THE GHOSTS OF FUNDAMENTAl BREACH: NEW DEVElOPMENTS IN THE ENFORCEABiliTY OF CONTRACTUAl

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THE ADVOCATE VOL. 72 PARl 5 SEPTEMBER 201 A

THE GHOSTS OF

FUNDAMENTAl BREACH:

NEW DEVElOPMENTS IN THE

ENFORCEABiliTY OF CONTRACTUAl liMITATIONS OF liABiliTY

SINCE TERCON

By Matthew Nied and Shawn Erker

665 ecent years have witnessed significant developments in the law that governs the enforceability of contractual limitations of liability. These legal developments were prompted by a

-..

"' ... 'AT, simplified and seemingly exhaustive analytical approach to determining the enforceability oflimitation clauses, 1 set forth in the 2010 decision of the Supreme Court of Canada in Tercon Contractors Ltd. v. British

Columbia (IYansportation and Highways).

2

This new approach was, in the graphic words of Binnie J., intended to

11 Shut the coffin" on the 11 jargon" associated with the doctrine of

It fundamental breach" in the context of limitation clauses.

3 That doctrine, which was first posited by Lord Denning and applied by Canadian courts in various forms for more than 50 years, effectively provided that a party could not rely on a clause that purported to limit its liability if the party was in breach of the fundamental 11 Core" of the contract and thereby deprived its counterparty of the very thing bargained for. 4

The application of the doctrine of fundamental breach tended to focus on whether a limitation clause was 11 unfair" or 11 Unreasonable" at the time of breach. This conferred on courts a seemingly broad, after-the-fact discretion to depart from the terms of a valid contract 11 Upon vague notions of 1 equity or reasonableness'". 5 This led to unpredictable outcomes that cast significant doubt on the enforceability of limitation clauses.

The new approach reinforces the right to limit liability in the interests of preserving individual liberty and commercial flexibility by attempting to circumscribe a court's ex post facto discretion. It provides that a party will only be able to avoid the effects of a limitation clause if at least one of three

666 VOl. 72 PART 5 SEPTEMBER 201 d THE ADVOCATE things is true: 1) if the clause, interpreted in context, does not apply to the liability at issue; 2) if the clause was unconscionable at the time the contract was made; or 3) if enforcement of the clause would be contrary to public policy. According to 'Thrcon, a court has no residual discretion beyond these cases to decline to enforce a limitation clause.

In the four years since 'Thrcon, courts have generally applied the new approach in a consistent manner. However, uncertainty has crept into the analysis in three key areas. First, while 'Thrcon dealt with the doctrine of fundamental breach in the context oflimitation clauses, there is some question as to the continued applicability of the doctrine in other contexts. Second, it is unclear whether the unconscionability stage of the analysis incorporates the traditional requirement that special notice be provided of extraordinary or unusual limitation clauses. Third, the breadth of the public policy stage of the analysis remains unclear.

This article provides an overview of the legal framework established in

'Thrcon and analyzes the three areas of continuing uncertainty.

THE FACTS OF TERCON

'Thrcon involved a dispute between a construction contractor and the province of British Columbia. The province issued a request for expressions of interest for the construction of a highway. Six parties responded, including Thrcon and a competitor. The province then issued a request for proposals, which specified that only the six parties who had responded to the original request for , expressions of interest were eligible to participate. In breach of that requirement, the competitor entered into a joint venture with a separate party that had not previously participated. This joint venture made a bid and was awarded the contract. Thrcon sued the province for allowing the joint venture to respond to the request for proposals and for awarding it the contract.

In its defence, the province relied on a limitation clause which provided that 11 no Proponent shall have any claim for compensation of any kind whatsoever, as a result of participating in this [request for proposals], and by submitting a Proposal each Proponent shall be deemed to have agreed that it has no claim".

