, 2014 SCC 71”. 2 2014 SCC 71 (“Bhasin (SCC 2014)”). 3 Trial Decision, ¶69, Appellant’s Record (“AR”), V.I, Tab 1, p. 19, emphasis added. 4 Ibid, ¶65, p. 18, emphasis added.
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5. The Court of Appeal did not interfere with these factual findings. Instead, it set the Trial Decision aside on the legal basis that “there is no unilateral duty to disclose information relevant to termination”.7 It is respectfully submitted that this approach carries this Court’s comments about non-disclosure in Bhasin too far. The duty of honest performance does not impose liability where a party passively fails to disclose material facts, in contrast to fiduciary relationships and uberrimae fidei contracts like insurance. But the law has recognized for centuries that silence can be tantamount to a positive misrepresentation if it creates a misleading impression when combined with a party’s active statements or conduct. This Court should confirm that the same principle applies to contractual performance, and hold that the Respondents “otherwise knowingly misle[d]” Callow about the termination through their active non-disclosure.
2. The Facts A. The Winter Agreement Between Callow and the Condos 6. For more than 10 years, Christopher Callow has been the sole principal and director of Callow, an Ottawa company that provides property maintenance services. Before this time, Mr. Callow personally shovelled driveways.8
7. In 2010 and 2011, Callow entered into winter maintenance contracts with ten of the Respondents, who are condominium corporations located at Baycrest Gardens in Ottawa (the “Condos”).9 The Condos are managed by the Respondent, Condominium Management Group (“CMG”), and its designated property manager. The Condos formed a Joint Use Committee (the “JUC”), with a representative from each Condo board, to make decisions about their shared assets.10
5 Ibid, ¶49, p. 14-15, emphasis added. 6 Ibid, ¶70, p. 19-20, emphasis added. 7 Appeal Decision, ¶17, AR V.I, Tab 3, p. 32. 8 Trial Decision, ¶1, 17, AR V.I, Tab 1, p. 1, 7. 9 Ibid, ¶18, p. 7. See also: Agreement for Winter Maintenance Services, Nov. 1, 2010, Ex. 1, AR V.III, Tab 28-A, p. 2-6; Callow Exam, Ex. 89B, AR V.II, Tab 16, p. 20:18-22:6, 23:1-4; Callow Chief/Cross, AR V.II, Tab 18, p. 53:12-19, 100:5-17. 10 Trial Decision, ¶1-2, 19, AR V.I, Tab 1, p. 1-2, 7.
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8. The agreements required Callow to remove snow from Baycrest. Callow performed the work well enough that the Condos signed two new agreements with Callow in April, 2012:
(a) a renewed winter maintenance agreement (the “Winter Agreement”), for November 1, 2012 to April 30, 2014, with a yearly value of $80,383.70; and
(b) a new summer maintenance agreement (the “Summer Agreement”), for May 1, 2012 to October 31, 2013, with a yearly value of $9,686.20.11
9. Melody Brown, then CMG’s property manager, advised the Condo boards to enter into both agreements with Callow together, since “having a contractor that provides both the Snow removal and the Landscaping contracts provides you with more leverage in both situations”.12 The Respondents saw the two contracts as linked. Callow, meanwhile, would not have entered into the Summer Agreement without the Winter one; the Summer Agreement was not profitable on its own.13
10. The 2012 agreements were based on CMG’s standard form, but the price was negotiated. Callow reduced the price by 5% since the Condos agreed to a two-year term.14 One of the standard terms in s. 9 of the Winter Agreement was a unilateral termination right in the Condos’ favour, reproduced in the Factum Appendix.15 The Winter Agreement did not contain an entire agreement clause, nor any other provision purporting to modify or exclude common law duties or implied terms.
11. Callow performed the work to the required standard.16
11 Ibid, ¶3, 18, 21-24, 28, p. 2, 7, 8-9. See also: Agreement for Winter Maintenance Services, April 2012, Ex. 2, AR V.III, Tab 28-B, p. 8-14; Agreement for Summer Maintenance Services, April 2012, Ex. 4, AR V.III, Tab 28-D, p. 22-30; Callow Exam, Ex. 89B, AR V.II, Tab 16, p. 16:8-24, 17:14- 18:8, Callow Cross, AR V.II, Tab 18, p. 101:1-22; Peixoto Cross, AR V.II, Tab 22, p. 175:17-29. 12 Email from M. Brown, March 9, 2012, Ex. 41, AR V.III, Tab 28-U, p. 143, emphasis added. See also: Brown Chief/Cross, AR V.II, Tab 26, p. 202:19-203:7, 204:30-205:21, 208:16-210:2. 13 Callow Chief, AR V.II, Tab 18, p. 61:15-23. 14 Trial Decision, ¶21, 23-24, AR V.I, Tab 1, p. 8-9. See also: Emails Between M. Brown and C. Callow, March 15-22, 2013, Ex. 3, AR V.III, Tab 28-C, p. 16-18; Callow Exam, Ex. 89B, AR V.II, Tab 16, p. 31:7-32:3; Callow Chief/Cross, AR V.II, Tab 18, p. 53:29-55:5, 55:15-18, 56:20-26, 57:12-58:32, 84:28-85:2; Tab 19, p. 103:29-104:10, 105:10-19, 106:5-9, 106:28-29; Tab 20, p. 120:4-23; Brown Chief, AR V.II, Tab 26, p. 205:12-19. 15 Trial Decision, ¶24, AR V.I, Tab 1, p. 8-9. See also: Agreement for Winter Maintenance Services, April 2012, Ex. 2, s. 9, AR V.III, Tab 28-B, p. 10. 16 Trial Decision, ¶29, 55 (and ¶20, 22, 25, 27, 30, 34-35, 39, 54, 75), AR V.I, Tab 1, p. 8-12, 16, 20- 21. See also: Email from M. Brown, Dec. 22, 2012, Ex. 50, AR V.III, Tab 28-W, p. 166-167; Email from C. Trites, Dec. 22, 2012, Ex. 51, AR V.III, Tab 28-X, p. 170; Emails from M. Brown, Jan. 7
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B. The Condos Decided to Terminate the Winter Agreement 12. Callow’s relationship with the Condos began to change on March 1, 2013, when the Respondent, Tammy Zollinger, replaced Ms. Brown as CMG’s property manager. Ms. Zollinger had never worked with Callow before. She became stuck in the snow at Baycrest’s parking lot on her first day, which likely had a negative impact on her view of Callow going forward.17 The Trial Judge found that “[t]he path that she took afterwards was not appropriate and did not fall in line with the principle of good faith dealings in contractual performance”.18
13. Less than three weeks into her new position, and without having spoken to the previous property manager about Callow or attending any Condo meetings at which snow removal was discussed, Ms. Zollinger told the JUC on March 19, 2013 that they should terminate the Winter Agreement due to “poor workmanship” during the 2012-2013 season.19 Even though the JUC members did not ask Ms. Zollinger to present on the Winter Agreement, she advised them that it could be terminated with no financial penalty under the “escape” clause in s. 9.20 The same day, or by no later than April, 2013, the JUC voted to terminate the Winter Agreement.21
and 10, 2013, Ex. 64, AR V.III, Tab 28-Y, p. 172-174; Baycrest Gardens Corporations Meeting Minutes, Jan. 14, 2013, Ex. 7, AR III, Tab 28-E, p. 34-36; Email from M. Brown, Jan. 15, 2013, Ex. 8, AR V.III, Tab 28-F, p. 39; Emails from K. Campbell and M. Brown, Feb. 28 and Mar. 1, 2013, Ex. 75, AR V.III, Tab 28-Z, p. 178-180; Email from M. Brown, Aug 27, 2013, Ex. 31, AR V.III, Tab 28- R, p. 85; Email from M. Brown, Sept. 6, 2013, Ex. 32, AR V.III, Tab 28-S, p. 93; Callow Chief/Cross, AR V.II, Tab 18, p. 62:17-63:4, 64:1-7, 90:17-96:9; Tab 20, p. 121:9-123:8; K. Campbell Cross, AR V.II, Tab 21, p. 141:20-142:5, 148:7-24, 149:13-17, 150:29-151:11, 153:22- 154:4; Trites Chief, AR V.II, Tab 23, p. 179:7-14; Brown Chief, AR V.II, Tab 26, p. 206:25-207:11. 17 Trial Decision, ¶14, 21, 36, AR V.I, Tab 1, p. 6-7, 8, 11. See also: Zollinger Exam, Ex. 89A, AR V.II, Tab 15, p. 6:1-25; Callow Chief, AR V.II, Tab 18, p. 65:10-15; Zollinger Chief, AR V.II, Tab 25, p. 184:10-11, 185:31-186:1, 186:31-187:16. 18 Trial Decision, ¶14 (and ¶45), AR V.I, Tab 1, p. 6-7, 13. 19 Ibid, ¶37-38, 52, p. 11-12, 15-16. See also: Baycrest Gardens Condo Board JUC Meeting Minutes, March 19, 2013, Ex. 10, AR V.III, Tab 28-G, p. 43-44; Zollinger Exam, Ex. 89A, AR V.II, Tab 15, p. 2:18-3:12; Zollinger Cross, AR V.II, Tab 25, p. 193:18-194:9; Peixoto Cross, AR V.II, Tab 22, p. 173:29-174:14; Brown Cross, AR V.II, Tab 26, p. 211:13-23. 20 Zollinger Exam, Ex. 89A, AR V.II, Tab 15, p. 4:5-12, 4:19-5:14, 8:1-9:5; Callow Chief, AR V.II, Tab 18, p. 69:32-70:9; K. Campbell Chief/Cross, AR V.II, Tab 21, p. 138:10-24, 152:1-8. 21 Trial Decision, ¶38, 51-52, 65, AR V.I, Tab 1, p. 12, 15-16, 18. See also: Letter from T. Zollinger, September 19, 2013, Ex. 12, AR V.III, Tab 28-I, p. 55; Email from M. Campbell, April 23, 2013, Ex. 29, AR V.III, Tab 28-P, p. 75; Zollinger Exam, Ex. 89A, AR V.II, Tab 15, p. 7:1-3, 9:6-9; Letter from J. Duquette, Sept. 21, 2017, Ex. 97, AR V.III, Tab 28-BB, p. 202; Callow Chief, AR V.II, Tab 18, p. 82:17-30; Peixoto Chief/Cross, AR V.II, Tab 22, p. 156:24-157:11, 171:16-24; M. Campbell
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C. The Condos Were Actively Dishonest About the Termination 14. Despite the JUC’s decision, no one informed Callow that the Condos were terminating the Winter Agreement until half a year later, on September 12, 2013. On that date, Ms. Zollinger sent Mr. Callow a curt email giving the 10 days’ notice required by s. 9.22 He received “no hint” of the termination before then.23 Ms. Zollinger and the Condos had never suggested to him that Callow would be terminated if its performance did not improve,24 even though he spoke to Ms. Zollinger and Condo board members on a weekly basis between March and September, 2013.25
15. Instead, the Condos deliberately kept their decision to terminate the Winter Agreement a secret. They did so because they did not want to jeopardize Callow’s performance of the Summer Agreement.26 Rather than give Callow an opportunity to address the alleged workmanship issues, as they had done in the past and as was contemplated by the Winter Agreement itself,27 the Condos deliberately withheld the termination decision from Callow.28 Mr. Callow – whose evidence the Trial Judge found to be credible and preferable to that of the Respondents’ witnesses after observing them all testify for eight days29 – explained his reasonable expectations as follows:
A. … I had a really good relationship with both Kyle [Campbell] and Joe [Peixoto], and you know, I saw them, along with other owners and board members from time to time on site… [I]f there was any kind of issue or problem, I would have expected them to bring it to my attention like they did with anything else in the past…30 16. The Respondents’ own witness, Ms. Brown, confirmed that the Condos’ silence was unusual in the context of a long-term relationship like the one with Callow:
Cross, AR V.II, Tab 24, p. 181:19-182:8. 22 Trial Decision, ¶4, 8, 49, AR V.I, Tab 1, p. 2, 4-5, 14-15. See also: Email from T. Zollinger, September 12, 2013, Ex. 11, AR V.III, Tab 28-H, p. 49. 23 Callow Exam, Ex. 89B, AR V.II, Tab 16, p. 37:15-17. 24 Zollinger Exam, Ex. 89A, AR V.II, Tab 15, p. 14:10-13; Callow Exam, Ex. 89B, AR V.II, Tab 16, p. 37:6-19; Callow Chief, AR V.II, Tab 18, p. 66:25-31, 81:27-82:9. 25 Callow Chief, AR V.II, Tab 18, p. 82:31-83:13; Zollinger Chief, AR V.II, Tab 25, p. 189:5-7. 26 Trial Decision, ¶8, 65, 76, AR V.I, Tab 1, p. 4-5, 18, 21. See also: Zollinger Exam, Ex. 89A, AR V.II, Tab 15, p. 10:23-12:13; K. Campbell Chief/Cross, AR V.II, Tab 21, p. 139:24-140:6, 143:11- 30, 147:15-32, 152:15-153:17; Peixoto Chief/Cross, AR V.II, Tab 22, p. 160:12-22, 161:3-14, 167:11-16, 170:9-28, 174:5-12. 27 Trial Decision, ¶31, AR V.I, Tab 1, p. 10; Agreement for Winter Maintenance Services, April 2012, Specifications and General Conditions, s. 16, Ex. 2, AR V.III, Tab 28-B, p. 14. 28 Trial Decision, ¶49, AR V.I, Tab 1, p. 14-15. 29 Ibid, ¶10-16, 39, 46-47, 51, 75, p. 6-7, 12, 14-15, 20-21. 30 Callow Chief, AR V.II, Tab 18, p. 81:18-24, emphasis added.
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A. … I firmly believe that no contract is perfect from the beginning. It’s a relationship you foster with your contractors, and it should – it – so, you know, switching from one year to the next doesn’t serve any purpose in my view. It takes a couple of years to work out the kinks in a contract. …[I]n my view, it’s always worth trying to work well with your contractor, and treat each other with respect, and try to make things work out…31 17. Critically, the Condos’ silence took place over a period of several months during which the Trial Judge found that they “actively deceived” Callow about the status of the Winter Agreement.32 The Condos’ active deception did not expressly concern the termination decision, but rather the closely related issues of whether the Condos were satisfied with Callow and would renew the Winter Agreement in 2014.33 However, by inducing Callow to believe that matters were so satisfactory that the Winter Agreement would be renewed in 2014, the Condos also, by necessary implication, induced Callow to expect that the Winter Agreement would not be terminated before then.34
18. In short, the Condos’ active deception about the renewal and Callow’s performance caused their silence about the termination to mislead Callow about the termination itself, to the full knowledge of the Condos. Mr. Callow was “shocked” by the termination and “didn’t even consider there was any problems with my existing contracts”, as “they certainly had me believing that we’re going to be renewing this contract for a further two-year term once the existing one expires”.35
19. The active deception occurred through the spring and summer of 2013, after the Condos decided to terminate the Winter Agreement, but before they informed Callow of this. During this time, Callow discussed the possibility of renewing the Winter Agreement with two Condo and JUC board members who testified at trial: Joe Peixoto, who negotiated the Winter Agreement and was the JUC’s “point person” with Callow, and Kyle Campbell.36 Callow believed from these discussions that the Condos were satisfied with Callow’s work, and that, far from the Winter Agreement facing early termination in September, 2013, it would be renewed in 2014. The Trial Judge found:
During the spring and summer of 2013, Callow… was in discussions with the condominium corporations’ board members to renew the contract for the following summer and also the winter maintenance services contract for a further two years. …
31 Brown Chief, AR V.II, Tab 26, p. 201:28-202:3, 202:9-11, emphasis added. 32 Trial Decision, ¶65-66, AR V.I, Tab 1, p. 18-19. 33 Ibid, ¶41, 47, p. 12-14; Callow Exam, Ex. 89B, AR V.II, Tab 16, p. 37:6-14. 34 Trial Decision, ¶13, 40, 65-66, 76, AR V.I, Tab 1, p. 6, 12, 18-19, 21. 35 Callow Chief, AR V.II, Tab 18, p. 70:13-15, 70:27-30 (and p. 69:27-31), emphasis added. 36 Trial Decision, ¶11-13, 23, AR V.I, Tab 1, p. 6, 8; Peixoto Cross, AR V.II, Tab 22, p. 170:19-28. See also: Callow Chief, AR V.II, Tab 18, p. 67:3-23.
