CITATION: Bhasin v. Hrynew, 2014 SCC 71, [2014] 3 S.C.R. 494
DATE: 20141113
DOCKET: 35380
BETWEEN:
Harish Bhasin, carrying on business as Bhasin & Associates
Appellant
and
Larry Hrynew and Heritage Education Funds Inc. (formerly known as Allianz Education Funds Inc., formerly known as Canadian American Financial Corp. (Canada) Limited)
Respondents
CORAM: McLachlin C.J. and LeBel, Abella, Rothstein, Cromwell, Karakatsanis and Wagner JJ.
REASONS FOR JUDGMENT:
(paras. 1 to 112)
Cromwell J. (McLachlin C.J. and LeBel, Abella, Rothstein, Karakatsanis and Wagner JJ. concurring)
BHASIN v. HRYNEW, 2014 SCC 71, [2014] 3 S.C.R. 494
Harish Bhasin, carrying on business as Bhasin & Associates Appellantv.
Larry Hrynew andHeritage Education Funds Inc.
(formerly known as Allianz Education Funds Inc., formerly known as Canadian American Financial Corp. (Canada) Limited) RespondentsIndexed as: Bhasin v. Hrynew2014 SCC 71
File No.: 35380.
2014: February 12; 2014: November 13.
Present: McLachlin C.J. and LeBel, Abella, Rothstein, Cromwell, Karakatsanis and Wagner JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR ALBERTA
Contracts — Breach — Performance — Non-renewal provision — Duty of good faith — Duty of honest performance — Agreement governing relationship between company and retail dealer providing for automatic contract renewal at end of three-year term unless parties giving six months’ written notice to contrary — Company deciding not to renew dealership agreement — Retail dealer lost value of business and majority of sales agents solicited by competitor agency — Retail dealer suing company and competitor agency — Whether common law requiring new general duty of honesty in contractual performance — Whether company breaching that duty.
Damages — Quantum — Contracts — Breach — Performance — Non-renewal provision — Duty of good faith — Duty of honest performance — Agreement governing relationship between company and retail dealer providing for automatic contract renewal at end of three-year term unless parties giving six months’ written notice to contrary — Company deciding not to renew dealership agreement — Retail dealer lost value of business and majority of sales agents solicited by competitor agency — Retail dealer suing company and competitor agency — What is appropriate measure of damages.
C markets education savings plans to investors through retail dealers, known as enrollment directors, such as B. An enrollment director’s agreement that took effect in 1998 governed the relationship between C and B. The term of the contract was three years. The applicable provision provided that the contract would automatically renew at the end of the three-year term unless one of the parties gave six months’ written notice to the contrary.
H was another enrollment director and was a competitor of B. H wanted to capture B’s lucrative niche market and previously approached B to propose a merger of their agencies on numerous occasions. He also actively encouraged C to force the merger. B had refused to participate in such a merger. C appointed H as the provincial trading officer (“PTO”) to review its enrollment directors for compliance with securities laws after the Alberta Securities Commission raised concerns about compliance issues among C’s enrollment directors. The role required H to conduct
audits of C’s enrollment directors. B objected to having H, a competitor, review his confidential business records.
During C’s discussions with the Commission about compliance, it was clear that C was considering a restructuring of its agencies in Alberta that involved B. In June 2000, C outlined its plans to the Commission and they included B working for H’s agency. None of this was known by B. C repeatedly misled B by telling him that H, as PTO, was under an obligation to treat the information confidentially. It also responded equivocally when B asked in August 2000 whether the merger was a “done deal”. When B continued to refuse to allow H to audit his records, C threatened to terminate the 1998 Agreement and in May 2001 gave notice of non-renewal under the Agreement. At the expiry of the contract term, B lost the value in his business in his assembled workforce. The majority of his sales agents were successfully solicited by H’s agency.
B sued C and H. The trial judge found C was in breach of the implied term of good faith, H had intentionally induced breach of contract, and both C and H were liable for civil conspiracy. The Court of Appeal allowed the appeal and dismissed B’s lawsuit.
Held: The appeal with respect to C should be allowed and the appeal with respect to H dismissed. The trial judge’s assessment of damages should be varied to $87,000 plus interest.
Canadian common law in relation to good faith performance of contracts is piecemeal, unsettled and unclear. Two incremental steps are in order to make the common law 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 step 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. Taking these two steps will put in place a duty that is just, that accords with the reasonable expectations of commercial parties and that is sufficiently precise that it will enhance rather than detract from commercial certainty.
There is an organizing principle of good faith that parties generally must perform their contractual duties honestly and reasonably and not capriciously or arbitrarily. An organizing 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. It is a standard that helps to understand and develop the law in a coherent and principled way.
The organizing principle of good faith exemplifies the notion that, in carrying out his or her own performance of the contract, a contracting party should have appropriate regard to the legitimate contractual interests of the contracting partner. While “appropriate regard” for the other party’s interests will vary depending on the context of the contractual relationship, it does not require acting to serve those interests in all cases. It merely requires that a party not seek to undermine those interests in bad faith. This general principle has strong conceptual differences from the much higher obligations of a fiduciary. Unlike fiduciary duties, good faith performance does not engage duties of loyalty to the other contracting party or a duty to put the interests of the other contracting party first.
This organizing principle of good faith manifests itself through the existing doctrines about the types of situations and relationships in which the law requires, in certain respects, honest, candid, forthright or reasonable contractual performance. Generally, claims of good faith will not succeed if they do not fall within these existing doctrines. However, this list is not closed. The application of the organizing principle of good faith to particular situations should be developed where the existing law is found to be wanting and where the development may occur incrementally in a way that is consistent with the structure of the common law of contract and gives due weight to the importance of private ordering and certainty in commercial affairs.
The approach of recognizing an overarching organizing principle but accepting the existing law as the primary guide to future development is appropriate in the development of the doctrine of good faith. Good faith may be invoked in widely varying contexts and this calls for a highly context-specific understanding of what honesty and reasonableness in performance require so as to give appropriate consideration to the legitimate interests of both contracting parties.