6

The SCC split 5-4 on the interpretation of the clause. Mr. Justice Binnie, in dissenting reasons, found that the language of the limitation clause covered the province's breach. However, the majority, written by Cromwell J., found that Thrcon's claim arose from the participation of ineligible parties in the request for proposals, not 11 as a result of participating in this [request for proposals]", and thus was not covered by the clause? In the alternative,

THE ADVOCATE VOL. 72 PART 5 SEPTEMBER 201 4 667 the majority found the limitation clause to be ambiguous and interpreted it contra preferentum against the province. 8

However, the court was unanimous in its rejection of the doctrine of fundamental breach as an instrument for avoiding the application of limitation clauses. The court was also unanimous in the adoption of the new threepart test for determining the enforceability of such clauses.

PART ONE OF THE TERCON ANALYSIS: DOES THE CLAUSE APPLY?

In applying the first part of the 'Thrcon analysis, the question is 11 Whether as a matter of interpretation the exclusion clause . . . applies to the circumstances".9 This 11 depend[s] on the court's assessment of the intention of the parties as expressed in the contract".

10

Notably, in keeping with the SCC's attempts to shut the coffin on fundamental breach in the context of limitation clauses, courts have warned that limitation clauses should not be given strained and artificial interpretations in order to avoid the impact of what seems, after the fact, to be an unfair and unreasonable application of the clause.

11 Nevertheless, some courts have adopted a strict approach to the interpretation of limitation clauses by reading them narrowly or contra preferentum, 12 as the majority did in 'Thrcon.

13

INITIAL UNCERTAINTY IN THE TEST: THE OTHER FUNDAMENTAL BREACH

One area. of uncertainty concerns whether the 'Thrcon analysis applies beyond limitation clauses. In Canadian Federation of Students v. Simon Fraser

Student Society, 14 the defendant student society claimed that the plaintiff had committed a fundamental breach of ~n agreement by 11 failing to use the fees collected from the defendant to further the interest of university students in general and the [defendant] in particular", and thus the defendant was free to repudiate the contract.

15 The plaintiff responded that this did not constitute a reasonable defence, as 'Thrcon had 11 laid to rest" the doctrine of fundamental breach.

16 Mr. Justice Grauer rejected the plaintiffs argument, holding that 'Thrcon dealt only with fundamental breach in the context of limitation clauses.

17

The case of Re Bul River Mineral Corp.

18 is similar. There, an insolvent petitioner under CCAA protection sought court approval of new financing arrangements. Before such arrangements could be approved, the court had to first determine whether a previous financing agreement between the petitioner and CuVeras LLC was still in effect. The petitioner argued that

CuVeras had committed a fundamental breach amounting to repudiation of the agreement, which is why the new financing arrangement was required.

CuVeras disputed that the contract had been repudiated and pointed to 'Thr-

con in support of its claim that certain clauses of the contract, including clauses pertaining to compensation, were still enforceable by CuVeras.

Madam Justice Fitzpatrick rejected CuVeras's arguments and found that the

Thrcon analysis was ''not engaged in these circumstances".

19 Elaborating,

Fitzpatrick J. approved the proposition that "the inquiry into the unfairness of an exclusion clause is very different from the inquiry into whether one party should be excused on the ground of the other's non-performance.

Clarity of thought demands that they be kept separate." 20

However, some Ontario decisions have extended the application of Thrcon beyond the context of limitation clauses. In 1328779 Ontario Inc. (c.o.b.

Angling Outfitters) v. 2047152 Ontario Ltd., 21 a landlord claimed entitlement to re-enter and declare leased property to be forfeited by a tenant that had committed "fundamental breach" of a lease agreement. Although this was a claim in the nature of repudiation, Leach J. of the Ontario Superior Court of Justice stated, "I doubt that such arguments (of fundamental breach] survive the

Supreme Court of Canada's decision in Thrcon ... rejecting the 'fundamental breach' analysis ... (although I appreciate that the Supreme Court's decision was focused on the enforceability of exclusion clauses)." 22 As well, in 7326246

Canada Inc. v. Ajilon Consulting, 23 Himel J. applied the Thrcon analysis in the context of an "entire agreement" clause, adopting the proposition that such clauses "pose the same policy issues as exclusion clauses".

