July 18th, 2019
In a decision released on July 18, 2019, Canada’s top court granted leave to appeal in yet another case involving the controversial and sometimes nebulous concept of good faith in the performance of a contract. Just last month, the Supreme Court of Canada granted leave to appeal from the Ontario Court of Appeal’s decision on contractual good faith in CM Callow v. Zollinger (See our article here). And, this month, the SCC agreed to hear an appeal from the British Columbia Court of Appeal’s decision in Greater Vancouver Sewerage and Drainage District v. Wastech Services Ltd. regarding whether there is an obligation to exercise discretion under a contract in good faith.
In the Greater Vancouver v. Wastech case, a contractor hired to transport solid waste alleged that the Vancouver Sewerage and Drainage District had allocated wastes between long-haul and short-haul destinations in bad faith and thus increased Wastech’s costs by millions of dollars. An arbitrator of the dispute found that the City had not given appropriate regard for Wastech’s interests or expectations and that this amounted to bad faith under the contract. Both the B.C. Supreme Court and Court of Appeal disagreed – with the B.C. Court of Appeal finding that any duty of good faith must be tied to the expectations that arise from the express terms of the contract.
Both the CM Callow v. Zollinger and the Greater Vancouver v. Wastech cases deal with the ultimate impact of the SCC’s 2014 decision in Bhasin v. Hrynew – a decision that created a narrow good faith duty of “honest performance” on the part of contracting parties that litigants have since tried to broaden and expand when it suits them, often at the expense of contractual certainty. Canada’s highest court is clearly alive to the need to further clarify – and hopefully restrict – the impact and application of its 2014 decision.