The principle of good faith must be applied in a manner that is consistent with the fundamental commitments of the common law of contract which generally places great weight on the freedom of contracting parties to pursue their individual self-interest. In commerce, a party may sometimes cause loss to another — even intentionally — in the legitimate pursuit of economic self-interest. Doing so is not necessarily contrary to good faith and in some cases has actually been encouraged by the courts on the basis of economic efficiency. The development of the principle of good faith must be clear not to veer into a form of ad hoc judicial moralism or “palm tree” justice. In particular, the organizing principle of good faith should not be used as a pretext for scrutinizing the motives of contracting parties.
The objection to C’s conduct in this case does not fit within any of the existing situations or relationships in which duties of good faith have been found to exist. 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.
Under this new general duty of honesty in contractual performance, 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.
This new duty of honest performance is a general doctrine of contract law that imposes as a contractual duty a minimum standard of honesty in 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. However, 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.
The duty of honest performance should not be confused with a duty of disclosure or of fiduciary loyalty. A party to a contract has no general duty to subordinate his or her interest to that of the other party. However, contracting parties must be able to rely on a minimum standard of honesty from their contracting partner
in relation to performing the contract as a reassurance that if the contract does not work out, they will have a fair opportunity to protect their interests.
In this case, the trial judge did not make a reversible error by adjudicating the issue of good faith. C breached the 1998 Agreement when it failed to act honestly with B in exercising the non-renewal clause. The trial judge concluded that C acted dishonestly with B throughout the period leading up to its exercise of the non-renewal clause, both with respect to its own intentions and with respect to H’s role as PTO. The trial judge’s detailed findings amply support this overall conclusion.
C is liable for damages calculated on the basis of what B’s economic position would have been had C fulfilled its duty. While the trial judge did not assess damages on that basis given the different findings in relation to liability, the trial judge made findings that permit this Court to do so. These findings permit damages to be assessed on the basis that if C had performed the contract honestly, B would have been able to retain the value of his business rather than see it, in effect, expropriated and turned over to H. It is clear from the findings of the trial judge and from the record that the value of the business around the time of non-renewal was $87,000. B is entitled to damages in the amount of $87,000. The Court of Appeal was correct in finding that there could be no liability for inducing breach of contract or unlawful means conspiracy. As such, it follows that the claims against H were rightly dismissed.
Cases Cited
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Statutes and Regulations Cited
Civil Code of Lower Canada.
Civil Code of Québec, arts. 6, 7, 1375.
Franchises Act, R.S.A. 2000, c. F-23, s. 7.
Restatement (Second) of Contracts, § 205 (1981).
Uniform Commercial Code, §§ 1-201(b)(20) “good faith”, 1-302, 1-304 (2012).
Authors Cited
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APPEAL from a judgment of the Alberta Court of Appeal (Côté and Paperny JJ.A. and Belzil J. (ad hoc)), 2013 ABCA 98, 84 Alta. L.R. (5th) 68, 544 A.R. 28, 567 W.A.C. 28, 362 D.L.R. (4th) 18, 12 B.L.R. (5th) 175, [2013] 11 W.W.R. 459, [2013] A.J. No. 395 (QL), 2013 CarswellAlta 822, setting aside a decision of Moen J., 2011 ABQB 637, 526 A.R. 1, 96 B.L.R. (4th) 73, [2012] 9 W.W.R. 728, [2011] A.J. No. 1223 (QL), 2011 CarswellAlta 1905. Appeal allowed in part.
Neil Finkelstein, Brandon Kain, John McCamus and Stephen Moreau, for the appellant.
Eli S. Lederman, Jon Laxer and Constanza Pauchulo, for the respondents.
The judgment of the Court was delivered by
CROMWELL J. —
[1] The key issues on this appeal come down to two straightforward questions: Does Canadian common law impose a duty on parties to perform their contractual obligations honestly? And, if so, did either of the respondents breach that duty? I would answer both questions in the affirmative. Finding that there is a duty to perform contracts honestly will make the law more certain, more just and more in tune with reasonable commercial expectations. It will also bring a measure of justice to the appellant, Mr. Bhasin, who was misled and lost the value of his business as a result.
Overview and Issues
[2] The appellant, Mr. Bhasin, through his business Bhasin & Associates, was an enrollment director for Canadian American Financial Corp. (“Can-Am”) beginning in 1989. The relationship between Mr. Bhasin and Can-Am soured in 1999 and ultimately Can-Am decided not to renew the dealership agreement with him. The litigation leading to this appeal ensued.
[3] Can-Am markets education savings plans (“ESPs”) to investors through retail dealers, known as enrollment directors, such as Mr. Bhasin. It pays the enrollment directors compensation and bonuses for selling ESPs. The enrollment directors are in effect small business owners and the success of their businesses depends on them building a sales force. It took Mr. Bhasin approximately 10 years to build his sales force, but his business thrived and Can-Am gave him numerous awards and prizes recognizing him as one of their top enrollment directors in Canada: 2011 ABQB 637, 526 A.R. 1, at paras. 51, 238 and 474.
[4] An enrollment director’s agreement that took effect in 1998 governed the relationship between Can-Am and Mr. Bhasin. (That Agreement replaced a previous agreement of an indefinite term that had governed their relationship since the outset in 1989.) The Agreement was a commercial dealership agreement, not a franchise agreement. There was no franchise fee and it was not covered by the statutory duty of fair dealing such as that provided for in s. 7 of the Franchises Act, R.S.A. 2000, c. F-23.
[5] That said, there were some features of the 1998 Agreement that are similar to provisions typically found in franchise agreements. Mr. Bhasin was obliged to sell Can-Am investment products exclusively and owed it a fiduciary duty. Can-Am owned the client lists, was responsible for branding and implemented central policies that applied to all enrollment directors: see cls. 4.1, 5.2, 5.3 and 4.7. Mr.
Bhasin could not sell, transfer, or merge his operation without Can-Am’s consent, which was not to be withheld unreasonably: see cls. 4.5 and 11.4.
[6] The term of the contract was three years. Clauses 8.3 and 8.4 allowed termination on short notice for misconduct or other cause. Clause 3.3 — the provision at the centre of this case ― provided that the contract would automatically renew at the end of the three-year term unless one of the parties gave six months’ written notice to the contrary.
[7] Mr. Hrynew, one of the respondents and another enrollment director, was a competitor of Mr. Bhasin and there was considerable animosity between them: trial reasons, at para. 461. The trial judge found, in effect, 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.
