Friday, November 14, 2014

Duty of Honest Performance of Contracts Recognized in Canadian Common Law


In a landmark decision, released on November 13, 2014,  (Bhasin v. Hrynew 2014 SCC 71), the Supreme Court of Canada recognized a new common law duty for parties to a contact to perform their contractual obligation honestly and in good faith, i.e. a duty of honest performance.   The recognition of this duty represents a change in the law in Canada. 

 

In this case, the plaintiff, Mr. Bhasin, operated a business in Alberta selling registered education savings plans on behalf of Canadian American Financial Corp.  (“Can-Am”).  After almost 10 years, Mr. Bhasin and Can-Am entered into a new agreement governing their relationship featuring a three year term which renewed automatically unless one party gave 6 months’ notice of termination. 

 

The defendant, Mr. Hrynew, a direct competitor of Mr. Bhasin, began working for Can-Am with a view to merging his business with Mr. Bhasin’s business.  Mr. Hrynew was placed in the position of “auditing” Mr. Bhasin’s business.  Can-Am repeatedly misled Mr. Bhasin about Mr. Hrynew’s duties and obligations as an “auditor” as well as the plan to merge Mr. Hrynew’s business with Mr. Bhasin’s.  Ultimately, Can-Am gave notice that it did not intend to renew Mr. Bhasin’s agreement resulting in the loss of value that Mr. Bhasin had built over a period of almost 10 years.  Mr. Bhasin’s sales force was subsequently assumed by Mr. Hrynew.

 

Mr. Bhasin sued Can-Am and Mr. Hrynew in the Alberta Superior Court alleging, among other things, that they had breached an implied duty of good faith.  His claim was successful at trial but was subsequently dismissed by the Alberta Court of Appeal. 

 

In a unanimous decision (the majority decision was written by Mr. Justice Thomas Cromwell), the Supreme Court of Canada held that the common law in Canada should take an incremental step forward to recognize a general doctrine in contract law that imposes a minimum standard of honest contractual performance.

 

The court recognized that Anglo-Canadian common law has resisted acknowledging any generalized, independent doctrine of good faith performance of contracts which is out of step with civil law of Quebec and most jurisdictions in the United States.  Rather, Canadian common law in that respect was piecemeal, unsettled, unclear and inconsistent with the reasonable expectations of commercial parties. 

 

Justice Cromwell identified the Court’s role to develop the common law to keep pace with the “dynamic and evolving fabric of Canadian society” where it can do so in an incremental fashion.  He contemplated not a wholesale change or a reversal of settled law, but a development directed at bringing greater certainty and coherence to the law.

 

The new doctrine of honest performance is characterized by two incremental steps:

 

  1.  the first step is to acknowledge that good faith contractual performance is a general organizing principle of common law of contract which informs varies rules in various situations and types of relationships and recognizes obligations of good faith contractual obligations; and
  2. the second step is to recognize as a further manifestation of this organizing principle that there is a common law duty which applies to all contracts to act honestly in the performance of contractual obligations.
This new duty of honest performance is not an implied term but a general doctrine.  This means that the duty is operative irrespective of the intentions of the parties and is analogous to any other equitable doctrine such as unconscionability.   Justice Cromwell provided some guidance on how the new doctrine would manifest itself in the day to day performance of the commercial parties.  A general duty of honesty in contractual performance means simply that the 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 put the other party’s economic interest ahead of its own.

This new principle has the potential to affect the manner in which commercial parties structure agreements, the way that parties to a contract exercise existing rights, negotiate for future rights and generally communicate with each other.

Regards,

Blair

Tuesday, November 11, 2014

Supreme Court Says Police Wiretaps Can Be Used in Civil Proceedings


The Supreme Court of Canada has ruled that once a private communication has been "intercepted" for use in a criminal investigation, it becomes available to a party in a civil proceeding who may have a claim to it based on relevance. 

In the early summer of 2004, the Competition Bureau of Canada began an investigation (the “Octane Investigation”) into allegations of a conspiracy to fix gasoline pump prices in certain regions of Quebec.   To carry out the investigation, the Competition Bureau obtained from the Superior Court of Quebec, 7 judicial authorizations that enabled it to intercept and record more than 220,000 private communications.  These authorizations for the wiretaps were obtained under Part VI of the Criminal Code of Canada.

