In Bhasin v Hrynew, [2014] 3 SCR 494, the supreme court of Canada imposed a duty of honest performance in contract. Bhasin has been considered or applied over 500 times. The supreme court of Canada is about to deal with Bhasin again, following the Ontario Court of Appeal reversal of a trial division application of Bhasin in an extremely similar fact situation.
The theoretical problem with Bhasin is the SCC assertion that there was a missing principle in contract law that required finding and fixing. Somehow ‘honesty’ was only being applied here and there rather than everywhere. Have no worries the SCC will patch things up and simply extend the duty of honest performance across contract. No problem.
Contract could better be understood to have evolved upon the premise that general application of the ‘duty of honest performance’ has already been repeatedly attempted and reversed because of the fact that such a general duty conflicts with so many well established contract principles from the duty of confidentiality (don’t be ‘honest’ with a contracting partner) to the termination clause that until now explicitly limited the extent of liability. Those are substantive principles- in conflict with ‘honesty’ as Cromwell articulated it.
Words like ‘honesty’ when used in a court room are fraught with an ambiguity that the supreme court does a disservice not to recognize and avoid. The court specifically did not properly articulate the nuances of ‘honesty’.
In McKinley v BC Tel, [2001] 2 SCR 161, a very senior executive failed to disclose personal medical facts which affected his ability to work. Precedent from the supreme court of Canada said that ‘honesty’ was one of those things that contracts could not do without. As such the ‘dishonest’ employee could be fired as a matter of law. (Sounds like a Bhasin-type ‘pronouncement’).
Iacobucci meticulously went through the ‘honesty’ precedents, acknowledging the two lines of thought: honest as a firing offence because it was so crucial to contract and honesty as a question of fact: how much dishonesty and how serious?
Iacobucci determined that the employee could intentionally fail to disclose material facts and keep his job, reversing SCC precedent that held ‘honesty’ out as a higher principle deserving of respect. Iacobucci too was ‘renovating’ the law when he decided McKinley in 2001.
Now fourteen years later and the SCC is renovating ‘honesty’ again, this time pointing back to the need for a stricter application of ‘honesty’.
It all sounds vaguely reminiscent of Kenyon deciding to extend ‘honesty’ in Mellish v Motteux, then Ellenborough reversing him years later, then the high court revising Ellenborough to come to our present law of latent defects in sale of property.
Has the common law really never thought about extending the ‘duty of honest performance’ across contract until Bhasin?