[8] When Mr. Hrynew moved his agency to Can-Am from one of its competitors many years before the events in question, Can-Am promised him that he would be given consideration for mergers that would take place and he in fact merged with other agencies in Calgary after joining Can-Am: trial reasons, at para. 238. He was in a strong position with Can-Am because he had the largest agency in Alberta and a good working relationship with the Alberta Securities Commission, which regulated Can-Am’s business: para. 284.
[9] Mr. Hrynew wanted to capture Mr. Bhasin’s lucrative niche market around which he had built his business: trial reasons, at para. 303. Mr. Hrynew personally approached Mr. Bhasin to propose a merger of their agencies on numerous occasions: para. 238. He also actively encouraged Can-Am to force the merger and made “veiled threats” that he would leave if no merger took place: para. 282; see also paras. 251 and 287. The trial judge found that the proposed “merger” was in effect a hostile takeover of Mr. Bhasin’s agency by Mr. Hrynew: para. 240. Mr. Bhasin steadfastly refused to participate in such a merger: para. 247.
[10] The Alberta Securities Commission raised concerns about compliance issues among Can-Am’s enrollment directors. In late 1999, the Commission required Can-Am to appoint a single provincial trading officer (“PTO”) to review its enrollment directors for compliance with securities laws: trial reasons, at paras. 149, 152 and 160. Can-Am appointed Mr. Hrynew to that position in September of that year. The role required him to conduct audits of Can-Am’s enrollment directors. Mr. Bhasin and Mr. Hon, another enrollment director, objected to having Mr. Hrynew, a competitor, review their confidential business records: paras. 189-96.
[11] Can-Am became worried that the Commission might revoke its licence and, in 1999 and 2000, it had many discussions with the Commission about compliance. During those discussions, it was clear that Can-Am was considering a restructuring of its agencies in Alberta that involved Mr. Bhasin. In June 2000, Can-Am outlined its plans to the Commission and they included Mr. Bhasin working for
Mr. Hrynew’s agency. The trial judge found that this plan had been formulated before June 2000: para. 256. None of this was known by Mr. Bhasin: paras. 243-46.
[12] In fact, Can-Am repeatedly misled Mr. Bhasin by telling him that Mr. Hrynew, as PTO, was under an obligation to treat the information confidentially and that the Commission had rejected a proposal to have an outside PTO, neither of which was true: trial reasons, at para. 195. It also responded equivocally when Mr. Bhasin asked in August 2000 whether the merger was a “done deal”: para. 247. When Mr. Bhasin continued to refuse to allow Mr. Hrynew to audit his records, Can-Am threatened to terminate the 1998 Agreement and in May 2001 gave notice of non-renewal under the Agreement: paras. 207-11.
[13] At the expiry of the contract term, Mr. Bhasin lost the value in his business in his assembled workforce. The majority of his sales agents were successfully solicited by Mr. Hrynew’s agency. Mr. Bhasin was obliged to take less remunerative work with one of Can-Am’s competitors.
[14] Mr. Bhasin sued Can-Am and Mr. Hrynew. Moen J. in the Alberta Court of Queen’s Bench found that it was an implied term of the contract that decisions about whether to renew the contract would be made in good faith. The court held that the corporate respondent was in breach of the implied term of good faith, that Mr. Hrynew had intentionally induced breach of contract, and that the respondents were liable for civil conspiracy.
[15] The trial judge found that Can-Am acted dishonestly with Mr. Bhasin throughout the events leading up to the non-renewal: it misled him about its intentions with respect to the merger and about the fact that it had already proposed the new structure to the Commission; it did not communicate to him that the decision was already made and final, even though he asked; and it did not communicate with him that it was working closely with Mr. Hrynew to bring about a new corporate structure with Hrynew’s being the main agency in Alberta. The trial judge also found that, had Can-Am acted honestly, Mr. Bhasin could have “governed himself accordingly so as to retain the value in his agency”: para. 258.
[16] The Alberta Court of Appeal allowed the respondents’ appeal and dismissed Mr. Bhasin’s lawsuit. The court found his pleadings to be insufficient and held that the lower court erred by implying a term of good faith in the context of an unambiguous contract containing an entire agreement clause: 2013 ABCA 98, 84 Alta. L.R. (5th) 68.
[17] The appeal raises four issues:
(a)
Did Mr. Bhasin properly plead breach of the duty of good faith?
(b)
Did Can-Am owe Mr. Bhasin a duty of good faith? If so, did it breach that duty?
(c)
Are the respondents liable for the torts of inducing breach of contract or civil conspiracy?
(d)
If there was a breach, what is the appropriate measure of damages?
A. Did Mr. Bhasin Properly Plead Breach of the Duty of Good Faith?
[18] The Court of Appeal held that Mr. Bhasin had not properly pleaded the good faith issue and that the trial judge had therefore erred in considering it. Mr. Bhasin contests this conclusion, while the respondents support it. I agree with Mr. Bhasin.
[19] The allegations in the statement of claim clearly put the questions of improper purpose and dishonesty in issue. These facts are sufficient to put Can-Am’s good faith in issue. The question of whether this conduct amounted to a breach of the duty of good faith is a legal conclusion that did not need to be pleaded separately. The defendants did not move to strike the pleadings or seek particulars of the allegation of wrongful termination in the statement of claim. Good faith was a live issue that was fully canvassed in a lengthy trial: A.F., at paras. 92-94. Written submissions by both parties at trial referred to the good faith issue and, even in his opening at trial, Mr. Bhasin’s counsel raised the issue of good faith.
[20] The trial judge held that any deficiency in the pleadings did not cause prejudice to the respondents: paras. 23 and 48. This is an assessment she was uniquely positioned to make and her conclusion ought to be treated with deference on appeal. The good faith issue was fully argued in and addressed by the Court of Appeal and has been fully argued on the merits in this Court.
[21] In my view, the trial judge did not make a reversible error by adjudicating the issue of good faith and we should address the merits of that issue.
B. Did Can-Am Owe Mr. Bhasin a Duty of Good Faith?
(1)
Decisions and Positions of the Parties
[22] The trial judge accepted Mr. Bhasin’s position that there was a duty of good faith in this case and that it had been breached. In brief, her reasoning was as follows.
