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#18823
CALLOW v. CMG et al : TERMINATION of Ottawa SNOWPLOW CONTRACT RULED IN BAD FAITH 2018/01/15 19:14  
1 - In November 2017 an otherwise routine-looking Sep 2013 SNOWPLOW CONTRACT TERMINATION was ruled IN BREACH OF IMPLIED "DUTY OF HONESTY" arising from "a general organizing principle of GOOD FAITH that underlies many facets of contract law".

( Relations between condo owners & their corporations are STATUTORY relationships, not "CONTRACTUAL" interactions as involved here. Looking over the fence, condo owners & directors should count their comparative blessings in that their Building Scheme counterparts are "inter-relationed" instead by hybrid contracts disputedly running with title; see 160 years of 100 legal judgments with almost no statute applicable. No Florida chapter 720 folks ! )

But for condos & Building Schemes alike this is a heads-up about terminating contracts with suppliers, servicers or so-called "self-employed contractors" ( ? always more cost-effective than employees ? ).

AND particularly where clients' condo Directors - maybe with TOO MUCH TIME ON THEIR HANDS BUT TOO FEW SKILLSETS - are directly dealing with the contractor . . . Even ( as actually held here ) holding direct discussions about contract extensions with that contractor. Too many cooks spoiling the broth ? DUBIOUS E-MAILS get dragged to the surface !

With the management company silent during a critical period, the plaintiff contractor looks not only effectively BLINDSIDED but is here held 'ACTIVELY DECEIVED'. That's instead of being promptly alerted of any irrevocable "Terminate" decision & held able to timelier mitigate or act alternatively etc . . .

This decision is judicial recognition of an alleged civil wrong of "active deception" or "misleading" IF - IF - able to get credibly argued by a complainant later willing & able to track down the clients' internal communications.

Think today's e-mails automatically disappear ?

And where that complainant is FURTHER NOW able to join as SEPARATE defendants, individual managers, management companies, individual client Directors etc so as to be able to compel their presence & submission to depositions . . . . better be especially careful ! ( That's instead of individuals - whose exposed roles may now critically undermine a defence - now slipping away into the shadows of "We cannot find them. So their inputs are at best anecdotal through what we wish to channel . . . " )

It may be especially worth thinking about this, respectfully, where there are imbalances of power and/or of sophistication etc. For example eg an "adhesion-type" take-it-or-leave-it service contract imposed on a desperate bidder.

AND SO THUSLY has swept onto Ontario's condo universe - like a giant diesel John Deere with frontbucket & rear snowblower - a somewhat overlooked 2014 Supreme Court of Canada decision.

That topcourt decision was rendered 14 months AFTER the Ottawa snowplow contract was terminated on the verge of the second year of 2 year contracted snow clearing.


2 - That 2014 Supreme Court of CANADA decision - targetting what was held "active deception" against a plaintiff Alberta retail seller of investment products by his RENEWAL-WITHHOLDING wholesaler in arguable collusion with the plaintiff's competitor - is Bhasin v Hrynew 2014 SCC 71 issued Nov 13 2014 http://canlii.ca/t/gf84s

In Bhasin ( 2014 ) for a unanimous topcourt panel SCC's Mr Justice Thomas Cromwell ( now retired ) repeatedly clarified - AS NOW IMPLIED INTO CONTRACTS DESPITE THEIR ACTUAL WORDINGS - the following :

quote: ". . .[93] A summary of the principles is in order:

(1) There is a general organizing principle of good faith that underlies many facets of contract law.

(2) In general, the particular implications of the broad principle for particular cases are determined by resorting to the body of doctrine that has developed which gives effect to aspects of that principle in particular types of situations and relationships.

(3) It is appropriate to recognize a new common law duty that applies to all contracts as a manifestation of the general organizing PRINCIPLE OF GOOD FAITH : a DUTY OF HONEST PERFORMANCE, which requires the parties to be honest with each other in relation to the performance of their contractual obligations. . . " - unquote

ACCOMPANYING BUT NOT NECESSARILY PART of the 2014 S.C.C. text, the unattributed Case Summary prologuing the decision itself states that :

quote : “ . . . It is appropriate to recognize a new common law duty that applies to all contracts as a manifestation of the general organizing principle of good faith : a duty of honest performance, which requires the parties to be honest with each other in relation to the performance of their contractual obligations.