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After his discussions with Mr. Peixoto and Mr. Campbell, Mr. Callow thought that he was likely to get a two-year renewal of his winter maintenance services contract and they were satisfied with his services. This assumption is also supported from the documentary evidence…37 20. Mr. Callow gave the following testimony about these discussions at trial:
Q. … Let’s hear what discussions were you having. A. Mostly with Joe, we discussed it, and he said “yeah, it looks good, I’m sure they’ll be up for it, let me talk to them”. Q. Up for what? A. A two-year renewal. Q. All right. Anyone else? A. Kyle Campbell I ran into once or twice on site and we had discussions as well too. Q. Okay, and what was your impression of – of – I mean I suppose you already answered.... A. That I was likely going to be getting a two-year renewal, there was no reason not to, they were satisfied with the service, they were happy with it.38 21. Similarly, during his examination for discovery, Mr. Callow testified:
A. …[I]n the course of the conversations that I would have I would see Joe around the site on a regular basis and I would speak to him and that’s the indication I was getting… Q. What did he say? What’s the indication? A. Well, the indication was, “Yes, after next winter we’ll get everything all sorted out for the next couple of years. We’ll see if we can get –” I proposed another two-year contract and maybe I could fix the rates for them at the same price and he said, “That sounds like that will fly, that sounds pretty good”. A. He said that? A. Yes. There was other conversation; I don’t remember the exact details of them. But yes, I was led to believe – I never would have gone and done anything for them.39 22. As a result, Callow even performed $5,000 of free services for the Condos that summer “as a show of good faith”.40 He intended that this would help solidify their decision to renew the Winter Agreement.41 The Trial Judge found:
37 Trial Decision, ¶40-41, AR V.I, Tab 1, p. 12, emphasis added. 38 Callow Chief, AR V.II, Tab 18, p. 67:25-68:7, emphasis added. 39 Callow Exam, Ex. 89C, AR V.II, Tab 17, p. 47:21-48:11, emphasis added. 40 Callow Cross, AR V.II, Tab 20, p. 110:26-111:2. 41 Callow Exam, Ex. 89B, AR V.II, Tab 16, p. 24:4-28:2; Callow Chief/Cross, AR V.II, Tab 18, pp. 71:26-72:17, 77:12-78:22, 85A:12-85B:1; Tab 20, p. 109:12-115:14, 116:29-119:16.
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…[D]uring the summer of 2013, Callow performed work above and beyond his summer maintenance services contract with CMG. … Callow performed this work because it was on the second year of the summer maintenance services contract and entering the second year of the winter maintenance services contract. Mr. Callow hoped that this supplemental work would act as an incentive for CMG to renew Callow’s winter maintenance services contract. Mr. Callow testified that he hoped the board members and owners would see that his work improved the appearance of the property and showed that he cared about it, which would make it worth keeping Callow for another two-year contract.42 23. Mr. Callow communicated these renewal hopes to the Respondents:
Q. Did you tell Joe, Tammy or anyone else at Baycrest that you were putting that mulch because – did you expressly tell them “you know, I’m putting that mulch because I understand my contracts are being renewed”? A. Did I use those words? Q. Did you clearly tell – communicated that message to them? A. That specific message? Q. Yes. A. I communicated that I was hopeful for an extension on a two year contract, and that I was doing this for free to improve the appearance of the – of the property.43 24. The Condos were aware that this work was a “freebie” to create a renewal incentive. Yet despite having already decided to terminate the Winter Agreement, they accepted it while leading Mr. Callow to believe, by their words and their conduct, that matters were so satisfactory the Winter Agreement would be renewed.44 The Trial Judge found:
On June 14, 2013, there were e-mails… Mr. Peixoto understood that the work performed by Callow was a “freebie” to add an incentive for the boards to renew his winter maintenance services contract. Mr. Peixoto advised Mr. Callow that he would tell the other board members about this work. … On July 16, 2013, there were e-mails… Mr. Callow decided to improve the appearance of the two gardens. Mr. Peixoto replied that he saw Callow’s staff working and thanked Mr. Callow. … Mr. Peixoto led Mr. Callow to believe that all was fine with the winter and summer maintenance services contracts and that the former was interested in a future extension of Callow’s contracts.45
42 Trial Decision, ¶42 (and ¶44), AR V.I, Tab 1, p. 12-13, emphasis added. 43 Callow Cross, AR V.II, Tab 20, p. 118:11-22, emphasis added. See also: Callow Exam, Ex. 89B, AR V.II, Tab 16, p. 28:3-30:1. 44 Callow Exam, Ex. 89C, AR V.II, Tab 17, p. 46:13-23, 49:19-22; Callow Chief, AR V.II, Tab 18, p. 71:23-75:10, 77:12-78:20. 45 Trial Decision, ¶43, 47 (and ¶13), AR V.I, Tab 1, p. 6, 13, 14, emphasis added. See also: Emails
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25. Mr. Callow had similar discussions with Mr. Campbell in person:
Q. …[T]ell the Court about that… A. Basically the conversation I had had with him, I can’t specify the exact date, was that… I was doing that to spruce up the appearance of the property, because I was looking at getting a two-year extension on my contract once the current terms had expired. And he seemed to be absolutely fine with that. Q. What do you mean he seemed to be fine with that? A. …[H]e le[d] me to believe that everything is fine, and that yes, we – we’re absolutely interested in extending the contract for a future couple of years. We weren’t even talking about the current one. Q. You weren’t talking about the current one to contract? A. No, because as far as I’m concerned, everything was fine, he said everything was fine and there was no issues.46 26. The Condos knew that Callow believed, through the summer of 2013, that its performance was satisfactory and that the Winter Agreement would continue into the 2013-2014 season. They deliberately chose not to tell it otherwise.47 The Trial Judge cited a crucial email confirming this:
On July 17, 2013, there were e-mails between Mr. Peixoto and Mr. Campbell. … They were both aware that this was “freebie” work performed by Callow and “no corporation is paying for this.” Mr. Campbell e-mailed Mr. Peixoto… regarding the “freebie” work: “Yeah, I was talking to him about it last week and he was mentioning he was going to do that. He’s basically doing this to try and make sure we keep him for summer grounds, which is fine by me.” Mr. Peixoto then responds: “I figured as much. It’s nice he’s doing it but I am sure it’s an attempt at us keeping him. Btw, I was talking to him last week and he is under the impression we’re keeping him for winter again. I didn’t say a word cuz I don’t wanna get involved but I did tell Tammy that Callow thinks we’re keeping him for winter.”48 27. Accordingly, on learning of the termination in September, 2013, Mr. Callow testified that “it
Between J. Peixoto and C. Callow, June 12, 2013, Ex. 14, AR V.III, Tab 28-K, p. 61; Emails Between J. Peixoto and C. Callow, June 13, 2013, Ex. 15, AR V.III, Tab 28-L, p. 65-66; Emails Between J. Peixoto and C. Callow, July 16, 2013, Ex. 17, AR V.III, Tab 28-N, p. 71; Peixoto Chief, AR V.II, Tab 22, p. 162:26-163:5, 164:17-165:3. 46 Callow Chief, AR V.II, Tab 18, p. 79:25, 79:28-88:14 (and 80:25-32), emphasis added. 47 Zollinger Exam, AR V.II, Tab 15, Ex. 89A, p. 13:1-22; K. Campbell Cross, AR V.II, Tab 21, p. 145:25-147:10; Peixoto Chief/Cross, AR V.II, Tab 22, p. 166:23-167:29, 168:32-169:16, 176:13-16, 177:16-32; Zollinger Chief/Cross, AR V.II, Tab 25, p. 190:8-26, 195:1-24, 196:16-31. 48 Trial Decision, ¶48 (and ¶12), AR V.I, Tab 1, p. 6, 14, emphasis added. See also: Emails Between J. Peixoto and K. Campbell, July 16-17, 2013, Ex. 21, AR V.III, Tab 28-O, p. 73; Emails Between J. Peixoto and K. Campbell, September 13, 2013, Ex. 13, AR V.III, Tab 28-J, p. 57.
- 10 - is pretty obvious that they used me, misled and lied to me”. The Trial Judge agreed.49
28. Ironically, despite the Condos’ concern that Callow would abandon the Summer Agreement once the decision to terminate the Winter Agreement was disclosed, Callow remained true to its word and completed the Summer Agreement to its expiry on October 31, 2013.50 Mr. Callow took the view that “I entered into it in good faith and I’m expected to be there every week to do my job”.51 The Condos, by contrast, refused even to pay their final invoice.52
D. The Trial Judge Found the Duty of Honest Performance Was Breached 29. Callow sued the Condos for breach of contract, and Ms. Zollinger and CMG for inducing that breach. The action sought damages for the opportunity Callow lost when it did not bid on other contracts for the winter of 2013-2014, as it would have done if the Condos had not misled it into believing that the Winter Agreement would not be prematurely terminated. Callow also claimed the Condos were unjustly enriched by the “freebies” it provided in the summer of 2013. The Statement of Claim alleged contractual bad faith, though it was issued before this Court’s ruling in Bhasin.53
30. The trial took place over eight days in October, 2017. Eight witnesses testified, producing over 1,000 pages of trial testimony and “a significant amount of written evidence… 108 exhibits to be exact”.54 In comprehensive reasons, Justice O’Bonsawin “made a series of findings regarding the evidence presented during this trial”.55 They centered on the conclusion that the Condos and their agents Ms. Zollinger and CMG (all of whom she referred to collectively as “CMG”)56 breached the duty of honest contractual performance by actively deceiving Callow about the termination of the Winter Agreement. Calling their conduct “deliberately misleading and deceiving”, the Trial Judge
49 Trial Decision, ¶49, AR V.I, Tab 1, p. 14-15, emphasis added. See also: Callow Chief, AR V.II, Tab 18, pp. 81:4-26. 50 Trial Decision, ¶3-4, 53, AR V.I, Tab 1, p. 2, 16. 51 Callow Chief, AR V.II, Tab 18, p. 83:15-21. See also: Trial Decision, ¶46, AR V.I, Tab 1, p. 14; Emails Between C. Callow and T. Zollinger, June 20, 2013, Ex. 16, AR V.III, Tab 28-M, p. 68-69; Callow Exam, Ex. 89B, AR V.II, Tab 16, p. 42:9-14; Callow Chief, AR V.II, Tab 18, p. 76:15-30. 52 Trial Decision, ¶75, AR V.I, Tab 1, p. 20-21. 53 Statement of Claim, ¶1(a)-(c), 7, 14, 19-21, 26-30, AR V.I, Tab 6, p. 43-45. 54 Trial Decision, ¶16 (and ¶9), AR V.I, Tab 1, p. 7. 55 Ibid, ¶17, p. 7. 56 Ibid, ¶1, p. 1.
- 11 - found that they had “intentionally withheld the information in bad faith”:57
In Callow’s case, CMG actively deceived Callow from the time the decision was made to terminate the winter maintenance services contract in either March or April to September 12, 2013. More specifically, CMG acted in bad faith by (1) withholding the information to ensure Callow performed the summer maintenance services contract; and (2) continuing to represent that the contract was not in danger despite CMG’s knowledge that Callow was taking on extra tasks to bolster the chances of renewing the winter maintenance services contract. … There were active communications between the parties between March/April and September 12, 2013, which deceived Callow. Due to the active deception by CMG, I do not accept the argument that no duty was owed to disclose the decision to terminate the contract before the notice.58 E. The Court of Appeal Erroneously Overturned the Trial Judge 31. On November 9, 2018, the Court of Appeal for Ontario issued a short per curiam judgment allowing the appeal. It concluded that the Trial Judge’s “findings may well suggest a failure to act honourably, but they do not rise to the high level required to establish a breach of the duty of honest performance”.59 In doing so, the Court of Appeal made two critical errors.
32. First, it found that the Condos “were free to terminate the winter contract… provided only that they informed [Callow] of their intention to do so and gave the required notice”, because “[i]t is clear from Bhasin that there is no unilateral duty to disclose information relevant to termination”.60 But as the Court of Appeal itself observed, “[n]ot only did the appellants fail to inform the respondent of their decision to terminate, but they actively deceived Callow as to their intentions and accepted the ‘freebie’ work he performed”.61 The Court of Appeal also held that “members of the JUC… knew [Callow] was under the impression that the contracts were likely to be renewed”, yet purposefully “delayed informing [it] that they were terminating the contract in order to avoid jeopardizing completion of [its] work under the summer contract”.62 This is therefore not a case about a passive failure to disclose material facts. Instead, it is about the Condos’ deliberate strategy to keep the termination decision secret from Callow while knowing that, because of their active deceit about a renewal and Callow’s performance, Callow would be misled by this silence.
57 Ibid, ¶69-70, p. 19-20, emphasis added. 58 Ibid, ¶65-66 (and ¶67, 76), p. 18-19, emphasis added. 59 Appeal Decision, ¶16 (and ¶8-9, 19), AR V.I, Tab 3, p. 29, 32, 33, emphasis added. 60 Ibid, ¶17 (and ¶19), p. 32, 33, emphasis added. 61 Ibid, ¶15, p. 32, emphasis added. 62 Ibid, ¶4-5, p. 28-29, emphasis added.
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33. Second, the Court of Appeal held that, even though “[c]ommunications between the parties may have led Mr. Callow to believe that there would be a new contract”, this deceit was not “directly linked to the performance of the contract”, as Bhasin requires. Instead, it found the deceit was related to the negotiation of a future agreement rather than to “the winter contract then in effect”.63 However, this ignores the fact that the Condos’ deceit about a renewal knowingly caused their silence about a termination to mislead Callow about the termination of the Winter Agreement itself. The Condos’ deceit was thus directly linked to their invocation of the termination right in the Winter Agreement, and whether they were satisfied with Callow’s own contractual performance of it.
PART II—ISSUES 34. This appeal presents two issues:
(a) Did the Condos’ active non-disclosure breach a duty of good faith under the Winter Agreement, i.e., the duty of honest performance, the duty not to abuse discretionary powers or a new duty to be recognized by this Court?
(b) If so, for what damages are the Respondents liable to Callow?
PART III—ARGUMENT 1. The Condos Breached Duties of Good Faith Under the Winter Agreement A. Introduction and Standard of Review 35. The Trial Judge’s disposition of Callow’s action was consistent with Bhasin. The Court of Appeal’s was not. This Court should allow the appeal, reverse the latter, and restore the former.
