Litigation 2022: Trends & Developments

• Published date: 06 December 2021
• Subject Matter: Environment, Government, Public Sector, Environmental Law, Government Contracts, Procurement & PPP, Climate Change, Waste Management, Indigenous Peoples
• Law Firm: Lawson Lundell LLP
• Author: Ms Meg Gaily, Craig A. B. Ferris, QC and Kinji C. Bourchier

Canada

Trends and Developments

Recent Developments in Canada's Legal Landscape

Introduction and summary

The Canadian legal landscape over the last year was punctuated not only by the profound effect of COVID-19 and how it shaped the way we practise law, but also by the number of significant decisions released by our highest court, the Supreme Court of Canada.? In this article, we highlight the court's pivotal decisions from the last year, including cases bringing clarity to the good faith doctrine in contract law, addressing the constitutionality of legislation to mitigate climate change, and the fiduciary duty of our federal and provincial governments to protect indigenous peoples against exploitative transactions and ensure they receive fair compensation for their land.?Oh, and there is nothing special about releases in terms of contractual interpretation. Sorry releases.

Good faith in contract law

In late 2020 and early 2021, the Supreme Court of Canada (SCC) released two decisions on good faith in contract law, C M Callow Inc v Zollinger, 2020 SCC 45 (Callow), and Wastech Services Ltd v Greater Vancouver Sewerage and Drainage District, 2021 SCC 7 (Wastech), building on the foundation laid in its landmark 2014 decision, Bhasin v Hrynew, 2014 SCC 71 (Bhasin).

Previously, in Bhasin, the SCC recognised that the organising principle of good faith underlies contract law and manifests itself in more specific doctrines governing contractual performance. One manifestation of this principle is the duty to honestly perform contractual obligations; meaning "not to lie or otherwise knowingly mislead" the counter-party about matters directly linked to the performance of the contract.

After Bhasin, courts struggled with the range of conduct that was captured by the phrase "knowingly misleading" where a failure to honestly perform contractual obligations was alleged and Callow addressed what is meant by "knowingly misleading" a counter-party in this context. In Wastech, the SCC addressed the duty to exercise contractual discretion in good faith, a scenario falling under the good faith organising principle.

Callow

In Callow, the SCC clarified what constitutes a breach of the duty of honest performance regarding the exercise of a seemingly unfettered, unilateral termination clause. The SCC held that while the determination of whether a party has actively misled their counter-party is a highly fact-specific determination, it can include lies, half-truths, omissions and even silence, depending on the circumstances.

The plaintiff had a two-year winter maintenance contract with the defendants, a group of condominium corporations, containing a clause allowing the defendants to terminate the contract without cause with ten days' written notice to the plaintiff. The parties also entered into a separate contract for summer maintenance. The defendants decided to terminate the winter maintenance contract, but waited several months to provide the required notice. During this time, the plaintiff provided free services related to the summer maintenance contract, hoping that it would incentivise the winter contract's renewal. The plaintiff also formed the impression that the defendants were satisfied with its services and likely to grant a two-year renewal of the winter contract.

When the defendants terminated the winter contract, the plaintiff claimed breach of contract based on a breach of the duty of honest performance in the manner in which the termination clause was exercised. The SCC majority found that the defendants had "knowingly misled" the plaintiff in the manner in which they exercised the termination clause, which amounted to a breach of contract under Bhasin. The SCC confirmed that the duty to act honestly is a negative obligation not to act dishonestly, although it is not a free-standing duty to disclose...