On November 13, 2014, the Supreme Court of Canada released a
landmark decision in Bhasin v. Hrynew, which recognizes a
general organizing principle of good faith in contract law and
establishes a new duty of honest performance.
An Osler Update on the substantive issues
in Bhasin is found
The case contains an interesting point on appellate practice.
The Supreme Court, somewhat stepping outside of its usual role,
assessed and awarded damages for a breach of the new duty of honest
performance in the absence of a finding on damages by the trial
It is beyond the scope of this blog to go into detail on the
facts of the case. Suffice it to say that the appellant
complained that he had lost the value of his business as a result
of dishonest conduct by his contractual counter-party.
In the courts below, the Alberta Court of Queen's Bench
found that it was an implied term of the agreement between the
parties that decisions about whether to renew the contract would be
made in good faith. It found that Can-Am acted dishonestly with
Bhasin in the period leading up to the non-renewal. The Court of
Appeal found that there was no implied term of good faith in the
context of an unambiguous contract containing an entire agreement
clause. On appeal to the Supreme Court, the issues were whether the
common law imposes a duty on parties to perform contractual
obligations honestly and, if so, whether Can-Am and Hrynew breached
that duty. The Supreme Court answered both questions in the
Since Can-Am had breached its duty of honest performance, the
Court concluded that it was liable for damages calculated on the
basis of what Bhasin's economic position would have been had
Can-Am fulfilled its duty. In an unusual step, the Court assessed
the damages in the absence of a finding by the trial judge on
damages. The Court considered that the trial judge had made
sufficient findings of fact for it to assess damages.
The trial judge had found that but for Can-Am's dishonesty,
Bhasin could have acted so as to "retain the value of his
agency." The trial judge was aware of the difficulties
associated with selling Bhasin's business given the level of
control that Can-Am had over enrollment directors. Taking these
limitations into considerations, the trial judge found that the
value of the business at the time of the non-renewal of the
agreement was $87,000. The Court considered these findings
sufficient for assessing damages. The Court further noted that
there was no suggestion in the parties' argument that the
figure of $87,000 should be reassessed. As a matter of the facts,
before the Court of Appeal, Can-Am submitted that if damages were
to be awarded, they should be assessed at the value of the business
at the time of the expiry of the agreement and noted the trial
judge's acceptance of their expert's valuation of $87,000.
On the basis of these circumstances, the Court awarded damages to
Bhasin in the amount of $87,000.
An article by Jacquie McNish in the Globe & Mail, quoting
your loyal blogger, is found here.
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