[23] First, the trial judge decided that the 1998 Agreement was a type of agreement which as a matter of law requires good faith performance. She recognized that the 1998 Agreement did not fall within any of the existing categories of contract, such as employment, insurance and franchise agreements, which have been held to require good faith performance. She concluded, however, that the Agreement was
analogous to a franchise or employment contract, and so by analogy to these cases, she implied a term of good faith performance as a matter of law. The contract was not balanced from its inception and the relationship placed the enrollment director in a position of inherent and predictable vulnerability: paras. 67-86.
[24] Second, and in the alternative, 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. She concluded that “[w]hen one considers the whole of the relationship . . . it is clear that the parties had to operate in good faith and there was a requirement of fairness between them. In other words, good faith was necessary to give business efficacy to the whole 1998 Agreement”: para. 101.
[25] The 1998 Agreement contained an “entire agreement clause” stating that there were no “agreements, express, implied or statutory, other than expressly set out” in it: cl. 11.2. The trial judge held, however, that this clause did not preclude the implication of a duty of good faith. The parties, she reasoned, cannot rely on exclusion clauses to avoid contractual obligations where there is an imbalance of power, and courts refuse to let parties shelter under entire agreement clauses where it would be unjust or inequitable to do so: paras. 116-18.
[26] Turning to the issue of breach, the trial judge found that Can-Am had breached the agreement, first by requiring Mr. Bhasin to submit to an audit by Mr. Hrynew and to provide the latter with access to his business records, and second by exercising the non-renewal clause in a dishonest and misleading manner and for an
improper purpose. The non-renewal clause was not intended to permit Can-Am to force a merger of the Bhasin and Hrynew agencies, but that was the purpose for which Can-Am exercised this power: para. 261. The trial judge also found both respondents liable for unlawful means conspiracy and found Mr. Hrynew liable for inducing Can-Am’s breach of its contract with Mr. Bhasin.
[27] The Court of Appeal reversed and held that there had been no breach of contract. The duty of good faith in employment contracts could not be extended by analogy to other types of contract. In any event, the duty of good faith in the employment context is limited to the manner of termination and does not include reasons for non-renewal: C.A. reasons, at paras. 27 and 31. Nor was this a circumstance in which a term could be implied because it was so obvious it was not thought necessary to mention or was necessary to make the contract work: para. 32. Even if there were an implied duty of good faith in this case, the impugned conduct concerned the non-renewal of a contract, which occurs on expiry, unlike a termination clause: para. 31.
[28] Moreover, the Court of Appeal held that a term cannot be implied where it goes against an express term of the contract. Here, the parties did not intend a perpetual contract, since they included a term allowing either party to unilaterally trigger its expiration prior to the end of each three-year term. The trial judge’s approach was inconsistent with the non-renewal provision of the contract. The motive for triggering expiration was not restricted under the Agreement. The
implication of a term of good faith also violated the entire agreement clause. The court held that the evidence of assurances given by Can-Am as to how the non-renewal power would be exercised fell afoul of the parol evidence rule and should not have been considered. Since the Court of Appeal held there was no breach of contract, the basis for the claims in unlawful means conspiracy and inducing breach of contract also disappeared.
(b)
Positions of the Parties
[29] Mr. Bhasin advances two related positions on appeal. His broad submission is that the Court should recognize a general duty of good faith in contract. The duty arises where the agreement gives the defendant the power to unilaterally defeat a legitimate contractual objective of the plaintiff and it does not clearly allow the defendant to exercise its power without regard for that objective: A.F., at para. 51. This duty of good faith prevents conduct which, while consonant with the letter of a contract, exhibits dishonesty, ill will, improper motive or similar departures from reasonable business expectations. Mr. Bhasin contends that common law in Canada is increasingly isolated as other jurisdictions embrace a greater role for good faith in contract law: A.F., at paras. 27-32. The recognition of a general duty of good faith would constitute an incremental advance in the law, given the numerous specific situations that already give rise to a duty of good faith. Mr. Bhasin relies on the findings of the trial judge that the respondents improperly and dishonestly used their non-renewal right to compel Mr. Bhasin to merge with his competitor. Mr. Bhasin
contends that the respondents had no legitimate business reason for not renewing the contract. He also says that the entire agreement clause should be construed narrowly, and that express language is needed for such a clause to derogate from a duty of good faith: A.F., at para. 83.
[30] Mr. Bhasin’s second position, emphasized in oral argument, is that the Court should at least recognize a duty of honest performance of contractual obligations: transcript, at pp. 8, 10 and 24. Mr. Bhasin relies on the trial judge’s findings that Can-Am acted dishonestly towards Mr. Bhasin throughout the period leading up to the non-renewal. It repeatedly lied to him about the nature of the organizational changes required by the Alberta Securities Commission, the nature of the audits that were to be carried out by Mr. Hrynew, and was dishonest about its intention to force him out: trial reasons, at paras. 195, 221, 246-47 and 267.
[31] Unsurprisingly, the respondents see things very differently. While they accept that good faith plays a role in Canadian contract law, they submit that this role is much more modest than Mr. Bhasin suggests. They say that such a duty arises only in certain classes of contract, such as employment contracts, and in contracts involving discretionary powers: R.F., at para. 52. In the employment context, the duty applies only to the manner in which a contract is terminated. The contract in this case was negotiated between commercial parties to whom the policy considerations underlying employment law doctrine do not apply. Mr. Bhasin is alleging a right to a perpetual, or at least indefinite, contract with the respondents. The contract in this
case could not be said to be discretionary, because it provided simply that on six months’ notice, either party could terminate the Agreement. The respondents submit that there is no ambiguity in the wording of the non-renewal clause of the contract and so there is no basis for implying other terms or for relying on extrinsic evidence of the parties’ intentions. The entire agreement clause specifically precluded the implication of any terms other than the express terms of the contract.
[32] The notion of good faith has deep roots in contract law and permeates many of its rules. Nonetheless, Anglo-Canadian common law has resisted acknowledging any generalized and independent doctrine of good faith performance of contracts. The result is an “unsettled and incoherent body of law” that has developed “piecemeal” and which is “difficult to analyze”: Ontario Law Reform Commission (“OLRCˮ), Report on Amendment of the Law of Contract (1987), at p. 169. This approach is out of step with the civil law of Quebec and most jurisdictions in the United States and produces results that are not consistent with the reasonable expectations of commercial parties.
