This post by OnPoint Legal Research may be of interest to readers of this blog. The article addresses the B.C. Court of Appeal’s recent decision, Do Process LP v. Infokey Software Inc., 2015 BCCA 52, which established an important point of law – namely, an affirmative plea of an absence of legal advice made in conjunction with a plea of duress, which is said to render an agreement unenforceable, constitutes an implied waiver of privilege over legal advice previously received on the subject of the agreement. This article also includes comments from counsel on both sides of the appeal, including Scott Griffin and Miriam Isman, counsel for the successful appellant Do Process LP.
A few months ago, the Supreme Court of Canada released its decision in Bhasin v Hrynew, a precedent-setting judgment, recognizing a general organizing principle of good faith in contract law. More recently, the BC Court of Appeal in Moulton Contracting Limited v. British Columbia, considered and elaborated upon Justice Cromwell’s discussion in Bhasin about the doctrines of good faith and implied contractual terms for “business efficacy,” clarifying that the two frameworks are distinct and not to be conflated.
The Court reversed the trial judge’s finding that there was an implied duty based on the business efficacy doctrine, and also rejected the argument that the implied duty (which could not be supported under the business efficacy framework) should arise under the good faith organizing principle as enunciated in Bhasin. In the absence of any alleged bad faith, dishonesty or capricious conduct, Bhasin did not inform the issues in this appeal.
Factual and Litigation Background
This case revolves around the grant of a Timber Sale License (“TSL”) by British Columbia (the “Province”) to Moulton Contracting Limited (“Moulton”). The holder of the TSL would have the right to access and harvest timber in a defined area.
During the tendering process for the TSL, the Province, as part of its duty to consult, held consultations with the Fort Nelson First Nation (“FNFN”). Following the grant of the TSL to Moulton, individual members of the FNFN (the “Behn Group”), who opposed the harvesting, blocked Moulton’s access. Moulton sued the Province, alleging breach of the following implied contract terms:
- “Access Promise”: the Province impliedly promised that Moulton would have access to the logging site.
- “Consultation Promise”: the Province impliedly promised that it had engaged in all necessary consultation at the time of the contract.
The trial judge found that an implied Consultation Promise existed and was breached, while the alleged Access Promise did not exist because such an implied term was inconsistent with explicit terms of the contract.
The trial judge also found that the only implied term that was breached, resulting in liability for the Province, was an unpleaded “Dissatisfaction Term” for failing to inform Moulton of threats that were made by the Behn Group to block physical access to the timber harvest areas after the contract was executed. The effect of the Dissatisfaction Term was to impose an ongoing duty on the Province to inform Moulton of any dissatisfaction with its consultation expressed by any individual member of a First Nation.
Both the Consultation Promise and Dissatisfaction Term were implied by the trial judge to give business efficacy to the contract between the Province and Moulton, but liability was only found on the basis of the latter. Accordingly, only the appropriateness of the imposition of the Dissatisfaction Term was considered by the Court of Appeal. Two claims were considered: negligent misrepresentation and breach of an implied contractual term.
No Negligent Misrepresentation
The Court determined that the Dissatisfaction Term, as articulated by the trial judge, was, in effect, an implied duty to warn because it would have imposed a positive obligation on the Province to notify Moulton, even after executing the contract, of any new dissatisfaction raised with its FNFN consultation. The Court went on to conclude that this implied term, in its effect, was tantamount to enforcing the Access Promise, which the judge had already determined was inconsistent with the contract. Moulton had not met the legal threshold to establish it was owed a duty to warn, so the Dissatisfaction Term could not stand.
Rejection of Implied Contractual Term for “Business Efficacy”
After reviewing the jurisprudence for implied contractual terms for business efficacy, the Court highlighted that terms implied for business efficacy must be informed by what the contracting parties actually intended, not what reasonable parties would intend. The trial judge had erred in applying this test, by considering “commercial reality” from the point of view of parties who contract with the Province generally, rather than evidence of the parties’ actual intentions.
Bhasin Ruling also does not Apply, Ground Implied Terms
Unlike with implied business efficacy terms, application of the overarching principle of good faith operates irrespective of the intentions of the contracting parties. It was thus argued by the respondents that the principle of good faith articulated by the Supreme Court in Bhasin supported implication of the Dissatisfaction Term. In particular, it was argued that the judge’s finding that the terms were necessary for the contract to have business efficacy accorded with the overarching principle of good faith.
