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.… Continue Reading
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 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 … Continue Reading
The Supreme Court of Canada has released a precedent-setting judgment in which it recognized, for the first time, that there is a general organizing principle of good faith in the performance of contracts throughout Canada: Bhasin v. Hrynew, 2014 SCC 71. The Bhasin case, which was successfully argued by Neil Finkelstein and Brandon Kain of McCarthy Tétrault’s Toronto litigation group, will be very important for Canadian businesses going forward. As a result of Bhasin, all contracts throughout Canada are now subject to a duty of, at a bare minimum, honest performance, which cannot be excluded by the terms … Continue Reading
In Hounga v Allen, the U.K. Supreme Court addressed an issue that has not received much attention from the courts recently: the defence of illegality, also called the “ex turpi causa” doctrine. The U.K. Supreme Court had the opportunity to shed light on this defense in the context of employment discrimination towards an illegal immigrant.
In the world of contractual interpretation, the decision of the Supreme Court of Canada in Sattva Capital Corp. v. Creston Moly Corp. is a blockbuster. Sattva does three significant things. First, it determines that contractual interpretation generally involves a mixed question of fact and law, not a question of law alone. That holding has major implications for appellate review of decisions involving issues of contractual interpretation, and represents the resolution of an issue that had previously divided provincial appellate courts. Second, Sattva emphasizes the importance to contractual interpretation of evidence of the surrounding circumstances or the factual matrix in which … Continue Reading
Clauses that exclude, or “release”, liability are widespread and critical to risk management for many businesses. Typically, such clauses stipulate that the signee waives the right to sue if they are injured while participating in certain activities. Inevitably, in the event that the signee is injured, a variety of arguments are put forward as to why the particular exclusion clause is unenforceable in the particular circumstances.
Recently, in 2010, the Supreme Court set out a new approach to the analysis of whether an exclusion clause is unenforceable in Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC … Continue Reading
In Rhebergen v. Creston Veterinary Clinic Ltd., 2014 BCCA 97, the British Columbia Court of Appeal granted the appeal of an employer veterinary clinic, Creston Veterinary Clinic (“CVC”), from a Supreme Court of British Columbia decision declaring unenforceable a contract clause requiring its employee, Dr. Stephanie Rhebergen, to pay CVC a prescribed amount in the event she was to compete with CVC within a certain period after the contract was terminated. Unlike conventional non-competition or non-solicitation clauses that constitute a restraint of trade, the clause before the BCCA contained no prohibition. Rather, the clause at issue was permissive in … Continue Reading
At issue in One West Holdings Ltd. v Greata Ranch Holdings Corp. et al. was whether an entire agreement clause which referred to multiple contracts could be used to incorporate an arbitration clause from one of the other contracts. The British Columbia Court of Appeal held that it could despite the fact that the contracts involved different parties.
A number of parties, including Concord Okanagan Developments Ltd., entered into a limited partnership agreement (LPA) to form Greata Ranch Developments Limited Partnership. The LPA described a project management agreement (PMA) that was to be entered into between the Limited … Continue Reading
Circumstances change and what is true today may not be true tomorrow. For that reason, some representations carry with them the obligation to advise the representee if the relevant circumstances change. These are usually referred to as “continuing” representations.
But can a continuing representation carry with it the obligation to update a third party, to whom the representation was not even made? The UK Supreme Court says it can in Cramaso LLP v Ogilvie-Grant, Earl of Seafield and Others, a case with a peculiar set of facts which may have broad implications for parties engaged in pre-contractual negotiations.
How do corporate and personal liability intersect in a corporation that has only one officer, director and shareholder? In the recent Shoppers Drug Mart v. 6470360 Canada Inc. case, the Court of Appeal helped to clarify when the person behind the corporation will be found liable.
In October 2005, Shoppers Drug Mart (“Shoppers”) contracted with Energyshop Consulting Inc. (“Energyshop”) to manage and pay its utility bills on a nationwide basis. Michael Wayne Beamish (“Beamish”) negotiated the contract on behalf of Energyshop, which had not yet been incorporated. Beamish later incorporated 6470360 Canada Inc. … Continue Reading
Third parties must know exactly who they are entering into a contract with, especially when dealing with a limited liability company. That said, the identity of the true contracting party may not be clear when an officer, director or employee of a company is negotiating on behalf of the company. Indeed, third parties are generally entitled to believe that these individuals are dealing on their own behalf, rather than on behalf of a company to which they are outsiders.… Continue Reading
The following post on the Canadian M&A Perspectives blog may be of interest to readers of this blog: SHOTGUN! You should know this before triggering a buy-sell provision.
On November 29, 2013, the Ontario Court of Appeal released its decision in Western Larch Limited v. Di Poce Management Limited, 2013 ONCA 722 with important lessons examining shotgun buy-sell provisions, and in particular, the enforceability of a buy-sell offer that does not perfectly comply with the terms and conditions of the shotgun provision. Read more.… Continue Reading
The recent Supreme Court decision in IBM Canada Limited v Waterman, 2013 SCC 70, has gotten much attention for its ruling and comments about the “collateral benefits” principle and how it applies to pension benefits paid to wrongfully dismissed employees during the notice period. The issue was whether the exception should apply to preclude a reduction, in the amount of the pension benefits, to the compensatory damages payable to the employee for the wrongfull dismissal. The application of the “collateral benefits” principle was the central point of disagreement between the majority judgment of Cromwell J. and the dissenting … Continue Reading
Rectification is an important equitable doctrine allowing courts to rewrite contracts that erroneously record the agreement reached by the parties. The basic requirements for rectification are well settled. Where there is a mutual mistake, the party seeking rectification must show (i) that the parties had a common continuing intention prior to the making of the document alleged to be deficient; (ii) that that intention remained unchanged or existed at the time when the document sought to be rectified was signed; and (iii) by mistake, the parties signed a document that did not accurately reflect their common intention.
