The Duty Good Faith in Contractual Discretionary Powers – Dominus/Cityzen Brampton SWQRP Inc. v. The Corporation of the City of Brampton

The Ontario Superior Court of Justice (the “Court”) recently dealt with the question of what constitutes a breach of the duty of good faith contractual performance in the context of a construction contract. In Dominus/Cityzen Brampton SWQRP Inc. v. The Corporation of the City of Brampton, 2020 ONSC 5806 (“Dominus”), the Court held that the City of Brampton’s failure to consent to significant reduction in the amount of a security deposit when much of the contracted work had been completed because of a third party dispute amounted to a breach of the general (and in this case contractual) duty to act reasonably and in good faith in the exercise of contractual discretion.

While decided in 2020, the Court’s decision in Dominus remains consistent with the Supreme Court of Canada’s (the “SCC”) more recent decision in Greater Vancouver Sewerage and Drainage District v. Wastech Services Ltd., 2021 SCC 7 (“Wastech”),[1]Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, 2021 SCC 7 [Wastech]. and provides a useful, construction-specific example of when a party is found to be exercising their discretion unreasonably and therefore contrary to the duty of good faith. In short, refusing (or choosing) to exercise contractual discretion based on an overly rigid interpretation is unreasonable and contrary to the duty of good faith.

Good Faith Principle and Discretionary Contractual Clauses

As outlined below, the general organizing principle of good faith contractual performance was first recognized by the SCC in Bhasin v. Hrynew, 2014 SCC 71 (“Bhasin”).[2]Bhasin v. Hrynew, 2014 SCC 71, at para. 63. The organizing principle underlies and manifests various other more specific doctrines governing contractual performance. One such specific doctrine, as identified in Bhasin, is the duty of good faith performance in exercising contractual discretion. Despite being decided before the SCC’s more recent decision in Wastech, the Court in Dominus provides some useful and detailed commentary regarding the exercise of such discretion.

In Wastech, the SCC held that the duty to exercise contractual discretion in good faith requires that a party exercise their discretionary powers reasonably.[3]Wastech at para. 67. Reasonableness is determined based on the purpose for which the discretionary powers were granted under the contract;[4]Ibid, at para. 88. an unreasonable exercise of discretion is one which is unconnected to the contractual purpose and is a breach of the duty of good faith.[5]Ibid, at para. 75. In Wastech, the Greater Vancouver Sewerage and Drainage District (“Metro”) was in a long-term contract for the removal and transportation of waste by Wastech Services Ltd. The contract gave Metro the discretion to choose which site to send the waste to and Wastech’s rate was dependent on the distance the waste was transported. Metro exercised their discretion by choosing the closer site, resulting in Wastech earning less revenue. Contrary to the ruling of the arbitrator, the SCC determined that the contract did not require Metro to use its discretion to ensure Wastech reached its target operating ratio in any given year. As such Metro, was not in breach of the duty of good faith because their exercise of discretion was connected to the purpose of the contract and was therefore reasonable.[6]Ibid, at para. 100.

Summary of the Decision

Facts

Dominus CityZen Brampton SWQRP Inc. (“Dominus”), the developer, was contracted by the City of Brampton (the “City”) to complete an expansion of the Brampton City Hall. Dominus and the City entered into a Site Plant Agreement (the “SPA”) pursuant to the Planning Act.[7]Planning Act, R.S.O. 1990, c. P.13. Under the SPA, the City had two roles: first as the owner of the lands and occupier of the City Hall constructed thereon, and second as the regulator acting on behalf of the community and public interests that are protected by the SPA. The Court was ultimately tasked with the interpretation of a security deposit provision of the SPA. Dominus was required by the SPA to post a deposit of $646,510.00 (the “Security Deposit”) as a performance guarantee for the estimated cost of all works required to be completed as part of the City Hall project.

Section 15 of the SPA provided that Dominus may, “from time to time, apply to the [City] for a reduction in the amount of the security by an amount up to ninety per cent (90%) of the value of the works for which security was deposited […]”.[8]Dominus/Cityzen Brampton SWQRP Inc. v. The Corporation of the City of Brampton, 2020 ONSC 5806 at para. 26 [Dominus].

Further, section 29 of the SPA contained a provision requiring the parties to act reasonably and in good faith:

Where approval or consent is required hereunder, such approval or consent shall not be unreasonably withheld. Where something is required to be done hereunder to the satisfaction of or in the discretion or opinion of a party or official thereof, such party or official shall act reasonably in exercising such satisfaction, discretion or opinion.[9]Ibid, at para. 30.

Dominus completed the redevelopment of the City Hall with the exception of two relatively minor items: a trench drain and a wooden privacy fence. Dominus took the position that it was unable to complete the two remaining items because of an ongoing suit that the owners of the neighboring properties had commenced against the City and Dominus for nuisance and trespass, claiming damages in excess of $2MM. Dominus requested that a portion of the Security Deposit be returned in amounts relative to the value of the work completed. However, the City denied Dominus’ request for two reasons:

  1. Under the City’s interpretation of the SPA, all work must be completed before any release of funds would be considered or made;[10]Ibid, at paras. 6 and 8. and,
  2. Because of the presence of an indemnity provision contained in the SPA, under which the City was claiming a right to set-off the indemnity claims against the Security Deposit[11]Ibid, at para. 6.
Issues and Decision

In considering the parties’ submissions and arguments, the Court distilled the dispute into six key questions.[12]Ibid, at para. 32. For the purposes of this blog post, we will focus on four of those questions:

  1. Does the SPA Allow for a Partial Reduction of the Security for Completed Works When Some Remain Outstanding?
  2. Was the City in breach of the SPA or any independent duty of good faith, or did it act unreasonably or in bad faith, by refusing to consider this request and/or for refusing to reduce the Security Deposit?
  3. Did the Security Deposit cover, or could it be set-off against, the City’s right to claim indemnity?
  4. If the entitlement to a reduction or refund is established, how much of the Security Deposit is Dominus entitled to receive?

Ultimately, the Court found the City’s refusal to release or reduce the Security Deposit was not reasonable in the circumstances and was contrary to the organizing principle of good faith in the performance of contracts, including under the specific terms of the SPA. Further, the Court held that the SPA did not give rise to any right of set-off against the Security Deposit, and ordered that the City release $596,510.00 plus pre-judgement interest.[13]Ibid, at para. 78.

