In Cromwell J.’s urgent need to ‘update’ the common law of contract to add the hitherto forgotten and neglected principle of ‘good faith’, he saw fit to turn to Mansfield’s apparent endorsement in Carter v Boehm (1766) 3 Burr. 1905 97 ER 1162
Cromwell said:
[35]…. 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;
But did Mansfield really say anything of assistance to Cromwell? Or is it the case, when examined, that Mansfield’s actual decision in Carter v Boehm rather contradicts Cromwell’s ‘good faith’ in contract.
As is always the case, the supreme court used a cannon where a peashooter was the appropriate weapon. In the need to find for Bhasin, the court just had to blow up the law of contract, nothing less would do, would it?
What was the ‘dishonesty’ committed by Can-Am against Bhasin?
Cromwell says this:
[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.
According to the above, Can-Am had a duty to disclose its future intentions about its own method of supplying the market in accordance with regulatory requirement, merely because its own actions might logically have indirect effects upon the value of Bhasin’s brokerage business. Can-Am’s purpose was not to destroy Bhasin’s business. That was as indirect an effect as Henry Ford and horse-drawn carriages.
So how exactly might we apply Carter v. Boehm to this story?
Carter was the East India Company’s deputy Governor at Fort Marlborough in Sumatra on September 13 1959, just as Wolfe was storming up Abraham. (Who is this Wolfe guy?)
Needless to say, all British possessions were on notice of a likely French attack. Carter saw the writing on the wall and took out a massive insurance policy against a French attack, the premium of which exceeded his salary. Did Carter have special knowledge that this attack was definite? Did Carter practice Cromwell’s ‘good faith’ and ‘honesty’ in contract when Carter did not tell the insurer all that Carter knew of the coming attack?
Mansfield said: No! Carter was not required to disclose all that he knew. Carter was only required to disclose ‘material’ facts. This means that facts – which the insurer should know on his own, or already knew – were not ‘material’ nondisclosure.
So Mansfield takes the side of the non-discloser? (Can-Am)
But what of Mansfield flowery obiter? Whatever it was meant to mean, it did not mean that contract parties and particularly pre-contract parties, are required to be ‘honest’. It did not mean than parties are required to tell every possible fact with any tenuous relevance to the situation.
Carter was in the very same employment-confidentiality requirement regarding his French information that Can-Am as in regarding his merger information. Who is Cromwell to say that Can-Am is now mandated to go around announcing every possible permutation of still impending merger-arrangements? Arrangements that are specifically dissociated from Bhasin by the structure of the pre-existing contract.
Bhasin already knew all the material facts
Most interestingly, did the judges at all levels not betray themselves when they went to such lengths to explain how much Bhasin already knew of the rivalry with Hyrnew, the impending arrangements and the coming threat to his business? How could a Can Am non-disclosure be material when Bhasin already knew all the important, if harmful, facts. What would have changed with Can-Am full disclosure? Can-Am would still be within its rights to appoint Hyrnew and terminate Bhasin.
Mansfield used precisely the generally known facts of French invasion of Fort Marlborough, to make Carter’s silence non-material. Bhasin’s level of knowledge makes Can-Am’s silence non-material. So the ‘good faith’ justification for attacking Can-Am is really a quite weak argument.
Why can’t we simply call everything material now?
It is no good to simply deem Can-Am’s nondisclosure to be ‘material’ when it obviously isn’t. This is why Cromwell was wrong to cite Mansfield. Whatever Mansfield’s obiter words, his ratio is in opposition to the very thread of Cromwell’s theme.
Carter v Boehm is a leading case, in part because Mansfield takes great pains to say what is good faith and what is not good faith. Bhasin introduces radical uncertainty with vague ‘honesty’ language and then follows up with a ratio which implicates the entire framework of material nondisclosure.
Watterson_2008_on_Carter_v_Boehm_1766
Bhasin v. Hrynew, [2014] 3 SCR 494, 2014 SCC 71 (CanLII)