This argument was swiftly rejected because it amounted to an improper conflation of the tests for implying contractual terms at law (per Bhasin) with the test for implying contractual terms for business efficacy. Further, Bhasin could not properly be invoked by Moulton to assert that its “legitimate contractual interests” be read into the interpretation of the contract because doing so would apply Bhasin too broadly. It was never pleaded nor argued that the Province had acted dishonestly, unreasonably, capriciously, or arbitrarily; absent such an allegation, Bhasin did not apply.
This decision is a helpful reminder that the Bhasin ruling, while potentially far-reaching in its application to cases of dishonesty or bad faith, reflects a truly incremental change to the law of contract by the Supreme Court and should generally not impact the determination of whether to imply terms.
Moulton Contracting Limited v. British Columbia,, 2015 BCCA 89
Date of Decision: February 26, 2015
 Note that in a parallel proceeding, Behn v. Moulton Contracting Ltd.,  2 SCR 227, 2013 SCC 26, the SCC determined there was only a duty for the Province to consult with the larger First Nation organization, Fort Nelson First Nation, and not with individual members. See our previous article on this decision here.
 Moulton, supra note 2, at para. 52.
 Ibid., at para. 92.
 Ibid., at para. 58.
 Ibid., at para. 59.
 Bhasin, supra note 1, at para. 74.
 Moulton, supra note 2, at para. 67.
 Ibid., at para. 76.
Earlier this year, the Supreme Court of Canada delivered a pair of big wins to Canadian unions. Both judgments relate to public sector unions, but may have important implications for labour law more generally. In both cases, the Court has undermined its own precedent.
Mounted Police Association of Ontario v. Canada (Attorney General) Continue Reading
Since our last post, the Supreme Court sat during the weeks of February 23 and March 16, 2015 and heard a few important appeals to take note of. The Court also released judgment in three appeals, including Potter v. New Brunswick Legal Aid Services Commission, an important constructive dismissal case.
Potter, 2015 SCC 10, is a notable decision for employers and employees everywhere as it clarifies the two branches of the constructive dismissal test. Mr. Potter was suspended indefinitely with pay and had his powers delegated to another worker. In unanimously finding that Mr. Potter had been constructively dismissed, the Court overturned the trial judge and Court of Appeal and revisited the applicable test.
In its recent decision in Wilson v. Atomic Energy of Canada Limited, 2015 FCA 17, the Federal Court of Appeal held that the rule of law can require the Court to apply a correctness standard of review to administrative decisions concerning the interpretation of the governing statute in certain cases, such as where adjudicators have long held conflicting interpretations of a particular provision.
Acknowledging that a labour adjudicator’s interpretation of a labour statute would be typically subject to a reasonableness review, the Court held that, where adjudicators have disagreed on a point of statutory interpretation for many years, the court must use the correctness standard to “act as a tie-breaker” and “determine the legal point once and for all”.
The following post by Bryn Gray and Stephanie Axmann on our Mining Prospects blog may be of interest to our readers of this blog: Appeals Court Overturns Damages Award to Proponent for Aboriginal Blockade
The article addresses the BC Court of Appeal’s recent decision, Moulton Contracting Ltd. v. British Columbia, 2015 BCCA 89, which overturns a significant trial decision that had ordered the province of British Columbia to pay damages to a logging company arising from a blockade by members of a Treaty 8 First Nation.
Are the legal profession’s rules regarding civility at odds with a lawyer’s duty to zealously advocate on behalf of his or her client? Debate on this point has recently focused on the Law Society of Upper Canada’s discipline of Toronto lawyer Joseph Groia for uncivil conduct during his defence of former Bre-X mining officer John Felderhof. The Ontario Divisional Court grappled with this question, and on February 2, 2015, upheld the Law Society’s finding that Mr. Groia’s conduct amounted to professional misconduct.
Since our last update, the Supreme Court of Canada denied leave to appeal in nine cases, heard one of the most highly anticipated appeals of the year, and released a judgment that impacts lawyers across the country.
In Canada (Attorney General) v. Federation of Law Societies of Canada the Supreme Court ended a 15 year legal battle between the federal government and the various Canadian Law Societies. At issue was whether certain anti-money laundering legislation was unconstitutional to the extent it applied to lawyers and documents in the hands of legal counsel. The majority of the court held that ss. 62, 63, 63.1 and 64 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act infringe on s. 8 of the Charter.