Analysis

In the result, the OSC found that a proper interpretation of the SPA based on the principles of contractual interpretation would allow for a partial reduction in the Security Deposit, as sought by Dominus.[14]Ibid, at para. 38. The Court held that the City’s interpretation of the SPA was too rigid and therefore unreasonable,[15]Ibid, at paras. 41 and 51. holding that the SPA did not link the Security Deposit to the indemnity provisions, nor did it expressly allow for setting-off of other claims against the Security Deposit.[16]Ibid, at para. 72. Therefore, the presence of the indemnity clause was held to be not relevant to the City’s determination of whether the deposit should be reduced or released, such that its refusal to do same was in breach of its general and contractual good faith obligations.[17]Ibid, at para. 72.

Did the SPA Allow for a Partial Reduction of the Security for Completed Works When Some Remain Outstanding?

The Court found that on a proper, contextual and purposeful interpretation of the SPA that a partial reduction of the Security Deposit for completed works was available even when some works remained outstanding.[18]Ibid, at para. 7. The City argued that in their role as a regulator and holder of public funds they were entitled to insist on strict adherence to the requirements of the SPA because of the recognized overarching planning and public interest objectives of the SPA.[19]Ibid, at para. 50. However, the Court determined that interpreting the SPA to allow for a partial reduction of the Security Deposit did not undermine the public interest or planning objectives associated with the SPA; instead, the Court held that such an interpretation “reflects an appropriate balance between the commercial realities of a significant contract such as this and the objective of securing the completion of the remaining outstanding works in furtherance of the planning objectives embodied in the SPA.”[20]Ibid, at para. 40.

The Court reached the following conclusions regarding the proper interpretation of section 15 of the SPA:

Section 15.3 explicitly provides that Dominus may, from time to time, apply to the City for a reduction in the amount of the security by an amount up to ninety per cent (90%) of the value of the works for which security was deposited. The contemplation of applications from time to time suggests that more then one request may be made and considered before the 90% cap is reached.[21]Ibid, at para. 38.

It makes common and commercial sense that these applications, from time to time, would correspond with the completion of certain works for which the certification requirements have been met to enable a partial release of the security deposit. Section 8 requires an engineering certificate prior to any reduction in security posted for public works purposes or occupancy of the building and section 13.5 requires an architect’s certificate prior to the release of any landscaping securities. The City emphasizes the word “any” in these provisions and says that it should be read as prohibiting “any” reduction in or release of security until all of the works have been completed. The word “any” could be equally read to be referring to any one of a number of potential requests for reductions or releases of the security. Reading the word “any” in this way is harmonious with the contemplation in section 15 that there may be releases or reductions to the security from time to time, for completed works that have received the necessary certifications.[22]Ibid, at para. 39. [emphasis added]

Ultimately, the Court found that the City’s interpretation of the SPA, namely that it did not allow for any opportunity for Dominus to apply for and potentially receive a reduction in the Security Deposit until all work was completed, “is too rigid an interpretation and application of the SPA.”[23]Ibid, at para. 41.

Was the City in breach of the SPA or any independent duty of good faith, or did it act unreasonably or in bad faith, by refusing to consider this request and/or for refusing to reduce the security deposit?

In addressing the issue of good faith, the Court cited Bhasin for the following general proposition regarding the duty of good faith in contractual discretion: “Failing to exercise contractual discretion without any reasonable justification is contrary the common law good faith principles in the performance of a contract.”[24]Ibid, at para. 27.

The City made three main arguments as to why they had reasonable justification for their failure to exercise the discretion granted to them under the SPA:

  1. Based on the overarching planning and public interest objectives of the SPA, they could insist on strict compliance with the SPA, such that all work must be completed before a reduction is to be considered;
  2. The general language in section 21.5 of the SPA, “together with all other applicable provisions of the SPA” gave the City discretion to withhold the Security Deposit until all incomplete works had been completed; and
  3. The existence of the third party tort claim triggered an indemnity by Dominus to the City.

The Court rejected the three justifications provided by the City and found that they were unreasonable for the following reasons.

In response to the first justification, the Court found that the reasonableness of this justification is dependent upon whether the SPA allowed for a partial reduction in the Security Deposit.[25]Ibid, at para. 50. As summarized above, the Court found that the City’s interpretation of the SPA was unreasonable, and therefore overarching planning and public interest objectives of the SPA did not give rise to a reasonable justification.[26]Ibid, at para. 51.

In response to the second justification, the Court determined that the City’s interpretation of section 21.5 of the SPA as “granting unfettered discretion to say no to a reduction of the Security Deposit as long as any of the works remain incomplete” was also incorrect.[27]Ibid, at para. 53. Under section 21.5 of the SPA, Dominus acknowledged that the City would not be required to reduce or release the Security Deposit until it was satisfied that Dominus had: (i) complied with the Construction Lien Act;[28]Construction Lien Act, RSO 1990, c C-30 (now the Construction Act, RSO 1990, c C-30). (ii) paid and discharged any and all liens under same; and (iii) indemnified the City for any claims arising out of a failure to comply with the Construction Lien Act. Based on contractual interpretation principles, the Court reiterated that a general phrase “must be read to be qualified by the sections identified immediately before it.”[29]Dominus, at para. 53. Therefore, the Court held that the general phrase in section 21.5 only applied to the specific lien claims contemplated in the sections regarding the Construction Lien Act, and did not provide the City with a general unfettered discretion to reject Dominus’ request.[30]Ibid.

In response to the third justification, the Court found that “the security deposit does not apply to the tort claims, nor has the City even made an indemnity claim against Dominus in respect of the tort claims.”[31]Ibid, at para. 58. Therefore, the existence of the third party tort claim did not provide the City with a reasonable justification to refuse or reduce the Security Deposit. This issue is discussed further below.

Ultimately, the Court concluded:

The City has, in this case, fettered the exercise of its discretion by too narrow an interpretation of the SPA (that unless all works are complete, nothing will be returned) and extraneous and irrelevant self-serving considerations (as security that was not contracted for or a set off for a contingent indemnity claim in tort). The City’s refusal to release or reduce the security deposit is not reasonable in the circumstances and is contrary to the organizing principle of good faith in the performance of contracts and section 29 of the SPA.[32]Ibid, at para. 32. [emphasis added]

Did the security deposit cover, or could it be set-off against, the City’s right to claim indemnity?

