The Employment Law Context: Haack v. Secure Energy (Drilling Services) Inc.
March 2022 - 2 min read
In 2020 and 2021, C.M. Callow Inc. v. Zollinger, 2020 SCC 45 and Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, 2021 SCC 7, two significant Supreme Court of Canada cases, clarified and confirmed the duty of good faith and honest contract performance. These cases have since been followed several times in Alberta and Canada to confirm, clarify, or extend the duty of good faith and honest performance. Understanding the evolution of the law following Callow and Wastech is essential for all individuals and entities with contractual duties and rights.
This article aims to provide an update on how appellate courts have applied the concepts of good faith and honest contractual performance, following Callow and Wastech.
In Haack, the Alberta Court of Queen's Bench confirmed that the duty of good faith and honest performance focuses on honesty and whether a contracting party has engaged in dishonest, deceptive or misleading behaviour. Haack's employment from Secure Energy (Secure) was terminated with cause, and his shares in the company were immediately bought for $1. He sued for wrongful dismissal, breach of the unanimous shareholder agreement (USA), and oppression.
The Court found that Secure made false and misleading statements about his performance and then suggested they had precise knowledge and accurate information about deficiencies in Haack's performance without substantiating their claims against him. Secure used these statements to justify the termination and share buy-out. The Court further found that those misleading statements were made relating to the performance of their contractual obligations. Secure did not investigate the accuracy of the statements and acted carelessly, so the Court held that they did have the requisite knowledge that the statements were false and misleading. As a result, the Court found that Secure breached its duty of good faith and honest performance.
This case confirms that damages for breach of the duty of good faith and honest performance are often expectation damages (damages that would put the plaintiff back in the position they would have been in had the contract been performed). In this case, Haack did not identify any grounds for recovery, such as mental distress, and the test for punitive damages was not met.