Physician-assisted death is permissible in Canada, for competent adults who: (1) clearly consent to the termination of life; and (2) have a grievous and irremediable medical condition that causes enduring suffering that is intolerable to the individual in the circumstances of their condition. In Carter v. Canada (Attorney General), a unanimous Supreme Court of Canada overruled its 1993 decision in Rodriguez v. British Columbia, in which a majority of the Court upheld the blanket prohibition on assisted suicide. Continue Reading
The highly anticipated judgment of the Supreme Court of Canada (SCC) in Tervita Corporation, et al v Commissioner of Competition is finally here (leave was granted back in July 2013 and argument heard in March 2014; reported on previously here and here). Many expressed concerns about potential problems arising from the Tribunal and Federal Court of Appeal (FCA) decisions in this case, including greater complications and less predictability in merger assessment and the reach of the Bureau, regardless of the size of the merger. The SCC decision seems to have brought some clarity and addresses the central problematic aspects of the underlying decisions.
The Supreme Court of Canada recently released several judgments that are of interest to Canadian businesses and professions.
In Saskatchewan Federation of Labour v. Saskatchewan, 2015 SCC 4, a majority of the Supreme Court upheld the right to strike pursuant to the s. 2(d) freedom of association right under the Canadian Charter of Rights and Freedoms (the “Charter”). It consequently found that The Public Service Essential Services Act, which contained an absolute ban on the right to strike for “essential services employees” was unconstitutional. In its ruling, the majority underscored the importance of the right to strike in promoting equality in labour bargaining processes. This case sends a strong message to policy makers throughout Canada that any legislation limiting the right to strike will come under careful Charter scrutiny by the courts.
A little over one year ago, the Ontario Superior Court’s decision in Moore v. Getahun sent a chill through the litigation bar in Ontario. During a medical negligence trial, the trial judge criticized an expert witness for discussing a draft expert report with counsel and required disclosure of all his drafts and notes of his communications with counsel during the course of the trial. The Court of Appeal’s decision has been among the most eagerly anticipated appellate decisions of this year. The decision, released on January 29th, confirms and clarifies the law prior to the trial judge’s decision. Communication between counsel and experts is both appropriate and necessary to ensure effective presentation of expert evidence at trial. It is only where there is a factual foundation to support a reasonable suspicion that counsel improperly influenced the expert’s opinion that disclosure of drafts and communications between counsel and expert will be warranted. Continue Reading
At the end of 2005, Ontario legislation came into effect which enabled aggrieved shareholders to bring a statutory action for secondary market misrepresentation against issuers and their directors and officers (and others) without the requirement to establish individual reliance. In order to commence such an action, however, a shareholder must first obtain leave from the Superior Court. Much of the jurisprudence in secondary market securities class actions has been devoted to examining the standard for leave.
We are pleased to share that Canadian Appeals Monitor was a finalist for Best Canadian Law Blog at this year’s Clawbies, which celebrates the best in Canadian legal blogging. We are proud of this achievement and we wish to thank our dedicated team of lawyers / bloggers who are committed to bringing you the most relevant and interesting appellate and litigation developments from across the country.
More importantly we wish to thank you, our readers, for continuing to support us and engage with our work. We hope that you will continue making the Canadian Appeals Monitor one of your sources for appellate and litigation news and analysis.
If you are a fan of our blog we encourage you to visit one of McCarthy Tétrault’s 10 other practice group blogs. You can find the list by viewing the blogroll section on the right hand side of this page.
We look forward to more great blogging in 2015. Thanks for reading!
In Dupuy v. Gauthier 2013 QCCA 774, the Quebec Court of Appeal has confirmed that a person who possesses immovable property for 10 years can acquire ownership of it whether or not the possessor knew the property belonged to another.
In the instant case, a shed owned by the defendants, situated on their land, partially encroached on the land of the plaintiff, their neighbour. As a result of deterioration in the relations between the neighbours, the plaintiff sought and obtained in first instance an injunction to have the defendants move or demolish the shed to eliminate the encroachment. The first instance judgement rejected the defendants’ argument that they had acquired the ownership of the plaintiff’s land under the shed by acquisitive prescription through long-term possession. In particular, the first instance judgement held that the defendants could not have had the intention to possess as owners and their possession could not be unequivocal because at the time they acquired the shed and part of the land under it, they were aware that part of the shed was located on land owned by the plaintiff. In the deed under which the defendants purchased the land and shed from a seller other than the plaintiff, the seller expressly identified the encroachment. The encroachment had also been recognized in the deed under which a previous buyer had purchased the land and shed from the plaintiff.
