The Supreme Court of Canada has just released its decision in Wastech v Greater Vancouver Sewerage and Drainage District. Wastech contracted to send Vancouver's waste to any of three locations, to be allocated by the District. The District and Wastech knew that Wastech's profits would depend on how much waste went to each location, but the allocation was left up to the District's discretion. Court found that the discretion had to be exercised "reasonably" in order to meet the requirements of good faith. Reasonably means in accordance with the purposes for which the discretion was bargained for in the first place. The purpose of the discretion is to be interpreted out of the contract, even where the discretion is stated to be unfettered. In this case, the discretion was assigned to the District so that it could allocate waste efficiently, and so it was not unreasonable for the District to ignore Wastech's profits in deciding how to proceed: no breach. A nice clarification of the notion of reasonableness in this context.

This case was not a hard one because Wastech was still running a profit even with the unfavourable waste allocation. A trickier case would arise if the District's discretionary choice gave it a small benefit at great expense to Wastech. In such a situation, one wonders whether the court would still find that the District was permitted to entirely ignore Wastech's profits; the court might rather get creative in interpreting the purpose behind the discretion to avoid the perceived unfairness.

In a concurrence, Brown and Rowe JJ joined by Côté J address several minor issues. Their primary disagreement with regard to good faith is that where contractual discretion is "unfettered on its face" they do not think it is possible (or perhaps wise?) to determine the purpose behind it and to require that it be exercised in accordance with that purpose.

Yours truly &c.,

John Enman-Beech

SJD Candidate, University of Toronto Faculty of Law