24

Therefore, while much of the case law limits the application of the Thrcon analysis and its effects on fundamental breach to the context of limitation clauses, some recent cases have hinted that the edifice of fundamental breach may crumble further.

PART TWO OF THE TERCON ANALYSIS: IS THE CLAUSE UNCONSCIONABLE?

In applying the second part of the Thrcon analysis, a court must determine whether the limitation clause was unconscionable at the time the contract was made.

25 Post-Thrcon case law has demonstrated that the party relying on the doctrine of unconscionability faces a "high hurdle". 26

Although the court in Thrcon did not set out a specific test for unconscionability, some courts in subsequent cases have held that the "usual test" for unconscionability continues to apply.27 Unfortunately, there is no consensus on what the 11 USual test" is.

28 Most B.C. courts have applied a two-part test for unconscionability, which provides that unconscionability will not be established unless the following factors exist:

• inequality in the position of the parties arising from the ignorance, need or distress of the weaker, which leaves him or her in the power of the stronger; and

THE ADVOCATE VOL. 72 PART 5 SEPH:MBER 20 14 669

• proof of substantial unfairness in the bargain. 29

With respect to the first factor, courts have indicated that the mere fact that a plaintiff has limited choices available to it will not create an inequality in the position of the parties provided that the plaintiff could have walked away from the contract . 30 In respect of the second factor, some courts have held that the standard is a high one: an exclusion clause must be ''egregiously unfair" rather than "just unfair".

31

Other courts, primarily in Alberta and Ontario, have applied expanded tests, 32 usually requiring the existence of the following four factors: .

• a grossly unfair and improvident transaction;

• the victim's lack of independent legal advice or other suitable advice;

• overwhelming imbalance in bargaining power caused by the victim's ignorance ofbusiness, illiteracy, ignorance of the language of the bargain, blindness, deafness, illness, senility or similar disability; and

• the other party knowingly taking advantage of this vulnerability.

Some courts have also applied a three-part test effectively identical to the four-part test except that a lack ofindependent legal advice is not an express requirement. 33

In practice, there may well be little substantive difference between the various tests. For example, although the four-part test expressly requires that the victim did not receive independent legal advice, that element seems to be implicitly contemplated in the requirement, common to all tests, of proof of inequality in the position of the parties. One might expect it to be difficult to find inequality in a party's position where that party has received the benefit of independent legal advice before entering into the contract. 34

UNCERTAINTY IN THE SECOND PART OF THE TEST: NOTICE AND lORD

DENNING'S RED HAND

A second area of uncertainty concerns whether the unconscionability stage of the Thrcon analysis incorporates the traditional requirement that special notice be provided of truly extraordinary or unusual limitation clauses.

Courts have traditionally required contracting parties to provide their counterparties with ample notice of extraordinary or highly unusual limitation clauses. This can be traced back to Lord Denning's decision in Thornton v. Shoe Lane Parking, 35 where his Lordship stated that an exclusion clause that was "so wide and so destructive of rights" would not be enforced by a

I

670

VOL 72 PART 5 SEPTEMBER 20 I e THE ADVOCATE court unless it was 11 drawn to [the plaintiffs] attention in the most explicit way ... In order to give sufficient notice, it would need to be printed in red ink with a red hand pointing to it-or something equally startling."36

Some post-Thrcon courts have considered whether a plaintiff must be provided with special notice of limitation clauses in order for them to apply, and whether such an analysis is to be considered part of the unconscionability analysis established in Thrcon. In Ajilon, Himel J., citing Professor

McCamus, noted that since the traditional 11 Special notice" requirements have been applied 11 0nly sparingly to signed agreements on the assumption that the signature constitutes a binding assent to all the written terms" ,37 the

Thrcon analysis may provide plaintiffs that have signed contracts without notice of arguably unconscionable provisions with a more viable avenue for relief than does the traditional 11 Special notice" case law, which was limited to highly unusual provisions.3s

For example, in a line of cases involving negligent home inspections, some lower courts have purportedly applied the Thrcon analysis and in doing so have declined to enforce limitation clauses because the plaintiffs had no expectation that the clauses would apply in the circumstances, they had not had the benefit of having the clauses pointed out to them or explained, and they had no reasonable opportunity to turn their mind to their effect. 39

These cases seem to expose a deep-rooted unwillingness on the part of some courts to enforce agreements seen as unfair after the breach has occurred, albeit without using the previous jargon of fundamental breach .