36. The facts of this case engage Bhasin’s organizing principle of good faith in multiple ways. The Condos’ active non-disclosure breached both the duty of honest performance and the duty not to abuse discretionary contractual powers. Alternatively, if these submissions are rejected, this Court should recognize a new doctrine under the organizing principle, by which active non-disclosure is prohibited. Imposing liability for such conduct will “help bring certainty and coherence to this area of the law in a way that is consistent with reasonable commercial expectations”.64
37. In considering these points, the Court should also bear in mind the standard of review. The Court of Appeal’s errors involve pure or extricable questions of law that are reviewable for
63 Ibid, ¶18, p. 32-33. 64 Bhasin (SCC 2014), supra note 2, ¶62.
- 13 - correctness.65 By contrast, the Trial Judge’s conclusion that the Respondents acted dishonestly toward Callow is based on “determinative findings of fact” which cannot be disturbed on appeal if “tainted by no palpable and overriding error”,66 particularly when the Court of Appeal made concurrent factual findings to the same effect.67 As Bhasin held:
The trial judge made a clear finding of fact that Can-Am “acted dishonestly toward Bhasin in exercising the non-renewal clause”… There is no basis to interfere with that finding on appeal. It follows that Can-Am breached its duty to perform the Agreement honestly.68 B. What Bhasin Decided 38. Less than five years after its release, “more words have been written about Bhasin v. Hrynew than any other case in the Canadian law of contracts”.69 The decision marked the first time this Court comprehensively addressed the idea of contractual good faith, which despite tracing its history to Roman and early English jurisprudence, and forming a vital component of the legal systems of Quebec and the United States, had come to exist in common law Canada as “an ‘unsettled and incoherent body of law’ that… developed ‘piecemeal’ and… [was] ‘difficult to analyze’”.70 The central achievement of Bhasin was to make this law “more certain, more just and more in tune with reasonable commercial expectations”.71
39. The Court’s decision has been widely celebrated by senior commentators,72 who have hailed
65 Housen v. Nikolaisen, 2002 SCC 33, ¶8, 27, 31, 33-36. 66 Churchill Falls (Labrador) Corp. v. Hydro‑Québec, 2018 SCC 46, ¶6, 120, 123 (“Churchill (SCC 2018)”). 67 Quebec (Director of Criminal and Penal Prosecutions) v. Jodoin, 2017 SCC 26, ¶51. 68 Bhasin (SCC 2014), supra note 2, ¶94. See also: Dunkin’ Brands Canada Ltd. c. Bertico inc., 2015 QCCA 624, ¶8-9, 48, 74, leave to appeal refused, [2015] S.C.C.A. No. 230; Industrial Alliance Insurance and Financial Services Inc. v. Brine, 2015 NSCA 104, ¶74, 78, 98, 105, 110-115, 126, leave to appeal refused, [2016] S.C.C.A. No. 18 (“Industrial (NSCA 2015)”); Algo Enterprises Ltd. v. Repap New Brunswick Inc.,, 2016 NBCA 35, ¶42; Northrock Resources v ExxonMobil Canada Energy, 2017 SKCA 60, ¶48-49; Willowbrook Nurseries Inc. v. Royal Bank of Canada, 2017 ONCA 974, ¶25, 45 (“Willowbrook (ONCA 2017)”); Warkentin v. BMO Nesbitt Burns Inc., 2018 MBCA 22, ¶25, 29. 69 D. Percy and D. Stollery, “Justice Jean E.L. Côté, The Court of Appeal, and the Changing Nature of Contract Law” (2019) 56 Alta L. Rev. 1263 at 1271, Appellant’s Book of Authorities (“ABOA”), Tab 33. 70 Bhasin (SCC 2014), supra note 2, ¶32 (and ¶35, 41, 59). 71 Ibid, ¶1. 72 Hon. J. Allsop, “Conscience, fair-dealing and commerce - parliaments and the courts” [2015] FedJSchol 17, ¶38, 43, 69, 71, 96; G. Hall, “Bhasin v. Hrynew: Towards an Organizing Principle of Good Faith in Contract Law” (2015) 30 B.F.L.R. 335 at 335-336, 344, ABOA Tab 34; A. Gray,
- 14 - it as “an important milestone in… the Canadian law of contract”,73 “a most welcome development” whose “precedential significance… should not be underestimated”,74 “a masterpiece of principled, incrementalist common-law reasoning”,75 and “an excellent example of a court doing exactly what a court, particularly a Supreme Court, should do”.76 It has also been cited favourably by courts in Ireland,77 Australia,78 New Zealand79 and the United States,80 and applied by several Canadian appellate judges,81 including this Court itself in contract cases under both the common law82 and the civil law of Quebec.83 As a recent and unanimous decision of this Court, it is important that Bhasin be reaffirmed in this appeal.84 As the Chief Justice of Alberta recently emphasized:
Development of Good Faith in Canada, Australia and Great Britain (2015) 57 Can. Bus. L.J. 84 at 92-94, 114-116, 118-119, ABOA Tab 27; L.I. Rotman, “The ‘Fusion’ of Law and Equity?: A Canadian Perspective on the Substantive, Jurisdictional, or Non-Fusion of Legal and Equitable Matters” (2016) 2 Can. J. Comp. & Contemp. L. 497 at 533-536, ABOA Tab 42; S.M. Waddams, The Law of Contracts, 7th ed. (Toronto: Thomson Reuters, 2017) at 304-306, 344-345, 380-381, ABOA Tab 55; A. Swan et al, Canadian Contract Law, 4th ed. (Toronto: LexisNexis Canada Inc., 2018) at 29, 351-352, 673, 818-821, 1021-1022, ABOA Tab 28. 73 J.D. McCamus, “The New General ‘Principle’ of Good Faith Performance and the New ‘Rule’ of Honesty in Performance in Canadian Contract Law” (2015) 32 J. Con. L. 103 at 118, ABOA Tab 41 (“McCamus”). 74 Hon. J.T. Robertson, “Good Faith As An Organizing Principle in Contract Law: Bhasin v Hrynew – Two Steps Forward and One Look Back” (2015) 93 Can. Bar. Rev. 811 at 866, 868, ABOA Tab 36 (“Robertson”). 75 P. Daly, “La bonne foi et la common law : L’arrêt Bhasin c. Hrynew” (forthcoming), University of Cambridge Faculty of Law Research Paper No. 39/2018, English Abstract. 76 A. Swan, “The Obligation to Perform in Good Faith: Comment on Bhasin v. Hrynew” (2015) 56 C.B.L.J. 395 at 405, ABOA Tab 29 (“Swan”). 77 Flynn v. Breccia, [2017] IECA 74, ¶2-10, per Hogan J.; Morrissey v. Irish Bank Resolution Corporation Ltd., [2017] IECA 162 ¶44-46. 78 Clarence Property Corporation Limited v. Sentinel Robina Office Pty Ltd., [2018] QSC 95, ¶72- 73. cf. Mineralogy Pty Ltd. v. Sino Iron Pty Ltd. (No. 6), [2015] FCA 825, ¶1007. 79 Heli Holdings Limited v. The Helicopter Line Ltd., [2016] NZHC 976, ¶114; SCC (NZ) Limited v. Samsung Electronic New Zealand Ltd., [2018] NZHC 2780, ¶176. 80 Canelli v. North Branford Board of Police Commissioners, 2014 WL 7272550, *1 (Conn. S.C. 2014), ABOA Tab 7. 81 Industrial (NSCA 2015), supra note 68, ¶94-105; Avalon Ford Sales (1996) Ltd. v. Evans, 2017 NLCA 9, ¶19, 26, 33, 36-37; IFP Technologies (Canada) Inc. v. EnCana Midstream and Marketing, 2017 ABCA 157, ¶2-4, 6, 65, 188-203, leave to appeal refused, [2018] S.C.C.A. No. 303 (“IFP (ABCA 2017)”). 82 Potter v. New Brunswick Legal Aid Services Commission, 2015 SCC 10, ¶99 (“Potter (SCC 2015)”). 83 Churchill (SCC 2018), supra note 66, ¶66, 117. 84 Ontario (A.G.) v. Fraser, 2011 SCC 20, ¶57; Copthorne Holdings Ltd. v. Canada, 2011 SCC 63,
- 15 -
Ensuring that contractual obligations are discharged in good faith… is essential to the economic well-being of this country. … If companies, and that includes sophisticated corporations, cannot rely on other companies with whom they contract to conduct themselves in a manner faithful to the parties’ contractual intentions, then that is not only hurtful to the company left with the problem. It is also harmful to the citizens of this country. Business craves certainty; it is understandably risk averse. Canadians lose if companies have to look over their shoulder to ensure that they are not being stabbed in the contractual back, especially where investments are measured in millions, if not billions, of dollars. … This is contrary to society’s enlightened collective self-interest. Companies are entitled to expect that the parties with whom they contract will be honest, reasonable, candid and forthright in their contractual dealings… … … Courts should not sanction interpretations disconnected from economic reality, much less from a contracting party’s obligation to act honestly and in good faith. Not only are these legitimate considerations in their own right, but if not followed, companies will be highly motivated to take their disputes out of the courts and into the private sector for resolution. Admittedly, this is already occurring in Canada. … When companies vote with their feet, this is ultimately hurtful to the evolution of the common law. …85 40. At the core of Bhasin lies the “organizing principle of good faith”. The arguments of the parties in Bhasin, like the case law and commentary before it, divided over whether the Court should recognize “a general duty of good faith in contract”, or limit good faith to a “much more modest” role relevant only to “certain classes of contract, such as employment contracts, and in contracts involving discretionary powers”.86 This Court chose neither approach. Instead, while declining to instantiate good faith as a general duty, Cromwell J. recognized that there were a “number of rules and doctrines that call upon the notion of good faith in contractual dealings”,87 and that these could be explained through a general principle of good faith:
…[T]here is an organizing principle of good faith that underlies and manifests itself in various more specific doctrines governing contractual performance. That organizing principle is simply that parties generally must perform their contractual duties honestly and reasonably and not capriciously or arbitrarily. …[A]n organizing principle states in general terms a requirement of justice from which more specific legal doctrines may be derived. An organizing principle therefore is not a free- standing rule, but rather a standard that underpins and is manifested in more specific legal doctrines and may be given different weight in different situations: see, e.g. … R. v. Hart,
¶57; Nishi v. Rascal Trucking Ltd., 2013 SCC 33, ¶23-28. 85 IFP (ABCA 2017), supra note 81, ¶2-4, 65, emphasis added. 86 Bhasin (SCC 2014), supra note 2, ¶29-31 (and ¶38-39). 87 Ibid, ¶42 (and ¶32).
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[2014] 2 S.C.R. 544, at para. 124; R. M. Dworkin, “Is Law a System of Rules?”, in R. M. Dworkin, ed., The Philosophy of Law (1977), 38, at p. 47. It is a standard that helps to understand and develop the law in a coherent and principled way. The organizing principle of good faith exemplifies the notion that, in carrying out his or her own performance of the contract, a contracting party should have appropriate regard to the legitimate contractual interests of the contracting partner. …”[A]ppropriate regard” for the other party’s interests will vary depending on the context of the contractual relationship...88 41. This approach reflects the well-established distinction between principles and rules that underlies many aspects of Canada’s legal system,89 a distinction illuminated by the Dworkin article the Court cited. In it, Dworkin observes that when judges decide “difficult cases”, there is often no clear answer dictated by a legal “rule”, so judges must turn to legal “principles” instead (i.e., “requirement[s] of justice or fairness or some other dimension of morality”). Unlike a rule, a principle is not automatically outcome-determinative; rather, it enables the judge to identify a justification for creating a new rule – or for changing or overruling an existing rule – that is outcome- determinative. The effect is that a judge resolving a hard case does not simply exercise an unfettered discretion, but applies standards which remain legitimately rooted in the law. Different principles exist, and they have different weight in different situations. Depending on the context and its interaction with other principles, a given principle can “incline” a judge in one direction, and may even be decisive. In the specific page from Dworkin’s article cited in Bhasin, he states:
A principle like ‘No man may profit from his own wrong’… states a reason that argues in one direction, but does not necessitate a particular decision. … There may be other principles or policies arguing in the other direction… If so, our principle may not prevail, but that does not mean that it is not a principle of our legal system, because in the next case, when these contravening considerations are absent or less weighty, the principle may be decisive. …90 42. The organizing principle of good faith thus does not have obligatory content of its own, but rather serves as the impetus behind more specific doctrines of contract law that do. As the Hart case cited in Bhasin holds, “[w]here its underlying rationale suggests that legal protection is needed in a specific context, but the law provides for none, the principle can be used to fashion a ‘contextually- sensitive’ new rule to address the gap in the law”.91 In this sense, it is similar to another principle
88 Ibid, ¶63-65, emphasis added. 89 Hon. R.J. Sharpe, Good Judgment: Making Judicial Decisions (Toronto: University of Toronto Press, 2018) at 98-124, ABOA Tab 38. 90 R.M. Dworkin, “Is Law a System of Rules?”, in R. M. Dworkin, ed., The Philosophy of Law (Oxford: Oxford University Press, 1977), 38 at 47 (and 43-65), ABOA Tab 51 (“Dworkin”). 91 R. v. Hart, 2014 SCC 52, ¶123 (and ¶124). See also: Churchill (SCC 2018), supra note 83, ¶104.
- 17 - that Dworkin recognized, freedom of contract.92 Bhasin itself analogized the good faith principle to that of unjust enrichment, which, while “grow[ing] out of the traditional categories of recovery” in restitution and being “informed by them”, is “capable, however, of going beyond them, allowing the law to develop in a flexible way as required to meet changing perceptions of justice”.93 Commentators have also compared it to the neighbour principle in Donoghue v. Stevenson.94
43. Bhasin holds that the organizing principle of good faith is not only reflected in several existing doctrines of contract law that vary by context, but may also give birth to new doctrines in the future depending on their utility, incrementalism and consistency with other legal principles:
This organizing principle of good faith manifests itself through the existing doctrines about the types of situations and relationships in which the law requires, in certain respects, honest, candid, forthright or reasonable contractual performance. Generally, claims of good faith will not succeed if they do not fall within these existing doctrines. But we should also recognize that this list is not closed. The application of the organizing principle of good faith to particular situations should be developed where the existing law is found to be wanting and where the development may occur incrementally in a way that is consistent with the structure of the common law of contract and gives due weight to the importance of private ordering and certainty in commercial affairs. … The approach of recognizing an overarching organizing principle but accepting the existing law as the primary guide to future development is appropriate in the development of the doctrine of good faith. Good faith may be invoked in widely varying contexts and this calls for a highly context-specific understanding of what honesty and reasonableness in performance require so as to give appropriate consideration to the legitimate interests of both contracting parties. …95 44. The existing doctrines of good faith identified in Bhasin include those where a duty is implied by law in certain relationships (e.g., employment, insurance and tendering), and those where a duty arises through interpretation, or implication in law or in fact, in certain situations (e.g., “(1) where the parties must cooperate in order to achieve the objects of the contract; (2) where one party exercises a discretionary power under the contract; and (3) where one party seeks to evade contractual duties”).96
92 Dworkin, supra note 90, at 44-45, 47, 55-56. See also: H.G. Beale et al, eds., Chitty on Contracts, 33rd ed. (London: Sweet & Maxwell, 2018), at 25, ABOA Tab 35 (“Chitty”). 93 Bhasin (SCC 2014), supra note 2, ¶67 (and ¶68). 94 [1932] A.C. 562 (H.L.) at 579-580; N. Reynolds, “The New Neighbour Principle: Reasonable Expectations, Relationality, and Good Faith in Pre-Contractual Negotiations” (2018) 60 Can. Bus. L.J. 94 at 120-123, ABOA Tab 47. 95 Bhasin (SCC 2014), supra note 2, ¶66, 69, emphasis added. 96 Ibid, ¶47 (and ¶42-46, 48-56).
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45. In addition, Bhasin recognized an entirely new doctrine under the organizing principle: “a duty of honest performance, which requires the parties to be honest with each other in relation to the performance of their contractual obligations”.97 This duty does not arise from interpretation or implication at all, but is “a general doctrine… that applies to all contracts” and “operates irrespective of the intentions of the parties”, so “parties are not free to exclude it”.98
C. The Condos Breached the Duty of Honest Performance i. Bhasin Prohibits Active Non-Disclosure 46. The Condos breached the duty of honest performance by withholding the termination decision from Callow when the Condos knew that – because of their active misstatements and conduct about a renewal and their satisfaction with Callow’s work – Callow would be misled by their silence.
47. In Bhasin, this Court held the duty of honest performance applies beyond direct lies:
…[T]here is a general duty of honesty in contractual performance. This means simply that parties must not lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract. …[I]t is a simple requirement not to lie or mislead the other party about one’s contractual performance. …99 48. The Court went on to emphasize that the principle of good faith manifests itself in doctrines which require “honest, candid, forthright or reasonable contractual performance”,100 which is the same description of good faith given in Wallace,101 a case on which Bhasin relied for the new duty:
… The requirement to act honestly is one of the most widely recognized aspects of the organizing principle of good faith… For example, the duty of honesty was a key component of the good faith requirements which have been recognized in relation to termination of employment contracts: Wallace, at para. 98…102 49. Tellingly, the very paragraph from Wallace cited here gives as a “clear” example of bad faith a case of active non-disclosure like Callow’s. In it, an employer delayed informing the employee that a termination decision had been made while reassuring him about his future:
The obligation of good faith and fair dealing is incapable of precise definition. However, at a minimum, I believe that in the course of dismissal employers ought to be candid, reasonable, honest and forthright with their employees and should refrain from engaging in conduct that
97 Ibid, ¶93 (and ¶1, 33, 72-92). 98 Ibid, ¶74-75 (and ¶33, 93). 99 Ibid, ¶73, emphasis added. 100 Ibid, ¶66, emphasis added. 101 Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701 (“Wallace (SCC 1997)”). 102 Bhasin (SCC 2014), supra note 2, ¶73, emphasis added.