Pursuant to the indemnity provision contained in section 20 of the SPA, Dominus agreed to indemnify the City for all actions arising based on Dominus’ performance of the contract.[33]Ibid, at para. 66. However, the Court found that the SPA did not link the Security Deposit to the indemnity provision, noting that the SPA clearly “earmarked” the Security Deposit only to secure the cost of the work Dominus undertook to complete.[34]Ibid.

The City also claimed that it was able to retain the Security Deposit based on a right of set-off. However, the Court noted that the parties did not make substantial submission in this respect. Nonetheless, the Court identified two somewhat tenuous instances that a right to set-off could exist, but which ultimately did not.[35]Ibid, at para. 72. First, for a potential contingent indemnity claim against Dominus in respect of the tort claims.[36]Ibid, at paras 69 and 70. However, the capacity in which the City was being sued in the tort claim and the capacity that the City had entered into the SPA (i.e. their two roles) may affect this right of set-off.[37]Ibid. Second, the uncertain costs to access the neighboring land could result in a contractual claim under section 15.2, however the Court determined that such an interpretation would be a stretch of the indemnity language.[38]Ibid, at para. 71.

If the entitlement to a reduction or refund is established, how much of the security deposit is Dominus entitled to receive?

Having found that the SPA allowed Dominus to be eligible for a possible reduction in the Security Deposit and that the City was in breach of the SPA for failing to exercise their discretion regarding same, the Court determined that Dominus was entitled to a receive a portion of the Security Deposit referable to the completed works.[39]Ibid, at para. 73.

Pursuant to section 15.4 of the SPA, Dominus was eligible to receive up to 90% of the value of the completed works until the two-year warranty lapsed.[40]Ibid, at para. 74. Given that five years had elapsed, the Court determined that Dominus would receive 100% of the Security Deposit, minus the value of the anticipated costs of the two uncompleted items.[41]Ibid. Evidence was given regarding the estimated value of that uncompleted work to be $10,000.00. The Court then multiplied this number by four to allow for a significant buffer given the uncertainty surrounding the additional costs associated with completing the outstanding work. Therefore, the reasonable estimation of the outstanding work, which included a reasonable holdback for uncertain additional costs associated with such work, was held to be $50,000.00.[42]Ibid, at para. 75. As such, the Court ordered the City to release $596,510.00 ($646,510.00 less $50,000.00) of the Security Deposit to Dominus.[43]Ibid, at para. 78.

References

References
↑1 Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, 2021 SCC 7 [Wastech].
↑2 Bhasin v. Hrynew, 2014 SCC 71, at para. 63.
↑3 Wastech at para. 67.
↑4 Ibid, at para. 88.
↑5 Ibid, at para. 75.
↑6 Ibid, at para. 100.
↑7 Planning Act, R.S.O. 1990, c. P.13.
↑8 Dominus/Cityzen Brampton SWQRP Inc. v. The Corporation of the City of Brampton, 2020 ONSC 5806 at para. 26 [Dominus].
↑9 Ibid, at para. 30.
↑10 Ibid, at paras. 6 and 8.
↑11 Ibid, at para. 6.
↑12 Ibid, at para. 32.
↑13 Ibid, at para. 78.
↑14 Ibid, at para. 38.
↑15 Ibid, at paras. 41 and 51.
↑16 Ibid, at para. 72.
↑17 Ibid, at para. 72.
↑18 Ibid, at para. 7.
↑19 Ibid, at para. 50.
↑20 Ibid, at para. 40.
↑21 Ibid, at para. 38.
↑22 Ibid, at para. 39.
↑23 Ibid, at para. 41.
↑24 Ibid, at para. 27.
↑25 Ibid, at para. 50.
↑26 Ibid, at para. 51.
↑27 Ibid, at para. 53.
↑28 Construction Lien Act, RSO 1990, c C-30 (now the Construction Act, RSO 1990, c C-30).
↑29 Dominus, at para. 53.
↑30 Ibid.
↑31 Ibid, at para. 58.
↑32 Ibid, at para. 32.
↑33 Ibid, at para. 66.
↑34 Ibid.
↑35 Ibid, at para. 72.
↑36 Ibid, at paras 69 and 70.
↑37 Ibid.
↑38 Ibid, at para. 71.
↑39 Ibid, at para. 73.
↑40 Ibid, at para. 74.
↑41 Ibid.
↑42 Ibid, at para. 75.
↑43 Ibid, at para. 78.

What Is An “Organizing Principle”, a “Duty” And A “Term” Of A Contract?”

In the last two articles I have been considering the recent decision of the Supreme Court of Canada in Bhasin v. Hrynew. In its decision, the Supreme Court of Canada established two fundamental principles for the Canadian common law of contract.

First, it is an “organizing principle” of contract law that the parties must perform the contract in good faith.

Second, the parties have a duty to act honestly in the performance of contracts.

In its decision the Supreme Court said that this “organizing principle” and “duty” are not “terms“of the contract, so the parties cannot contract out of them. Yet, the court found that the defendant had breached the contract by acting dishonestly. How could the defendant breach the contract if this obligation or duty are not terms of the contract?

Background

A reminder about the facts which were found by the trial judge. Bhasin and Hrynew were both retail dealers who marketed education savings plans developed by Canadian American Financial Corp. (“Can-Am”). Bhasin’s agreement with Can-Am was for a term of three years and automatically renewed unless one of the parties gave six months’ notice of termination.

Hrynew was a competitor of Bhasin and wanted to take over Bhasin’s agency. He campaigned with Can-Am to direct such a merger of the agencies. Can-Am had discussions with the Alberta Securities Commission about restructuring its agencies. Can-Am did not tell Bhasin about these discussions. Can-Am repeatedly misled B about its future plans for its agencies. Can-Am gave notice of non-renewal of the agreement. As a consequence, Bhasin lost his business and his workforce went to work for Hrynew. Bhasin sued Can-Am and Hrynew.

The trial judge held that a term of good faith performance should be implied based on the intentions of the parties in order to give business efficacy to the agreement. The trial judge found that Can-Am had breached that implied term in its contract with Bhasin. He found that Can-Am had dealt dishonestly with Bhasin.

The Supreme Court of Canada restored the trial judge’s finding that Can-Am had breached its contract with Bhasin by dealing with him dishonestly.