PART THREE OF THE TERCON ANALYSIS: WOULD ENFORCEMENT OF THE

CLAUSE BE CONTRARY TO PUBLIC POLICY?

If a limitation clause applies to the liability at issue and was not unconscionable at the time that the contract was made, a court will proceed to consider whether it should refuse to enforce the limitation clause because of overriding public policy. The burden of persuasion rests on the party seeking to avoid the application of the clause to demonstrate an abuse of freedom of contract 11 that outweighs the very strong public interest in their enforcement". 40

In discussing a court's "narrow" public-policy jurisdiction to give relief against a limitation clause, Binnie J. held that 1 lc]onduct approaching serious criminality or egregious fraud are but examples of well-accepted and

~substantially incontestable' considerations of public policy" that may preclude a defendant from relying upon a limitation clause.

However, Binnie J. noted that less egregious conduct could require the same conclusion: 11 the contract breaker's conduct need not rise to the level

THE ADVOCATE VOL 72 PART 5 SEPTEMBER 20 I

A

671 of criminality or fraud to justify a finding of abuse" where, for example, "the defendant was so contemptuous of its contractual obligation and reckless as to the consequences of the breach as to forfeit the assistance of the court". 41

As a result, although it is clear that the defendant's conduct in breaching the contract is relevant to the public-policy analysis, 42 it is not clear what must be shown, at a minimum, to trigger a court's public-interest jurisdiction. Most early post-'Thrcon decisions seemed to indicate that a court must be satisfied that the defendant was seeking to use the limitation clause as a shield for deliberate deception or intentional misconduct. 43 Mere or even gross negligence appeared to be insufficient. 44

One notable example is the decision of the British Columbia Court of

Appeal in Loychuk v. Cougar Mountain Adventures Ltd. 45 In that case, the plaintiffs were injured on a zip-line tour operated by the defendant. The defendant, who conceded negligence, brought a summary-trial application on the basis that the waivers signed by the plaintiffs were a complete defence. The trial judge granted the application, but did not discuss the applicability of the 'Thrcon analysis, focusing instead on principles developed in a line of cases in the bodily injury context.

On appeal, the court applied the 'Thrcon analysis and upheld the decision.

Mr. Justice Frankel, writing for the court, considered Binnie J.'s comments regarding the public-policy analysis and concluded that 11 [w]hat those examples have in common is that the party seeking to rely on an exclusion clause either knew it was putting the public in danger by providing a substandard product or service, or was reckless as to whether it was doing so". 46 In other words, what was required was a showing that the party had "engaged in conduct that is so reprehensible that it would be contrary to the public interest to allow it to avoid liability". 47

UNCERTAINTY IN THE THIRD PART OF THE TEST: RIDING THE UNRULY HORSE

OF PUBLIC POLICY

The decision in Loychuk was recently followed by another decision of the

British Columbia Court of Appeal involving similar facts: Niedermeyer v. Charlton. 48 In that case, the majority declined to enforce a limitation clause on the basis of public policy because of the nature of the limitation clause itself rather than the actions of the party seeking the protection of the clause.

The plaintiff in Niedermeyer was injured in a vehicle provided by a zipline company while travelling from the zip-lining location. The defendant company relied on a waiver of liability that excluded liability for any accidents that occurred while travelling to or from the zip-lining location. The

672 VOL. 72 PA.RT 5 SEPTEMBER 20 \4 THE ADVOCATE plaintiff argued that the waiver was contrary to public policy because it amounted to a contracting-out of the mandatory provincial vehicleinsurance scheme.

The trial judge acknowledged that 11 Contracts precluding one party from taking advantage of statutory rights may, in some circumstances, constitute an impermissible undermining of public policy", but 11 in this case, the

Release does not impact public policy or the statutory automobile insurance scheme" .

