Welcome to our third annual list of the Top 10 business decisions in Canada. This is the second of a two-part series, and features the top five cases in ascending order. Cases ranked 6-10 can be found here.
By Julius Melnitzer | March10, 2022
5. 6362222 CANADA INC. v. PRELCO INC. (SCC)
In a judgment that is critically important for parties contracting under Quebec law, the SCC ruled that non-consumer parties could limit or exclude their contractual liability. As the unanimous court saw it, the doctrine of breach of a fundamental obligation, which the Civil Code specifically applies to consumer contracts and contracts of adhesion, does not invalidate these types of limitations or exclusions when freely negotiated between sophisticated commercial parties.
“The court recognized that the statutory doctrine of fundamental breach focused on unconscionability and did not intrude on freedom of contract,” said Guy Pratte in Borden Ladner Gervais’ Montreal office, who represented 6362222 Canada, the successful appellant.
4. GRANT THORNTON LLP v. NEW BRUNSWICK (SCC)
“Discoverability” has long plagued the law relating to limitation periods. So much so that, given the opportunity to set a standard for determining the degree of knowledge required to “discover” a claim, the SCC saw fit to formulate an entirely new standard. That standard, the court stated, was a “plausible inference of liability”, a bar that is beyond suspicion or speculation but short of certainty.
As Peter Griffin, a partner at Toronto litigation boutique Lenczner Slaght, who represented the successful appellant, accounting firm Grant Thornton, sees it, the formulation of a single standard should bring some certainty to a highly contentious area of law.
“There are so many limitation-period related disputes, motions and appeals that having a national standard for discoverability will be very useful,” he says.
A “plausible inference” of liability, the court explained, was one that requires a “permissible fact inference”, which means that a plaintiff need not necessarily be aware of the exact harm suffered or the precise cause of the harm for the limitation period to begin. Direct and circumstantial evidence, as well as constructive knowledge – – – where an individual should have discovered the material facts through reasonable diligence – – – were relevant in assessing a plaintiff’s degree of knowledge. The court did not elaborate, however, on the parameters of “reasonable diligence”, so the issue, common in limitation disputes, will remain controversial.
It is nonetheless important to remember that the SCC was dealing with common law discoverability. In this regard, the court was careful to note that limitations statutes can oust the common law rule, but require clear language to do so.
In this decision, the SCC sought to end the uncertainty that has long plagued Canadian law regarding the interpretation of releases; more particularly, how specific a release must be to bar future claims that parties had not contemplated when drafting their documents.
“Because the rubber was hitting the road differently from province to province, litigants faced a great deal of uncertainty with respect to an extremely common document,” says Erin Best, a litigation partner in Stewart McKelvey’s St. John’s office, who represented Corner Brook, the successful appellant. “The Supreme Court went a long way to remedying that by laying down the principles for interpreting some of the most common types of clauses found in these documents.”
Indeed, the court ruled that there were no special rules for interpreting releases differently from other contractual clauses. That meant reading them with regard to the circumstances of their creation. And while there was no rule of law requiring a narrow interpretation of releases, and parties could release claims unknown at the time of the release, they had to do so in terms that made it clear they intended to cover specific time frames or subject matters.
In 2014, the SCC recognized a duty to perform contracts in good faith, honestly and with regard to the legitimate expectations of others. What it did not do in Bhasin v. Hrynew was establish the limits of the principle. Indeed, Bhasin was open-ended: it presaged that new duties would emerge from the overall “organizing principle”. Here, think Donoghue v. Stevenson, the seminal decision in tort law that engendered a continuing evolution of new duties of care.
Many observers feared, however, that Bhasin’s open-endedness would create commercial chaos. By putting limits on the duty to exercise contractual discretion in good faith, Wastech is a significant step in allaying these fears. Parties breach this duty, the court stated, only when they exercise a discretionary power unreasonably; that is, in a fashion that is not connected to the purpose for which the discretion was granted. And what is unreasonable is determined by a proper interpretation of the contract, not on general notions of fairness or commercial reasonableness.
Still, Geoffrey Cowper of Vancouver, leader of Fasken Martineau Dumoulin’s litigation and dispute resolution group, who represented the successful respondent Greater Vancouver Sewerage, maintains that the uncertainty will continue.
“The need to determine the purpose of the contract as both parties thought it should be leaves doors wide open for litigation,” he says.
Jeremy Opolsky, a litigation partner in Torys’ Toronto office, who represented the intervener Canadian Chamber of Commerce, is of similar mind.
“Every conversation I have with my corporate colleagues regarding this case is about the uncertainty it creates because it affects all contracts that have discretionary clauses and puts limits on how the discretion can be exercised,” he says.
Law Firms: Arvay Finlay LLP; Assembly of First Nations; Attaran, Amir; Attorney General of Alberta; Attorney General of British Columbia; Attorney General of Canada; Attorney General of Manitoba; Attorney General of New Brunswick; Attorney General of Ontario; Attorney General of Quebec; Attorney General of Saskatchewan; Borden Ladner Gervais LLP; Canadian Environmental Law Association; Chalifour, Nathalie; Crease Harman LLP; de Beer, Jeremy; DHC Avocats; Elgie, Stewart; Gall Legge Grant Zwack LLP; Ginsberg, Joshua; Goldblatt Partners LLP; Gowling WLG International Limited; Kowalchuk Law Office; McKercher LLP; Olszynski, Martin; Paul A. Hildebrand Law Corporation; Public Interest Law Centre; Ratcliff LLP; Resilient LLP; Stockwoods LLP; Westaway Law Corporation
Not only is the SCC’s decision upholding the Greenhouse Gas Pollution Pricing Act the top-ranked business decision for 2021, it may one of the most significant judgments from the SCC ever and perhaps for years to come. The 6-3 majority ruling upholding the legislation under the “Peace, Order and Good Government” (POGG) federal power in the Constitution recasts POGG so that it trenches on matters that were previously under provincial jurisdiction.
The legislation allows the federal government to set fuel charges on carbon-based fuel and imposes a pricing mechanism for greenhouse gas emissions (GHG) that are not subject to the fuel charge. The majority ruled that the “pith and substance”, or true purpose, of the legislation was “establishing minimum national standards of GHG price stringency to reduce GHG emission.” The court noted that the Act did not regulate GHG emissions or require provincial businesses to reduce them in any particular way. The legislation did, however, allow provinces to create their own schemes; where these schemes met federal standards, provinces would be exempt from the federal legislation.
Perhaps most significantly, the SCC recognized climate change as a “grave threat to humanity’s future”, that it had no geographic boundaries, that the impact of GHG emissions did not necessarily link to the emissions’ sources, and that no jurisdiction could deal with climate change adequately on its own.
Still, Bruce Hallsor, managing partner of Victoria’s Crease Harman, who represented the intervener the Canadian Taxpayers Federation, is skeptical about the efficacy of the pricing scheme.
“There is a lot of research that demonstrates that a carbon tax is not an appropriate tool to deal with the kind of emergency climate change presents,” he says. “A true emergency requires direct regulation and not merely a revenue-raising scheme – – – it’s similar to the government raising taxes on cigarettes for years with no impact on smoking levels until they started disallowing it in various places.”
Julius Melnitzer is a Toronto-based legal affairs writer, ghostwriter, writing coach and media trainer. Readers can reach him at [email protected] or https://legalwriter.net/contact.