Dear Colleagues:

The Supreme Court has granted leave to appeal in another contracts case concerning the issue of good faith.  This is the second case on good faith for which the Court has granted leave this month.

 

I provide a summary of the case prepared by supremeadvocacy.ca  (Eugene Meehan QC):

 

Contracts: Good Faith Exercise of Discretion 

Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, 2019 BCCA 66 (38601)
Wastech Services Ltd. and Greater Vancouver Sewerage and Drainage District (“Metro”) were involved in a 20-year contract for the disposal of solid waste from the Vancouver regional district. A dispute arose in 2011 over Metro’s discretionary allocation of solid waste to various dumping sites which negatively impacted Wastech’s contractual profit margin. The dispute went to arbitration. The arbitrator refused to include an implied term restricting Metro’s discretion to re‑allocate waste. The arbitrator found Metro did not exercise its discretion capriciously or arbitrarily. He accepted the basis for Metro’s conduct was the furtherance of its own objectives and held Metro was both honest and reasonable from its own perspective. However, the arbitrator determined Metro breached its duty of good faith in the exercise of its discretion because it lacked the appropriate regard for Wastech’s legitimate expectations. The arbitrator awarded damages to Wastech. A chambers judge of the B.C.S.C. allowed an appeal of the arbitrator’s decision. The chambers judge determined there was no free-standing obligation on a party to exercise its contractual discretionary power in good faith. The chambers judge concluded the arbitrator had expanded good faith beyond what was allowed in Bhasin v Hrynew, 2014 SCC 71. The B.C.C.A. dismissed the subsequent appeal for reasons that differed from the chambers judge. It determined good faith exercise of discretion exists in contract law but Wastech’s legitimate expectation had to be founded in the agreement. Because the arbitrator did not find an implied term in the agreement (including an expectation that Metro would deny Wastech the possibility of achieving its profit margin) the duty of good faith did not apply here.

 

 

Wastech will likely be heard with C.M. Callow Inc. v. Tammy Zollinger, et al. (38463), for which leave was granted last month.  Callow involves facts rather similar to Bhasin, having to do with good faith in the terminations of contracts.

 

Two cases on good faith in the same month might suggest that the Court is inclined to clarify Bhasin before too much time passes.

 

On that note, I hope members of the list will not mind my making a pitch for the latest edition of the Journal of Commonwealth Law, which is devoted to the question of Good Faith in Contract, and contains articles by Paul S Davies (UCL), Catherine Valcke (Toronto) and Rosalie Junkier (McGill), among others.  The issue is up on the web and is open access.  It can be found here:

 

https://www.journalofcommonwealthlaw.org/

 

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Matthew P Harrington
Professeur
Faculté de droit
Université de Montréal
www.commonlaw.umontreal.ca
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