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is unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive. …I refer now to some examples… … In Dunning… bad faith conduct was clearly present. Although the plaintiff’s position had been eliminated, he was told by several senior executives that another position would probably be found for him and that the new assignment would necessitate a transfer. However, at the same time that the plaintiff was being reassured about his future, a senior representative of the company was contemplating his termination. When a position could not be found, the decision was made to terminate the plaintiff. This decision was not communicated to the plaintiff for over a month despite the fact that his employers knew he was in the process of selling his home in anticipation of the transfer. News of his termination was communicated to the plaintiff abruptly following the sale of his home.103 50. This Court made a similar point in Potter, where it found that an employer constructively dismissed its employee by administratively suspending him without justification. In holding the suspension unauthorized, Wagner J. (as he then was) emphasized the importance of “good faith”.104 Citing Bhasin, he held that the “minimum” good faith standard was not met, as the employer was not “candid, and forthright”, but instead failed to give the employee any reasons and harboured “a concealed intention to have [him] terminated”.105
51. On the facts of Bhasin itself, this Court found that the defendant breached the duty of honest performance when it “failed to mention” facts that made its positive statements to the plaintiff misleading. This was an instance of active non-disclosure akin to that here:
When Mr. Bhasin complained about Mr. Hrynew’s conflict of interest in being both auditor and competitor, Can-Am in effect blamed the Commission, claiming that the Commission had rejected its proposal to appoint a third party PTO. This was not truthful. Can-Am failed to mention that it had proposed to appoint a non-resident of Alberta who was clearly not qualified according to the Commission’s criteria or that it had decided to appoint Mr. Hrynew even though he did not meet the Commission’s criteria either…106 52. Additionally, the Bhasin Court found that the duty was beached when the defendant “did not communicate”, “said nothing” and “equivocated” to the plaintiff in June-August, 2000 about its settled intentions to exercise its contractual non-renewal right in May, 2001. This Court did so even though, like the termination clause in s. 9 of the Winter Agreement, the non-renewal right in Bhasin only entitled the plaintiff to six months’ notice, and there was no direct lie:
103 Wallace (SCC 1997), supra note 101, ¶98-99, emphasis added. 104 Potter (SCC 2015), supra note 82, ¶97 (and ¶84). 105 Ibid, ¶46, 99 (and ¶100), emphasis added. 106 Bhasin (SCC 2014), supra note 2, ¶101, emphasis added.
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Can-Am repeatedly misled Mr. Bhasin… It… responded equivocally when Mr. Bhasin asked in August 2000 whether the merger was a “done deal”… … The trial judge found that Can-Am acted dishonestly with Mr. Bhasin throughout the events leading up to the non-renewal: …it did not communicate to him that the decision was already made and final, even though he asked; and it did not communicate with him that it was working closely with Mr. Hrynew to bring about a new corporate structure… … …[I]t sent an organizational chart to the Commission showing that Mr. Bhasin’s agency was to be merged under Mr. Hrynew’s. But it had said nothing of this to Mr. Bhasin… …[W]hen questioned about Can-Am’s intentions with respect to the merger, the official “equivocated” and did not tell him the truth that from Can-Am’s perspective this was a “done deal”. …[T]he official was “not honest with [Mr.] Bhasin” at that meeting… … …Can-Am’s breach of contract consisted of its failure to be honest with Mr. Bhasin… with respect to its settled intentions with respect to renewal. …107 53. Accordingly, while Bhasin also held that the duty of honest performance “does not impose a duty of… disclosure”,108 numerous commentators have recognized that Bhasin leaves open the possibility that “omissions nonetheless constitute bad faith in certain circumstances”,109 since “the line between a lie (or a misrepresentation) and a simple failure to disclose is not always easy to draw”.110 In their view, the duty may apply to “half-truths”, in which a defendant’s silence on a matter is actively misleading in light of another statement it has made.111 One writes that “[a]lthough the organizing principle of good faith does not impose on parties a duty to disclose, ‘active non- disclosure’, ‘selective disclosure’ and failure to be forthright can constitute breaches of the duty to
107 Ibid, ¶12, 15, 99-100, 108, emphasis added. 108 Ibid, ¶73. 109 M. Goswami, “Coherence and Consistency in a System of Good Faith: Assessing and Explaining the Impact of Bhasin v. Hrynew on Canadian Contract Law” (2017) 77 S.C.L.R. (2d) 309 at 319, ABOA Tab 43. See also: S. O’Byrne and R. Cohen, “The Contractual Principle of Good Faith and the Duty of Honesty in Bhasin v. Hrynew” (2015) 53 Alta. L. Rev. 1 at 7-9, ABOA Tab 54 (“O’Byrne”); M.P. Harrington, “‘A Lawless Science’: Punitive Damages for Breach of Contract in Canada” (2015) 69 S.C.L.R. (2d) 185 at 222, ABOA Tab 45; T. Buckwold, “The Enforceability of Agreements to Negotiate in Good Faith: The Impact of Bhasin v. Hrynew and the Organizing Principle of Good Faith in Common Law Canada” (2016) 58 C.BL.J. 1 at 13-14, ABOA Tab 56 (“Buckwold”); B. Crawford, “The New Contractual Principle of Good Faith and the Banks” (2017) 32 B.F.L.R. 407 at 408-409, 413, ABOA Tab 30; J. Enman-Beech, “The Subjects of Bhasin: Good Faith and Relational Theory” (2017) 13 J.L. & Equal. 1 at 22, 25-26, ABOA Tab 40. 110 Swan, supra note 76, at 402. See also: Robertson, supra note 74, at 864. 111 O’Byrne, supra note 109, at 8-9, footnote 56; C. Mummé, “Bhasin v. Hrynew: A New Era for Good Faith in Canadian Employment Law, or Just Tinkering at the Margins?” (2016) 32 Int. J. Comp. L.I.R. 117 at 123, ABOA Tab 32.
- 21 - act honestly”.112 Professor Buckwold explains:
The duty declared by Bhasin “means simply that parties must not lie or otherwise knowingly mislead each other about matters directly linked to performance of the contract.” … We may have little difficulty identifying a lie but what it means to “otherwise knowingly mislead” is less obvious. … Though one can in fact “knowingly mislead” another through non-disclosure, the court says specifically that the duty of honesty is not a duty of disclosure and that “active” dishonesty may be distinguished from mere non-disclosure. … … [P]resumably one may not “knowingly mislead” by allowing the other to persist in a mistaken understanding of fact to which one has materially contributed. …113 54. This captures the Condos’ conduct here.
ii. This Case Goes Well Beyond Passive Non-Disclosure of Material Facts 55. It is clear from the above passages that the Bhasin Court’s concern about non-disclosure had nothing to do with active non-disclosure. Instead, the Court wished to clarify that the new duty did not create liability for passively withholding facts just because they are material, as may arise in special contexts like fiduciary relationships and insurance:
The duty of honest performance that I propose should not be confused with a duty of disclosure or of fiduciary loyalty. A party to a contract has no general duty to subordinate his or her interest to that of the other party. …[A] dealership agreement is not a contract of utmost good faith (uberrimae fidei) such as an insurance contract, which among other things obliges the parties to disclose material facts… But a clear distinction can be drawn between a failure to disclose a material fact, even a firm intention to end the contractual arrangement, and active dishonesty. …[T]here is no unilateral duty to disclose information relevant to termination. But the situation is quite different, as I see it, when it comes to actively misleading or deceiving the other contracting party in relation to performance of the contract.114 56. The active non-disclosure in which the Condos engaged here went well beyond a passive failure to disclose material facts. The Trial Judge found that they deliberately remained silent about their decision to terminate the Winter Agreement; they knew Callow would be misled by this silence given their positive misstatements and conduct suggesting a renewal and their satisfaction with
112 N. Effendi et al, “Bhasin v. Hrynew: Towards Clarity and Coherence With Respect to Good Faith in Contractual Performance?” (2016) 46 Adv. Q. 94 at 114 (and 109, 115), ABOA Tab 46 (“Effendi”), emphasis added. 113 Buckwold, supra note 109, at 13, underlining in original, other emphasis added. See also: Effendi, supra note 112, at 122. 114 Bhasin (SCC 2014), supra note 2, ¶86-87, emphasis added.
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Callow’s performance; and they did this for the specific purpose of ensuring that Callow performed the Summer Agreement – which it did anyway, even after the termination was disclosed. In other words, the Condos created the conditions in which their silence was deceiving, and their intentional failure to make disclosure in the face of this can only be described as “active dishonesty”.
57. There is simply no equivalence between a duty of disclosure (rejected in Bhasin) and a duty to refrain from active non-disclosure tantamount to a positive misrepresentation (which Bhasin accepts). Courts have distinguished between them for centuries, across many areas of the law.115 The Court of Appeal’s failure to consider this distinction was the central error below.116
58. In the context of contractual formation, for instance, it has long been the law that a party is under no positive duty to disclose material facts to its prospective counterparty outside of fiduciary relationships and uberrimae fidei contracts like insurance.117 Despite this, the courts recognize that a positive misrepresentation sufficient to create liability for statements during contractual formation may still occur where a party remains silent while actively participating in the deceit, such as when it tells a half-truth,118 fails to correct a prior statement after it becomes untrue or after learning that it is untrue,119 knowingly stands by while a third party asserts a falsehood to the plaintiff in order to profit from it,120 actively conceals the truth,121 or says nothing in response to a question.122
115 J. Cartwright, Misrepresentation, Mistake and Non-Disclosure, 3rd ed. (London: Sweet & Maxwell, 2012) at 34-35, 39-40, 190-191, 784, ABOA Tab 39; P. Burns and J. Blom, Economic Torts in Canada, 2nd ed. (Markham, Ont.: LexisNexis Canada Inc., 2016) at 196-200, ABOA Tab 48; Hon. K.R. Handley, Spencer Bower & Handley, Actionable Misrepresentation, 5th ed. (London: LexisNexis, 2014) at 47-54, ABOA Tab 37. 116 Trial Decision, ¶69-70, AR V.I, Tab 1, p. 19-20. 117 Brownlie v. Campbell (1880), 5 App. Cas. 925 (H.L.) at 954, ABOA Tab 6, per Lord Blackburn (“Brownlie (HL 1880)”); Bell v. Lever Brothers Ltd., [1932] A.C. 161 (H.L.) at 227, 231-232, 235, ABOA Tab 4 (“Bell (HL 1932)”); Dorsch v. Freeholders Oil Co., [1965] S.C.R. 670 at 676-677. 118 Peek v. Gurney (1873), L.R. 6 H.L. 377 (H.L.) at 403, ABOA Tab 21, per Lord Cairns; Panzer v. Zeifman, 1978 CarswellOnt 1461 (C.A.), ¶22, ABOA Tab 19; V.K. Mason Construction Ltd. v. Bank of Nova Scotia, [1985] 1 S.C.R. 271 at 284. 119 Brownlie (HL 1880), supra note 117, at 950, per Lord Blackburn; Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd., 2002 SCC 19, ¶12, 14-15, 39, 50-53, 67, 80; Kerr v. Danier Leather Inc., [2007] 3 S.C.R. 331, ¶36. 120 Bradford Third Equitable Benefit Building Society v. Borders, [1941] 2 All E.R. 205 (H.L.) at 211, 220, ABOA Tab 5 (“Bradford (HL 1941)”); Sidhu Estate v. Bains, 1996 CanLII 3332 (B.C.C.A.), ¶30-33, leave to appeal refused, [1996] S.C.C.A. No. 403. cf. Bruno Appliance and Furniture, Inc. v. Hryniak, 2014 SCC 8, ¶25-29. 121 Ward v. Hobbs (1878) 4 App. Cas. 13 (H.L.) at 26, ABOA Tab 26, per Lord O’Hagan; Bell (HL
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59. Cognos illustrates this point. There, an employer told a potential employee during a hiring interview that the project for which he interviewed was a major one that would take place over two years. The employer did not disclose that there was no guaranteed funding for the project or that it remained subject to approval. The employee was terminated after only one year. This Court allowed his claim for negligent misrepresentation, finding that even though the law did not recognize a duty to disclose, the employer (per Mr. Johnston) still engaged in a positive misstatement by its silence:
...I do not read the trial judge’s reasons as suggesting that the respondent… had a duty to make “full disclosure”… Rather, I read his reasons as suggesting that, in all the circumstances of this case, Mr. Johnston breached a duty to exercise reasonable care by, inter alia, representing the employment opportunity in the way he did without, at the same time, informing the appellant about the precarious nature of the… financial commitment… There are many reported cases in which a failure to divulge highly relevant information is a pertinent consideration in determining whether a misrepresentation was negligently made… In so doing, these cases… are not applying a standard of uberrima fides to the transactions involved therein. … These decisions simply reflect the applicable law by taking into account all relevant circumstances in deciding whether the representor’s conduct was negligent. In some cases, this includes the failure to divulge highly pertinent information. … …[A] flexible approach to this issue is preferable. It is arbitrary and premature to declare as a general rule that nothing less than express or direct representations can succeed… Undoubtedly, there will be cases such as the present one where the surrounding circumstances are such that it makes little difference, if any, how one characterizes the manner in which the representation is made, and where it would be unjust to deny recovery simply because the representation relied on is said to be implied rather than express. …123 60. More than hundred years earlier, in Aaron’s Reefs, the House of Lords recognized the same principle in relation to civil fraud, distinguishing active non-disclosure in a share prospectus from the duty of disclosure that applies in uberrimae fidei contracts like insurance:
… The duty of disclosure is not the same in the case of a prospectus inviting share subscriptions as in the case of a proposal for marine insurance. In an honest prospectus many facts and circumstances may be lawfully omitted, although some subscribers might be of opinion that these would have been of materiality… But the statement of a portion of the truth, accompanied by suggestions and inferences which would be possible and credible if it contained the whole truth, but become neither possible nor credible whenever the whole
1932), supra note 117, at 183, 220-221, 223, 227, 231; Hepting v. Schaaf, [1964] S.C.R. 100 at 102; Abel v. McDonald, 1964 CarswellOnt 108 (C.A.), ¶9, ABOA Tab 3. 122 Smith v. Hughes (1871), L.R. 6 Q.B. 597 (Q.B.D.) at 604-605, ABOA Tab 24, per Cockburn C.J. 123 Queen v. Cognos, [1993] 1 S.C.R. 87 at 122-124, 131 (and 127-130), emphasis added. See also: Spinks v. Canada, 1996 CarswellNat 326 (F.C.A.), ¶30-31, ABOA Tab 25.
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truth is divulged, is, to my mind, neither more nor less than a false statement. …124 61. Similarly, in Coaks, the House of Lords held:
…[I]nasmuch as a purchaser is (generally speaking) under no antecedent obligation to communicate to his vendor facts which may influence his own conduct or judgment when bargaining for his own interest, no deceit can be implied from his mere silence as to such facts, unless he undertakes or professes to communicate them. This, however, he may be held to do, if he makes some other communication which, without the addition of those facts, would be necessarily or naturally and probably misleading. If… he did this intentionally, and with a view to mislead in any material point, that is fraud…125 62. This Court has also recognized the distinction between passive and active non-disclosure in the context of contractual performance. In Soucisse, a case decided under the civil law of Quebec, Beetz J. precluded the defendant bank from recovering under a suretyship when it disclosed some of a surety’s obligations to his heirs, but not his other obligations that the heirs could revoke. He based this decision on two alternate grounds: (a) a unilateral duty of disclosure flowing from the implied contractual obligation of good faith (which goes beyond the duty of honest performance in Bhasin); and (b) the misleading nature of the bank’s positive but partial statements (which is active non- disclosure falling within the Bhasin paradigm):
If it were necessary to do so, I would not hesitate to hold that, to the extent that it wished to make new advances after the surety’s death on the basis of the letters of suretyship, the Bank was under an obligation as soon as it learned of the death itself to disclose to the heirs of the surety that these suretyships existed and were revocable. …I would hold that this obligation results from the principle that agreements must be performed in good faith. … In any event, once the Bank took the initiative in advising the estate of the surety’s obligations toward it, it assumed a duty to do this completely, because partial information is misleading information. The Bank especially could not simply disclose what it was to its advantage to disclose and withhold what was in its interest to conceal.126 63. The decision in Tercon is instructive here as well. In that case, the province initiated a tender process, accepted a bid from an ineligible bidder, “and then took steps to ensure that this fact was not
124 Aaron’s Reefs Ltd. v. Twiss, [1896] A.C. 273 (H.L.) at 287 (and 293-294), ABOA Tab 2, per Lord Watson, emphasis added. See also: HIH Casualty and General Insurance Ltd. v. Chase Manhattan Bank, [2003] UKHL 6, ¶71-72, per Lord Hoffmann. 125 Coaks v. Boswell (1886), 11 App. Cas. 232 (H.L.) at 235-236, ABOA Tab 10, per Earl Selborne, emphasis added. See also: Xerex Exploration v. Petro-Canada, 2005 ABCA 224, ¶56-58. 126 National Bank of Canada v. Soucisse, [1981] 2 S.C.R. 339 at 356-357 (“Soucisse (SCC 1981)”), emphasis added.