 

In 2008 as a result of the Octane Investigation, a series of charges were laid against a number of people alleging that they had conspired to fix pump prices in certain regions of Quebec.  In July 2010 and September 2012, other charges for the same offences were laid bringing the total number of persons charged to 54.

 

Parallel with the criminal proceedings, certain individuals and the Automobile Protection Association, instituted a class action in the Quebec Superior Court against a number of persons, including the accused, alleging that they had breached duties imposed on them under the Civil Code of Quebec and under section 36 of the Competition Act, by engaging in anti-competitive practices.  The class action was subsequently authorized by the Quebec Superior Court. 

 

In support of the class action, the plaintiffs filed a motion for disclosure of documents under the Quebec Code of Civil Procedure and requested that the Federal Director of Public Prosecutions (“DPP”) and the Competition Bureau disclose to them all the private communications/wiretaps that had been intercepted in the course of the Octane Investigation.   Shortly before the motion was heard, the plaintiffs narrowed the scope of their request limiting it to the recordings that had already been disclosed to the accused in the parallel criminal proceedings.  The accused contested the motion.

 

The motions judge granted the plaintiffs’ motion and ordered that the Competition Bureau and the DPP disclose the wiretaps, but only to the lawyers and experts participating in the class action and screen the recordings to protect the privacy of third parties who had nothing to do with the class action.  

 

The accused persons appealed to the Quebec Court of Appeal.  In two separate judgments, the Court of Appeal declined to review the merits of the motion judge’s decision.

 

The accused persons further appealed to the Supreme Court of Canada ( see Imperial Oil v. Jacques, 2014 SCC 66).  The Supreme Court, in a 6–1 decision, dismissed the appeal.  The majority of the court (decision was written by Mr. Justice LeBel) held that a party to a civil proceeding can request the disclosure of recordings of private communications intercepted by the state in the course of a criminal investigation. 

The Supreme Court held that although section 29 of the Competition Act provides for confidentiality of the Competition Bureau’s record of investigation, it does not prohibit the disclosure of private communications intercepted under Part VI of the Criminal Code.  In addition, even though section 193(1) of the Criminal Code lays down the principle that it is unlawful to disclose or use an intercepted private communication without the consent of the originator or the intended recipient of the communication, there are exceptions to this general prohibition.  For example, section 193(2)(a) provides that a disclosure is not an offence if it is made “in the course of or for the purpose of giving evidence in any civil proceedings”.  Nothing in the words of this provision justifies limiting its application to the time when evidence is being given.  The documents requested at the exploratory stage of any civil proceeding may be requested “for the purpose” of testifying at the hearing.  The Court concluded that section 193(2)(a) does not have "facilitating the fight against crime "as its sole purpose; rather its objective is to ensure that courts will have access to all information relevant to the proceedings before them.

 

The Supreme Court held that the Quebec Civil Code of Procedure empowers a judge to order disclosure of documents relating to the issues between the parties that are in possession of a third party.  Judges have great discretion, but should generally favour disclosure.  Nevertheless, the judge must deny a request for disclosure if immunity from disclosure is either provided for in legislation or established by the courts.  Judges must remain sensitive to the duty to protect a person’s privacy.  However, the scope of the protection of the right of the innocent to privacy must always be assessed in light of the various interests at stake.

 

The majority of the Court reasoned that judges have great discretion to control the process of disclosing evidence at the exploratory stage of proceedings and to set conditions for and limits on disclosure.  Where the request of documents results from a criminal investigation, the judge must also consider the impact of disclosure on the efficient conduct of the criminal proceedings and on the right of the accused to a fair trial.

 

Here, the Supreme Court found that the motion judge’s order was consistent with those principles and there was no factual or legal impediment to disclosure of the documents.  The requested evidence was relevant.  Further, the scope of the disclosure order was limited so as to protect the right to privacy of all those whose communications were intercepted.  The disclosure would not hinder the efficient conduct of the criminal proceedings or violate the rights of the parties still facing charges to a fair trial. 

Regards,

Blair

 

Wednesday, November 5, 2014

Cuban Claimant Denied Refugee Protection in Canada


Luis Alberto Hernandez Febles was admitted to the United States as a refugee from Cuba.  While living in the United States, he was convicted and served time in prison for two assaults with a deadly weapon – in the first case, he struck a roommate on the head with a hammer, and in the second case, he threatened to kill a roommate’s girlfriend at knife point.  The US revoked his refugee status and issued a removal warrant, which is still outstanding.