Decision of the Supreme Court relating to Organizing Principles and Terms of the Contact

Speaking for a unanimous court, Justice Cromwell stated the following propositions:

“…good faith contractual performance is a general organizing principle of the common law of contract which underpins and informs the various rules in which the common law, in various situations and types of relationships, recognizes obligations of good faith contractual performance. …a further manifestation of this organizing principle of good faith…is a common law duty which applies to all contracts to act honestly in the performance of contractual obligations.” (underlining added)

The Supreme Court explained what it meant by “an organizing principle.” Such a principle “states in general terms a requirement of justice from which more specific legal doctrines may be derived. An organizing principle therefore is not a free-standing rule, but rather a standard that underpins and is manifested in more specific legal doctrines and may be given different weight in different situations.”

Having recognized the organizing principle of good faith performance of contracts, Justice Cromwell held that the court should now recognize a contractual duty of honest performance:

“I would hold that there is a general duty of honesty in contractual performance. This means simply that parties must not lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract. This does not impose a duty of loyalty or of disclosure or require a party to forego advantages flowing from the contract; it is a simple requirement not to lie or mislead the other party about one’s contractual performance. Recognizing a duty of honest performance flowing directly from the common law organizing principle of good faith is a modest, incremental step.”

Justice Cromwell then summarized the position:

“(1) There is a general organizing principle of good faith that underlies many facets of contract law.

(2) In general, the particular implications of the broad principle for particular cases are determined by resorting to the body of doctrine that has developed which gives effect to aspects of that principle in particular types of situations and relationships.

(3) It is appropriate to recognize a new common law duty that applies to all contracts as a manifestation of the general organizing principle of good faith: a duty of honest performance, which requires the parties to be honest with each other in relation to the performance of their contractual obligations.” (underlining added)

Justice Cromwell then discussed the nature of these duties and organizing principles. He held that:

“a new duty of honest performance….should not be thought of as an implied term, but a general doctrine of contract law that imposes as a contractual duty a minimum standard of honest contractual performance. It operates irrespective of the intentions of the parties, and is to this extent analogous to equitable doctrines which impose limits on the freedom of contract, such as the doctrine of unconscionability.”

He then noted that;

“There is a longstanding debate about whether the duty of good faith arises as a term implied as a matter of fact or a term implied by law… I do not have to resolve this debate fully, which…casts a shadow of uncertainty over a good deal of the jurisprudence.  I am at this point concerned only with a new duty of honest performance and, as I see it, this should not be thought of as an implied term, but a general doctrine of contract law that imposes as a contractual duty a minimum standard of honest contractual performance. It operates irrespective of the intentions of the parties……. Viewed in this way, the entire agreement clause in cl. 11.2 of the Agreement is not an impediment to the duty arising in this case. Because the duty of honesty in contractual performance is a general doctrine of contract law that applies to all contracts, like unconscionability, the parties are not free to exclude it.” (underlining added)

In any event, he concluded that since “the duty of honest performance interferes very little with freedom of contract, since parties will rarely expect that their contracts permit dishonest performance of their obligations.” However, Justice Cromwell did not discount the possibility that the parties might try to limit their obligations of good faith and honesty. He said:

“I would not rule out any role for the agreement of the parties in influencing the scope of honest performance in a particular context. The precise content of honest performance will vary with context and the parties should be free in some contexts to relax the requirements of the doctrine so long as they respect its minimum core requirements.”

When it came time to apply these principles to the actual facts, Justice Cromwell found that “Can-Am breached its duty to perform the Agreement honestly.” He concluded that:

“this dishonesty on the part of Can-Am was directly and intimately connected to Can-Am’s performance of the Agreement with Mr. Bhasin and its exercise of the non-renewal provision. I conclude that Can-Am breached the 1998 Agreement when it failed to act honestly with Mr. Bhasin in exercising the non-renewal clause.”

Discussion

This decision leaves us asking a number of questions:

Did Can-Am breach a term of the contract? If it didn’t, how could it be in breach of the contract? If it did, what term did it breach?

Is the “organizing principle” of good faith performance a term of the contract?

Is the duty of honest performance a term of the contract?

The answer to the last two questions seems to be No. The Supreme Court differentiated between an “organizing principle” and a duty and a term. It held that good faith performance fell into the first category, an organizing principle. It held that honesty fell into the second category, a duty. It held that neither the “organizing principle” of good faith nor the ”duty” of honest performance amounted to a term, with the result that the parties cannot contract out of them and the entire agreements clause does not apply to them.

If that is so, it is hard to see how a breach of these non-terms can amount to a breach of the contract. In addition, how should drafters of contracts deal with these non-terms? The parties may want to define what is permissible conduct so that no argument can be made that it is in bad faith or dishonest. While Justice Cromwell said that the parties are entitled to “relax the requirements of the doctrine” of honest performance as long as they respect the “core requirements” of the doctrine, how do they do so since these concepts are, according to the Supreme Court, not part of the contract? Will the terms that the parties write into the contract be effective, and to what degree?

The concept of “organizing principles” has been adopted by the Supreme Court in various areas of the law. For instance, it has been used by that court in the law relating to conflict of laws, criminal law, constitutional law and employment law. But contract law is very different from those areas of law because, in their contract, the parties can make their own law and contract out of other legal principles, unless precluded by some principle of law from doing so.

In those other areas of law, there has been a tension between “organizing principles” and the substantive law. In the Provincial Judges’ Reference (1997), Chief Justice Lamer noted that the preamble to the Constitution Act, 1867 “recognizes and affirms the basic principles which are the very source of the substantive provisions of the Constitution Act, 1867.” He continued:

“although the preamble is clearly part of the Constitution, it is equally clear that it has no enacting force…In other words, strictly speaking, it is not a source of positive law, in contrast to the provisions which follow it. …But the preamble does have important legal effects. Under normal circumstances, preambles can be used to identify the purpose of a statute, and also as an aid to construing ambiguous statutory language…. The preamble to the Constitution Act, 1867, certainly operates in this fashion. However, in my view, it goes even further……It recognizes and affirms the basic principles which are the very source of the substantive provisions of the Constitution Act, 1867. As I have said above, those provisions merely elaborate those organizing principles in the institutional apparatus they create or contemplate. As such, the preamble is not only a key to construing the express provisions of the Constitution Act, 1867, but also invites the use of those organizing principles to fill out gaps in the express terms of the constitutional scheme. It is the means by which the underlying logic of the Act can be given the force of law.” (underlining added)

If the “organizing principles” of contract law are of this nature, can a breach of them amount to a breach of contract?