- 25 - disclosed to the bidders who remained”.127 Noting that the province “took active steps to obscure the reality of the situation”, and may have “covered up its knowledge that the successful proponent was an ineligible joint venture”, Cromwell J. affirmed the lower court’s conclusion that the province had breached its “implied obligation of good faith”.128
64. Liability for active non-disclosure in contractual performance is also recognized in the United States. The Restatement (Second) of Contracts provides that “bad faith may be overt or may consist of inaction”, and gives a case of active non-disclosure as an illustration.129 American courts have thus found bad faith performance in situations similar to this one, where one party misled the other in exercising a termination right by remaining silent while the latter performed work for it.130
65. Finally, since Bhasin was released, several lower courts have confirmed that it can extend to non-disclosure,131 particularly in situations of active non-disclosure like this:
(a) In RPC, the Court permitted pleading amendments that the defendant – a general contractor in an RFP – breached the duty of honest performance by not disclosing to the plaintiff subcontractor, before its entry into the subcontract, that statements the defendant made to the plaintiff in the tender documents had knowingly changed.132
(b) In Energy Fundamentals, the Court held that an optionor was under an implied obligation, informed by good faith, to disclose information so that the optionee could
127 Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC 4, ¶1. 128 Ibid, ¶6, 40, 58, emphasis added. 129 Restatement (Second) of Contracts, §205, comment d, illustration 7, ABOA Tab 53, emphasis added. See also: Equitable Life Ins. Co. of Iowa v. Halsey, Stuart & Co., 312 U.S. 410, 425-426 (1941). 130 Malone v. U.S., 849 F.2d 1441, 1445-1446 (Fed. Cir. 1988), ABOA Tab 16. See also: Celeron Gathering Corp. v. U.S., 34 Fed.Cl. 745, 751, 753 (1996), ABOA Tab 9; Department of General Services v. Pittsburgh Bldg. Co., 920 A.2d 973, 986-987 (Pa. Cmwlth., 2007), appeal denied, 595 P.A. 712 (2007), ABOA Tab 12; Peach State Roofing, Inc. v. Kirlin Builders, LLC, 2018 WL 3097326, *33-35 (D. Ala. 2018), ABOA Tab 20. 131 Directcash ATM Management Partnership v. Maurice’s Gas & Convenience Inc., 2015 NBCA 36, ¶4, 22-30; Canaccord Genuity Corp. v. Pilot, 2015 ONCA 716, ¶14-17, 46-51; Osteria Da Luca Inc. v. 1850546 Ontario Inc., 2015 ONSC 5606, ¶42-45, 50-52; Gemeinhardt v. Babic, 2016 ONSC 4707, ¶482-485; Gladu v. Robineau Estate, 2017 ONSC 37, ¶270-275; Geophysical Service Inc. v. Devon ARL Corp., 2017 ABQB 463, ¶42-50; Faber v. First View Properties Inc., 2018 ONSC 4332, ¶53-54; Jonasson v. Nexen Energy ULC, 2018 ABQB 598, ¶56 (and ¶52, 55, 58); Matthew Sloboda Professional Corp. v. Vincent Cairo Professional Corp., 2018 ABCA 405, ¶14-17. 132 RPC Limited Partnership v. SNC-Lavalin ATP Inc., 2018 ABCA 423, ¶6-12, 15, 21-22.
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confirm the optionor’s express representations about the option price.133
(c) In Lavrijsen, the Court held the vendor of a campground property, who warranted it would provide the purchasers with information about prepaid camper deposits/rentals, breached its duties when it “selectively disclosed partial information and actively withheld important information concerning prepaid rentals”, since “[a]ctive non- disclosure constitutes intentional misrepresentation” under Bhasin.134
(d) In Baier, the Court found that a skating club breached the duty of honest performance when it did not tell an instructor that it had decided against renewing her contract, but allowed her to register her skaters with it, as it “crossed the line between ‘a failure to disclose a material fact… and active dishonesty’” by “dishonestly… accepting [her] registrations… when they knew they would not permit her to coach them”.135
iii. Active Non-Disclosure Liability Is Desirable, Incremental and Principled 66. The preceding review demonstrates three important points.
67. First, the law would clearly be “wanting” if the type of behaviour the Condos engaged in were not proscribed.136 This would deny justice to Callow, which had a reasonable expectation the Condos would not deliberately keep the termination decision a secret, while knowingly creating a misleading impression about this through their active dishonesty about a renewal and their satisfaction with its performance. As one judge has said of the Court of Appeal’s decision itself:
I might have thought that what the defendants/appellants did was exactly not be honest with the other party concerning matters directly linked to the performance of the contract, that is, the exercise by the defendants/appellants of their right under the winter contract to terminate it early. The winter contract was to run until April, 2014 and was terminated in September, 2013. The defendants/appellants were not dealing with a renewal, a future contract not yet negotiated or entered into.137 68. Further, the “[p]recise content of honest performance will vary with context”,138 and the
133 Energy Fundamentals Group Inc. v. Veresen Inc., 2015 ONCA 514, ¶13-17, 28, 39-40, 46-50. 134 Lavrijsen (ONSC 2015), supra note 1, ¶13-16, emphasis added. 135 Baier v. Kitchener-Waterloo Skating Club, 2019 CanLII 31632 (ONSC (Sm. Cl.)), ¶151, 154 (and ¶150) (“Baier (ONSC (Sm. Cl.) 2019)”) emphasis added. 136 Bhasin (SCC 2014), supra note 2, ¶66. 137 Baier (ONSC (Sm. Cl.) 2019), supra note 135, ¶148 (and ¶147), emphasis added. 138 Bhasin (SCC 2014), supra note 2, ¶77. See also: Z.X. Tan, “Keeping Faith with Good Faith? The Evolving Trajectory Post-Yam Seng and Bhasin” [2016] 5 J.B.L. 420 at 440-444, ABOA Tab 58.
- 27 - dishonesty in this setting is especially acute. It did not occur in the context of a mere “transactional exchange”, but “a long-term contract of mutual cooperation” that both continued the parties’ historic relationship,139 and did not attempt to define all of their obligations with precision.140
69. This Court held in Bhasin that “a basic level of honest conduct is necessary to the proper functioning of commerce”, and that “[c]ommercial parties reasonably expect a basic level of honesty and good faith in contractual dealings”.141 As such, “contracting parties must be able to rely on a minimum standard of honesty from their contracting partner in relation to performing the contract as a reassurance that if the contract does not work out, they will have a fair opportunity to protect their interests”.142 This cannot be achieved if the duty of honest performance is limited only to express lies. That is why the cases discussed above extend liability to active non-disclosure – and why commentators argue that the Bhasin duty should do the same. As Professor McCamus points out:
… If outright falsehoods are assumed to be uncommon in commercial experience, one may wonder whether the phenomenon of half-truths might be a more frequently occurring phenomenon. …143 70. Indeed, denying any liability for non-disclosure may inhibit communications between the parties by tempting them to remain silent rather than make statements which risk being found untrue, and could lead to avoidance schemes where a party engineers a way to deceive its counterparty without making an overt misstatement.144 The duty of honest performance must be sufficiently flexible to accommodate real-world instances of dishonesty like this. Professor Summers notes:
… By invoking good faith… it may be possible for a judge to do justice and do it according to law. Without legal recourses of this general nature he might, in a particular case, be unable to do justice at all, or he might be able to do it only at the cost of fictionalizing existing legal concepts and rules, thereby snarling up the law for future cases. In begetting snarl, fiction may introduce inequity, unclarity or unpredictability.145
139 Bhasin (SCC 2014), supra note 2, ¶60, 69; Churchill (SCC 2018), supra note 83, ¶66-69. 140 Callow Cross, AR V.II, Tab 19, p. 107:10-14; Brown Chief, AR V.II, Tab 26, p. 201:28-202:3, 202:9-11; Churchill (SCC 2018), supra note 83, ¶66-69. 141 Bhasin (SCC 2014), supra note 2, ¶60. 142 Ibid, ¶86. 143 McCamus, supra note 73, at 114, emphasis added. 144 M. Tapia, “The Good Faith Doctrine: A Positive Duty to Disclose Would Protect the Reasonable Expectations of Parties During Contract Performance” (2019) 96 U. Det. Mercy L. Rev, 291 at 319, ABOA Tab 44. 145 R.S. Summers, “‘Good Faith’ In General Contract Law and the Sales Provisions of the Uniform Commercial Code” (1968) 54 Va. L. Rev. 195 at 198, ABOA Tab 52, underlining in original, other
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71. Second, the duty of honest performance as articulated in Bhasin either already applies to active non-disclosure, or extending it to do so would entail at the most an extremely modest, incremental change that is consistent with the law of contract.146 In numerous settings, courts have recognized that active non-disclosure triggers the “simple requirement not to lie or mislead the other party”147 that “is by our law a duty of universal obligation”,148 including good faith performance cases like Wallace, Soucisse and Tercon – along with Bhasin itself. As noted in Bradford:
… I fully agree that fraud may assume many disguises and wrappings, but the court will always look at the substance, and, if it finds the wicked intent and consequent damage, will give effect to its findings. As Sir Horace Davey QC, is reported to have said in his argument in Derry v Peek, at p 339: ‘Fraud never has been and never will be exhaustively defined, the forms which deceit may take being so many and various. There is a negative characteristic: it must be something which an honest man would not do; not merely what a logical or clear- headed man would not do.’149 72. Thus, “surely to be consistent… the law here should operate in some contexts of silence as well as contexts of overt action”.150 While “[t]he [Bhasin] Court was careful to say that the duty of honest performance is not a fiduciary duty… a fiduciary duty does not have to be found in order for a person to be said to have a duty speak”, there being “[i]n misrepresentation… a rich law accepting that sometimes silence or half-truths amount to a statement”, which “is equivalent to the situation in Bhasin itself, where the dishonestly… included… failure to communicate”.151 If Bhasin’s duty did not prohibit active non-disclosure, then the law would reflect a “‘piecemeal’ approach… that… fails to take a consistent or principled approach to similar problems” and is “out of step with… major trading partners of common law Canada” like Quebec and the U.S.152 It was precisely “to make the
emphasis added. See also: R. Powell, “Good Faith in Contracts” (1956) Current Legal Problems 16 at 26, 29, ABOA Tab 50; R. Brownsword, “‘Good Faith in Contracts’ Revisited” (1996) 49 Current Legal Problems 111 at 132, ABOA Tab 49. 146 Bhasin (SCC 2014), supra note 2, ¶66. 147 Ibid, ¶73. 148 Nocton v. Lord Ashburton, [1914] A.C. 932 (H.L.) at 954, ABOA Tab 18, per Viscount Haldane L.C. 149 Bradford (HL 1941), supra note 120, at 220-221, per Lord Wright, emphasis added. See also: Reddaway v. Banham, [1896] A.C. 199 (H.L.) at 221, per Lord Macnaghten, ABOA, Tab 23. 150 B. MacDougall, Misrepresentation (Toronto: LexisNexis Canada Inc., 2016) at 66, ABOA, Tab 31. 151 Ibid, at 66-67. 152 Bhasin (SCC 2014), supra note 2, ¶41-42 (and ¶32, 47, 59).
- 29 - common law less unsettled and piecemeal” that Bhasin imposed the duty, framing it as “a general doctrine of contract law that applies to all contracts [which] the parties are not free to exclude”.153
73. Third, imposing liability for active non-disclosure is consistent with private ordering and commercial certainty.154 This Court already weighed those principles against good faith in Bhasin, and found that “a duty of honesty in contract performance poses no risk to commercial certainty in the law of contract”, and that “[a]ny interference by the duty of honest performance with freedom of contract is more theoretical than real”.155 The most that is proposed in this case is a minor extension of this duty to cases where a party does not expressly lie but “otherwise knowingly mislead[s]”.156
74. Further, the proposed clarification will be easy to apply.157 A party may not deliberately withhold information about their contractual performance from their counterparty when they know the latter will be misled by their silence when coupled with their active misstatements and conduct. The courts have proven themselves capable of applying such a test for centuries. Parties already expect that this behaviour may attract censure in other legal contexts,158 and the consequences of proscribing it through the duty of honest performance are foreseeable from jurisdictions like Quebec and the United States, on whose experiences the Bhasin Court drew in creating the duty.159 Indeed, much more expansive duties of disclosure have been imposed through contractual good faith in other legal systems (e.g., Quebec),160 or in specific contractual relationships (e.g., insurance161 and franchise contracts162). They have not caused any breakdown in the law.
D. The Condos Breached the Duty Not to Abuse Discretionary Contractual Rights 75. Even if the Court rejects the foregoing submission, it should still hold that the Condos’ active non-disclosure breached the duty not to abuse the termination discretion in s. 9 of the Winter
153 Ibid, ¶33, 75 (and ¶93), emphasis added. 154 Ibid, ¶66. 155 Ibid, ¶80-81 (and ¶79). 156 Ibid, ¶73. 157 Ibid, ¶80. 158 Ibid, ¶80. 159 Ibid, ¶32, 41, 82-85. See also: Jean Coutu Group (PJC) Inc. v. Canada (A.G.), 2016 SCC 55, ¶52; Churchill (SCC 2018), supra note 83, ¶115, 117. 160 Soucisse (SCC 1981), supra note 126, at 356-357; Bank of Montreal v. Bail Ltée, [1992] 2 S.C.R. 554 at 585-588; ABB Inc. v. Domtar Inc., 2007 SCC 50, ¶108. 161 Bhasin (SCC 2014), supra note 2, ¶55, 86. 162 Trillium Motor World Ltd. v. General Motors of Canada Ltd., 2015 ONSC 3824, ¶158-161, aff’d, 2017 ONCA 545.
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Agreement. This would not be inconsistent with rejecting liability for active non-disclosure under the duty of honest performance. The duty not to abuse discretionary powers is narrower; it applies only to the exercise of discretionary rights, and is capable of exclusion by the parties.163 Hence, the limits of the liability would be more tightly circumscribed.
76. The requirement not to abuse discretionary powers is one of the most ancient and well- established contractual obligations implied by the courts.164 It is accepted even in jurisdictions like the United Kingdom, which do not overtly recognize a general principle or duty of good faith.165 It reflects the deep-seated aversion to abuses of power manifest in many areas of the law, such as constraints on public authority.166 In Bhasin, the duty was affirmed by this Court.167
77. The power to terminate or to otherwise escape from a contract is one of the principal types of discretion to attract this duty. This is so in common law Canada,168 Quebec169 and the United States.170 Bhasin recognized this not only in employment cases like Keays171 – noting it establishes “an implied term of good faith governing the manner of termination”, in which “the duty of honesty
163 Bhasin (SCC 2014), supra note 2, ¶50, 72. 164 Dallman v. King (1837), 4 Bing (N.C.) 105 (C.P.) at 109-110 and 112-113, 132 E.R. 729; Braunstein v. Accidental Death Insurance Co. (1861), 1 B. & S. 782 (K.B.) at 794-797, 121 E.R. 904; Stadhard v. Lee (1863), 3 B. & S. 364 (K.B.) at 372-373, 122 E.R. 138; Oshawa (City) v. Brennan Paving Co., [1955] S.C.R. 76 at 78; Ronald Elwyn Lister Ltd. v. Dunlop Canada Ltd., [1982] 1 S.C.R. 726 at 746-747; Cohnstaedt v. University of Regina, [1989] 1 S.C.R. 1011 at 1020; Houle v. Canadian National Bank, [1990] 3 S.C.R. 122 at 136-164, 169-176; Mitsui & Co. (Canada) Ltd. v. Royal Bank of Canada, [1995] 2 S.C.R. 187, ¶34; Royal Bank of Canada v. W. Got & Associates Electric Ltd., [1999] 3 S.C.R. 408, ¶18-21; Ferme Vi-Ber inc. v. Financière agricole du Québec, 2016 SCC 34, ¶49-51, 86. 165 Braganza v. BP Shipping Ltd., [2015] UKSC 17, ¶18-32, 52-57, 102-103. 166 Roncarelli v. Duplessis, [1959] S.C.R. 121 at 125, 140, 143, 155-156. 167 Bhasin (SCC 2014), supra note 2, ¶35, 44, 47-48, 50, 89. See also: 2123201 Ontario Inc. v. Israel Estate, 2016 ONCA 409, ¶28-29; IFP (ABCA 2017), supra note 81, ¶190. 168 Boone v. Canada, [1934] S.C.R. 457 at 468-470, per Crocket J.; Cosmo Underwear Company Ltd. v. Valleyfield Silk Mills Ltd., [1962] S.C.R. 418 at 423-424; McCauley v. McVey, [1980] 1 S.C.R. 165 at 168-172; Jack Wookey Holdings Ltd. v. Tanizul Timber Ltd., 1988 CarswellBC 219 (C.A.), ¶4, 18- 20, ABOA, Tab 14; Doucet v. Spielo Manufacturing Inc., 2011 NBCA 44, ¶54, 56, leave to appeal refused, [2001] S.C.C.A. No. 317; Mohamed v. Information Systems Architects Inc., 2018 ONCA 428, ¶17-19 (“Mohamed (ONCA 2018)”). cf. Styles v. Alberta Investment Management Corp., 2017 ABCA 1, ¶41-42, leave to appeal refused, [2017] S.C.C.A. No. 743. 169 Civil Code of Québec, art. 1375; Centre commercial Innovation inc. c. Lafleur, 2009 QCCA 845, ¶14; Bhasin (SCC 2014), supra note 2, ¶83. 170 Restatement (Second) of Contracts, (1981), §205, comment d, ABOA Tab 53. 171 Honda Canada Inc. v. Keays, 2008 SCC 39, ¶58.