49 In the trial judge's view, the statutory scheme was not triggered until liability had accrued in another party; if liability were pre-emptively waived, the statutory scheme did not apply and there was no public-policy argument to be made.

However, on appeal, Garson J .A. held that 11 interpreting the legislative scheme, in its entirety, as permitting an owner or driver to exclude by contract the operation of the 1 Universal compulsory vehicle insurance' is con- trary to generally accepted principles of statutory interpretation". 50 Therefore, the waiver ofliability was not applied by the court, as 11 [i]t would be contrary to public policy and to a harmoniously contextual interpretation of the legislation to allow private parties to contract out of this regime".

51

In dissent, Hinkson J .

A . [as he then was-Ed . (see "Letters to the Editor ' )] stated that the third part of the Thrcon analysis should be limited to the traditional categories of public policy: contracts injurious to the state; contracts injurious to the justice system; contracts involving immorality; contracts affecting marriage; and contracts in restraint of trade.

5

2 Furthermore, Hinkson J.A

. felt that 111 public policy', as articulated and discussed in

Thrcon, was used by Binnie J. as a broad term .

.

. encompassing the concepts of statutory illegality, common law illegality, and the doctrine of public policy, and was not intended to expand the doctrine of public policy beyond the previous jurisprudence".

53

Essentially, despite the fact that the legislation did not expressly make it illegal to contract out of its provisions for universal vehicle insurance, Garson J.A

. determined that to allow such a waiver would circumvent the objects of the legislation and would therefore be contrary to public policy and void. In making this determination, Garson J .

A. relied upon, among other things, the self-described universality of the legislation's 11 universal compulsory vehicle insurance" as well as the fact that the legislation provided that only the Lieutenant Governor in Council may exempt any person or class of persons. 54

It remains to be seen whether such a broad application of the public-policy element of the Thrcon analysis will take hold in the jurisprudence. It may be that the decision's precedential impact will be limited to contexts in which

THE ADVOCATE VOl. 72 PART 5 SEPTEMBER 20 14 673 limitation clauses seem at odds with the objects of statutory or regulatory regimes. Until this decision, most cases involving public-policy arguments have focused on the actions of the parties seeking the protection oflimitation clauses rather than the nature of the limitation clauses themselves .

For example, in the recent case of Horizon Resource Management Ltd. v.

Blaze Energy Ltd.

55 a contracting party, Roll'n Oilfield Industries Ltd., had failed to comply with provincial safety regulations when carrying out the requirements of a contract. The counterparty, Blaze Energy Ltd., claimed that the failure to comply with the regulations meant that the contract was illegal as performed, and therefore void; or, in the alternative, that the regulatory non-compliance meant that enforcement of the limitation clause within the same contract, which Roll'n was relying on, would be contrary to public policy according to the third part of the 'Thrcon analysis. Mr. Justice

Brooker rejected the argument that mere non-compliance with safety regulations triggered the invalidation of a limitation clause.

Mr. Justice Brooker noted that the case was unlike the example of Plas-

'Thx Canada Ltd . v. Dow Chemical of Canada Ltd.,

5

6 referenced in 'Thrcon, where the defendant 11 Was found to have knowingly and deliberately withheld information at significant peril to life and property".

57 In the facts of

Horizon, the non-compliance was found to be neither wilful nor intentional.

58

In Brooker J.'s view, 'technical non-compliance with [the] regulation [was not] one of those 'substantially incontestable' considerations of public policy that justifies interference with freedom of contract" .

59

CONCLUSION

During the era of fundamental breach, the application of the law that governed the enforceability oflimitation clauses was clouded with considerable uncertainty . That uncertainty seems to have arisen from a combination of at least two factors: the significant degree of ex post facto discretion that the law afforded courts to determine the enforceability of limitation clauses, and the human reality that limitation clauses will often be perceived as being far less fair at the time ofbreach than they were when the parties happily entered into the contract in the first place .

