Lexpert magazine features articles and columns on developments in legal practice management, deals and lawsuits of interest in Canada, the law and business issues of interest to legal professionals and businesses that purchase legal services.
Issue link: https://digital.carswellmedia.com/i/1470131
www.lexpert.ca 19 "We lawyers didn't know what that meant," says Martin. "What is an orga- nizing principle? Either there's a term in the contract that's written, or there's a term in the contract that's implied." She says the concept was particularly interesting to the infrastructure and construction industry, where contracts tend to be long-term, governing relationships that span years. "So, when that case came out, it really caused some ripples across the infrastruc- ture and construction industry. What does this mean for infrastructure projects?" Lawyers used to be able to assume that if the contract included things like discretion clauses or renewal rights, they could advise clients that they had the right to "act in a discretionary, self-interested way," says David Little, a partner at Bennett Jones LLP in Vancouver whose practice involves construc- tion and infrastructure. Now, lawyers not only read the words and go over them with the client, but they must also ask about the client's conduct, he says. Sometimes, it means disclosing a position or view that could otherwise be misleading. "It is a little bit harder on the business side of things to advise on that." When it comes to disputes, the duty of good faith may also require "more work and legal analysis," says Little. "We don't know quite how far that's headed. But we do know that that's now firmly entrenched in the common law." In a sense, Bhasin established basic stan- dards in human relations, says Annibale. "You must behave honestly. You can't lie or mislead anybody. "I don't know if that had a massive impact on parties' behaviour as they perform their contracts," he says. e advice of good counsel and the aim of "good corporate citizens" would be to behave in that manner regardless. "is was an affirmation that the law actu- ally functions in this way," says Annibale. "ere was an active statement that there is an obligation to act in good faith, whereas there might have been a bit of a question mark behind that before." e SCC expanded on the duty of good faith in C.M. Callow Inc. v. Zollinger. e 2020 decision involved a contract among a group of condo corporations collectively managed by a company called Baycrest, and a snow-removal and landscaping firm named Callow. Aer deciding to terminate their contract in the spring of 2013, Baycrest did not inform Callow until that September. is disclosure was in line with the contract's provision requiring 10 days' notice. Still, between the decision to terminate and the notice of termination, Callow had performed free extra work to motivate Baycrest to renew their contract for another season. Callow claimed Baycrest had led it to believe its services were satisfactory and that Baycrest should have known that Callow would not seek other contracts while under the impression the agreement would be renewed. e SCC found that Baycrest had violated the duty to act honestly in the performance of the contract. By not correcting Callow's misconception that it was in good standing , Baycrest know- ingly misled the company to believe that Baycrest intended to renew its agreement. Callow's lesson is that contracting parties must not mislead counterparties through half-truths or silence, says Annibale. "Where you know that there is this mistaken belief that sits in the mind of your counterparty, there would be an obligation to correct that. You can't sit on that sort of information." On the other hand, Callow also clarifies that there is no "free-standing positive duty of disclosure," he says. "ere is a balancing act between those concepts." e final piece in the SCC's good-faith trilog y is Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, from 2021. e dispute arose from a discre- tionary clause in a long-term waste-re- moval contract. e contract required Wastech Services to remove and transport waste to three different disposal facilities. Wastech rates varied depending on which facility Greater Vancouver chose to direct "When [Bhasin v. Hrynew] came out, it really caused some ripples across the infrastructure and construction industry" "There are few claims that I see nowadays, whether in arbitration or litigation, where a claimant or plaintiff is not making that allegation [regarding good faith]" Karen Martin DENTONS Jason Annibale MCMILLAN LLP