Under this new general duty of honesty in contractual performance, 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.

This new duty of honest performance is a general doctrine of contract law that imposes as a contractual duty a minimum standard of honesty in contractual performance. It operates irrespective of the intentions of the parties, and is to this extent analogous to equitable doctrines which impose limits on the freedom of contract, such as the doctrine of unconscionability.

However, the precise content of honest performance will vary with context and the parties should be free in some contexts to relax the requirements of the doctrine so long as they respect its minimum core requirements. " unquote

3 - In 2014 attention within the condo governance universe was quickly alerted to the then-new topcourt decision by Guelph condo lawyer Michelle Kelly.

Nov 14 2014 “New Duty of Honest Performance of Contracts” by Michelle Kelly LLB (Sutherland Kelly LLP Guelph )

https://ontcondolaw.com/2014/11/14/new-duty-of-honest-performance-of-contracts/

Implications for charities & NFPs were soon drawn by an article of lawyer Nicole K. D’Aoust.

Dec 2014 Miller Thomson LLP Dec 2014 newsletter “Supreme Court Says Parties to Contracts Must Act in Good Faith” by lawyer Nicole K. D’Aoust JD LLB tax & NFP specialist http://www.millerthomson.com/en/publications/newsletters/charities-and-not-for-profit-newsletter/ 2014-archives/december-2014/supreme-court-says-parties-to-contracts-must


4 - Some SPECIFICS

The 2013 Ottawa termination itself occurred 14 months BEFORE the SCC's Bhasin v Hyrnew landmark 2014 decision was released.

( Litigated against a lengthy list of separate Ottawa defendants, all could be separately deposed by the terminated contractor. ) The first of the multiple, separately named arms-length defendant is the property manager herself.

( The contract issuing authority may ? technically have been the Ottawa PMC Condominium Management Group, NOT the ten separate lowrise condo corporations said to be acting collectively - maybe informally ? - under some undetailed form of collective Joint Service purchasers. )

The 2017 judgment cites a JUC Joint use Committee collectively serving 10 separate client condo corporations in “Baycrest Gardens” roughly west of the Walkley & Heron Roads triangle . A sort of snowbound Bermuda Triangle.

Other separate defendants included the Ottawa PMC employing her, as well as some of the multiple clients' Directors - sources of Directoral e-mails suggestive ( to the Ottawa judge ) of "active" dishonesty despite management claims to the contrary.

5 - THE DIRECTORAL E-MAILS

And then somehow obtained were the defence-damaging E-MAILS between client Directors whose contents here get construed to trigger the new HONESTY duty.

Imagine if there were UNSEND BUTTONS that could now be magically used to eradicate what the e-mailer clients failed to understand . . . including that such e-mailed interactions could come back to haunt big time.

6 - And so - arriving already at a significant cost to owners and maybe to be appealed - a delayed CONTRACT-TERMINATING decision that was ostensibly simple, maybe harsh & unfair as to timing but ostensibly contract-compliant.

Now it gets held "active" deception & breach of the Supreme Court of Canada's 2014 new honesty duty . . .


7 - Subject to appeal the Nov 2017 Ottawa Superior Court decision applying Bhasin (2014) is

C.M. Callow Inc. v. Tammy Zollinger et al., 2017 ONSC 7095 issued Nov 27/17 http://canlii.ca/t/hp00r
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#18824
deconstructing CALLOW V. CMG et al : TERMINATION RULED IN BAD FAITH 2018/01/15 20:14  
1 - This is NOT legal advice, which condo & Building Scheme Directors & service providers should obtain - AND LISTEN TO - from licensed & insured members of the Law Society of Ontario !

Issued in November 2017 Callow v (Zollinger) CMG et al has NOT appeared on any Top Ten 2017 judgment lists. This is NOT a management-friendly decision.

2 - In litigation that included formal hearings over 8 days, the Ottawa Superior Court decision ( by Madame Justice Michelle O’Bonsawin ) hits a contract termination at a ten corporation grouping of condominium lowrises west of Walkley-Heron Roads.

These client corporations are jointly cited as forming a JUC Joint use Committee collectively serving “Baycrest Gardens” but with a common PMC & a property manager ( unfortunately for her cited topmost within the judgment's citation ).