- 31 -
[is] a key component” – but also in commercial cases like Mason,172 which it said “required that discretionary powers not be exercised in a manner that is ‘capricious’ or ‘arbitrary’”:173
…[I]n Mason… the vendor in a real estate transaction regretted the bargain he had made. He then sought to repudiate the contract by failing to convey title in fee simple because he claimed his wife would not provide a bar of dower. The issue was whether he could take advantage of a clause permitting him to repudiate the transaction in the event that he was “unable or unwilling” to remove this defect in title even though he had made no efforts to do so by trying to obtain the bar of dower. Judson J. held that the clause did not “enable a person to repudiate a contract for a cause which he himself has brought about” or permit “a capricious or arbitrary repudiation”… On the contrary, “[a] vendor who seeks to take advantage of the clause must exercise his right reasonably and in good faith and not in a capricious or arbitrary manner”…174 78. Further, Bhasin distinguished the non-renewal right before it – which the Court held did not attract the duty limiting contractual discretion, only the duty of honest performance – from a termination clause, which it recognized does engage the anti-abuse duty:
…[E]ven in jurisdictions that embrace a broader role for the duty of good faith, plaintiffs have met with only mixed success in alleging bad faith failure to renew a contract. Some cases have treated non-renewal as equivalent to termination and thus subject to a duty of good faith… Other courts have seen non-renewal as fundamentally different…175 79. This distinction is sound in principle, because termination clauses effect a much greater curtailment of rights.176 A clause like s. 9 of the Winter Agreement, which permits a party to terminate when there is no fundamental breach or repudiation by the other, excludes the common law rules that would otherwise protect the latter from contractual discharge.177 By contrast, a non-renewal clause simply limits a right to renewal in the contract itself, which would not exist at common law.
80. The limits imposed on a discretionary power vary with the context,178 but “whether measured
172 Mason v. Freedman, [1958] S.C.R. 483 at 486-488. 173 Bhasin (SCC 2014), supra note 2, ¶54, 73, 89. 174 Ibid, ¶51, emphasis added. 175 Ibid, ¶91 (and ¶72), emphasis added. See also: Robertson, supra note 74, at 858-860. 176 Photo Production Ltd. v. Securicor Transport Ltd., [1980] A.C. 827 (H.L.) at 850-851, ABOA Tab 22, per Lord Diplock. See also: Bauer v. The Bank of Montreal, [1980] 2 S.C.R. 102 at 108-109. 177 Keneric Tractor Sales Ltd. v. Langille, [1987] 2 S.C.R. 440 at 453-454; Sail Labrador Ltd. v. Challenge One (The), [1999] 1 S.C.R. 265, ¶31; Guarantee Co. of North America v. Gordon Capital Corp., [1999] 3 S.C.R. 423, ¶48. 178 Bhasin (SCC 2014), supra note 2, ¶89; Sherry v. CIBC Mortgages Inc., 2016 BCCA 240, ¶63-66; Willowbrook (ONCA 2017), supra note 68, ¶39-44.
- 32 - by subjective or objective standards, [it] is subject to a requirement of honesty”.179 As the Court of Appeal for Ontario said in Greenberg – a case that Bhasin cited in finding that “[t]he requirement to act honestly is one of the most widely recognized aspects of the organizing principle of good faith”180 – “[a]part altogether from the question of reasonableness, a discretion must be exercised honestly and in good faith. That proposition is so fundamental as to require no elaboration”.181 In Canada Egg, this Court held that a clause allowing a purchaser to reject goods if did not find them “satisfactory” – similar to s. 9 of the Winter Agreement here – must at least be exercised honestly:
This provision, it is suggested, gives to the respondent a right which it is free to exercise in a manner arbitrary or otherwise… … In Truman… the plaintiff undertook to supply sods… in a manner satisfactory to the defendant. When the latter became dissatisfied with the sods it cancelled the contract and the plaintiff brought an action for breach thereof. …[T]he Court of Appeal [found] that the defendant, having acted honestly, was acting within his contractual rights. …[U]nder a contract providing for the delivery of powdered egg, which, if not satisfactory, might be returned, the purchaser is within his contractual rights if he honestly rejects the powder. The fact that… he has acted unreasonably is not material. ….182 81. Appellate courts have therefore repeatedly held that parties must act honestly when exercising contractual termination rights,183 and found that such rights can be abused through non-disclosure.184
82. There is nothing in the Winter Agreement that excludes this duty here. The contract does not contain an entire agreement clause or any other provision purporting to limit or modify common law duties or implied terms. Nor does s. 9 itself state that the Condos’ termination power may be exercised dishonestly, through active non-disclosure. Indeed, “even where the language of an agreement appears to give an unfettered discretion to one party to act with reference solely to his or
179 Greenberg v. Meffert, 1985 CarswellOnt 727 (C.A.), ¶18, leave to appeal refused, [1985] 2 S.C.R. ix (S.C.C.), ABOA Tab 13 (“Greenberg (ONCA 1985)”). 180 Bhasin (SCC 2014), supra note 2, ¶73, emphasis added. 181 Greenberg (ONCA 1985), supra note 179, ¶26. 182 Canada Egg Products Ltd. v. Canadian Doughnut Co. Ltd., [1955] S.C.R. 398 at 408-409, emphasis added. 183 LeMesurier v. Andrus, 1986 CarswellOnt 670 (C.A.), ¶20-24, leave to appeal refused, [1986] 2 S.C.R. v, ABOA Tab 15; Marshall v. Bernard Place Corp., 2002 CarswellOnt 404 (C.A.), ¶4, 16, 20, 26, 31, 33 (“Marshall (ONCA 2002)”), ABOA, Tab 17; Barclays Bank PLC v. Devonshire Trust, 2013 ONCA 494, ¶131, 135-137, 146, leave to appeal refused, [2013] S.C.C.A. No. 374. See also: W. Courtney, “Good Faith and Termination: The English and Australian Experience” (2019) 1 J. Commonwealth L. 1 at 3-4, 23, ABOA Tab 57. 184 McDonald’s Restaurants of Canada Ltd. v. British Columbia, 1997 CanLII 2368 (B.C.C.A), ¶97, 99.
- 33 - her own interests, such a discretion may be circumscribed by obligations of good faith”.185 Courts have therefore held that clauses which go much further than this – conferring “absolute” or “sole” discretion – must still be exercised honestly.186 This reflects Bhasin’s teaching that “[i]t will surely be rare that parties would wish to agree that they may be dishonest with each other in performing their contractual obligations”.187 The Condos breached that basic requirement here.
E. Alternatively, A New Duty of Good Faith Should Be Recognized In this Case 83. If this Court finds that the Condos’ active non-disclosure is not captured either by the duty of honest performance or by the duty not to abuse discretionary powers, it should recognize a new duty under the organizing principle of good faith to prohibit it. This Court recognized that Bhasin’s duties would “not completely address th[e] problems” in the law, and left “the implications of the broader, organizing principle of good faith… to evolve according to [an] incremental judicial approach”.188
84. As noted, the law would be deficient without liability for active non-disclosure in contractual performance. The Condos deliberately withheld their decision to terminate the Winter Agreement from Callow when they knew it would be deceived by this given their actively misleading statements and conduct about a renewal and their satisfaction with its performance. Further, the Condos kept the decision a secret with the intention that Callow be deceived, to ensure that it completed the Summer Agreement. This eviscerated Callow’s basic “expect[ation]… that the other party to a contract would not be dishonest about his or her performance”,189 and went beyond even the duty of honest performance itself, which “does not require the defendant to intend that the false statement be relied on”.190 Holding the Condos to account for this would not “subordinate” their interests to Callow; it would simply recognize their complete disregard for Callow’s own legitimate contractual interests.191
85. Callow does not seek “ad hoc judicial moralism or ‘palm tree’ justice” in this case.192 It merely asks that this Court apply a prohibition on active non-disclosure which is already recognized
185 Imperial Oil Ltd. v. Young, 1998 CanLII 18026 (N.L.C.A.), ¶161 (and ¶52), emphasis added. 186 Greenberg (ONCA 1985), supra note 179, ¶16-18; Marshall (ONCA 2002), supra note 183¸¶16, 19-20, 23, 26. See also: Comeau’s Sea Foods Ltd. v. Canada (Minister of Fisheries and Oceans), [1997] 1 S.C.R. 12, ¶31 and 36. 187 Bhasin (SCC 2014), supra note 2, ¶81 (and ¶61, 76, 80). 188 Ibid, ¶41, 92. 189 Ibid, ¶80 (and ¶60-61). 190 Ibid, ¶88. 191 Ibid, ¶65, 69, 86. 192 Ibid, ¶70.
- 34 - in many other jurisdictions and across numerous areas of contract law. This would be at most an incremental legal change that is consistent with the principles of private ordering and commercial certainty. The context of this case does not contain any features that requires giving those principles primacy over the principle of good faith. Callow and the Condos were in a long-term contractual relationship, not a mere transactional exchange, and nothing in the Winter Agreement suggests that they intended to exclude the “basic element of honesty in performance”193 that lies at the bedrock of the organizing principle. To refuse liability in these circumstances would “would go beyond what prudent caution requires”.194 It would deny Callow justice, and rob Bhasin of its promise.
2. Callow Is Entitled to Damages A. Introduction and Standard of Review 86. The Trial Judge awarded Callow damages of $80,742.10, comprised of $64,306.96 for lost profits, $14,835.14 for wasted expenditures and $1,600 for its final unpaid invoice.195 The $64,306.96 in lost profits reflected the $80,383.70 annual value of the Winter Agreement that Callow lost for the 2013-2014 season, discounted by 20% for the expenses Callow would have incurred to perform it.196 The Respondents challenged this award below, but the Court of Appeal declined to address the issue of damages on finding that there was no breach.197 This Court should confirm the Trial Judge’s damages assessment, which is entitled to “considerable deference” on appeal.198
B. Callow Is Entitled to Damages for Its Lost Profits 87. The Respondents argued in the Court of Appeal that the Trial Judge erred in awarding Callow damages for its lost profits over the balance of the Winter Agreement. They asserted that this Court’s decision in Hamilton requires that it be presumed that the Condos would have exercised their termination right even if they had not done so dishonestly, this being their “least onerous” mode of
193 Ibid, ¶60 (and ¶61). 194 Ibid, ¶59. 195 Trial Decision, ¶80-83, AR V.I, Tab 1, p. 21-22; Trial Judgment, ¶1, AR V.I, Tab 2, p. 24. 196 The Respondents argued in the Court of Appeal that this 20% figure was an error, but it was based on Callow’s estimated expenses of $20,000 to perform the Winter Agreement for the 2013-2014 season: Callow Cross, AR V.II, Tab 20, p. 126:24-30. The Respondents also argued below that the Trial Judge should have further deducted HST from Callow’s lost profits, but Callow must remit HST for the damages award under the Excise Tax Act, R.S.C. 1985, c. E-15, s. 182(1). 197 Appeal Decision, ¶8-9, AR V.I, Tab 3, p. 29. 198 Kerr v. Baranow, 2011 SCC 10, ¶158.
- 35 - performance.199 This Court should reject that submission, for four reasons.
88. First, the Respondents neither pleaded nor argued this at trial.200 They thus deprived Callow of the right to develop evidence in response to it below, and deprived the Trial Judge of the ability to making a finding on it. The Respondents should not be permitted to make this submission now.201
89. Second, Hamilton did not involve the duty of honest performance, but “[c]ontractual obligations… voluntarily assumed by parties”.202 Unlike those obligations, the duty of honest performance “operates irrespective of the intentions of the parties”.203 It is thus much closer to “unpromised negative obligations to not harm another’s interests in tort law”, which the Hamilton Court held do not attract the “least onerous” performance measure of damages.204 Unlike the appellant in Bhasin, Callow is not asking for “a contract of indefinite duration”.205
90. Third, the Trial Judge’s damages award is, in any event, consistent with the approach to contract damages that this Court endorsed in Hamilton and again in Bhasin. Hamilton is based on the principle that “the non-breaching party is entitled to be restored to the position they would have been in had the contract been performed”.206 Here, the amount in question appropriately reflects “what [Callow]’s economic position would have been had [the Condos] fulfilled th[eir] duty” to “be honest with [Callow] about [their] contractual performance”.207
91. On the Trial Judge’s findings, the Condos could have met their duty of honest performance by complying with “[t]he minimum standard of honesty” i.e., “to address the alleged performance issues, to provide prompt notice, or to refrain from any representations in anticipation of the notice period”.208 This would have been the “least onerous” way to perform the Winter Agreement honestly. Callow then would either have known during the summer of 2013 that the Winter Agreement would
199 Hamilton v. Open Window Bakery Ltd., 2004 SCC 9 [Hamilton (SCC 2004)]. 200 Statement of Defence, ¶30-32, AR V.I, Tab 8, p. 61; Defendants’ Closing Submissions, AR V.II, Tab 27, p. 214:21-215:13. 201 Quan v. Cusson, 2009 SCC 62, ¶36-38. 202 Hamilton (SCC 2004), supra note 199, ¶15, emphasis added. 203 Bhasin (SCC 2014), supra note 2, ¶74, emphasis added. 204 Hamilton (SCC 2004), supra note 199, ¶15 (and ¶14, 16-19). See also: Mohamed (ONCA 2018), supra note 168, ¶29. 205 Bhasin (SCC 2014), supra note 2, ¶90. 206 Hamilton (SCC 2004), supra note 199, ¶17, emphasis added. 207 Bhasin (SCC 2014), supra note 2, ¶108. 208 Trial Decision, ¶67, AR V.I, Tab 1, p. 19, emphasis added.
- 36 - be terminated in September, or would at least have been on its guard and not foregone other opportunities without first confirming the winter 2013-2014 season with the Condos.
92. If there is any uncertainty that Callow would not have lost these opportunities had the Condos performed the Winter Agreement honestly, then the Court should presume as much as a matter of law.209 It was the Condos’ own dishonesty that now precludes Callow from conclusively proving what would have happened if the Condos had been honest. Further, Callow’s loss of opportunity was entirely foreseeable to the Condos. Ms. Zollinger testified that she knew Callow would want to bid on other contracts as soon as the termination decision was disclosed, and even stated that “it would be bad faith to give him the actual 10 days notice and not give him any obligations to fulfill the space in his contract with another property”.210
93. Callow had opportunities to bid on other contracts in the summer of 2013. It lost those opportunities because of the Condos’ dishonesty. Roughly a third of the work that Callow did in 2013 was at Baycrest.211 The termination thus left it with significant excess capacity for the 2013- 2014 winter season.212 Callow also generally bid for winter contracts during the summer months.213 Mr. Callow’s uncontroverted evidence was that, if Callow had been able to bid on other contracts when it was being deceived in the summer of 2013, “there was a good chance [it] would have gotten another two or three-year contract”.214
94. This is illustrated by the fact that, on June 12, 2013, Callow was invited to submit a tender bid by June 28, 2013 for a lucrative winter and summer maintenance agreement with RioCan Management Inc., running from January 1, 2014 to December 31, 2014 with the possibility of two renewal periods, for a number of large shopping malls.215 The June 2013 bid submission timeframe
209 Lamb v. Kincaid (1907), 38 S.C.R. 516 at 539-540; Coldman v. Hill, [1919] 1 K.B. 443 (C.A.) at 457-458, ABOA Tab 11, per Scrutton L.J.; Le Soleil Hospitality Inc. v. Louie, 2010 BCSC 1183, ¶283, 286-287, 301, aff’d, 2011 BCCA 305, leave to appeal refused, [2011] S.C.C.A. No. 442. 210 Zollinger Chief, AR V.II, Tab 25, p. 191:11-29, 192:4-6 (and 185:1-12, 188:8-11), emphasis added. See also: Brown Chief/Cross, AR V.II, Tab 26, p. 198:16-199:8, 200:24-29, 212:4-8; M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd., [1999] 1 S.C.R. 619, ¶55-60. 211 Callow Exam, Ex. 89B, AR V.II, Tab 16, p. 19:9-12. 212 Callow Cross, AR V.II, Tab 20, p. 133:19-27. 213 Callow Cross, AR V.II, Tab 18, p. 99:11-24. 214 Callow Exam, Ex. 89C, AR V.II, Tab 17, p. 51:4-7. 215 RioCan Management Inc. Tender Package, June 12, 2013, Ex. 34, AR V.III, Tab 28-T, p. 116- 122.