This uncertainty can perhaps be explained by reference to the concept of

11 Unspecified contracts" . That concept posits that parties, due to a finite supply of time and imagination, will not be able to provide for all possible contingencies when drafting, and will therefore leave contracts incomplete. 60 As one commentator states, '~s a general matter, parties will want incomplete contracts to be interpreted as if they had spent the time and effort to specify more detailed terms. " 61 If the particular breach was, in the opinion of the

674 VOl. 72 PART 5 SEPTEMBER 201 A THE ADVOCATE court, unforeseeable at the time of drafting with the result that the limitation clause seems unfair at the time ofbreach, courts with a significant degree of ex post facto discretion may be more likely to effectively 11 read-in" exceptions to limitation clauses that the parties would presumably have included had they been more thorough with their drafting.

Before Thrcon, the SCC had on multiple occasions attempted to reduce the uncertainty in the doctrine of fundamental breach through a clearer expression of what, if any, discretion was available to a court when confronted with a prayer for relief from a limitation clause.

In Thrcon's most significant precursor, Hunter Engineering Co . v. Syncrude

Canada Ltd., Dickson C.J.C. and Wilson J. diverged markedly on whether a court should retain any discretion to ignore limitation clauses in the face of a fundamental breach.

62 According to the Chief Justice, fundamental breach should be solely treated as a question of construction, and 11 the courts should not disturb the bargain the parties have struck". 63 Madam Justice

Wilson, on the other hand, felt that such an approach would allow a defendant to subsequently breach contracts 11 Secure in the knowledge that no liability can attend it", and maintained that the courts should retain some discretion to decline to enforce a limitation clause when a defendant was trying to 11 have his cake and eat it too". 64 The court divided in their endorsement of the two positions, and the project of clarifYing the discretion of courts was postponed for another day.

That day supposedly came with the decision in Thrcon. The court unanimously declared the 11 jargon" of fundamental breach to be dead, and in its place left a seemingly clear three-part test. In some areas, the new approach appears to be bringing newfound clarity and certainty to the law. For example, most courts are now focusing on whether a clause was unconscionable or unfair at the time of drafting, rather than whether it was unfair at the time of breach. This appears to be consistent with Dickson C.J.C!s approach in

Hunter.

However, as shown by this article, subsequent cases have illuminated surviving areas of uncertainty. In addition, some courts still seem hesitant to enforce limitation clauses that seem unfair at the time of breach. Interestingly, Himel J :s acknowledgement in Ajilon that Thrcon's unconscionability analysis may, in application, provide a more viable avenue for voiding limitation clauses than did earlier law shows that the new approach may grant courts more discretion than the court in Thrcon may have intended.

Accordingly, while it seems true that the coffin has been shut on fundamental breach in the context of limitation clauses, some ghosts may still linger .

THE ADVOCATE VOL. 72 PART 5 SEPTEMBER 2014 675

ENDNOTES

1. In this article, "limitation clauses" will refer to both contractual limitations of liability and contractual exclusions of liability.

2. 2010 SCC 4 (Tercon].

3. Ibid at para 82, Binnie J . dissenting on another point .

4. See Karsa/es (Harrow} LJcl v Wallis, (1956] 1 WLR

936 (CA) . The "doctrine 11 was later adopted, in a modified form, by the House of lords in ductions

Photo Pro-

LJcl v Securicor Transport Ltcl, (1980] AC

827 (HL).

5.

6.

Tercon, supra note 2 at para 114, quoting ABB Inc v

Domtar Inc, 2007 SCC 50, (2007] 3 SCR 461.

Tercon, supra note 2 at pora 60.

7 .

8.

9.

10.

Ibid at paras 75-78.

Ibid at para 79.

Ibid at para 122 (emphasis removed] .

Ibid.

11. See e .

g. ibid at para 127; Rankin Construction Inc v

Ontario, 2013 ONSC 139 at para 88 [Rankin].