Against snowplow contractor Callow's claim of Bad Faith contract termination issued by CMG 6 weeks ahead of year 2 of a two year contract, the 'LITERALLY COMPLIANT' Contract Termination here gets held effectively undercut & in bad faith ( ie that what the judge held six months of alleged 'active deception' was an actionable breach of the Supreme Court of Canada's new Honesty Duty ).

Open to potential defence were such as :

Literal Compliance eg : "We lawfully terminated without cause being necessary with no less than the minimum Notice period agreed to freely by the plaintiff Callow" etc. "Callow entered a contract which neither expressly prohibited Termination on the brink of the winter season nor deadlined the Notice".

Entirety of Agreement - is it relevant ? The 2017 Ottawa snowplowing judgment is silent as to any Entirety of Agreement provision in the terminated Agreement , but Canada's Supreme Court decision in Bhasin ( 2014 ) expressly cites & overrides one such in the disputed Alberta renewal dispute.

"We claim inadequate performance by snowplower Callow !" Is that relevant & credible ? : Madame Justice O’Bonsawin also opines that the defendants' performance complaints ( against snowplower Callow ) in this litigation are unsupported. The alleged under-performance would have also occurred at least SIX MONTHS before the September 2013 Termination.

"That it's a huge & unsupported judicial leap to platform alleged bad faith on a mere JUC client recommendation to management . . . What status if any did the JUC motion have as to the literal contract ?"

And even if somehow "active deception", just how much lost income could be attributed where Callow did not perform the second winter & had at least 6 weeks to mitigate by finding other clients ?

If appealed, there could be a lot of such arguments repeated.

3 - Had there been SIX MONTHS of deliberately secreted INTENTION TO TERMINATE the second year of Callow's snowplowing contract until just 6 weeks before snow season ?

( Motive : to avoid disruption to summer landscape activity contracted separately to the plaintiff Callow. )

Would such be even adequate to reasonably constitute "active" deception ?

Xxcrpt from Callow v CMG et al :

quote " . . . [38] The Minutes indicate that “ ( CMG’s individual co-defendant property manager Ms XXX is considering terminating the snow removal contract with CM Callow due to poor workmanship in the 2012-13 winter”.

In fact, the Minutes continue to state that Ms. XXX had reviewed the contract and advised the JUC members that they could terminate the contract with Callow with no financial penalty.

She advised that she would get quotes from other snow removal contractors. In response to Callow’s counsel’s demand letter, Ms. XXX states that the JUC made the determination to terminate Callow’s winter maintenance services contract on March 19, 2013, and it was a unanimous decision. . . .

. . . . [48] On July 17, 2013, there were e-mails between ( client Directors P. and C. ). Counsel for Callow submits that these are very relevant because they are private communications between them.

These two men never expected that they would be disclosed during this proceeding.

I agree with her.

Mr. C e-mailed Mr. P on July 17, 2013, regarding the “freebie” work: “Yeah, I was talking to him about it last week and he was mentioning he was going to do that. He’s basically doing this to try and make sure we keep him for summer grounds, which is fine by me.”

Mr. P then responds: “I figured as much. It’s nice he’s doing it but I am sure it’s an attempt at us keeping him.

Btw, I was talking to him last week and he is under the impression we’re keeping him for winter again.

I didn’t say a word cuz I don’t wanna get involved but I did tell ( Ms XXX ) that Callow thinks we’re keeping him for winter.”

[49] Mr. Callow was only advised by way of e-mail from Ms. XXX on September 12, 2013:

“Please be advised that Baycrest will not be requiring your services for the winter contract for 2013/2014 season, as per section 9 of the contract, Baycrest needs to provide the contractor with 10 days’ notice.”

Mr. Callow testified that immediately after he received the termination notice, he reached out to both Mr. P. and Mr. C. Mr. Callow believed that if there was a problem, he would have expected them to bring it to his attention like they had done in the past.

Callow entered into the contract with CMG under good faith.

Mr. Callow testified: “After reading this, it is pretty obvious that they used me, misled and lied to me.” I agree. . . " unquote

4 - The above Director E-MAILS & March 2013 alleged JUC client Directors decision to terminate the snowplow contract : ARE THEY IRRELEVANT ?

Do both fail to support a finding of "active" concealment by CMG ? What's an "active" misleading, as opposed to lawful silence or prudent desire not to risk collateral retaliation ?

Regardless, IF there is an appeal, will CMG succeed in distancing the actual September 2013 termination from the alleged "active misleading" aspect ?

