TCLG: Recent Commercial Cases That Could Impact Your IT Practice (Summary)

Peter Ruby, a Partner at Goodmans LLP, presented an overview of IT-related commercial cases at a recent Toronto Computer Lawyers Group event on April 1, 2015. As the cases discussed have particular relevance to our practice, I’ve summarized them as follows:

1. Email Acceptance (Christmas v. Fort McKay First Nation, 2014 ON SC 373)

Facts:  Christmas was an Ontario lawyer hired by a First Nations band in Alberta and now suing for wrongful dismissal. Christmas received the offer of employment in Ontario and accepted it by email. Employment had a choice of law provision of Ontario, but no forum selection clause.

Decision / Legal Principle:

  • Unlike the mail box rule where acceptance is effective when dropped off at the mail box, “[i]t is well-established that when acceptance of a contract is transmitted electronically and instantaneously, the contract is considered to be made in the jurisdiction where the acceptance is received”, and therefore the governing law and forum of the recipient applies (absent choice of law and forum selection provisions).

2. Organizing Principle of Good Faith / Duty of Honest Performance (Bhasin v. Hrynew, 2014 SCC 71)

Facts: This complicated scenario involved lying, straight-up misleading statements, and the fact that the Plaintiff could prove but-for bad faith conduct of the Defendant, damages to him could have been avoided.

Decision/Legal Principle:

  • The courts recognized a new general organizing principle of good faith requiring contracting parties to have “appropriate regard” for the interests of the other contracting party. The courts stated that such, “organizing principle is simply that the parties generally must perform their contractual cuties honestly and reasonably and not capriciously or arbitrarily.”
  • Furthermore, as a “further manifestation of the organizing principle of good faith”, the courts recognized a duty of honest contractual performance. Such duty of honest contractual performance, “means simply that the 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.”
  • Lastly, one should recognize that these are contractual principles, even though it can seem like principles of tort. Thus, the resultant damages are expectation damages (vs. damages suffered under tort law).

3. Limitation of Liability Clause (Swift v. Tomeck Roney Little & Associates Ltd., 2014 ABCA 49)

Facts: Mr. & Mrs. Swift purchased a land to build their home. Mr. Swift hires an architect, who architect then subcontracted aspects of the project to certain engineers. The design and construction of the home suffered deficiencies in the amount of $1.9 million. Mr. Swift then sued both in contract and tort, and Mrs. Swift sued in tort. The Defendants argued that: (1) the limitation clause limited damages to $500K and barred claims for negligent misrepresentation; and (2) Mrs. Swift was also bound by the limitation clause since her husband was acting as an agent on her behalf. The limitation of liability clause in the agreement stated:

3.8.1   With respect to the provision of services by the Designer to the Client under this Agreement, the Client agrees that any and all claims which the Client has or hereafter may have against the Designer which arise solely and directly out of the Designer’s duties and responsibilities pursuant to this Agreement (hereinafter referred to in this Article 3 as “claims”), whether such claims sound in contract or in tort, shall be limited to the amount of $500,000.00.

Decision/Legal Principle:

  • In a limitation clause, the words “any and all” does not necessarily mean an “aggregate sum”. Thus when contracting, if the intent is for a limitation to mean “in the aggregate”, one should say so.
  • Mr. Swift’s claim for negligent misrepresentation fell outside the parameters of the limitation clause as it is unreasonable to conclude that negligent misrepresentation was contemplated as something that “arises solely and directly” out of the Designer’s duties and responsibilities pursuant to the Agreement.
  • Lastly, Mr. Swift is not an agent for his wife, Mrs. Swift, simply by virtue of marriage; to do so would ignore the separate legal identity of each spouse. Thus, when contracting with associated parties, one should ensure that they are parties to the contract.

4. No Appeal from Appointment of Arbitrator (Toronto Standard Condominium Corporation No. 2130 v. York Bremner Developments Limited, 2014 ONCA 809 ) 

Facts: Dispute arose between the parties and the Plaintiff proposed certain arbitrators to arbitrate the dispute. The Defendent refused to move forward with arbitration because they felt the dispute wasn’t within scope of arbitration clause. The Plaintiff proceeded to asked the court to appoint an arbitrator and such arbitrator could decide whether they had jurisdiction over the issues in dispute. As a result, Defendant ended up with sub-optimal arbitrator and appealed the appointment of the arbitrator.

Decision/Legal Principle:

  • Court cited the Section 10(2) of the Arbitration Act, 1991 and affirmed that there is no appeal from the court’s appointment of the arbitrator.
  • In addition, “a court will decline to have the arbitrator determine his or her jurisdiction only when it is clear or obvious that there is no jurisdiction”. And since at least one issue arguably fell within jurisdiction of arbitrator, the arbitrator should be appointed and determine his jurisdiction.

5. Dispute Resolution Wording: “under this Agreement” (2156775 Ontario Inc. vs. Just Energy, 2014 ONSC 3276)

Facts: The Defendant submitted a motion for a stay of action because of an arbitration clause. One of the contracts at issue contained the following arbitration clause:

17. Dispute Resolution, Binding Arbitration. Customer may contact Just Energy with regard to a concern or dispute under this Agreement by mail, fax or telephone using Just Energy’s contact information as set out at the top of the Customer Agreement. Both parties will, in good faith, use commercially reasonable efforts to resolve a dispute. If not resolved within 45 days, such dispute will be referred to and finally resolved by binding arbitration pursuant to Governing Law, before a single arbitrator, without the right of appeal to law and/or facts, at an arbitration services organization to be chosen exclusively by Just Energy. The arbitration costs will be shared evenly between the parties. Customer waives any right to commence or participate in any class action related to this Agreement. In addition to, but not in lieu of binding arbitration, Customer may contact the OEB’s Customer Service Centre at [phone number] for details about its dispute resolution process. Customer shall remit all undisputed amounts during the pendency of any dispute.

