Mohamed v. Information Systems Architects Inc., 2018 ONCA 428, 2018 CarswellOnt 7099, [2018] O.J. No. 2421, 2018 C.L.L.C. 210-048, 291 A.C.W.S. (3d) 749, 423 D.L.R. (4th) 174, 48 C.C.E.L. (4th) 234, 79 B.L.R. (5th) 1:
The defendant was a technology corporation that hired plaintiff pursuant to six-month independent consulting agreement to provide technological services to its client. The Plaintiff had disclosed prior conviction for assault with weapon. The client found out about the criminal history and requested his replacement. The defendant terminated the plaintiff pursuant to provision in his Independent Contractor Agreement (“ICA”), and he brought action for breach of contract (for the balance of the ICA). At trial, the judge found that termination provision was vague, unclear and unenforceable. The Court of Appeal did not agree with this point. The Court of Appeal agreed with trial judge that the defendant breached the duty of good faith in the performance of the ICA. The appeal was dismissed. The plaintiff was entitled to payment of the unexpired portion of the ICA without mitigation.
The ICA provided as follows:
This agreement and its Term shall terminate upon the earlier occurrence of:
- ISA, at their sole discretion, determines the Consultant’s work quality to be substandard.
- ISA’s project with Customer gets cancelled, experiences reduced or altered scope and/or timeline
- . ISA determines it is in ISA’s best interest to replace the Consultant for any reason.
- Immediately, upon written notice from ISA, for any breach of this Agreement by the Consultant.
The Court of Appeal noted (para. 17) that the trial judge referred to evidence of the “respondent’s understanding that there would be an element of good faith in the exercise of the provision by the appellant, and found that this understanding was supported by the law from the Bhasin decision of the Supreme Court. He concluded that the appellant breached the ICA by terminating it in the way and the circumstances that he did.” The Court went on and stated: “I agree that although the appellant had a facially unfettered right to terminate the contract, it had an obligation to perform the contract in good faith and therefore to exercise its right to terminate the contract only in good faith.” [para. 18, underlining added.] The plaintiff had disclosed his criminal conviction prior to entering into the contract. Accordingly, the termination of the ICA one month later was not a good faith exercise of its contractual discretion.
The ONCA decision was followed by the BC Supreme Court in Lightstream Telecommunications Inc. v. Telecon Inc., 2018 BCSC 1940, 2018 CarswellBC 2987, 301 A.C.W.S. (3d) 293, 87 B.L.R. (5th) 130.