A further question arises. Does the decision in Bhasin v. Hrynew re-introduce, in one form or another, the doctrine of fundamental term or fundamental breach that the Supreme Court of Canada discarded in the Tercon v. British Columbia decision (2010)? Is the Supreme Court saying in Bhasin v. Hrynew that there are some core elements of contractual conduct –now defined more by morality than by the terms of the contract – which the parties cannot contract out of?

Bhasin v. Hrynew, 2014 SCC 71

Building Contract – Performance – Good Faith –  Honest Performance

Thomas G. Heintzman O.C., Q.C., FCIArb                                        December 20, 2014

tgh@heintzmanadr.com

constructionlawcanada.com

 

 

 

Contracts Must Be Honestly Performed Says The Supreme Court of Canada

In its recent decision in Bhasin v. Hrynew, the Supreme Court of Canada has established two fundamental principles for the Canadian common law of contract.

First, parties are under a general obligation to perform contracts in good faith.

Second, the parties have a duty to act honestly in the performance of contracts. These contractual obligations can no longer be relegated to some kinds of contracts or situations. Rather, they are principles that apply to every sort of contract.

It is, perhaps, somewhat surprising that these principles were still in dispute under Canadian contract law and that the Supreme Court had not previously ruled on them. Having now done so in Bhasin v. Hrynew, this decision is of great importance to the common law of contract in Canada and should be well understood by anyone concerned with the performance of contracts.

Background

The following facts were found by that trial judge:

Bhasin and Hrynew were both retail dealers who marketed education savings plans developed by Canadian American Financial Corp. (“Can-Am”).   Bhasin’s agreement with Can-Am was for a term of three years and automatically renewed unless one of the parties gave six months’ notice of termination.

Hrynew was in effect a competitor of Bhasin and wanted to obtain capture Bhasin’s market. On many occasions, Hrynew had proposed to Bhasin that they merge their dealerships and he campaigned with Can-Am to direct such a merger. Bhasin had resisted any such merger. Can-Am appointed Hrynew as the officer to review dealership compliance with securities laws, but Bhasin object to Hrynew reviewing his business records.

Can-Am had discussions with the Alberta Securities Commission about restructuring its agencies. Can-Am did not tell Bhasin about these discussions. Can-Am repeatedly misled B about its future plans for its agencies. When Bhasin continued to refuse to allow Hrynew to review his records, Can-Am gave notice of non-renewal of the agreement. As a consequence, Bhasin lost his business and his workforce went to work for Hrynew.

Decisions of the Trial Judge and Alberta Court of Appeal

Bhasin sued Can-Am and Hrynew.  The trial judge held that Can-Am breached the implied term in its contract with Bhasin that the contract would be performed in good faith. He found that Mr. Hrynew pressured Can-Am not to renew its Agreement with Mr. Bhasin and that Can-Am dealt dishonestly with Mr. Bhasin and ultimately gave in to that pressure.

The Court of Appeal allowed the appeal and dismissed B’s lawsuit. The court held that there was no self-standing contractual duty of good faith in Canadian law. In addition, the court found that Bhasin had suffered no recoverable damages because, quite apart from any alleged bad faith conduct by it, Can-Am was entitled in any event to give notice of non-renewal of the contract.

Decision of the Supreme Court of Canada

The Supreme Court forthrightly stated that it was necessary to clarify – or some might say, reform – the Canadian common law relating to the performance of contracts. Speaking for a unanimous court, this is how Justice Cromwell approached the matter:

“In my view, it is time to take two incremental steps in order to make the common law less unsettled and piecemeal, more coherent and more just. The first step is to acknowledge that good faith contractual performance is a general organizing principle of the common law of contract which underpins and informs the various rules in which the common law, in various situations and types of relationships, recognizes obligations of good faith contractual performance. The second is to recognize, as a further manifestation of this organizing principle of good faith, that there is a common law duty which applies to all contracts to act honestly in the performance of contractual obligations.” (emphasis added)

The Supreme Court explained what it meant by “an organizing principle.” Such a principle “states in general terms a requirement of justice from which more specific legal doctrines may be derived. An organizing principle therefore is not a free-standing rule, but rather a standard that underpins and is manifested in more specific legal doctrines and may be given different weight in different situations.”

Having recognized the organizing principle of good faith performance of contracts, Justice Cromwell held that the court should now recognize a contractual duty of honest performance:

“I would hold that there is a general duty of honesty in contractual performance. This means simply that parties must not lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract. This does not impose a duty of loyalty or of disclosure or require a party to forego advantages flowing from the contract; it is a simple requirement not to lie or mislead the other party about one’s contractual performance. Recognizing a duty of honest performance flowing directly from the common law organizing principle of good faith is a modest, incremental step.”

Justice Cromwell then summarized the position in three paragraphs which should be duly noted for application in future cases:

“A summary of the principles is in order:

(1) There is a general organizing principle of good faith that underlies many facets of contract law.

(2) In general, the particular implications of the broad principle for particular cases are determined by resorting to the body of doctrine that has developed which gives effect to aspects of that principle in particular types of situations and relationships.

(3) It is appropriate to recognize a new common law duty that applies to all contracts as a manifestation of the general organizing principle of good faith: a duty of honest performance, which requires the parties to be honest with each other in relation to the performance of their contractual obligations.” (emphasis added)

Having stated the legal principles, Justice Cromwell found that Can-Am had breached its contractual duty of honest performance. Can-Am wanted to force a merger of the Bhasin and Hrynew agencies, effectively giving Mr. Bhasin’s business to Mr. Hrynew. To accomplish that end, it acted dishonestly with Bhasin throughout the period leading up to its exercise of the non-renewal clause. It told the Alberta Securities Commission that Bhasin’s agency was to be merged under Hrynew’s but it said nothing of this to Bhasin. Can-Am was working to forestall the Commission’s termination of its license in Alberta and was prepared to do whatever it could to forestall that possibility.  When questioned by Bhasin about Can-Am’s intentions with respect to the merger, it equivocated and did not tell him the truth. Nor was it truthful with Bhasin about its dealings with the Commission and the Commission’s intentions, and repeatedly misrepresented to Bhasin that he was bound by duties of confidentiality. Can-Am continued to insist that Hrynew audit Mr. Bhasin’s agency, on the supposed basis that it required to do so by the Commission, even though it arranged for its own employees to conduct the audit of Hrynew’s agency.

The Supreme Court noted that the trial judge had found that this dishonesty on the part of Can-Am was directly and intimately connected to Can-Am’s performance of its agreement with Bhasin and its exercise of the non-renewal provision. The court concluded that “Can-Am breached the 1998 Agreement when it failed to act honestly with Mr. Bhasin in exercising the non-renewal clause.”