[33] 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.
[34] In my view, taking these two steps is perfectly consistent with the Court’s responsibility to make incremental changes in the common law when appropriate. Doing so will put in place a duty that is just, that accords with the reasonable expectations of commercial parties and that is sufficiently precise that it will enhance rather than detract from commercial certainty.
(b)
Good Faith as a General Organizing Principle
[35] The doctrine of good faith traces its history to Roman law and found acceptance in early English contract law. For example, Lord Northington wrote in Aleyn v. Belchier (1758), 1 Eden 132, 28 E.R. 634, at p. 637, cited in Mills v. Mills (1938), 60 C.L.R. 150 (H.C.A.), at p. 185, that “[n]o point is better established than that, a person having a power, must execute it bona fide for the end designed, otherwise it is corrupt and void.” Similarly, Lord Kenyon wrote in Mellish v. Motteux (1792), Peake 156, 170 E.R. 113, “in contracts of all kinds, it is of the highest
importance that courts of law should compel the observance of honesty and good faith”: p. 113-14. In Carter v. Boehm (1766), 3 Burr. 1905, 97 E.R. 1162, at p. 1910, Lord Mansfield stated that good faith is a principle applicable to all contracts; see also Herbert v. Mercantile Fire Ins. Co. (1878), 43 U.C.Q.B. 384; R. Powell, “Good Faith in Contracts” (1956), 9 Curr. Legal Probs. 16.
[36] However, these broad pronouncements have been, for the most part, restricted by subsequent jurisprudence to specific types of contracts and relationships, such as insurance contracts, leaving unclear the role of the broader principle of good faith in the modern Anglo-Canadian law of contracts: Chitty on Contracts (31st ed. 2012), vol. I, General Principles, at para. 1-039; W. P. Yee, “Protecting Parties’ Reasonable Expectations: A General Principle of Good Faith” (2001), 1 O.U.C.L.J. 195, at p. 195; E. P. Belobaba, “Good Faith in Canadian Contract Law”, in Special Lectures of the Law Society of Upper Canada 1985 — Commercial Law: Recent Developments and Emerging Trends (1985), 73, at p. 75. One leading Canadian contracts scholar went so far as to say that the common law has taken a “kind of perverted pride” in the absence of any general notion of good faith, as if accepting that notion “would be admitting to the presence of some kind of embarrassing social disease”: J. Swan, “Whither Contracts: A Retrospective and Prospective Overview”, in Special Lectures of the Law Society of Upper Canada 1984 — Law in Transition: Contracts (1984), 125, at p. 148.
[37] This Court has not examined whether there is a general duty of good faith contractual performance. However, there has been an active debate in other courts and among scholars for decades over whether there is, or should be, a general or “stand-alone” duty of good faith in the performance of contracts. Canadian courts have reached different conclusions on this point.
[38] Some suggest that there is a general duty of good faith: Gateway Realty Ltd. v. Arton Holdings Ltd. (1991), 106 N.S.R. (2d) 180 (S.C. (T.D.)), aff’d on narrower grounds (1992), 112 N.S.R. (2d) 180 (S.C. (App. Div.)); McDonald’s Restaurant of Canada Ltd. v. British Columbia (1997), 29 B.C.L.R. (3d) 303 (C.A.), at para. 99; Crawford v. Agricultural Development Board (N.B.) (1997), 192 N.B.R. (2d) 68 (C.A.), at paras. 7-8. They see a broad role for good faith as an implied term in all contracts that establishes minimum standards of acceptable commercial behaviour. As Kelly J. put it in Gateway Realty, at para. 38:
The law requires that parties to a contract exercise their rights under that agreement honestly, fairly and in good faith. This standard is breached when a party acts in a bad faith manner in the performance of its rights and obligations under the contract. “Good faithˮ conduct is the guide to the manner in which the parties should pursue their mutual contractual objectives. Such conduct is breached when a party acts in “bad faithˮ — a conduct that is contrary to community standards of honesty, reasonableness or fairness.
[39] Other courts are of the view that there exists no such general duty of good faith in all contracts: Transamerica Life Canada Inc. v. ING Canada Inc. (2003), 68 O.R. (3d) 457 (C.A.), at paras. 53-54; Mesa Operating Limited Partnership v. Amoco
Canada Resources Ltd. (1994), 149 A.R. 187 (C.A.), at paras. 15-19, per Kerans J.A., dubitante; Barclays Bank PLC v. Metcalfe & Mansfield Alternative Investments VII Corp., 2013 ONCA 494, 365 D.L.R. (4th) 15, at para. 131; see G. R. Hall, Canadian Contractual Interpretation Law (2nd ed. 2012), at pp. 338-46. The detractors of such a general duty of good faith have accepted a limited role for good faith in certain contexts but have held that it would create commercial uncertainty and undermine freedom of contract to recognize a general duty of good faith that would permit courts to interfere with the express terms of a contract.
[40] This Court ought to develop the common law to keep in step with the “dynamic and evolving fabric of our society” where it can do so in an incremental fashion and where the ramifications of the development are “not incapable of assessment”: R. v. Salituro, [1991] 3 S.C.R. 654, at p. 670; Bow Valley Husky (Bermuda) Ltd. v. Saint John Shipbuilding Ltd., [1997] 3 S.C.R. 1210, at para. 93; see also Watkins v. Olafson, [1989] 2 S.C.R. 750, at pp. 760-64; Hill v. Church of Scientology of Toronto, [1995] 2 S.C.R. 1130, at para. 85; R.W.D.S.U., Local 558 v. Pepsi-Cola Canada Beverages (West) Ltd., 2002 SCC 8, [2002] 1 S.C.R. 156; British Columbia v. Imperial Tobacco Canada Ltd., 2005 SCC 49, [2005] 2 S.C.R. 473; Grant v. Torstar Corp., 2009 SCC 61, [2009] 3 S.C.R. 640, at para. 46. This is even more appropriate where, as here, what is contemplated is not the reversal of some settled rule, but a development directed to bringing greater certainty and coherence to a complex and troublesome area of the common law.
