Duty of Good Faith

Duty of Good Faith

Best Lifestyle v. County of Simcoe, 2019 ONSC 6619 (CanLII)

[76] This is clearly a contract of adhesion as referred to in Shelanu at para. 58-59. Further in Shelanu, the court explained the difference between a fiduciary duty and a duty of good faith: [69] There is at least one important difference between the duty of good faith and a fiduciary duty. If, for example, A owes a fiduciary duty to B, A must act only in accordance with B's interests when A exercises its powers or exercises a discretion arising out of the relationship: see York Condominium Corp. No. 167 et al. v. Newrey Holdings Ltd. et al. (1981), 1981 CanLII 1932 (ON CA), 122 D.L.R. (3d) 280 (Ont. C.A.) at 289, leave to appeal to the Supreme Court of Canada refused [1981] 1 S.C.R. xi; Hodgkinson v. Simms, 1994 CanLII 70 (SCC), (1994) 3 S.C.R. 377. If, on the other hand, A owes a duty of good faith to B, A must give consideration to B's interests as well as to its own interests before exercising its power. Thus, if A owes a duty of good faith to B, so long as A deals honestly and reasonably with B, B's interests are not necessarily paramount: see for example Mason v. Freedman, 1958 CanLII 7 (SCC), (1958) S.C.R. 483.

[77] It has also been held by the courts that parties should deal fairly with each other in order “not to nullify the reasonable expectations” that the parties have “fostered”. CivicLife.com Inc. v. Canada (Attorney General), 2006 CanLII 20837 (ON CA), (2006) O.J. No. 2474 (C.A.) para. 18. In CivicLife at para. 52, the court also made it clear that an entire agreement clause does not preclude the expectation that the parties would act in good faith. The court has a discretion to refuse to enforce such a clause where to do so would be “unconscionable, unfair or otherwise contrary to public policy”. See Guarantee Co. of North America v. Cordon Capital Corp. [1993] 3 S.C.R. 423.

[79] In Bhasin v. Hrynew, 2014 SCC 71 (CanLII), at paras. 63- 65, the Supreme Court of Canada discussed the principle of good faith as an “organizing principle” and that it 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”. The organizing principle of good faith is “simply that parties must perform their contractual duties honestly and reasonably and not capriciously or arbitrarily” and to have “appropriate regard to the legitimate contractual interests of the contracting partner”. The Court stated:

[73] …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. The requirement to act honestly is one of the most widely recognized aspects of the organizing principle of good faith: see Swan and Adamski, at s. 8.135; O'Byrne, "Good Faith in Contractual Performance", at p. 78; Belobaba; Greenberg v. Meffert (1985), 1985 CanLII 1975 (ON CA), 50 O.R (2d) 755 (C.A.), at p. 764; Gateway Realty, at para. 38, per Kelly J.; Shelanu Inc. v. Print Three Franchising Corp. (2003), 2003 CanLII 52151 (ON CA), 64 O.R. (3d) 533 (C.A.), at para. 69. For example, the duty of honesty was a key component of the good faith requirements which have been recognized in relation to termination of employment contracts: Wallace, at para. 98; Honda Canada, at para. 58.

See also: Greater Vancouver Sewerage and Drainage District v. Wastech Services Ltd., [2019] B.C.J. No. 236 (C.A.)

Norquay v. Kasprzyk, 2015 ONSC 5292 (CanLII)

[69] Municipalities owe a duty of good faith to the public in their decision-making, and a duty to those in sufficient proximity to take reasonable care in executing a regulatory scheme (Froese v. Hik (1993), 1993 CanLII 2815 (BC SC), 78 B.C.L.R. (2d) 389 (S.C.), at para. 30).

[70] Norquay was in sufficient proximity to the Fire Department to be owed a duty of care by the City of Woodstock. The Inspection Orders were individualized orders that specifically addressed Norquay. The defendants knew that the Inspection Orders would result in Norquay having to take remedial action. They knew that the posting of the Inspection Orders would communicate to Norquay’s tenants that in the opinion of the Fire Department the Buildings had fire safety issues.

The “clean hands” doctrine

BMO Nesbitt Burns Inc. v. Wellington West Capital Inc., 2004 CanLII 33776 (ON SC)

(c) The “clean hands” doctrine

[29] Third, the defendants claim that the conduct of Nesbitt as pleaded by them disentitles Nesbitt to equitable remedies because Nesbitt does not come before the court with “clean hands.”

[30] The clean hands doctrine permits an assessment of a plaintiff’s conduct with respect to the specific transaction in which equitable relief is sought. It does not permit the court to embark upon an assessment of the plaintiff’s unrelated, general conduct. See Justice Robert J. Sharpe, Injunctions and Specific Performance, looseleaf, (Aurora, Ont.: Canada Law Book Inc., 2003) at 1-45, para. 1.1050.

[31] The defendants’ pleading relates to general allegations of alleged conduct by Nesbitt on unspecified occasions in the recruitment of investment advisors other than the defendants. The referenced allegations do not relate to the specific resignations of the Nesbitt defendant employees.