However, … Continue Reading
In Ontario (Training, Colleges and Universities) v. Two Feathers Forest Products LP, 2013 ONCA 598, the Ontario Court of Appeal granted the appeal of an interim receiver, Pricewaterhousecoopers Inc., from a Superior Court of Justice decision where grant funds that were advanced by the respondent, Ontario’s Minister of Training Colleges and Universities (the “Ministry”), to a First Nations limited partnership in northern Ontario, but not spent before the partnership sought to dissolve and appoint the interim receiver, were held to be subject to a “Quistclose trust” for the benefit of the Ministry.
… Continue Reading
The problem and the fix
A taxpayer intends to undertake a transaction on a tax-efficient basis. But the transaction gets papered wrong, and the intended tax treatment is not achieved. Can the law of contract save the taxpayer by allowing a court to rewrite the contract documents retroactively in order to achieve the original intention of tax efficiency?
For over a decade the answer in common law Canada has been yes, through the equitable doctrine of rectification. The basic concept underlying rectification is that where a written agreement has incorrectly recorded the parties’ prior oral agreement, the court has the … Continue Reading
The doctrine of marshaling has existed for centuries and was developed to address inequitable circumstances in which secured parties were unable to realize on their security. The UK Supreme Court has recently considered the doctrine in a case, Szepietowski (nee Seery) (Appellant) v The National Crime Agency (formerly the Serious Organised Crime Agency) (Respondent), which provides helpful guidance concerning the limits of the doctrine.
Although it arises infrequently, the doctrine does apply in Canada. For that reason, Szepiotwski will be of interest to holders of secured debt (and their lawyers) both for the particular holdings and the court’s general … Continue Reading
Next month marks the bicentennial of the birth of Sir William Johnstone Ritchie, one of the first judges appointed to the Supreme Court of Canada and Chief Justice from 1879 to 1892. Why are we thinking about him this week? Until today, he was the longest serving Chief Justice of Canada. That title now belongs to Chief Justice Beverley McLachlin, who has held the position since January 7, 2000. Having served on the Court for nearly a quarter century – most of that time as Chief Justice – her impressive legacy to date includes the development of the law in … Continue Reading
In decisions recently released from the Ontario Court of Appeal and the British Columbia Court of Appeal, the courts identify which party bears the burden when zoning irregularities materialize following the close of a real estate transaction.
In Lee v. 1435375 Ontario Ltd., the purchaser of a dry cleaning business was prohibited from relying upon the doctrine of equitable mistake where the rezoning of the leased premises had taken place, unbeknownst to the vendor, and the purchaser failed to investigate the status of zoning prior to closing. In contrast, 0759594 B.C. Ltd. v. 568295 British Columbia Ltd., the… Continue Reading
Last week, the Supreme Court granted leave to appeal from an important Quebec Court of Appeal decision on labour standards, which may bring significant changes in the interpretation of the law on notices of termination (or délai-congé) for employment contracts.
In the facts of the case, Mr. Guay (hereinafter “the employee”) worked for Asphalte Desjardins Inc. (hereinafter “the employer”) from 1994 to 2008, moving up through the company ranks and ending up as a project manager. In February 2008, when the employee presented his employer with a resignation letter intending to leave on March 7, 2008, the employer unsuccessfully tried… Continue Reading
In an interesting decision that will no doubt influence the calculation of restitutionary awards and quantum meruit payments in Canada and elsewhere, the United Kingdom Supreme Court recently engaged in, in the words of Lord Clarke, “a wide-ranging discussion of the principles relevant to an aspect of unjust enrichment which has been the subject of lively debate among academics.” The Court considered whether restitution for services rendered in the absence of a contract could take into account the defendant’s opinion of the value of those services. The Court held that it could – but only to decrease, not increase, the… Continue Reading
In a very recent decision of the ABCA, Benfield Corporate Risk Canada Limited v. Beaufort International Insurance Inc, 2013 ABCA 200, the Court attempted to address a host of interesting contract issues, some with potentially wide implication, such as how to interpret multiple contracts within a single transaction, including the effect of entire agreement clauses and the ability to benefit from a breach of one of the related contracts. Also mentioned are general duties of good faith, the role of fairness and implying terms. However, unique circumstances and a lack of agreement in the Court leaves us, unfortunately, without… Continue Reading
Contributory negligence legislation allows liability to be apportioned between tortfeasors – but what about defendants who are severally liable for a single loss caused by independent breaches of contract? In Petersen Pontiac Buick GMC (Alta.) Ltd. v. Campbell, 2013 ABCA 251, counsel for both parties could find no authority on the issue of apportioning liability between defendants when “a plaintiff suffers the same loss, caused by a breach of contract by one party and a breach of a different contract and negligence by another.” The Alberta Court of Appeal helped fill this gap by holding that the common… Continue Reading