[41] As I see it, the developments that I propose are desirable as a result of several considerations. First, the current Canadian common law is uncertain. Second, the current approach to good faith performance lacks coherence. Third, the current law is out of step with the reasonable expectations of commercial parties, particularly those of at least two major trading partners of common law Canada — Quebec and the United States: see, e.g., Hall, at p. 347. While the developments which I propose will not completely address these problems, they will bring a measure of coherence and predictability to the law and will bring the law closer to what reasonable commercial parties would expect it to be.
(ii)
Survey of the Current State of the Common Law
[42] Anglo-Canadian common law has developed a number of rules and doctrines that call upon the notion of good faith in contractual dealings; it is a concept that underlies many elements of modern contract law: S. M. Waddams, The Law of Contracts (6th ed. 2010), at para. 550; J. D. McCamus The Law of Contracts (2nd ed. 2012), at pp. 835-38; OLRC, at p. 165; Belobaba, at pp. 75-76; J. F. O’Connor, Good Faith in English Law (1990), at pp. 17-49; J. Steyn, “Contract Law: Fulfilling the Reasonable Expectations of Honest Men” (1997), 113 Law Q. Rev. 433. The approach, not unfairly, has been characterized as developing “piecemeal solutions in response to demonstrated problems”: Interfoto Picture Library Ltd. v. Stiletto Visual Programmes Ltd., [1989] 1 Q.B. 433 (C.A.), at p. 439, per Bingham L.J. (as he then was). Thus we see, for example, that good faith notions have been applied to
particular types of contracts, particular types of contractual provisions and particular contractual relationships. It also underlies doctrines that explicitly deal with fairness in contracts, such as unconscionability, and plays a role in interpreting and implying contractual terms. The difficulty with this “piecemeal” approach, however, is that it often fails to take a consistent or principled approach to similar problems. A brief review of the current landscape of good faith will show the extent to which this is the case.
[43] Considerations of good faith are apparent in doctrines that expressly consider the fairness of contractual bargains, such as unconscionability. This doctrine is based on considerations of fairness and preventing one contracting party from taking undue advantage of the other: G. H. L. Fridman, The Law of Contract in Canada (6th ed. 2011), at pp. 329-30; E. Peden, “When Common Law Trumps Equity: the Rise of Good Faith and Reasonableness and the Demise of Unconscionability” (2005), 21 J.C.L. 226; Belobaba, at p. 86; S. M. Waddams, “Good Faith, Unconscionability and Reasonable Expectations” (1995), 9 J.C.L. 55.
[44] Good faith also plays a role in the law of implied terms, particularly with respect to terms implied by law. Terms implied by law redress power imbalances in certain classes of contracts such as employment, landlord-lessee, and insurance contracts: London Drugs Ltd. v. Kuehne & Nagel International Ltd., [1992] 3 S.C.R. 299, at p. 457, per McLachlin J. (as she then was); see also Machtinger v. HOJ Industries Ltd., [1992] 1 S.C.R. 986, per McLachlin J., concurring. The implication
of terms plays a functionally similar role in common law contract law to the doctrine of good faith in civil law jurisdictions by filling in gaps in the written agreement of the parties: Chitty on Contracts, at para. 1-051. In Mesa Operating, the Alberta Court of Appeal implied a term that a power of pooling properties for the purpose of determining royalty payments be exercised reasonably. The court implied this term in order to give effect to the intentions of the parties rather than as a requirement of good faith, but Kerans J.A. stated that “[t]he rule that governs here can, therefore, be expressed much more narrowly than to speak of good faith, although I suspect it is in reality the sort of thing some judges have in mind when they speak of good faith”: para. 22. Many other examples may be found in Waddams, The Law of Contracts, at paras. 499-506.
[45] Considerations of good faith are also apparent in contract interpretation: Chitty on Contracts, at para. 1-050; Hall, at p. 347. The primary object of contractual interpretation is of course to give effect to the intentions of the parties at the time of contract formation. However, considerations of good faith inform this process. Parties may generally be assumed to intend certain minimum standards of conduct. Further, as Lord Reid observed in Schuler A.G. v. Wickman Machine Tool Sales Ltd., [1974] A.C. 235 (H.L.), at p. 251, “[t]he more unreasonable the result the more unlikely it is that the parties can have intended it”. As A. Swan and J. Adamski put it, the duty of good faith “is not an externally imposed requirement but inheres in the parties’ relation”: Canadian Contract Law (3rd ed. 2012), at §§ 8.134-8.146.
[46] Good faith also appears in numerous contexts in a more explicit form. The concept of “good faith” is used in hundreds of statutes across Canada, including statutory duties of good faith and fair dealing in franchise legislation and good faith bargaining in labour law: S. K. O’Byrne, “Good Faith in Contractual Performance: Recent Developments” (1995), 74 Can. Bar Rev. 70, at p. 71.
[47] There have been many attempts to bring a measure of coherence to this piecemeal accretion of appeals to good faith: see, among many others, McCamus, at pp. 835-68; S. K. O’Byrne, “The Implied Term of Good Faith and Fair Dealing: Recent Developments” (2007), 86 Can. Bar Rev. 193, at pp. 196-204; Waddams, The Law of Contracts, at paras. 494-508; R. S. Summers, “‛Good Faith’ in General Contract Law and the Sales Provisions of the Uniform Commercial Codeˮ (1968), 54 Va. L. Rev. 195; S. J. Burton, “Breach of Contract and the Common Law Duty to Perform in Good Faithˮ (1981), 94 Harv. L. Rev. 369. By way of example, Professor McCamus has identified three broad types of situations in which a duty of good faith performance of some kind has been found to exist: (1) where the parties must cooperate in order to achieve the objects of the contract; (2) where one party exercises a discretionary power under the contract; and (3) where one party seeks to evade contractual duties (pp. 840-56; CivicLife.com Inc. v. Canada (Attorney General) (2006), 215 O.A.C. 43, at paras. 49-50).
[48] While these types of cases overlap to some extent, they provide a useful analytical tool to appreciate the current state of the law on the duty of good faith.
