John Pepall: With a Court like this, who needs legislatures?

By John Pepall
National Post
Apr 23, 2015

It’s not just in Charter of Rights cases that the Supreme Court of Canada is laying down the law to Parliament and the legislatures. The Court’s judgment in Bhasincheerfully reported some months ago, had nothing to do with the Charter. It was an apparently mundane common law contract case.

But the Court saw it as an opportunity to “make law” and was very forward in proclaiming that new law was needed and it would make it. The provincial legislatures are responsible for contract law under the Constitution and have passed many acts altering the common law. But why bother the legislatures when the courts stand ready to pass laws in their stead?

The issue in Bhasin was either quite simple, as the Alberta Court of Appeal saw it in dismissing his case in 11 pages, or wonderfully deep, as the Court saw it in 50.

Harish Bhasin, an Edmonton-based financial planner, had a contract with Can-Am to market RESPs in Alberta. His contract was for three years, to renew automatically unless either party gave six months notice that it would not renew. Can-Am gave Bhasin the six months notice. Bhasin had to close his business and sued.

The Court of Appeal saw it as an open and shut case. Can-Am had invoked the non-renewal provision and that was an end of the matter.

The trial judge had seen it differently. In a three-week trial every twist and turn of the dealings between Bhasin and Can-Am had been gone into. There was evidence that Can-Am had said things to Bhasin that were untrue and misled him as to its intentions. There was no evidence that any of this affected the performance of the contract by either party. But the trial judge found that Can-Am had not dealt with Bhasin in “good faith” and awarded him almost $400,000 in damages.

The Supreme Court held that parties to a contract have a “duty to perform their contractual obligations honestly.” This “new duty,” as the Court called it, it based on an “organising principle” of “good faith.”

Who could object to honesty and good faith? But what does it mean? One might have thought it would mean that parties must observe the terms of the contract. If I contract with you to deliver two dozen apples on Wednesday it won’t do to deliver two dozen oranges or two dozen apples on Thursday. And if I contract with you to clean my eaves for three years renewable subject to six months notice you must expect that I may give you notice if I think someone else would do a better job or simply don’t like the cut of your jib.

When courts make law, they do not set it out as legislatures would with sections and subsections and definitions. You have to find it in their reasons. When courts are properly making law, settling an unsettled point, it is usually easy enough. But when they are enunciating a broad principle, as the Court does in Bhasin, it opens up endless speculation as to what the law may be or how it will apply in any specific case.

Despite thousands of words from the trial judge and the Court it is impossible to see what exactly Can-Am’s dishonest performance was. The Court says Bhasin “was misled and lost the value of his business as result.” While there was evidence Bhasin was misled, there is none that he lost anything as a result.

Making new law as the Court has done is wrong because it is ex post facto law. Law is settled rules. Its value is letting us know where we stand, in the limiting case, which side of the road to drive on, though it doesn’t matter which so long as there is a rule. But we need to know what the law is before we act, which is why legislation is the business of legislatures and public debate and comes into effect on a specified date and not retroactively.

The Court claims a duty to “develop the common law to keep in step with the ‘dynamic and evolving fabric of our society…'” Was honest performance of contracts not such a good idea 50 years ago? Or is it simply that people were so much more honest then that no legal requirement of honesty was required?

The Court claims that its “new duty” is “incremental,” trying to assure us of its caution. But in proclaiming the “organising principle” of “good faith” the Court literally invites new lawsuits that will lead to new increments, new applications of the “organising principle” and offers the prospect of a law in flux as it keeps up with the “dynamic and evolving fabric of our society.” That is, the negation of law.

The new Chief Justice of Ontario made conventional remarks on his swearing in about the “complexity and time it takes to complete legal proceedings.” The complexity and time legal proceedings take is very much a product of the decay of the law the Court is promoting. If law is to be a matter of “organising principles” and “increments” and the exploration of everyone’s “good faith” in three-week trials, its “complexity and time … to complete” will only become greater.

National Post

John Pepall practiced civil litigation in Toronto for 25 years.