12. See e.g. Wales McLelland Construction Co (1988}

Ltcl v First Queensborough Shopping Centres Ltd,

2013 BCPC 17 (clause did not apply to preclude claims for interest on late payments under contract);

Houweling Nurseries Oxnarcllnc v Saskatoon Boiler

Mfg Co, 2011 SKQB 112 at paras 199-213; Kobelt

Manufacturing Co v Pacific Rim Engineered Products

( 1987} Ltcl, 2011 BCSC 224 at paras 133-153. The use of contra preferentum as a tool for avoiding the application of limitation douses is, of course, an old one : see Bow Valley Husky (Bermuda} Ltd v Saint

John Shipbuilding Ltd (1997), 153 DLR (4th) 385

(SCC) .

13. Tercon, supra note 2 at paras 66, 72-73 .

14. 2010 BCSC 1816.

15.

16.

17.

Ibid at para 32.

Ibid at para 49 .

Ibid at para 50 .

18. 2014 BCSC 645.

19 . Ibid at para 108. Madam Justice Fitzpatrick went on to find that even if Tercon applied in the circum-

20 . stances the disputed provisions would still not be enforceable by CuVeras: ibid.

Ibid at para 106, citing SM Waddams, The Law of

Contracts, 4th ed (Aurora, ON: Canada low Book,

1999) at para 590.

21. 2013 ONSC 4953

22.

24.

Ibid at para 16.

23. 2014 ONSC 28 [Ajilon].

Ibid at para 56, citing MH Ogilvie, "Entire Agreement Clauses : Neither Riddle nor Enigma" (2008)

87 Can Bar Rev 625 at 632.

25. Tercon, supra note 2 at para 122.

26. See e.g. Rankin, supra note 11 at paras 95-98

(clause not unconscionable where party was sophisticated contractor); Swih v Eleven Eleven Architecture

Inc, 2012 ABQB 764 at para 56 (clause in contract for service not unconscionable because client was "a sophisticated, experienced businessman well versed in the concepts of liability and risk who negotiated this limitation amount with the benefit of counsel");

Hans v Volvo Trucks North American Inc, 2011 BCSC

1574 [Hans] at paras 94-95 (clause not unconscionable even where plaintiffs were in a vulnerable position) . But see Maloney v Dockside Marine Centre

Ltcl, 2013 BCSC 395 (clause unconscionable due to inequality in the position of the buyer of the product) .

See generally Sonya Morgan, "Exclusion Clauses

PostTercon 11 (2013) Annual Review of Civil Litigation, The Honourable Justice Todd l Archibald &

Randall Scott Echlin, eels (Toronto : Carswell, 2013)

27 .

305 at 325-29.

Roy v 1216393 Ontario Inc, 2011 BCCA 500 at para 30 .

28. See e.g. Campbell (cob Soup's We/cling} v 0698900

BC Ltcl, 2010 BCPC 136 at para 40 for a list of factors that have been applied in determining whether it would be unconscionable to exempt a boilee from liability . ,

29 . See e .

g . Loychuk v Cougar Mountain Adventures

Ltd, 2012 BCCA 122 at paras 29-31 [Loychuk], leave to appeal to SCC refused, SCC Docket 34823

(27 September 2012); Niedermeyer v Charlton,

2012 BCSC 1668 at paras 82-89 [Niedermeyer

(Trial)], rev'd on other grounds 2014 BCCA 165

[Niedermeyer].

30. See Hans, supra note 26 at para 98; Raabe v

4042492 Manitoba Ltcl, 2011 MBQB 234 at paras

53-54 .

31 . See Hans, supra note 26 at para 86.

32. See e.g

. Horizon Resource Management Ltcl v Blaze

Energy Ltcl, 2011 ABQB 658 at para 1015 [Horizon] aff'd on other grounds 2013 ABCA 139; Titus v

William F Cooke Enterprises Inc, 2007 ONCA 573

33 . at para 38.

See e .

g . Gyimah v Toronto Hydro Electric System

Ltcl, 2012 ONSC 683; Allarco Entertainment 2008

Inc v Rogers Communications Inc, 2011 ONSC 5623

34. at para 176.