5 - Xcrpted Madam Justice O'Bomsawin :

quote " . . . [65] In Callow’s case, CMG actively deceived Callow from the time the decision was made to terminate the winter maintenance services contract in either March or April to September 12, 2013.

More specifically, CMG acted in bad faith by

(1) withholding the information to ensure Callow performed the summer maintenance services contract; and

(2) continuing to represent that the contract was not in danger despite CMG’s knowledge that Callow was taking on extra tasks to bolster the chances of renewing the winter maintenance services contract.

[66] CMG argue that on its own, the exercise of the contractual right of termination is not evidence of a breach as there was no positive obligation on CMG to disclose their intention to terminate the contract before the ten days’ notice.

CMG further state that Callow has not successfully provided evidence of bad faith in the decision to delay.

I disagree. There were active communications between the parties between March/April and September 12, 2013, which deceived Callow.

Due to the active deception by CMG, I do not accept the argument that no duty was owed to disclose the decision to terminate the contract before the notice.


[67] CMG did not perform the contract pursuant to the minimum standard of honesty.

CMG’s delay to provide notice to Callow failed to provide a fair opportunity for the latter to protect its interests.

The minimum standard of honesty would have been to address the alleged performance issues, to provide prompt notice, or to refrain from any representations in anticipation of the notice period.

[68] Although the scope of good faith may be broader in the franchise and employment context, principles from these areas provide guidance.

In the employment context, it is recognized that there is a duty to act in good faith when terminating an employee.

In this case, Callow was not an employee. However, as a result of Bhasin, it is arguable that the duty to act in good faith in performing a contract also extends to terminating a contract. . . .

. . . [83] For the reasons noted previously, I order that CMG must pay Callow the amounts as follows:

(a) $64,306.96 for the value of the contract after expenses;

(b) $14,835.14 for the value of one year of the lease of equipment; and

(c) $1,600.00 for the last unpaid invoice. . . " unquote

5 - Footnote :

- This Ottawa judge in Sep 2017 turfed most of a grotesque $20 K award imposed in a Small Claims award against an Ottawa condo owner who lost a $ 2,500 challenge of a charge back SEE http://ontario.cafcor.org/index.php?option=com_fireboard&Itemid=46&func=view&catid=2&id=18830#18830

- from 2017 Superior Court ( East ) appointee Madame Justice Michelle O'Bonsawin 's appointment biography :

Justice O'Bonsawin holds a B.A. (Laurentian University), an LL.B. (University of Ottawa), and an LL.M. (Osgoode Hall), and is currently enrolled in the University of Ottawa's Ph.D. program in law.

She began her legal career with the RCMP Legal Services and later was counsel with Canada Post Corporation, specializing in labour, employment, human rights, and privacy law.

Prior to her appointment, Justice O'Bonsawin was general counsel for the Royal Ottawa Health Care Group, where she developed a specialization in mental health law. She has taught Indigenous law part-time in the University of Ottawa's French common law program.

She serves on the Board of Governors of the University of Ottawa, as well as its Executive Committee.

Justice O'Bonsawin also acts as a mentor in the Canadian Bar Association, Ontario Bar Association, and University of Ottawa mentorship programs.
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#18825
does the MANAGEMENT COMPANY ALONE GET HIT FOR THE ENTIRE AWARD ? ( Callow v CMG et al ) 2018/01/17 16:02  
The judgment's text does NOT list the defendants in their entirety.

The ( abbreviated ) judicial citation unfortunately even cites by name the property manager herself, who I decline to personally identify.

IF - IF - Callow's sole privity of contract is with management company CMG against whom the award is to be paid without successful appeal, can such final burdens be backloaded to the clients / ex-clients ( ?) / management company's insurers ?

OR will the management company have to suck it all up less any business insurer contribution if payable ? This alone may be a biggy . . .

from the text of the Callow termination judgment

"Conclusion

[83] For the reasons noted previously, I order that CMG must pay Callow the amounts as follows

(a) $64,306.96 for the value of the contract after expenses;
(b) $14,835.14 for the value of one year of the lease of equipment; and
(c) $1,600.00 for the last unpaid invoice.

