In Callow v. Zollinger 18 December 2021, the Supreme Court of Canada expanded the duty of good faith, honest performance in Bhasin v. Hrynew.
The Ontario Court of Appeal just considered this case in Bhatnagar v. Cresco Labs Inc., 2023 ONCA 401 (June 2023)
In its commentary on the case, Blaney’s points out:
“2. Did the application judge err by failing to presume loss by the appellants as a result of Origin House’s breach of the duty of honest performance?
No. The Court held that Callow does not stand for the proposition that, where a party is found to have breached its duty of honest performance, the court must presume the aggrieved party is entitled to damages in the absence of an evidentiary foundation of a lost opportunity.
The appellants argued that Callow required the court to presume damages when there is a breach of the duty of honest performance, even absent evidence of an opportunity having been lost and that the application judge erred in law by requiring “an evidentiary premise …[to] prove the facts upon which damages are estimated.” Their submission was based on para. 116 of Callow, which reads, in part, as follows:
[E]ven if I were to conclude that the trial judge did not make an explicit finding as to whether Callow lost an opportunity, it may be presumed as a matter of law that it did, since it was Baycrest’s own dishonesty that now precludes Callow from conclusively proving what would have happened if Baycrest had been honest. [Emphasis added.]The Court noted that the emphasized words are part of one sentence in para. 116. When read in whole, para. 116 demonstrates that Kasirer J. explicitly found an evidentiary foundation for Callow’s claim of lost opportunity. The Court found that the appellants’ submission that lost opportunity must be presumed fails to account for both the permissive language in the emphasized words and the qualifying language that immediately follows them. The Court noted that the use of the word “may” runs contrary to the appellants’ submission that once the court found a breach of the duty of honest performance, it was obliged to presume that they had suffered a loss of opportunity.
Further, and in any event, the Court found that the appellants’ submission failed to recognize that the emphasized words are followed by two qualifications: it might be presumed in law that Callow lost an opportunity (1) since it was Baycrest’s own dishonesty that precluded Callow from (2) conclusively proving what would have happened. In the case at bar, the Court held that neither qualifier applied, as it was not Origin House’s failure to advise the appellants of the delayed closing that precluded them from proving what would have happened had they been so advised. As for the second qualifier, the Court noted that in Callow there was an evidentiary foundation for the claim of lost opportunity and the defendant’s dishonesty precluded Callow from “conclusively proving” lost opportunity.”
Comment
So, even if a party fails to meet the honest performance standard, the other party still has to prove damages in order to be successful.
Brian Madigan LL.B., Broker