Legal Blog

Bad Faith

Time Development Group Inc. (in trust) v. Bitton 2018 Ont SCJ

A purchaser did not close a land transaction because the purchaser had lost its financing at the last moment. The vendors, relying on a time of the essence clause, refused to extend the closing of the transaction. The vendors scooped the $500,000 deposit and, ultimately, the purchaser brought an action for specific performance. By way of a summary judgment motion, the motions judge dismissed the purchaser’s action. He noted, correctly, that the Supreme Court of Canada did not recognise good faith as a rule of law or a general duty applicable to all contracts. It did not recognise good faith as a stand-alone duty or rule. It was merely an informing principle to manifest itself in different ways for different types of contracts and different contractual relationships. Further, good faith merely requires that a party not seek, in bad faith, to undermine the other party’s interests. It does not engage loyalty to the other party; it is not an opportunity for ad hoc judicial moralism or to be used as a pretext for scrutinising the motives of contracting parties. Accordingly, the vendors, merely by refusing to extend the closing of a contract as was their contractual right, did not perform an act of bad faith. They were subject to no good faith principle or rule that would oblige them to forego their rights under the agreement.

Written by Jonathan Speigel, the founding partner of Speigel Nichols Fox LLP, leads the litigation and construction practices.