Discussion

The decision in Bhasin v. Hrynew is significant on three levels.

First, it firmly establishes good faith performance as an organizing principle in the common law of contract in Canada. From now on, the interpretation of all contractual obligations of performance involves asking this question: is this interpretation consistent with good faith performance? Similarly, the actual performance of contracts can be analyzed by asking this question: does this conduct amount to the good faith performance of the contract?

Second, every contract will now have an implied term that the contract will be performed honestly. In Bhasin v. Hrynew, the Supreme Court noted that Bhasin was not a franchisee of Can-Am. Nor was there any fiduciary obligation between the two parties. Bhasin’s claim was dealt with on the basis of the general law of contract. Accordingly, the court’s conclusions will apply to all contracts.

It appears that the parties cannot contract out of these duties. In the Bhasim decision, the Supreme Court said that “because the duty of honesty in contractual performance is a general doctrine of contract law that applies to all contracts, like unconscionability, the parties are not free to exclude it”. However, Justice Cromwell did say that he would “not rule out any role for the agreement of the parties in influencing the scope of honest performance in a particular context. The precise content of honest performance will vary with context and the parties should be free in some contexts to relax the requirements of the doctrine so long as they respect its minimum core requirements.” In any event, it’s hard to imagine parties to a contract expressly agreeing that ‘dishonest performance of this contract shall be permitted” or words to that effect.

Third, the facts in the Bhasin v. Hrynew case provide good examples of the kind of circumstances that may constitute dishonest contractual performance. Misleading or acting untruthfully toward the other party, particularly in the lead-up to the termination of the contract or contractual rights; misrepresenting the intentions of a regulatory tribunal or dealings with the tribunal; and preferring one contracting party over another in a like position; all have the potential to amount to dishonest performance of the contract.

Honesty is, however, a word which may have different meanings in different circumstances. It may mean one thing for the principles of equity and another thing for the principles of criminal law. Using the conclusions in Bhasin v. Hrynew, Canadian courts will now, through actual cases, develop the scope of that word for Canadian contract law, just like they have with the words “reasonable”, and “good faith”. This is a serious matter for building contracts and one which American courts have wrestled with. Thus, for a cost plus contract, what sort of unjustified additions to the costs amount to “dishonesty”? What sort of mis-management of a project site amount to “dishonesty”? Perhaps we just know it when we see it.

Bhasin v. Hrynew, 2014 SCC 71

Building Contract – Performance – Good Faith – Honest Performance

Thomas G. Heintzman O.C., Q.C., FCIArb                                                              November 30, 2014

www.heintzmanadr.com

www.constructionlawcanada.com

 

 

 

What Amounts to Good Faith Conduct or Repudiation on Construction Projects?

Last week we discussed joint ventures in construction projects.  That issue arose from the important recent decision of the Prince Edward Island Court of Appeal in WCI Waste Conversion Inc. v. ADI International In. 

In this article, we will examine two further issues raised by that decision:

One, the duties of good faith and fiduciary duties in a construction project; and

Two, the degree to which conduct must be wrongful before it will amount to repudiation entitling the other party to terminate a construction contract.

The Background

To refresh our memory from my article last week, in June 2000, a PEI Crown Corporation, Island Waste Management Corporation (“IWMC”), issued a Request for Proposals for the design, construction and operation of a central composting facility to serve the province of Prince Edward Island.  WCI approached ADI about making a proposal together.  The ultimate Proposal was submitted in March 2001 by ADI and it stated that it was prepared by both companies.  In July 2001, IWMC awarded the contract to ADI, with WCI shown as a sub-contractor.

In May 2001, ADI and WCI entered into a Memorandum of Understanding (“MOU”).  They entered into a further MOU in August 2001 after the contract had been awarded by IWMC to ADI.  A provision of the August MOU stated that, while ADI would be the prime contractor and WCI the subcontractor, the actual working relationship between them would be based upon the general principles of a joint venture agreement.  The majority of the Court of Appeal held that this provision resulted in the parties being joint venturers, not independent contractors.

Under ADI’s contract with IWMC, ADI was to enter into a five year operating contract with IWMC, and under the MOU, ADI was to enter into a five year subcontract with WCI under which WCI was to be the operator.

In its Substantial Performance letter dated October 7, 2001, IWMC accepted ADI’s application for Substantial Performance effective October 1, 2001.  In accepting Substantial Performance, IWMC stated that its concerns about throughput performance were to be addressed by the date of Total Performance, which was to occur on February 1, 2003.  As a result, both ADI and WCI had until February 1, 2003 to demonstrate throughput performance.  Moreover, the majority of the Court of Appeal concluded that, based upon its conduct leading up to the Substantial Performance letter, ADI effectively viewed WCI’s performance with respect to throughput performance as being a deficiency, and not conduct which repudiated WCI’s obligations under the contract.

On November 26, 2002, ADI gave notice to WCI that it was in default of its obligations and gave a five day “cure” notice to WCI.  By letter dated November 29, 2001, WCI denied that it was in default and restated its commitment to improve the throughput performance of the project.  By letter dated December 4, 2002, ADI terminated the contractual relationship between the parties.

Repudiation and Termination

The trial judge held that, as of the date of ADI’s termination of the contract, WCI had not repudiated the contract, and therefore ADI’s termination was unlawful.  This finding was upheld by the majority of the Court of Appeal.  There are several aspects of its conclusions that are important.

First, the majority of the Court of Appeal held that the “cure” notice could not be given by ADI if WCI was not then in default.  Since WCI had until February 2003 to ensure that throughput performance was met, WCI was not in breach of any obligations as of November 26, 2002 when ADI delivered its “cure” notice, and December 4, 2002 when it terminated the contract. The Court of Appeal stated its affirmation of the trial judge’s conclusion as follows:

“The trial judge was entitled to find, as he did that WCI did not by its words or conduct repudiate; that, in any event, the time for correction of the deficiencies in question was not exhausted; and, in the circumstances of the status of the deficiencies, ADI did not show that WCI was incapable of performing its part of the contract.”

This is a very useful check list for a contractor contemplating termination of a subcontractor, particularly when deciding to give or act upon a “cure” notice.  First, by its words or conduct, has the subcontractor really repudiated its obligations?  Second, has the time for performance of the obligations in question really been exhausted?  And third, is the subcontractor really incapable of performing its contract?   And for good measure, can I prove all these elements at a trial?