- 37 - was during the very period when the Condos were actively deceiving Callow about the Winter Agreement. Callow declined to bid on the RioCan contract because it wrongly believed, due to the Condos’ deception, that it lacked sufficient capacity to handle it.216
95. If the Condos’ dishonesty had not deprived Callow of the opportunity to bid on the RioCan contract, then it could have made an amount that was at least equal to all the profits it lost under the Winter Agreement for 2013-2014.217 This Court awarded damages on a similar “lost opportunity” basis in Bhasin, where it “assess[ed] damages on the basis that if Can-Am had performed the contract honestly, Mr. Bhasin would have been able to retain the value of his business”.218 As in Bhasin,219 the Trial Judge found here that “CMG’s delay to provide notice to Callow failed to provide a fair opportunity for the latter to protect its interests”.220
96. Fourth, Hamilton imposes restrictions on contractual damages, which apply only to the Condos. They do not apply to Ms. Zollinger and CMG, who are liable in tort for inducing the Condos to breach their contract with Callow. Unlike in Bhasin, the Condos’ dishonest conduct in their dealings with Callow was fairly attributable to these other Respondents.221 Indeed, the Trial Judge found that Ms. Zollinger was “the instigator” and the person “responsible for the termination of the winter contract with Callow”.222 Ms. Zollinger decided the specific date on which the termination was disclosed.223 The Trial Judge also found that “CMG” (which includes Ms. Zollinger and CMG itself) “actively deceived Callow” and “intentionally withheld the information”.224 All the
216 Callow Exam, Ex. 89B, AR V.II, Tab 16, p. 33:3-35:25, 36:9-18; Callow Chief/Cross, AR V.II, Tab 18, p. 96:26-98:11; Tab 20, p. 134:25-30. 217 Callow Exam, Ex. 89C, AR V.II, Tab 17, p. 50:7-51:7. 218 Bhasin (SCC 2014), supra note 2, ¶109 (and ¶108, 110-111). See also: Kinkel v. Hyman, [1939] S.C.R. 364 at 383; Penvidic Contracting Co. Ltd. v. International Nickel Co. of Canada Ltd., [1976] 1 S.C.R. 267 at 279-280; Canlin Ltd. v. Thiokol Fibres Canada Ltd., 1983 CarswellOnt 136 (C.A.), ¶2-7, 10, 31-37, ABOA Tab 8; Houweling Nurseries Ltd. v. Fisons Western Corp., 1988 CanLII 186 (B.C.C.A.), at 8-9, leave to appeal refused, [1988] S.C.C.A. No. 200; Fidler v. Sun Life Assurance Co. of Canada, 2006 SCC 30, ¶27-30, 43-44, 48 and 54-55. 219 Bhasin (SCC 2014), supra note 2, ¶109 (and ¶86). 220 Trial Decision, ¶67, AR V.I, Tab 1, p. 19, emphasis added. 221 Bhasin (SCC 2014), supra note 2, ¶105. 222 Trial Decision, ¶14, 52 (and ¶14, 38), AR V.I, Tab 1, p. 6-7, 15-16. See also: Callow Chief, AR V.II, Tab 18, p. 69:14-70:12. 223 K. Campbell Cross, AR V.II, Tab 21, p. 143:16-28, 144:7-17, 147:13-32. 224 Trial Decision, ¶65, 69 (and ¶66-67, 76), AR V.I Tab 1, p. 18-19.
- 38 - elements of the tort of inducing breach of contract are met.225 That Ms. Zollinger and CMG were the Condos’ agents is immaterial; they did not act “bona fide”,226 but dishonestly and “in bad faith”.227
97. The “measure of damages for inducing the breach of contract may or may not be the same as would apply to the breach of contract”,228 including because “the damages available in tort may be broader”.229 This Court held in Hamilton that, unlike damages for breach of contract, which are generally measured on the basis the defendant would have performed in the way least onerous to itself, “[i]n tort cases… the inquiry into what would have been but for the tort is appropriate”.230 Here, but for the fact that Ms. Zollinger and CMG induced the Condos to breach the Winter Agreement, Callow would have earned its profits under it.
C. Callow Is Entitled to Damages for Its Wasted Expenditures 98. The Trial Judge awarded $14,835.14 in damages for Callow’s wasted expenditures. This reflected the annual leasing costs for the 2013-2014 season of a front-end loader that Callow leased for an unrelated contract, so that his existing backhoe vehicle could service Baycrest. This expense would have been unnecessary were Callow not misled about the Winter Agreement’s termination.231
99. The Respondents argued in the Court of Appeal that the Trial Judge should not have awarded Callow both its lost profits on the Winter Agreement, and wasted expenditures it would have incurred had the Winter Agreement remained in place, because this put Callow in a better position than if the contract had been performed. However, a court may award net lost profits (which subtract the future expenses the plaintiff would have incurred to perform the contract), alongside wasted expenditures actually incurred in reliance on the contract, provided the total does not exceed the gross amount the
225 Persaud v. Telus Corp., 2017 ONCA 479, ¶26. 226 1175777 Ontario Ltd. v. Magna International Inc., 2001 CarswellOnt 1446 (C.A.), ¶16, 18-19, 24, ABOA, Tab 1; Walsh v. Nicholls, 2004 NBCA 59, ¶66-69; XY Inc. v. International Newtech Development Inc., 2013 BCCA 352, ¶57-58, 60-61, 65, 72, 74, leave to appeal refused, [2013] S.C.C.A. Nos. 376, 378, 380. 227 Trial Decision, ¶66, 69, 76, AR V.I, Tab 1, p. 18-19, 21. 228 Dumbrell v. The Regional Group of Companies Inc., 2007 ONCA 59, ¶85. See also: Lumley v. Gye (1853), 2 E. & B. 216 (K.B.) at 230 and 234, 118 E.R. 749. 229 SAR Petroleum Inc. v. Peace Hills Trust Co., 2010 NBCA 22, ¶33, emphasis added. 230 Hamilton (SCC 2004), supra note 199, ¶16 (and ¶14-15, 17, 19). 231 Trial Decision, ¶81, 83, AR V.I Tab 1, p. 21, 22; Roynat Lease Finance, Ex. 30, AR V.III, Tab 28-Q, p. 78-83; Callow Exam, Ex. 89B, AR V.II, Tab 16, p. 42:15-44:6; Callow Chief/Cross, AR V.II, Tab 18, p. 86:21-89:26; Tab 20, p. 124:12-19, 125:6-8, 127:7-129:9.
- 39 - plaintiff would have received under the agreement.232 Otherwise, the award of net profits alone would not cover the costs the plaintiff has actually incurred, and for which it would have been indemnified upon receiving the gross amount if the contract had been performed.233
100. Here, the $64,306.96 for lost net profits and $14,835.14 in wasted expenditures was still less ($79,142.10) than the gross revenue of $80,742.10 that Callow would have earned under the Winter Agreement or the RioCan contract. Indeed, the uncontroverted evidence is that, if the Respondents’ dishonesty had not deprived Callow of the opportunity to bid on replacement contracts like the RioCan one, then even Callow’s net profits on those other contracts would have exceeded the combined $79,142.10 in lost profits and wasted expenditures awarded to it by the Trial Judge.234
D. Callow Is Entitled to Damages for Its Unpaid Invoice 101. The Trial Judge found the Respondents had been unjustly enriched by their failure to pay Callow’s final $1,600 invoice.235 There is no basis to set this finding aside.
E. Callow Did Not Fail to Mitigate Its Damages 102. Contrary to the Respondents’ arguments in the Court of Appeal, the damages awarded to Callow should not be reduced based on mitigation principles. Callow met its duty to mitigate by making significant efforts to seek replacement work, but by the time the Winter Agreement was cancelled nearly all the work for the 2013-2014 winter season was gone.236
103. While Callow did work on some smaller contracts during the 2013-2014 winter season, the amounts that it earned from them should not reduce its damages. This work reflected “independent transaction[s] which in no way arose out of the consequences of the breach”.237 There is no evidence that Callow could or would not have performed these smaller contracts in addition to the Winter Agreement, and they either arose from renewals of pre-existing agreements, or from new clients that
232 Chitty, supra note 92, at 1811. See also: Ticketnet Corp. v. Air Canada, 1997 CanLII 1471 (Ont. C.A.), ¶162-170, leave to appeal refused, [1998] S.C.C.A. No. 4. 233 The Winter Agreement even provides that all equipment Callow supplied to perform the work was “included in the quoted price”: Winter Agreement, Ex. 2, s. 7, AR V.III, Tab 28-B, p. 9. 234 Callow Exam, Ex. 89C, AR V.II, Tab 17, p. 50:23-51:7; Callow Chief, AR V.II, Tab 18, p. 98:8- 11. 235 Trial Decision, ¶75, 77, 82, 83(c), AR V.I, Tab 1, p. 20-22. 236 Callow Exam, Ex. 89B, AR V.II, Tab 16, p. 37:20-41:9; Callow Cross, AR V.II, Tab 20, pp. 130:10-26, 131:21-132:24. 237 Apeco of Canada Ltd. v. Windmill Place, [1978] 2 S.C.R. 385 at 389 (and 390).
- 40 -
Callow secured tong before the termination.238
F. Callow Is Entitled to Pre-Judgment and Post-Judgment Interest
104. Callow is entitled to pre-judgment interest of $4,420.02 at a 1.3% rate from September 12, 2013 (the date of the exercise of the termination right) to November 27, 2017 (the date of the Trial Decision), and post-judgment interest at a 2% rate commencing November 27, 20 17.239
PART IV—COSTS 105. Callow is entitled to costs at all levels of court pursuant to s. 47 of the Supreme CourtAct, and post-judgment interest. Along with costs in this Court, these consist of $84,000 for trial costs at a 2% post-judgment interest rate commencing November 27, 2017, and $10,000 for appeal costs at a 3% post-judgment interest rate commencing November 9, 2018.240
PART V—ORDERS SOUGHT 106. Callow requests that the appeal be allowed, and the damages award of $80,742.10 be restored with pre-judgment interest of $4,420.02, along with $94,000 in costs below, costs in this Court, and post-judgment interest on the whole.
PART VI—SUBMISSIONS ON CONFIDENTIALITY 107. Nil.
ALL OF WHICH IS RESPECTFULLY SUBMITTED this 30th day of September, 2019.
4’
Kain Adam Goldenberg Vivian Ntiri Miriam Vale Peters
238 Callow Cross, AR V.11,Tab 20, p. 130:24-131:20, 135:18-136:31. Sce also: Letter from M. Peters re Anwer to Undertakings, Dec. 12, 2016, Ex. 93, AR V.111,Tab 28 AA, p. 192, #31. 239 Trial Judgment, ¶4, AR V.1,Tab 2, p. 25. See also: Courts ofJustice Act, R.S.O. 1990. c. C.43, ss. 128-129. 240 Trial Costs Order, ¶1-2, AR V.1,Tab 12, p. 81-82; Appeal Judgment, ¶3-4, AR V.1,Tab 4, p. 36. See also: Courts ofJusticeAct, R.S.O. 1990, c. C.43, s. 129. - 41 -
APPENDIX – RELEVANT CONTRACTUAL PROVISIONS AGREEMENT FOR WINTER MAINTENANCE SERVICES ... 3. The term of this Agreement shall commence on the 1st day of November, 2012 and end on the 30th day of April, 2014 4. The Contractor agrees with the Corporation that he shall comply with the specifications and general conditions prepared by the Corporation in the performance of this Agreement, which specifications and general conditions are attached to this Agreement and form a part thereof. … 9. If the Contractor fails to give satisfactory service to the Corporation in accordance with the terms of this Agreement and the specifications and general conditions attached hereto or if for any other reason the Contractor’s services are no longer required for the whole or part of the property covered by this Agreement, then the Corporation may terminate this contract upon giving ten (10) days’ notice in writing to the Contractor, and upon such termination, all obligations of the Contractor shall cease and the Corporation shall pay to the Contractor any monies due to it up to the date of such terminations.
Specifications and General Conditions for the Agreement for Winter Maintenance Services at Baycrest Gardens 2012-2014 … 16. The contractor shall meet with the Corporation(s) as required during the term of the contract, at the convenience of both the Contractor and the Corporation(s), for the purpose of clearing up any problems the contractor may have with respect to performing his duties within the terms of the contract.