See Felty v Ernst & Young LLP, 2013 BCSC 815 at para 258. See also Ma v MIV Therapeutics Inc,

2004 BCCA 483 at paras 21-24, 30 (where the presence of independent legal advice was an "overwhelming" consideration in the unconscionability analysis) .

35. [1971] 2 QB 163, [1971]1 AllER 686 (CA) .

36. Ibid at 690 (All ER) . Although this was a legal case dealing with an unsigned, "ticket" contract, this legal approach has been adopted in Canada for signed contracts as well. See Tilden Rent-A-Car Co v Clendenning (1978), 18 OR (2d) 601, 83 DLR (3d) 400

(CA); Karroll v Silver Star Mountain Resorts Ltd

(1988), 33 BCLR (2d)160, 47 CCLT 269 (BCSC).

37 . John D McCamus, The Law of Contracts (Toronto :

Irwin low, 2005) at 444.

38. See Ajilon, supra note 23 at 59-61.

39 . See Larouche v Raclwanski, 2011 YKSM 3 (YT Small daims Ct); Schiltroth v RDS Enterprises, 2010 SKPC

676 VOL. 72 PART 5 SEPTEMBER 2014 THE ADVOCATE

47 (Sask Prov Ct) at paras 46-48. Cf. Hans, supra note 26 at para 65 .

40. Tercon, supra note 2 at para 123.

41. Ibid at para 118 . See also Arora v Whirlpool

Canada LP, 2012 ONSC 4642 at para 181 (wh .

ere the court remarked that a plaintiff's allegation that the defendant's washing machines had a defective design had "no overriding public policy reasons

(as there might be for a dangerous product) for not enforcing the express terms of the [defendant's] warranty").

42 . See Lam v Univers i ty of British Columbia , 2010

BCCA 325 at para 71.

43. See Roy v 1216393 Ontario Inc, 2011 BCSC 465 at para 35, where the trial judge said, without deciding , that the defendant's "deliberate deception" could provide a powerful basis for reaching a con clusion that there was an overriding public policy consideration. See also Horizon, supra note 32 at paras 1022-23.

44. See Loychuk, supra note 29 at para 46; Tercon, supra note 2 at para 117-18. See especially Roy v

12163930ntario Inc , 2012 BCSC 1752 at para 141

(public-policy discretion "must be exercised rarely and only in the most egregious circumstances ... The public policy concerns must be clear and unambiguous and give rise to an unquestionable duty on the court to curb the abuse perpetrated by the party seeking to hide behind the limitation clause"). See e.g

. Rankin, supra note 11 at paras 99-100 (an error by a government ministry in a tendering process made " not to subvert the integrity of the tender process in order to gain some unfair advantage, but rather to promote the integrity of the process" was not considered conduct justifying court intervention on public-policy grounds) .

45 . Loychuk, supra note 29 .

46. Ibid at para 46.

47. Ibid.

48. Niedermeyer supra note 29 .

49. Niedermeyer (Tria/), supra note 29 at paras 91-92.

50 . Niedermeyer, supra added]. note 29 at para 91 [emphasis

51.

52.

Ibid at para 114.

Ibid at para 44.

53. Ibid at para 52.

54. Ibid at paras 83, 87.

55 . Horizon, supra note 32 .

56 . 2004 ABCA 309, 357 AR 139.

57.

58.

Horizon, supra note 32 at para 1023.

Ibid at paras 438-532 .

59 . Ibid at paras 1022-1023 .

60 . See Steven Shovel!, Foundations of Economic Analysis of Law {Cambridge , MA : Harvard University

Press, 2004) at 301 FF.

61. Ibid.

62. [1989]1 SCR 426 at 455 [Hunter].

63 . Ibid.

64 . Ibid at 510 .

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Investigation

Neil Hain,

BA , JD,PCM

604.313.5891 neil@solvitdr.com

Patrick Poyner,

BA , LLB

604.998.3377

, C.Arb

patrick@solvitdr.com

.

David Yule,

BA, LLB, PCM

250.702.6162 david@solvitdr.com www. sol vi tdi sp u teres ol uti on. com

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