The second important aspect of the Court of Appeal’s decision is its affirmation of the principle that “when a contract provides a time within which the contract work must be completed, the contractor is entitled to the whole of that time for doing the work” relying on Goldsmith and Heintzman on Canadian Building Contracts (4th ed) at chapter 5, part 1(d).

Third, the trial judge and majority judgment in the Court of Appeal applied the principle of good faith performance of contractual obligations.  The trial judge held that ADI did not act in good faith in seeking approval of Substantial Completion on the basis of throughput performance being achieved by February 2003 and then turning around and terminating the contract with WCI based upon its deficiencies in relation to throughput performance before February 2003.  The Court of Appeal held that a contract must be performed in good faith, that this obligation involves performance within the reasonable expectations established by the contract, and that the trial judge was entitled to find that ADI’s “tactics and motivations” were inconsistent with a good faith exercise of its obligations and contractual duties to WCI.

Fourth, in examining the conduct and rights of ADI and WCI, the trial judge and Court of Appeal looked to the conduct and rights as between the owner, IWMC, and ADI.  Thus, IWMC had delivered no “cure” notice or termination notice to ADI in relation to throughput performance.  Why was ADI delivering such a notice to WCI?  At ADI’s request, IWMC had agreed that throughput performance would be established by the date of Total Performance.  Why was ADI not agreeing with WCI to the same date for performance?  Clearly, ADI’s inconsistent conduct or attitude was of crucial concern to the trial judge, and the Court of Appeal upheld the trial judge’s findings based on those concerns.

The minority judge agreed with this conclusion but would have directed a new trial related to the entitlement of ADI to terminate the operating contract with WCI at its sole discretion and whether it had done so in good faith.

All the judges of the Court of Appeal were firmly of the view that the issue of whether or not WCI had repudiated the contract and whether or not ADI had the right to terminate the contract based on repudiation, was to be determined on an objective basis.  The majority held that repudiating is “not lightly to be inferred from a party’s conduct”, and that, as the terminating party, ADI had the obligation to prove WCI’s repudiation and its entitlement to terminate.  Accordingly, there was no element of discretion or deference to be accorded to ADI’s decision to terminate.

In all respects, this decision of the PEI Court of Appeal provides a very useful survey of the issues which must be addressed by contractors and subcontractors when termination for repudiation is contemplated under a construction contract, particularly when a “cure” notice is involved.

Good Faith and Fiduciary Duties

The trial judge concluded that, by reason of the joint venture between them, the parties owed fiduciary duties to each other.  Both the majority and the minority of the Court of Appeal disagreed.  The majority held that a joint venture, unlike a partnership, does not necessarily give rise to fiduciary duties.  Without deciding if fiduciary duties did arise in this joint venture, the majority held that the material findings of the trial judge about the conduct of the parties and the legal consequences of that conduct could be supported without reference to fiduciary duties.

The minority judge found that it was unlikely that, in the circumstances of this case, fiduciary duties would arise.  The minority judge then considered whether the parties had an obligation to exercise their rights under the contract in good faith.  He concluded that there was no such obligation in relation to any of the provisions of the contract which did not involve discretion, and that there was in relation to those provisions that did involve discretion.  He then concluded that under the “cure notice” provision of the MOU, if AWI properly followed the notice provisions and WCI did not cure, then the MOU could be terminated without regard to issues of good faith.  However, he held that AWI’s right to terminate the operating agreement was unilateral and could be exercised “in its sole discretion”, provided it gave the required notice and paid the required termination fees.  In this circumstance, the minority judge concluded that AWI was required to act in good faith in giving a notice to terminate the operating agreement.

The concepts of a fiduciary duty and a duty of good faith are very different.  A fiduciary duty is a duty to act in the utmost good faith and in the other party’s best interest.  An obligation of good faith is not a fiduciary duty.  It is not the obligation to act in the utmost good faith and in other party’s best interest.  It is the obligation to act in accordance with the purpose of the contract and not to undermine its performance.

It is highly doubtful that a true fiduciary duty will arise during a construction project unless the parties call themselves partners.  The commercial setting for the project is not consistent with such an obligation.

On the other hand, it is hard to see why an obligation to act in good faith should not arise.  After all, that obligation simply requires a party not to act in bad faith, not to act for an ulterior motive, that is, a motive which is outside the purpose of the contract.

Making an obligation of good faith dependent upon the existence of discretion, as the minority judge did, is highly problematic.  The element of discretion is usually relevant to determining whether the duty is a fiduciary duty, not whether a duty of good faith exists.  If a cure notice is given properly on its face, but is given for an ulterior motive having nothing to do with the proper completion of the construction project, why should that sort of conduct be valid?  Why is the right to terminate the operating contract any more “unilateral” than the right to give a cure notice?  And if a party has a right to terminate “in its sole discretion”, then surely the real issue is whether that right is exercised for bona fide reasons consistent with the purpose of the contract.

In all these circumstances, good faith appears to be applicable to most of the obligations on a construction project.

See Heintzman and Goldsmith on Canadian Building Contracts, 4th ed, Chapter 7, part 1.

Building Contracts   –   Good Faith   –   Fiduciary Duties   –   Repudiation  –  Cure Notice

WCI v. ADI, 2011 PECA 14 (CanLII)

Thomas G. Heintzman O.C., Q.C.                                                                          January 10, 2012

www.heintzmanadr.com                                                                                        constructionlawcanada.com

When Is A Building Contract A Joint Venture?

A difficult issue that may arise between contractors and subcontractors is the nature of their contractual relationship.  Are they:  independent contractors; or partners; or joint venturers; or employees one of the other?

In WCI Waste Conversion Inc. v. ADI International Inc, The Prince Edward Island Court of Appeal recently considered whether a contractor and subcontractor were actually in a joint venture relationship.  The decision is an important one as the majority and minority of the court approached the issue in a different way.

The Court also considered questions relating to the obligations of good faith, fiduciary duty and repudiation on a construction project.  The decision provides a useful insight into those issues as they apply to a construction project.

Those issues will be addressed in my next blog, but for now, let’s consider the question of when parties to a construction project may be in a joint venture.