[84] CMG must pay Callow within 30 days of these Reasons for Decision." unquote
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#18827
Entirety of Agreement clauses - what are they ? How good a defence ? 2018/01/20 10:28  
Again this ain't legal advice. Is this where we're heading ? :

Flipside :“the parole rule” (pronounced exactly like interim release after incarceration) judicial interpretation should reject alleged verbal changes of a written agreement, whose "Four Corners" should limit.

aka "INTEGRATION CLAUSE" especially USA or MERGER CLAUSE

xcrpt : Bates, M., Entire Agreement Clauses (UK), accessed 16 January 2018

U.K. Dr Malcolm Bates “Entire agreement clauses”

“ . . . . Entire agreement clauses often form part of the “boiler plate” provisions of commercial contracts and so the temptation may be not to pay them much attention.

. . . Recent case law ( U.K. ) has highlighted that it is important to consider the effect of entire agreement clauses carefully when including them in commercial contracts.

In particular, if a party wishes to exclude liability for any pre-contractual representations, the contract must expressly exclude such liability, although one can never exclude liability for fraudulent pre-contractual representations.

Entire agreement clauses must also be reasonable under the ( UK's ) Unfair Contract Terms Act 1977.

If the parties are both commercial entities and the contract is made in a commercial context, it is unlikely that an entire agreement clause excluding liability for pre-contractual representations would be unreasonable.

This may be the case even where one of the parties is much larger than the other, provided that the smaller party is accustomed to dealing with such agreements.”

Is this where we're heading ?
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#18908
ONCA overturns CALLOW v. CMG et al : NOT ENOUGH BAD FAITH ? 2018/11/13 18:55  
Almost a year after the above decision, Ontario's Court of Appeal has reversed it. Maybe also a little too much ? Would it chill interactions with service-providers ? Given the typical skill-sets, would it trigger a flood of such claims ? . . .

C.M. Callow Inc. v. Zollinger et al., 2018 ONCA 896 issued Nov 97/18 http://canlii.ca/t/hw0kb

xcrpted

" . . . [8] The appellants ( PMC & governancers etc ) argue that the trial judge erred by improperly expanding the duty of honest performance in a manner that went beyond the terms of the winter contract.

They argue, further, that the trial judge erred in calculating damages.

[9] We agree. Given our conclusion that the contract was not breached, it is not necessary to address the damages issue.

[10] The Supreme Court held in Bhasin v. Hrynew, 2014 SCC 71 (CanLII), [2014] 3 S.C.R. 494, at para. 33, that good faith contractual performance “is a general organizing principle of the common law of contract which underpins and informs the various rules in which the common law, in various situations and types of relationships, recognizes obligations of good faith contractual performance.”
In addition, the Court held that there is a duty of honest performance “which requires the parties to be honest with each other in relation to the performance of their contractual obligations”: at para. 93.

[11] The Court was at pains to emphasize that the concept of good faith was not to be applied so as to undermine longstanding contract law principles, thereby creating commercial uncertainty.

[12] The same is true of the new duty the Court recognized as flowing from the good faith organizing principle, the duty of honesty in contractual performance.

As Cromwell J. explained, at para. 73:

[The duty] 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.

[13] This, he emphasized at para. 73, was a “modest, incremental step” in the development of the law of contract.

. . [16] In our view, these findings may well suggest a failure to act honourably, but they do not rise to the high level required to establish a breach of the duty of honest performance.

[17] It is clear from Bhasin that there is no unilateral duty to disclose information relevant to termination: at para. 73.

Unlike Bhasin, this was not a case in which the contract would renew automatically, nor were the parties required to maintain an ongoing relationship.

The appellants were free to terminate the winter contract with the respondent provided only that they informed him of their intention to do so and gave the required notice.

That is all that the respondent bargained for, and all that he was entitled to.

[18] The duty of honest performance in this case required that the parties be honest with each other concerning matters “directly linked to the performance of the contract” (Bhasin, at para. 73) – that is, linked to the winter contract then in effect.

It did not limit the appellants’ freedom concerning future contracts not yet negotiated or entered into.

Communications between the parties may have led Mr. Callow to believe that there would be a new contract, but those communications did not preclude the appellants from exercising their right to terminate the winter contract then in effect. . . . " unquote
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#18909
condo corp's co-counsel reviews latest CALLOW v. CMG et al ONCA 2018/11/14 18:51  
"Can Condos Terminate a Snow Removal Contract Early ?" by Jocelyn Duquette LLB Gowling WLG :

http://condoadviser.ca/2018/11/can-condos-terminate-a-snow-removal-contract-early/condo-law-blog- Ontario
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