They also reveal some of the lack of coherence in the current approach. It is often unclear whether a good faith obligation is being imposed as a matter of law, as a matter of implication or as a matter of interpretation. Professor McCamus notes:
Although the line between the two types of implication is difficult to draw, it may be realistic to assume that implied duties of good faith are likely, on occasion at least, to slide into the category of legal incidents rather than mere presumed intentions. Certainly, it would be difficult to defend the implication of terms on each of the cases considered here on the basis of the traditional business efficiency or officious bystander test. In the control of contractual discretion cases, for example, it may be more realistic to suggest that the implied limitation on the exercise of the discretion is intended to give effect to the “reasonable expectations of the parties.ˮ [pp. 865-66]
[49] The first type of situation (contracts requiring the cooperation of the parties to achieve the objects of the contract) is reflected in the jurisprudence of this Court. In Dynamic Transport Ltd. v. O.K. Detailing Ltd., [1978] 2 S.C.R. 1072, the parties to a real estate transaction failed to specify in the purchase-sale agreement which party was to be responsible for obtaining planning permission for a subdivision of the property. By law, the vendor was the only party capable of obtaining such permission. The Court held that the vendor was under an obligation to use reasonable efforts to secure the permission, or as Dickson J. (as he then was) put it, “[t]he vendor is under a duty to act in good faith and to take all reasonable steps to complete the sale”: p. 1084. It is not completely clear whether this duty was imposed as a matter of law or was implied based on the parties’ intentions: see p. 1083; see also Gateway Realty and CivicLife.com.
[50] Mitsui & Co. (Canada) Ltd. v. Royal Bank of Canada, [1995] 2 S.C.R. 187, is an example of the second type of situation (exercise of contractual discretion). The lease of a helicopter included an option to buy at the “reasonable fair market value of the helicopter as established by Lessor”: para. 2. This Court held, at para. 34, that, “[c]learly, the lessor is not in a position, by virtue of clause 32, to make any offer that it may feel is appropriate. It is contractually bound to act in good faith to determine the reasonable fair market value of the helicopters, which is the price that the parties had initially agreed would be the exercise price of the option.” The Court did not discuss the basis for implying the term, but suggested that in the absence of a reasonableness requirement, the option would be a mere agreement to agree and thus would be unenforceable, which means that the implication of the term was necessary to give business efficacy to the agreement.
[51] This Court’s decision in Mason v. Freedman, [1958] S.C.R. 483, falls in the third type of situation in which a duty of good faith arises (where a contractual power is used to evade a contractual duty). In that case, the vendor in a real estate transaction regretted the bargain he had made. He then sought to repudiate the contract by failing to convey title in fee simple because he claimed his wife would not provide a bar of dower. The issue was whether he could take advantage of a clause permitting him to repudiate the transaction in the event that he was “unable or unwilling” to remove this defect in title even though he had made no efforts to do so by trying to obtain the bar of dower. Judson J. held that the clause did not “enable a person to repudiate a contract for a cause which he himself has brought about” or
permit “a capricious or arbitrary repudiation”: p. 486. On the contrary, “[a] vendor who seeks to take advantage of the clause must exercise his right reasonably and in good faith and not in a capricious or arbitrary manner”: p. 487.
[52] The jurisprudence is not always very clear about the source of the good faith obligations found in these cases. The categories of terms implied as a matter of law, terms implied as a matter of intention and terms arising as a matter of interpretation sometimes are blurred or even ignored, resulting in uncertainty and a lack of coherence at the level of principle.
Honda Canada Inc. v. Keays
(iv)
Towards an Organizing Principle of Good Faith
(v)
Should There Be a New Duty?
[94] The trial judge made a clear finding of fact that Can-Am “acted dishonestly toward Bhasin in exercising the non-renewal clause”: para. 261; see also para. 271. There is no basis to interfere with that finding on appeal. It follows that Can-Am breached its duty to perform the Agreement honestly.
[95] The immediate dispute in this case centred on the non-renewal clause contained in cl. 3.3 of the 1998 Agreement which Mr. Bhasin entered into in November 1998. It provided that the Agreement was for a three-year term and would be automatically renewed unless one of the parties gave notice to the contrary at least six months before the end of the initial or any renewed term:
3.3 The term of this Agreement shall be for a period of three years from the date hereof (the “Initial Term”) and thereafter shall be automatically renewed for successive three year periods (a “Renewal Term”), subject to earlier termination as provided for in section 8 hereof, unless either [Can-Am] or the Enrollment Director notifies the other in writing at least six months prior to expiry of the Initial Term or any Renewal Term that the notifying party desires expiry of the Agreement, in which event the Agreement shall expire at the end of such Initial Term or Renewal Term, as applicable.
[96] The factual matrix in which the judge made her finding of dishonest performance is complicated and I will only outline it in very broad terms in order to put that finding in context. There were two main interrelated story lines.
[97] The first concerns Mr. Hrynew’s persistent attempts to take over Mr. Bhasin’s market through a merger — in effect a takeover by him of Mr. Bhasin’s agency. The second concerns the difficulties, beginning in early April 1999, that Can-Am was having with the Alberta Securities Commission, which regulated its business and its enrollment directors in Alberta. The Commission insisted that Can-Am appoint a full-time employee to be a PTO responsible for compliance with Alberta securities law. Can-Am ultimately appointed Mr. Hrynew, with the result that he would audit his competitor agencies, including Mr. Bhasin’s, and therefore have access to their confidential business information. Mr. Bhasin’s refusal to allow Mr. Hrynew access to this information led to the final confrontation with Can-Am and its giving notice of non-renewal in May 2001. Can-Am, for its part, wanted to force a merger of the Bhasin agency under the Hrynew agency, effectively giving Mr.
Bhasin’s business to Mr. Hrynew. It was in the context of this situation that the trial judge made her findings of dishonesty on the part of Can-Am.
[98] The trial judge concluded that Can-Am acted dishonestly with Mr. Bhasin throughout the period leading up to its exercise of the non-renewal clause, both with respect to its own intentions and with respect to Mr. Hrynew’s role as PTO. Her detailed findings amply support this overall conclusion.
[99] By early 2000, Can-Am was considering a significant reorganization of its activities in Alberta; by June of that year, it sent an organizational chart to the Commission showing that Mr. Bhasin’s agency was to be merged under Mr. Hrynew’s. But it had said nothing of this to Mr. Bhasin: trial reasons, at paras. 167-68. The trial judge found that these representations made by Can-Am to the Commission were clearly false if, as she concluded, they intended to refer to Mr. Bhasin: para. 246. She also found that Can-Am, by June 2000, was fearful that the Commission was going to pull its licence in Alberta and that it was prepared to do whatever it could to forestall that possibility. “However, it was not dealing honestly with [Mr.] Bhasin about the realities of the situation as [it] saw them”: para. 246.