The Background

In June 2000, a PEI Crown Corporation, Island Waste Management Corporation (“IWMC”), issued a Request for Proposals for the design, construction and operation of a central composting facility to serve the province of Prince Edward Island.  WCI approached ADI about making a proposal together.  The two companies submitted a Pre-Qualification Submission which was expressly made by those companies “in association” and as a “team”.  The ultimate Proposal was submitted in March 2001 by ADI and it stated that it was prepared by both companies.  In July 2001, IWMC awarded the contract to ADI, with WCI shown as a sub-contractor.

In May 2001, ADI and WCI entered into a Memorandum of Understanding (“MOU”).  They entered into a further MOU in August 2001 after the contract had been awarded by IWMC to ADI.  The key provision of the August MOU stated as follows:

It is agreed that ADI will be the prime contracting party, with WCI engaged as a sub-contractor.  ADI will provide the bonding and insurances as stipulated by the RFP. However, it is agreed that the actual working relationship will be based on the general principles of a joint venture agreement as summarized below.

In their correspondence with each other, ACI and WCI frequently referred to the bid as being “joint” and to the relationship as being a “joint venture”, but ADI insisted throughout that it was the prime contractor and carried the associated rights and risks.

Construction of the project was substantially completed by October 2002.  During the construction, the relationship between ADI and WCI deteriorated and ADI terminated the contract with WCI.

The Sub-Contract or Joint Venture Issue

The trial judge found that the contract between the parties included the two MOUs and the correspondence between the parties, at least so far as determining the relationship between the parties.  He held that, for the purposes of the relationship with IWMC, the parties were in a contractor-sub-contractor relationship, but between themselves they were parties to a joint venture relationship.

The  majority of the PEI Court of Appeal affirmed this finding.  A number of features of its reasoning are important.

First, the majority held that ADI could not rely on evidence outside the MOU to contradict the statement in the MOU that the relationship between the parties was a joint venture.

Second, the majority held that it was not necessary that WCI have an expectation of profit from the prime contract with IWMC for there to be a joint venture between the parties.  Even though WCI was only entitled to a fixed payment from ADI, and ADI was entitled to all the upside and subject to the downside of that prime contract, the parties were still entitled to call their agreement a joint venture agreement and thereby impose duties upon themselves consistent with a joint venture.

Third, the majority held that contractors and subcontractors are entitled to contract between themselves as joint venturers, and to contract with the owner on the basis that only one of them is the contractor and the other is a subcontractor.  The majority distinguished the case of Design Services v. R, [2008] 1SCR 737 in which a subcontractor asserted that it was in a contractual relationship with the owner based upon it really being part of a joint venture with the contractor.  The majority of the PEI Court of Appeal said that, in Design Services, the owner had issued no contract at all to the contractor but had issued the contract to another bidder:

“Canada awarded no construction contract to the contractor, Olympic.  Olympic didn’t enter into a subcontract with Design Services.  In the present case, WCI’s claim is between the contracting parties, inter se, where terms have been agreed and expressed by the parties.”

The minority judge disagreed.  As to the clause in the MOU stating the parties’ relationship, the minority judge held that there was an inconsistency between the first and third sentences and that “the court was obligated to find an interpretation which would give meaning to both provisions that create the inconsistency.”

The minority judge then turned to the actual responsibilities and the actual entitlements to payment and profits to determine whether the relationship was really one of joint venture or one of contractor-subcontractor.  He found that ADI entered into a fixed price contract with IWMC in which WCI had no entitlement to profit, and that WCI entered into a fixed price contract for WCI to be paid a fixed price.  There was no sharing in profits under either arrangement.  ADI and WCI had separate activities for which they were responsible.  Each party entered into separate sub-contracts.  Neither party was vulnerable to the other.  In short, all the ingredients of the relationship indicated that there was no joint venture and that the parties were independent contractors.  According to the minority judge, the statement about a joint venture in the MOU:

“meant they would work in close cooperation with each other to carry out their specialized duties as contractor and subcontractor…. Reliance on joint venture was for purposes of facilitating the proper functioning of their working relationship as contractor and subcontractor…there is nothing in their contractual arrangements which would indicate they agreed to enter into a joint venture….The statement standing by itself in the contract did not make their legal relationship that of parties to a joint venture.”

This disagreement between the majority and minority reveals a fundamentally different approach to determining the legal relationship between the parties.

The majority held that, if the parties state in their agreement that they are joint venturers, then the court will hold them to that statement.

The minority held that the court may go behind that statement, at least if the parties also state that they have a contractor-subcontractor relationship so far as the owner is concerned; and the court may determine if the relationship between the parties is really one of joint venture and if it is not, then the parties’ statement about joint venture may be over-ridden.

This difference in opinion raises a number of questions:

First, if the parties wish to have a joint venture relationship between themselves, but also wish one of them to be the prime contractor and the other to be the subcontractor, can they legally do so?  If they can, how do they do so to ensure that the relationship is not disputed later?

The wording used by the parties in the key provision of the MOU seems as clear as possible, namely, that the parties wanted a joint venture arrangement between them, but recognized that one of them would be contractor and the other sub-contractor so far as the owner was concerned.  How could they have more clearly stated that intention?  Would it have been better to leave out reference to the “actual working relationship” being “based on” a joint venture agreement, and instead say that the “real legal relationship between the parties is that of joint venture”?   Or with this judicial precedent, can we now proceed on the basis that the words in this contract are sufficient in the future to create a joint venture between a contractor and subcontractor?

Second, which approach is better?  Should courts accept the parties’ statement as it is?  Or should they inquire into the actual relationship to see if it is one of joint venture?  In the employment setting, courts often determine whether the relationship is really one of employment or one of independent contractors, but there are real public policy reasons for doing so.  When the parties say that they are partners, should the court go behind that statement to see if they really are?  If they say that they have entered into a joint venture agreement, are there good public policy reasons for the court to go behind that statement?

These thoughts are enough for the moment.  In the next blog we will consider the approach of the PEI Court of Appeal to the following important issues:

…when do parties to a construction project owe duties of good faith or fiduciary duties to each other?

…and what misconduct on a construction project will be considered to be sufficiently serious that it amounts to repudiation entitling the other party to terminate the contract?

A very meaty decision indeed!

See Heintzman and Goldsmith on Canadian Building Contracts, 4th ed, Chapter 7, part 1.

WCI v. ADI, 2011 PECA 14 (CanLII)

 Construction Law   –   Contractors and Subcontractors   –   Joint Venture

Thomas G. Heintzman O.C., Q.C.                                                                  January 7, 2012

www.constructionlawcanada.com
www.heintzmanadr.com