I can’t predict the future and I don’t have respect for people who try to.
-Jackie Mason (1931-)
As part of the Appeals Monitor’s annual attempt to give lawyers something to talk about over the holidays other than the two traditional Canadian touchstones (weather and hockey), we are proud to once again this year present our top ten anticipated appeals for the new year. Of course, we can’t control what the judges will actually do with these cases, but we think these are the ones worth watching.
The Appeals Monitor is pleased to present our annual review of the most significant appeals of the past year that can be expected to impact Canadian businesses for years to come.
In Kaynes v BP, PLC, 2014 ONCA 580 (previously discussed here), the Court of Appeal for Ontario stayed a proposed secondary market securities class action due to forum non conveniens. Although the Court held that Ontario could assume jurisdiction over claims by Canadian residents who had purchased securities on foreign exchanges, it held Ontario should nonetheless decline jurisdiction as foreign courts were “clearly more appropriate” venues.
In Kara v. Arnold, 2014 ONCA 871, the Ontario Court of Appeal seized an opportunity to revisit its recent jurisprudence regarding status hearings and to clarify the interrelation between its recent status hearing decisions (i.e., 1196158 Ontario Inc. and Faris) and the line of jurisprudential authority stemming from motions to set aside registrar’s dismissals for delay (i.e. Scaini ) which call for an overarching “contextual approach” to determine what outcome is just in the circumstances.
Careful observers may have noticed that the Ontario Court of Appeal has allowed three civil appeals on the basis of reasonable apprehension of bias in the last few months. This presents an opportunity to reflect on what conduct constitutes reasonable apprehension of bias and what it means for an appeal court to make such a finding.
Trusts are widely used in commercial transactions. But, as creatures of equity, trusts raise issues that may not be immediately familiar to everyone who relies on them in the commercial world. Indeed, the interrelationship between equitable doctrines and remedies and common law principles and remedies is complicated. Fortunately, the U.K. Supreme Court has revisited the issue in its recent decision in AIB Group (UK) Plc v. Mark Redler & Co Solicitors,  UKSC 58.
The forum in which to litigate is a difficult decision in any case that crosses provincial or national borders. It is even more complicated in claims against the federal government. The Federal Court has exclusive jurisdiction in some cases; in others, the Federal Court and the provincial Superior Court in which the claim “arises” have concurrent jurisdiction. Where the jurisdiction is concurrent and the plaintiff elects to sue in Superior rather than Federal Court, the question becomes: in which province does the claim “arise”?
The question is further complicated where there are multiple causes of action asserted. One claim may be said to “arise” in one province and another claim somewhere else, even where the claims are related and stem from the same facts. The Ontario Court of Appeal’s decision in David S. LaFlamme Construction Inc. v. Canada demonstrates the jurisdictional jockeying that can result from electing to sue the federal Crown in Superior Court.
The British Columbia Court of Appeal’s decision in Roy v Kretschmer, 2014 BCCA 429 provides guidance on the element of reliance in the tort of deceit. It also holds that a contractual clause limiting liability is unenforceable even where the breaching party did not commit a criminal act or egregious fraud.
This decision is of interest to Canadian businesses because it suggests that where a contract has been breached, the breaching party can be sued in tort for hiding the circumstances of the breach if the non-breaching party relies on the breaching party’s fraudulent silence or misrepresentations. Further, in such circumstances, the breaching party may not be able to rely on the protection of a limitation of liability clause.
This was a busy week at the Court, with the release of one oral decision, and eight leave-to-appeal rulings, all likely to be of interest to Canadian businesses and professionals.
The Court granted an oral decision in British Columbia Teachers’ Federation v. British Columbia Public School Employers’ Association, 2014 SCC 70. The SCC reversed the ruling of the BCCA on the grounds that the lower court had failed to give adequate deference to an arbitrator’s interpretation of a collective agreement, and had failed to recognize the differences between the purposes underlying pregnancy benefits and parental benefits.
Canadian Appeals Monitor co-editor and litigation partner Elder Marques, together with business law partner Leila Rafi were guest-bloggers on the Cordell Parvin Blog this week, writing about some of their lessons from McCarthy Tétrault’s recent law firm retreat.
You can read the post on the Cordell Parvin Blog.