PART VII—TABLE OF AUTHORITIES
Paragraph(s) Referenced in Factum
Legislation
Civil Code of Québec, art. 1375 (En.), art. 1375 (Fr.) 77
Courts of Justice Act, R.S.O. 1990, c. C.43, s. 128 (En.), s. 128 (Fr.), s. 129 104, 105 (En.), s. 129 (Fr.) Excise Tax Act, R.S.C. 1985, c. E-15, s. 182(1) (En.), s. 182(1) (Fr.) 86
Case Law
1175777 Ontario Ltd. v. Magna International Inc., 2001 CarswellOnt 1446 96 (C.A.) 2123201 Ontario Inc. v. Israel Estate, 2016 ONCA 409 76
Aaron’s Reefs Ltd. v. Twiss, [1896] A.C. 273 (H.L.) 59, 60
ABB Inc. v. Domtar Inc., 2007 SCC 50 74
Abel v. McDonald, 1964 CarswellOnt 108 (C.A.) 58
Algo Enterprises Ltd. v. Repap New Brunswick Inc., 2016 NBCA 35 37
Apeco of Canada Ltd. v. Windmill Place, [1978] 2 S.C.R. 385 103
Avalon Ford Sales (1996) Ltd. v. Evans, 2017 NLCA 9 39
Baier v. Kitchener-Waterloo Skating Club, 2019 CanLII 31632 (ONSC 65, 67 (Sm. Cl.)) Bank of Montreal v. Bail Ltée, [1992] 2 S.C.R. 554 74
Barclays Bank PLC v. Devonshire Trust, 2013 ONCA 494, leave to appeal 81 refused, [2013] S.C.C.A. No. 374 Bauer v. The Bank of Montreal, [1980] 2 S.C.R. 102 79
Bell v. Lever Brothers Ltd., [1932] A.C. 161 (H.L.) 58
Paragraph(s) Referenced in Factum
Bhasin v. Hyrnew, 2014 SCC 71 2, 3, 5, 29, 32-33, 35-45, 47-48, 50- 53, 55, 57, 62, 65, 69, 71-74, 76-80, 82-83, 85, 89-90, 95-96
Boone v. Canada, [1934] S.C.R. 457 77
Bradford Third Equitable Benefit Building Society v. Borders, [1941] 2 All 58, 71 E.R. 205 (H.L.) Braganza v. BP Shipping Ltd., [2015] UKSC 17 76
Braunstein v. Accidental Death Insurance Co. (1861), 1 B. & S. 782 76 (K.B.), 121 E.R. 904 Brownlie v. Campbell (1880), 5 App. Cas. 925 (H.L.) 58
Bruno Appliance and Furniture, Inc. v. Hryniak, 2014 SCC 8 58
Canaccord Genuity Corp. v. Pilot, 2015 ONCA 716 65
Canada Egg Products Ltd. v. Canadian Doughnut Co. Ltd., [1955] S.C.R. 80 398 Canelli v. North Branford Board of Police Commissioners, 2014 WL 39 7272550, *1 (Conn. S.C. 2014) Canlin Ltd. v. Thiokol Fibres Canada Ltd., 1983 CarswellOnt 136 (C.A.) 95
Celeron Gathering Corp. v. U.S., 34 Fed.Cl. 745 (1996) 64
Centre commercial Innovation inc. c. Lafleur, 2009 QCCA 845 77
Churchill Falls (Labrador) Corp. v. Hydro‑Québec, 2018 SCC 46 37, 39, 42, 68, 74
Clarence Property Corporation Limited v. Sentinel Robina Office Pty Ltd., 39 [2018] QSC 95 Coaks v. Boswell (1886), 11 App. Cas. 232 (H.L.) 61
Cohnstaedt v. University of Regina, [1989] 1 S.C.R. 1011 76
Paragraph(s) Referenced in Factum
Coldman v. Hill, [1919] 1 K.B. 443 (C.A.) 92
Comeau’s Sea Foods Ltd. v. Canada (Minister of Fisheries and Oceans), 82 [1997] 1 S.C.R. 12 Copthorne Holdings Ltd. v. Canada, 2011 SCC 63 39
Cosmo Underwear Company Ltd. v. Valleyfield Silk Mills Ltd., [1962] 77 S.C.R. 418 Dallman v. King (1837), 4 Bing (N.C.) 105 (C.P.), 132 E.R. 729 76
Department of General Services v. Pittsburgh Bldg. Co., 920 A.2d 973 (Pa. 64 Cmwlth., 2007), appeal denied, 595 P.A. 712 (2007) Directcash ATM Management Partnership v. Maurice’s Gas & 65 Convenience Inc., 2015 NBCA 36 Donoghue v. Stevenson, [1932] A.C. 562 (H.L.) 42
Dorsch v. Freeholders Oil Co., [1965] S.C.R. 670 58
Doucet v. Spielo Manufacturing Inc., 2011 NBCA 44, leave to appeal 77 refused, [2001] S.C.C.A. No. 317 Dumbrell v. The Regional Group of Companies Inc., 2007 ONCA 59 97
Dunkin’ Brands Canada Ltd. c. Bertico inc., 2015 QCCA 624, leave to 37 appeal refused, [2015] S.C.C.A. No. 230 Energy Fundamentals Group Inc. v. Veresen Inc., 2015 ONCA 514 65
Equitable Life Ins. Co. of Iowa v. Halsey, Stuart & Co., 312 U.S. 410 64 (1941) Faber v. First View Properties Inc., 2018 ONSC 4332 65
Ferme Vi-Ber inc. v. Financière agricole du Québec, 2016 SCC 34 76
Fidler v. Sun Life Assurance Co. of Canada, 2006 SCC 30 95
Flynn v. Breccia, [2017] IECA 74 39
Gemeinhardt v. Babic, 2016 ONSC 4707 65
Paragraph(s) Referenced in Factum
Geophysical Service Inc. v. Devon ARL Corp., 2017 ABQB 463 65
Gladu v. Robineau Estate, 2017 ONSC 37 65
Greenberg v. Meffert, 1985 CarswellOnt 727 (C.A.), leave to appeal 80, 82 refused, [1985] 2 S.C.R. ix Guarantee Co. of North America v. Gordon Capital Corp., [1999] 3 S.C.R. 79 423 Hamilton v. Open Window Bakery Ltd., 2004 SCC 9 87, 89, 90, 96, 97
Heli Holdings Limited v. The Helicopter Line Ltd., [2016] NZHC 976 39
Hepting v. Schaaf, [1964] S.C.R. 100 58
HIH Casualty and General Insurance Ltd. v. Chase Manhattan Bank, 59 [2003] UKHL 6 Honda Canada Inc. v. Keays, 2008 SCC 39 77
Houle v. Canadian National Bank, [1990] 3 S.C.R. 122 76
Housen v. Nikolaisen, 2002 SCC 33 37
Houweling Nurseries Ltd. v. Fisons Western Corp., 1988 CanLII 186 95 (B.C.C.A.), leave to appeal refused, [1988] S.C.C.A. No. 200 IFP Technologies (Canada) Inc. v. EnCana Midstream and Marketing, 39, 76 2017 ABCA 157, leave to appeal refused, [2018] S.C.C.A. No. 303 Imperial Oil Ltd. v. Young, 1998 CanLII 18026 (N.L.C.A.) 82
Industrial Alliance Insurance and Financial Services Inc. v. Brine, 2015 37, 39 NSCA 104, leave to appeal refused, [2016] S.C.C.A. No. 18 Jack Wookey Holdings Ltd. v. Tanizul Timber Ltd., 1988 CarswellBC 219 77 (C.A.) Jean Coutu Group (PJC) Inc. v. Canada (A.G.), 2016 SCC 55 74
Jonasson v. Nexen Energy ULC, 2018 ABQB 598 65
Keneric Tractor Sales Ltd. v. Langille, [1987] 2 S.C.R. 440 79
Paragraph(s) Referenced in Factum
Kerr v. Baranow, 2011 SCC 10 86
Kerr v. Danier Leather Inc., [2007] 3 S.C.R. 331 58
Kinkel v. Hyman, [1939] S.C.R. 364 95
Lamb v. Kincaid (1907), 38 S.C.R. 516 92
Lavrijsen Campgrounds Ltd. v. Reville, 2015 ONSC 103 2, 65
Le Soleil Hospitality Inc. v. Louie, 2010 BCSC 1183, aff’d, 2011 BCCA 92 305, leave to appeal refused, [2011] S.C.C.A. No. 442 LeMesurier v. Andrus, 1986 CarswellOnt 670 (C.A.), leave to appeal 81 refused, [1986] 2 S.C.R. v Lumley v. Gye (1853), 2 E. & B. 216 (K.B, 118 E.R. 749 97
M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd., [1999] 1 92 S.C.R. 619 Malone v. U.S., 849 F.2d 1441 (1988) 64
Marshall v. Bernard Place Corp., 2002 CarswellOnt 404 (C.A.) 81, 82
Mason v. Freedman, [1958] S.C.R. 483 77
Matthew Sloboda Professional Corp. v. Vincent Cairo Professional Corp., 65 2018 ABCA 405 McCauley v. McVey, [1980] 1 S.C.R. 165 77
McDonald’s Restaurants of Canada Ltd. v. British Columbia, 1997 CanLII 81 2368 (B.C.C.A) Mineralogy Pty Ltd. v. Sino Iron Pty Ltd. (No. 6), [2015] FCA 825 39
Mitsui & Co. (Canada) Ltd. v. Royal Bank of Canada, [1995] 2 S.C.R. 187 76
Mohamed v. Information Systems Architects Inc., 2018 ONCA 428 77, 89
Morrissey v. Irish Bank Resolution Corporation Ltd., [2017] IECA 162 39
Paragraph(s) Referenced in Factum
National Bank of Canada v. Soucisse, [1981] 2 S.C.R. 339 62, 71, 74
Nishi v. Rascal Trucking Ltd., 2013 SCC 33 39
Nocton v. Lord Ashburton, [1914] A.C. 932 (H.L.) 71
Northrock Resources v ExxonMobil Canada Energy, 2017 SKCA 60 37
Ontario (A.G.) v. Fraser, 2011 SCC 20 39
Oshawa (City) v. Brennan Paving Co., [1955] S.C.R. 76 76
Osteria Da Luca Inc. v. 1850546 Ontario Inc., 2015 ONSC 5606 65
Panzer v. Zeifman, 1978 CarswellOnt 1461 (C.A.) 58
Peach State Roofing, Inc. v. Kirlin Builders, LLC, 2018 WL 3097326, *33- 64 35 (D. Ala. 2018) Peek v. Gurney (1873), L.R. 6 H.L. 377 (H.L.) 58
Penvidic Contracting Co. Ltd. v. International Nickel Co. of Canada Ltd., 95 [1976] 1 S.C.R. 267 Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd., 2002 58 SCC 19 Persaud v. Telus Corp., 2017 ONCA 479 96
Photo Production Ltd. v. Securicor Transport Ltd., [1980] A.C. 827 (H.L.) 79
Potter v. New Brunswick Legal Aid Services Commission, 2015 SCC 10 39, 50
Quan v. Cusson, 2009 SCC 62 88
Quebec (Director of Criminal and Penal Prosecutions) v. Jodoin, 2017 37 SCC 26 Queen v. Cognos, [1993] 1 S.C.R. 87 59
R. v. Hart, 2014 SCC 52 40, 42
Paragraph(s) Referenced in Factum
Reddaway v. Banham, [1896] A.C. 199 (H.L.) 71
Ronald Elwyn Lister Ltd. v. Dunlop Canada Ltd., [1982] 1 S.C.R. 726 76
Roncarelli v. Duplessis, [1959] S.C.R. 121 76
Royal Bank of Canada v. W. Got & Associates Electric Ltd., [1999] 3 76 S.C.R. 408 RPC Limited Partnership v. SNC-Lavalin ATP Inc., 2018 ABCA 423 65
Sail Labrador Ltd. v. Challenge One (The), [1999] 1 S.C.R. 265 79
SAR Petroleum Inc. v. Peace Hills Trust Co., 2010 NBCA 22 97
SCC (NZ) Limited v. Samsung Electronic New Zealand Ltd., [2018] NZHC 39 2780 Sherry v. CIBC Mortgages Inc., 2016 BCCA 240 80
Sidhu Estate v. Bains, 1996 CanLII 3332 (B.C.C.A.), leave to appeal 58 refused, [1996] S.C.C.A. No. 403 Smith v. Hughes (1871), L.R. 6 Q.B. 597 (Q.B.D.) 58
Spinks v. Canada, 1996 CarswellNat 326 (F.C.A.) 59
Stadhard v. Lee (1863), 3 B. & S. 364 (K.B.), 122 E.R. 138 76
Styles v. Alberta Investment Management Corp., 2017 ABCA 1, leave to 77 appeal refused, [2017] S.C.C.A. No. 743 Tercon Contractors Ltd. v. British Columbia (Transportation and 63, 71 Highways), 2010 SCC 4 Ticketnet Corp. v. Air Canada, 1997 CanLII 1471 (Ont. C.A.), leave to 99 appeal refused, [1998] S.C.C.A. No. 4 Trillium Motor World Ltd. v. General Motors of Canada Ltd., 2015 ONSC 74 3824, aff’d, 2017 ONCA 545 V.K. Mason Construction Ltd. v. Bank of Nova Scotia, [1985] 1 S.C.R. 271 58
Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701 48, 49, 71
Paragraph(s) Referenced in Factum
Walsh v. Nicholls, 2004 NBCA 59 96
Ward v. Hobbs (1878) 4 App. Cas. 13 (H.L.) 58
Warkentin v. BMO Nesbitt Burns Inc., 2018 MBCA 22 37
Willowbrook Nurseries Inc. v. Royal Bank of Canada, 2017 ONCA 974 37, 80
Xerex Exploration v. Petro-Canada, 2005 ABCA 224 61
XY Inc. v. International Newtech Development Inc., 2013 BCCA 352, leave 96 to appeal refused, [2013] S.C.C.A. Nos. 376, 378, 380 Secondary Sources
A. Gray, Development of Good Faith in Canada, Australia and Great Britain 39 (2015) 57 Can. Bus. L.J. 84 at 92-94, 114-116, 118-119 th A. Swan et al, Canadian Contract Law, 4 ed. (Toronto: LexisNexis Canada 39 Inc., 2018) at 29, 351-352, 673, 818-821, 1021-1022 A. Swan, “The Obligation to Perform in Good Faith: Comment on Bhasin v. 39, 53 Hrynew” (2015) 56 C.B.L.J. 395 at 405 B. Crawford, “The New Contractual Principle of Good Faith and the Banks” 53 (2017) 32 B.F.L.R. 407 at 408-409, 413 B. MacDougall, Misrepresentation (Toronto: LexisNexis Canada Inc., 2016) 72 at 66-67 C. Mummé, “Bhasin v. Hrynew: A New Era for Good Faith in Canadian 53 Employment Law, or Just Tinkering at the Margins?” (2016) 32 Int. J. Comp. L.I.R. 117 at 123 D. Percy and D. Stollery, “Justice Jean E.L. Côté, The Court of Appeal, and 38 the Changing Nature of Contract Law” (2019) 56 Alta L. Rev. 1263 G. Hall, “Bhasin v. Hrynew: Towards an Organizing Principle of Good Faith 39 in Contract Law” (2015) 30 B.F.L.R. 335 at 335-336, 344 rd H.G. Beale et al, eds., Chitty on Contracts, 33 ed. (London: Sweet & 42, 99 Maxwell, 2018), §25, 26-032 Hon. J. Allsop, “Conscience, fair-dealing and commerce - parliaments and the 39 courts” [2015] FedJSchol 17, ¶38, 43, 69, 71, 96 Hon. J.T. Robertson, “Good Faith As An Organizing Principle in Contract 39, 53, 78 Law: Bhasin v Hrynew – Two Steps Forward and One Look Back” (2015) 93 Can. Bar. Rev. 811 at 866, 868 Hon. K.R. Handley, Spencer Bower & Handley, Actionable 57 Misrepresentation, 5th ed. (London: LexisNexis, 2014) at 47-54
Paragraph(s) Referenced in Factum
Hon. R.J. Sharpe, Good Judgment: Making Judicial Decisions (Toronto: 41 University of Toronto Press, 2018) at 98-124 rd J. Cartwright, Misrepresentation, Mistake and Non-Disclosure, 3 ed. 57 (London: Sweet & Maxwell, 2012) at 34-35, 39-40, 190-191, 784 J. Enman-Beech, “The Subjects of Bhasin: Good Faith and Relational Theory” 53 (2017) 13 J.L. & Equal. 1 at 22, 25-26 J.D. McCamus, “The New General ‘Principle’ of Good Faith Performance and 39, 69 the New ‘Rule’ of Honesty in Performance in Canadian Contract Law” (2015) 32 J. Con. L. 103 at 118 L.I. Rotman, “The ‘Fusion’ of Law and Equity?: A Canadian Perspective on 39 the Substantive, Jurisdictional, or Non-Fusion of Legal and Equitable Matters” (2016) 2 Can. J. Comp. & Contemp. L. 497 at 533-536 M. Goswami, “Coherence and Consistency in a System of Good Faith: 53 Assessing and Explaining the Impact of Bhasin v. Hrynew on Canadian Contract Law” (2017) 77 S.C.L.R. (2d) 309 at 319 M. Tapia, “The Good Faith Doctrine: A Positive Duty to Disclose Would 70 Protect the Reasonable Expectations of Parties During Contract Performance” (2019) 96 U. Det. Mercy L. Rev, 291 at 319 M.P. Harrington, “‘A Lawless Science’: Punitive Damages for Breach of 53 Contract in Canada” (2015) 69 S.C.L.R. (2d) 185 at 222 N. Effendi et al, “Bhasin v. Hrynew: Towards Clarity and Coherence With 53 Respect to Good Faith in Contractual Performance?” (2016) 46 Adv. Q. 94 at 114 (and 109, 115) N. Reynolds, “The New Neighbour Principle: Reasonable Expectations, 42 Relationality, and Good Faith in Pre-Contractual Negotiations” (2018) 60 Can. Bus. L.J. 94 at 120-123 nd P. Burns and J. Blom, Economic Torts in Canada, 2 ed. (Markham, Ont.: 57 LexisNexis Canada Inc., 2016) at 196-200 P. Daly, “La bonne foi et la common law : L’arrêt Bhasin c. Hrynew” 39 (forthcoming), University of Cambridge Faculty of Law Research Paper No. 39/2018, English Abstract R. Brownsword, “‘Good Faith in Contracts’ Revisited” (1996) 49 Current 70 Legal Problems 111 at 132 R. Powell, “Good Faith in Contracts” (1956) Current Legal Problems 16 at 26, 70 29 R.M. Dworkin, “Is Law a System of Rules?”, in R. M. Dworkin, ed., The 40, 41, 42 Philosophy of Law (Oxford: Oxford University Press, 1977), 38 at 47 (and 43-65) R.S. Summers, “‘Good Faith’ In General Contract Law and the Sales 70 Provisions of the Uniform Commercial Code” (1968) 54 Va. L. Rev. 195 at 198
Paragraph(s) Referenced in Factum
Restatement (Second) of Contracts, §205, comment d, illustration 7 64, 77
S. O’Byrne and R. Cohen, “The Contractual Principle of Good Faith and the 53 Duty of Honesty in Bhasin v. Hrynew” (2015) 53 Alta. L. Rev. 1 at 7-9 th S.M. Waddams, The Law of Contracts, 7 ed. (Toronto: Thomson Reuters, 39 2017) at 304-306, 344-345, 380-381 T. Buckwold, “The Enforceability of Agreements to Negotiate in Good Faith: 53 The Impact of Bhasin v. Hrynew and the Organizing Principle of Good Faith in Common Law Canada” (2016) 58 C.BL.J. 1 at 13-14 W. Courtney, “Good Faith and Termination: The English and Australian 81 Experience” (2019) 1 J. Commonwealth L. 1 at 3-4, 23 Z.X. Tan, “Keeping Faith with Good Faith? The Evolving Trajectory Post- 68 Yam Seng and Bhasin” [2016] 5 J.B.L. 420 at 440-444