 

After his refugee status in the US was revoked, Mr. Febles fled to Canada, entering illegally.  He then claimed refugee protection in Canada. Refugee protection claims in Canada are adjudicated by the Refugee Protection Division of the Immigration Refugee Board.

The question was whether Article 1F(b), the “serious criminality exclusion” article of the Convention Relating to the Status of Refugees (“Refugee Convention”) incorporated in Canada by section 98 of the Immigration and Refugee Protection Act (“Act”) barred Mr. Febles from refugee protection because of the crimes he had committed in the past. 

 

Different interpretations of the article of the Refugee Convention were in play.  The Minister of Citizenship and Immigration (“Minister”) argued that the serious criminality exclusion was triggered whenever the refugee claimant had committed a serious non-political crime before coming to Canada.  It is not confined to fugitives from justice.  The Minister also took the position that post-crime events like rehabilitation or expiation, were not relevant.  The only question was whether the claimant committed a serious non-political crime before seeking refugee protection in Canada.

 

Mr. Febles and the United Nations High Commissioner for Refugees (“High Commissioner”) argued for a narrower interpretation of the Article.  Mr. Febles argued that the exclusion in the Article was confined to fugitives from justice.  Mr. Febles, having served his sentences, was not a fugitive from justice.   The High Commissioner argued that the question was whether the refugee claimant was “deserving” of refugee protection at the time of the application, which requires consideration not only of the seriousness of the offence itself, but of how long ago the offence was committed, the conduct of the claimant since the commission of the offence, whether the claimant has expressed regret or renounced criminal activities and whether the claimant posed a threat to the security of Canada at the present time.  

 

Simply put, the Minister argued that serious criminality under the Article was simply a matter of looking at the seriousness of the crime and when it was committed, while Mr. Febles and the High Commissioner argued that the article requires consideration of other matters, including whether the claimant was currently dangerous.   

 
In deciding Mr. Febles’ refugee protection claim , the Board concluded that Febles was among the persons referred to by the Article and therefore ineligible for refugee protection in Canada pursuant to section 98 of the Act.   Both the Federal Court and the Federal Court of Appeal dismissed Febles’ application for judicial review. 

 

In a 5 to 2 decision, the Supreme Court of Canada agreed with the decisions below and dismissed the application for judicial review.  The majority decision was written by Chief Justice McLachlin.  See Febles v. Canada (Citizenship and Immigration) 2014 SCC 68.

 

The Court held that interpreting an international treaty was governed by the Vienna Convention on the Law of Treaties (“Vienna Convention”).  Pursuant to article 31(1) of the Vienna Convention, interpretation of a treaty should be approached by considering:  (1)  the ordinary meaning of its terms; (2)  the context; and (3) the object and purpose of the treaty.  In addition, article 32 of the Vienna Convention provided that recourse to interpretation may be had to supplementary means, including the preparatory work of the treaty and the circumstances of the conclusion, but only if the application for article 31 leaves the meaning ambiguous or obscure or leads to a result which is manifestly absurd or unreasonable.

 

The Court held that the ordinary meaning of the terms “has committed a serious crime” refers only to the crime at the time it was committed and not to anything subsequent to the commission of the crime.  The Court concluded that there is nothing in the text of the provision suggesting that the Article only applies to fugitives, or that factors such as a current lack of dangerousness or post-crime expiation or rehabilitation are to be considered or balanced against the seriousness of the crime. 

 

The Court held that the context around the Article supported this interpretation.  The article in the Refugee Convention is not confined to fugitives.  The reason article 33(2) applies only to particularly serious crimes and has the additional requirement that “danger to the community” be demonstrated, is because it authorizes removal of a person whose need for protection has been recognized. 

 

In addition, the object and purposes of the Refugee Convention do not support the argument that the Article is confined to fugitives.  The Refugee Convention has twin purposes:  it aims to strike a balance between helping victims of oppression by allowing them to start new lives in other countries while also protecting the interest of receiving countries.  These countries did not renounce their interests simply by negotiating specific provisions to aid victims of oppression.  Exclusion clauses should not be enlarged in a manner inconsistent with the Refugee Convention’s broad humanitarian aims but overly narrow interpretations should not be adopted which ignore the contracting states need to control who enters their territories. 

