20 www.lexpert.ca
Feature
it to dispose of the waste. e contract gave
Greater Vancouver absolute discretion to
allocate the waste.
Greater Vancouver reallocated the waste
in a way that ate away at Wastech's profit,
and the company alleged Greater Vancouver
had breached the contract. First, an arbi-
trator found a duty of good faith applied,
and Greater Vancouver had violated it. But
when the case reached the SCC, it ruled in
Greater Vancouver's favour, finding it had
not breached the duty.
Good faith requires that parties exercise
contractual discretion reasonably, the court
said. at exercise is
unreasonable when
unconnected to the
purposes for which the
parties had contracted.
e Wastech case
limits the duty of
good faith in finding
that each party is not
required to look aer
the other side's commercial interests, says
Martin. She says that lawyers do not know
yet what compliance with the duty will
mean on big infrastructure projects. e
case leaves lawyers with a "continuum of
conduct," in which it is unclear what will
amount to a breach of the good-faith duty.
"I think we are in very interesting times,
and we are going to see disputes. And we're
going to see cases going to court … to try
to get some direction from the court as to
what exactly this means for infrastructure
projects. It's very important."
Annibale says parties are claiming breach of
good-faith duty too frequently and not exer-
cising enough caution over the toll the allega-
tion could take on the business relationship.
"I would encourage parties to think strate-
gically about whether it makes sense to levy
such an allegation, given what you might
be able to secure in a dispute as against the
impact of the long-term relationship that
you may have with your counterpart."
One of the "lingering questions"
surrounding the duty of good faith is
what kinds of remedies or damages it will
produce, says Andrew Konopelny at MLT
Aikins in Regina.
"Especially in construction infrastructure,
where you have larger projects, you usually
have very sophisticated contracts that have
been carefully draed, that oen have a lot of
remedies and obligations and duties. So where
this fits into that, in terms of what you get in
the end result if there's a dispute, I think that's
something that remains to be seen."
DUTY OF GOOD FAITH CASE
LAW DEVELOPMENT
• Bhasin v. Hrynew
Established good-faith contractual
performance as a general organizing
principle of the common law of contract
• C.M. Callow Inc. v. Zollinger
Good faith requires that parties not
knowingly mislead counterparties by
not correcting misconceptions
• Wastech Services Ltd. v. Greater
Vancouver Sewerage and Drainage
District
Good faith requires that parties exercise
contractual discretion reasonably; that
exercise is unreasonable when used in
a manner unconnected to the purposes
for which the parties had contracted
"WHENEVER WE'RE HELPING OUR
CLIENTS WITH CONTRACTS THAT ARE IN
PLACE … WE ACTUALLY ALSO NEED TO
ASK ABOUT OUR CLIENT'S CONDUCT"
David Little
BENNETT JONES LLP