Decision/Legal Principle:

  • There is no question that the validity of an agreement is an issue that can be referred to arbitration; however, dispute regarding existence of the Agreement is not a dispute “under” the Agreement.
  • Words such as “in connection with” or “arising out of” or “touching or concerning” should be used to encompass validity of the Agreement.
  • As a result, the motion for a stay of action was dismissed.

6. “May Arbitrate” is Permissive (Durham v. Oshawa, [1999] O.J. No. 1300)

Facts: The parties disagreed on the interpretation of the word “may” in an arbitration clause because a requirement to arbitrate would have implications with respect to the calculation of limitation periods.

Decision/Legal Principle:

  • If contract says, “may arbitrate”, then there is no binding arbitration provision in place. Had the parties used the words “shall”, the outcome would have been different.

7. RFP: Contracting out of Contract A (Everything Kosher Inc. v. Joseph and Wolf Lebovic Jewish Community Centre, 2013 ONSC 2067)

Facts: Parties disagreed whether Contract A was formed in a response to an RFP.

Decision/Principle:

  • In the context of the documents issue, the RFP was “a request for proposals and nothing more. The prize at the end of the exercise was…the opportunity to negotiate for a contract.”
  • Even though the RFP contemplated a 90 day negotiation period, that in itself does not constitute a binding agreement since, “the ‘contract to make a contract’ is not a contract at all”.

8. Implied Fraudulent Misrepresentation / Entire Agreement (Iatomasi v Conciatori, 2012 ONCA  913)

Facts: Mr. an Mrs. Iatomasi purchased a home from Mr. and Mrs. Conciatori. Mr. Conciatori: (1) false represented that the home never suffered water leakage when he knew otherwise; (2) handed over plans to home to Mr. Iatomasi knowing that the home was not built according to such plans; and (3) claims the “entire contract” provision in the agreement barred claims by the Iatomasis. Nevertheless, the Iatomasis sued for fraudulent misrepresentation and breach of contract.

Decision/Legal Principle:

  • Making a statement knowing it to be false was clearly fraudulent misrepresentation, and the “entire agreement clause” did not save the Defendant.
  • Interestingly, silence is not tantamount to active dishonesty; the “handing over of plans” by Mr. Conciatori knowing that the home was not built according to such plans cannot amount to implied fraudulent representation.

9. Internet Defamation (Awan v. Levant, 2014 ONSC 6890)  

Relevance: Many bloggers believe that when they are commenting on issues, they attract no liability because it’s simply their opinion. This case shows that is not necessarily the case.

Fact: Levant sat in human rights tribunal and “live-blogged” from a human rights tribunal hearing. Levant, on his blog, repeatedly calls the Plaintiff, Awan, a liar. Levant also made several factual errors about what was said during the hearing.  Awan sued for defamation. Among other defences, Levant argues the defence of fair comment.

Decision/Legal Principle:

  • Blog posts stating that the witness was a liar repeatedly was not an opinion; this is important because opinions generally don’t give rise to defamation but facts do.
  • With respect to the fair comment defence, the court stated, “[w]hat is comment and what is fact must be determined from the perspective of a ‘reasonable reader’”, and “must be determined in the specific context of the words complained of. Comment must be recognizable as such – the opinion must be expressed in such a way that the reader can readily distinguished what is asserted as fact and what is claimed as comment…further, while the use of ‘opinion-like’ words such as ‘in my view’ or ‘I have come to the conclusion that’ are not determinative, it is relevant that there are no such words in this blog post”.

10. Misuse of Social Media (Kim v International Triathlon Union, 2014 BCSC 2151)  

Relevance: Employees should communicate their expectations of employee performance through written Social Media policies.

Facts: Ms. Kim criticized her employer, ITU, online and compared her disagreement with management to the abuse she suffered from her mother as a child. Ms. Kim was fired and sued for wrongful dismissal.  ITU did not have a social media policy, and other employees of ITU knew about Ms. Kim’s blog.

Decision/Legal Principle:

  • To dismiss Ms. Kim for cause, the Court stated there had to be “express and clear” warning about Ms. Kim’s performance relating to the social media posts and a “reasonable opportunity” to improve her performance after warning her. Since there was no clear warning, Ms. Kim was wrongfully dismissed.

11. Unjust Enrichment (Infinity Steel Inc. v. B&C Steel Erectors Inc., 2011 BCCA 215)  

Relevance: Even if there a contract is not established, there is still a legal regime in place for unjust enrichment.

Facts: Parties agreed on timing of work to be done and the nature of the work to be done, but held different views regarding payment terms. One though it was fixed-priced, and the other thought it was a cost-plus arrangement.

Decision / Legal Principle:

  • There is no enforceable contract when essential terms such as price is not established; however, courts found unjust enrichment nevertheless put a price on the value of services delivered on the basis of quantum meruit.
  • The value of such services will be at the court’s discretion. The Court stated, “…it is now firmly established that a claim for unjust retention of a benefit conferred in an ineffective transaction is a discrete category of the doctrine of unjust enrichment, which may attract a personal monetary remedy…and that remedy must match, as best it can, the extent of the enrichment unjustly retained…the appropriate measure for restitutionary quantum meruit is to be selected to meet the circumstances of the particular case. Important factors will include but not be limited to, the course of dealings between the parties, any estimates obtained, the costs incurred, the scope of work, the actual work done, the market value of the services provided.”

 

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