Top 10 Recent Legal Developments Impacting Commercial Litigation In Alberta

• Published date: 31 March 2022
• Subject Matter: Corporate/Commercial Law, Government, Public Sector, Litigation, Mediation & Arbitration, Food, Drugs, Healthcare, Life Sciences, Corporate and Company Law, Contracts and Commercial Law, Constitutional & Administrative Law, Class Actions, Trials & Appeals & Compensation
• Law Firm: Borden Ladner Gervais LLP
• Author: Borden Ladner Gervais LLP

The past year has seen a number of significant legal developments that impact Albertans and Alberta businesses. From recognizing the new tort of public disclosure of private facts, clarifying the duty of honest contractual performance, to paving the way to more significant costs awards for successful litigants, the Courts have released a number of decisions that will affect the matters brought before them and how parties conduct themselves in litigation.

In this article, we highlight ten recent judicial and legislative developments of interest to both existing and prospective litigants in Alberta.

1. Duty of Honest Performance: Canlanka Ventures Ltd v Capital Direct Lending Corp., 2021 ABCA 115

In Canlanka Ventures Ltd v Capital Direct Lending Corp., the Alberta Court of Appeal confirmed that a party may breach its duty of honest contractual performance even if the conduct that constituted the breach was not for personal gain.

What you need to know

• The duty of good faith in contractual performance exists in every contract and operates irrespective of the intentions of the parties. Parties must not lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract.
• A breach of the duty of honesty in contractual performance does not turn on whether the underlying misrepresentation was made for personal gain.

Background

Canlanka Ventures Ltd. (Canlanka) bought a number of second mortgages from Capital Direct Lending Corp. (Capital) and hired Capital to administer its mortgages in exchange for a fee. The "administration agreement" between the parties expressly stated that, "[t]he Administrator [Capital] agrees to act in good faith and to the best of its ability in the best interest of the Mortgage Holder [Canlanka]".

Canlanka advised Capital that it had stopped receiving payments with respect to its "Bastien mortgage". Capital then sent an email to Canlanka with an updated loan payment schedule for the Bastien mortgage and stated, "... the aforementioned mortgage is in foreclosure." In fact, and as Capital knew, only the first mortgage on the property was in foreclosure, not Canlanka's second mortgage. Capital took no steps to clarify or remedy the misleading statement, and the trial judge found Capital's actions were deliberate. Canlanka's mortgage was removed from title during the foreclosure of the first mortgage, resulting in Canlanka losing its entire investment.

The trial judge found that, as a result of the misrepresentations, Canlanka was precluded from making an informed decision as to whether to foreclose on its Bastien mortgage, seek to obtain its own appraisals, or to offer to buy out the first mortgage, and awarded damages for loss of opportunity.

Summary of the Alberta Court of Appeal decision

Capital argued before the Court of Appeal that it did not breach its obligations to act in good faith because, while its misrepresentations were deliberate, they were not for personal gain. Instead, Capital submitted it reasonably concluded, although without advising Canlanka or seeking its permission, that no action should be taken because of the respondent's limited equity in the secured property and because the costs of foreclosure and sale would make a recovery action uneconomical. The Court of Appeal disagreed and held that Capital's acts were not simply a failure to advise of general information, but an active misrepresentation that deprived Canlanka of the right to make its own decision in relation to taking action to protect its investment.

The Court of Appeal held that a finding of a breach of the duty of honesty in contractual performance does not turn on whether the underlying misrepresentation was made for personal gain. In this case, the misrepresentations were active, intentional, well beyond innocent non-disclosure and amounted to a breach of the duty of honest contractual performance.

The duty of good faith in contractual performance exists in every contract and operates irrespective of the intentions of the parties. Parties must not lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract. In the Canlanka decision, the Alberta Court of Appeal confirmed that a party may breach these obligations even where its conduct was not engaged in for personal gain.

2. Duty of good faith: Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District

In its decision Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District (Wastech), the Supreme Court of Canada recognized that parties need to exercise contractual discretion in good faith. This means making decisions that are reasonable in light of the bargain the parties made, which we cover in our full case summary.

3. Legislation: The COVID-19 Related Measures Act, S.A. 2021, c.C-31.1

In response to anticipated claims against health service providers related to the transmission of COVID-19, the Alberta government enacted the COVID-19 Related Measures Act (CRMA) on June 17, 2021, which took effect retroactively to March 1, 2020.

What you need to know

• The CRMA protects health care providers against civil liability for the transmission of COVID-19 in health care settings provided they acted in good faith to...