[100] In August 2000, Mr. Bhasin first heard of Can-Am’s merger plans for him during a meeting with Can-Am’s regional vice-president. But when questioned about Can-Am’s intentions with respect to the merger, the official “equivocated” and did not tell him the truth that from Can-Am’s perspective this was a “done deal”. The
trial judge concluded that the official was “not honest with [Mr.] Bhasin” at that meeting: para. 247.
[101] When Mr. Bhasin complained about Mr. Hrynew’s conflict of interest in being both auditor and competitor, Can-Am in effect blamed the Commission, claiming that the Commission had rejected its proposal to appoint a third party PTO. This was not truthful. Can-Am failed to mention that it had proposed to appoint a non-resident of Alberta who was clearly not qualified according to the Commission’s criteria or that it had decided to appoint Mr. Hrynew even though he did not meet the Commission’s criteria either: trial reasons, at paras. 195 and 221. It also misrepresented — repeatedly — to Mr. Bhasin that Mr. Hrynew was bound by duties of confidentiality and segregation of activities in the course of an audit, when in fact there was no such requirement. Can-Am did not even finalize its PTO contract with Mr. Hrynew until March 2001 and, notwithstanding its assurances to Mr. Bhasin, it failed to include such a provision in the contract: paras. 190-221. As the trial judge found, Can-Am “could not possibly have missed this honestly in the PTO agreement, given that [Mr. Bhasin’s] very protests about [Mr.] Hrynew’s appointment as PTO were about confidentiality and segregation of activities”: para. 221. The judge also found that Can-Am repeated these “lies” about Mr. Hrynew’s supposed obligations of confidentiality even after the PTO agreement, without these protections, had been signed: para. 204.
[102] Can-Am pushed on with the requirement that Mr. Hrynew audit Mr. Bhasin’s agency as if it were required to do so by the Commission even though it had arranged to have one of its employees conduct the audit of Mr. Hrynew’s agency: trial reasons, at para. 198.
[103] As the trial judge found, 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.
C. Liability for Civil Conspiracy and Inducing Breach of Contract
[104] In light of this conclusion, I agree with the Court of Appeal’s rejection of Mr. Bhasin’s claims based on the torts of inducing breach of contract and unlawful means conspiracy.
[105] The trial judge specifically found that Mr. Hrynew did not encourage Can-Am to act dishonestly in its dealings with Mr. Bhasin and that Can-Am’s dishonest conduct was not fairly attributable to Mr. Hrynew: paras. 271 and 287. It follows that Mr. Hrynew did not induce Can-Am’s breach of its contractual duty of honest performance.
[106] The trial judge dismissed the claim for conspiracy to injure and there is no basis to interfere with that finding. However, the trial judge held the respondents liable for unlawful means conspiracy, with the unlawful means being the breach of contract and inducing breach of contract: para. 326. Because, in light of my conclusions, the only relevant breach of contract in this case is the breach of the duty of honest performance and there was no inducement of breach of contract, the only relevant unlawful means pertained to Can-Am alone and not Mr. Hrynew. Accordingly, there can be no liability for civil conspiracy: see Agribrands Purina Canada Inc. v. Kasamekas, 2011 ONCA 460, 106 O.R. (3d) 427, at para. 43.
[107] I therefore agree with the result reached by the Court of Appeal that there could be no liability for inducing breach of contract or unlawful means conspiracy: para. 36. It follows that the claims against Mr. Hrynew were rightly dismissed.
D. What Is the Appropriate Measure of Damages?
[108] I have concluded that Can-Am’s breach of contract consisted of its failure to be honest with Mr. Bhasin about its contractual performance and, in particular, with respect to its settled intentions with respect to renewal. It is therefore liable for damages calculated on the basis of what Mr. Bhasin’s economic position would have been had Can-Am fulfilled that duty. While the trial judge did not assess damages on that basis given her different findings in relation to liability, she made findings that permit this Court to do so.
[109] The trial judge specifically held that but for Can-Am’s dishonesty, Mr. Bhasin could have acted so as to “retain the value in his agency”: paras. 258-59. In reaching this conclusion, the trial judge was well aware of the difficulties that Mr. Bhasin would have in selling his business given the “almost absolute controls” that Can-Am had on enrollment directors and that it owned the “book of business”: para. 402. She also heard evidence and made findings about what the value of the business was, taking these limitations into account. These findings, in my view, permit us to assess damages on the basis that if Can-Am had performed the contract honestly, Mr. Bhasin would have been able to retain the value of his business rather than see it, in effect, expropriated and turned over to Mr. Hrynew.
[110] It is clear from the findings of the trial judge and from the record that the value of the business around the time of non-renewal was $87,000. The defendants’ expert at trial valued Mr. Bhasin’s business as of 2001 (the time of non-renewal) as approximately $87,000. While there is some confusion in the record about the date of evaluation and the relevance of discount rates, I am persuaded that the trial judge found that the business was worth $87,000 at the time that the Agreement expired and that she made this finding fully alive to the difficulties standing in the way of a sale of the business given the contractual arrangements between Can-Am and its enrollment directors: see, e.g., para. 451. In addition, we have had no suggestion in argument that this figure should be reassessed. In fact, the defendants, as appellants before the Court of Appeal, submitted to that court that if damages were payable, they should be assessed at the value of the business at the time of the expiry of the Agreement and
noted that the trial judge had accepted the evidence of their expert witness, Mr. Bailey, that the value was $87,000.
[111] I conclude therefore that Mr. Bhasin is entitled to damages in the amount of $87,000.
IV. Disposition
[112] I would allow the appeal with respect to Can-Am and dismiss the appeal with respect to Mr. Hrynew. I would vary the trial judge’s assessment of damages to $87,000 plus interest. Mr. Bhasin should have his costs throughout as against Can-Am. There should be no costs at any level in favour of or against Mr. Hrynew.
Appeal allowed in part.
Solicitors for the appellant: McCarthy Tétrault, Toronto.
Solicitors for the respondents: Lenczner Slaght Royce Smith Griffin, Toronto.