 

Ultimately the purpose of an exclusion clause is to exclude.  Article 1F(b) is not directed solely at fugitives or at some subset of serious criminals who are undeserving at the time of the refugee application.  Rather, in excluding all claimants who have committed serious, non-political crimes, the article expresses the contracting states’ agreement that such persons by definition would be undeserving of refugee protection by reason of their serious criminality.

 

The Court found that there were a number of rationales for excluding people who have committed serious crimes – it may prevent people fleeing from justice, it may prevent dangerous and particularly undeserving people from entering the host country, it may help preserve the integrity and legitimacy and ultimate viability of the refugee protection system, it may deter states from exporting criminals as refugees, it may allow states to reduce danger to their society from serious criminality cases given the difficult task and potential for error when attempting to determine the ongoing dangerousness of criminals from abroad on whom they may often have limited, reliable information.   Whatever rationale may or may not exist for Article 1F(b), its purpose is clear in excluding persons from protection who previously committed serious crimes abroad.

Regards,

Blair

 

Monday, November 3, 2014

Air Canada Passengers Can't Sue for Airline's Failure to Provide French Language Services


Air Canada failed to provide services in French on some international flights as it was obliged to do under the Official Languages Act (“Act”).  Michel and Lynda Thibodeau, two Air Canada passengers, applied to the Federal Court for damages and for orders requiring Air Canada to take steps to ensure future compliance with the Act.  Air Canada defended the claims for damages by relying on the limitation of damages liability set out in the Convention for the Unification of Certain Rules for International Carriage by Air (the “Montreal Convention”) which is part of Canadian Federal law by virtue of the Carriage by Air Act.     

 

The Federal Court rejected Air Canada’s defence, awarded damages to the Thibodeaus and granted a “structural” order.  However, the Federal Court of Appeal set that ruling aside in part, holding that the Montreal Convention precluded the damages remedy for the events that took place on board Air Canada flights.  It also held that a structural order was not appropriate.  The Thibodeaus appealed to the Supreme Court of Canada. 

 

In a 5 to 2 decision, the Supreme Court of Canada dismissed the appeal – Thibodeau v. Air Canada, 2014 SCC 67.  The majority decision was written by Mr. Justice Cromwell.  

The Court held that the Montreal Convention’s uniform and exclusive scheme of damages liability for international air carriers does not permit an award of damages for breach of language rights during international carriage by air.  To hold otherwise would “do violence” to the text and purpose of the Montreal Convention, apart from Canada’s international obligations under the convention and put Canada off-side a strong international consensus concerning its scope and effect.  The general remedial powers under the Act to award "appropriate and just" remedies cannot, and should not, be read as authorizing Canadian courts to depart from Canada’s international obligations under the Montreal Convention. 

 

The court held that two of the main purposes of the Montreal Convention are to achieve a uniform set of rules governing damages liability of international air carriers and to provide the limitation of carrier liability.   These purposes can only be achieved if the Montreal Convention provides the exclusive set of rules in relation to the matters that it covers.  The Montreal Convention does not deal with all aspects of international carriage by air, but within the scope of the matters which it does address ,it is exclusive in that it bars resort to other basis for liability in those areas.

 

The claims before the Supreme Court fell squarely within the exclusion established by the Montreal Convention.  The key provision (Article 29) makes clear that the Montreal Convention provides the exclusive recourse against airlines for various types of claims arising in the course of international carriage by air.  Article 29 establishes that in relation to claims falling within the scope of the Montreal Convention, “any action for damages, however founded” may only be brought “subject to the conditions and such limits of liability as are set out in this Convention”.

 

The court rejected the Thibodeaus argument that the Montreal Convention does not limit claims for damages sought in relation to public law claims or breaches of quasi-constitutional statutes.  It held that such argument had no support in the text or purpose of the convention or in international jurisprudence.  The Thibodeaus claims were an “action for damages” within the meaning of Article 29 as they claimed damages for injuries, namely moral prejudice, pain and suffering and loss of enjoyment of their vacation, suffered in the course of an international flight.

 

The court held that the Montreal Convention is part of an internationally agreed upon uniform and exclusive scheme addressing the damages claimed in the field of international carriage by air.  The remedial provisions in the Act cannot be understood to be an exhaustive code that requires damages to be available in all settings and without regard to all relevant laws.  The Act does not provide that damages should be granted in every cases but authorizes courts to grant “appropriate and just” remedies.  The power to grant such a remedy can be reconciled with a specific and limited exclusion of damages in the context of international air travel.

Regards,

Blair