In a recent decision, the BC Court of Appeal in Ocean Pacific Hotels v. Lee, 2025 BCCA 57, further clarified the organizing principle of the duty of good faith and honest performance, in a decision appealing the certification of a proposed class proceeding. The Court also commented on the availability of pleading amendments on certification, a procedural point interesting to class counsel.
The proposed class proceeding was brought by three plaintiffs on behalf of employees of the Pan Pacific Hotel in Vancouver. During the COVID-19 pandemic, economic pressure caused the hotel to decrease its operative work force. To address employees’ concerns over benefits during the period of reduced employment, the hotel offered “casual agreement” contracts, which would purportedly provide benefits. The benefits under the casual agreements were later terminated. On behalf of the class, the plaintiff alleged that Pan Pacific’s conduct during the negotiations of the casual agreements constituted a breach of the duty of honest performance. On application, the claim was certified by the BC Supreme Court.
Scope of the duty of honest performance
On appeal, the Court rejected the chambers judge’s expansive interpretation of the duty of honest performance. Relying on the existing jurisprudence in Bhasin v. Hrynew, 2014 SCC 71 and C.M. Callow Inc v. Zollinger, 2020 SCC 45, the Court held that the duty of honest performance applies to the performance of an existing contract and the duty does not arise in pre-contractual negotiations. The Court emphasized that existing remedies were available and appropriate to address deceptive pre-contractual conduct, noting:
[66] I am also of the view there is no need to expand the contractual duty of honest performance to apply to dishonest conduct during pre-contractual negotiations which is intended to induce a party to enter into a contract. The law concerning the torts of negligent and fraudulent misrepresentation is well-developed and provides an adequate remedy in this situation. In Queen v. Cognos Inc., [1993] 1 S.C.R. 87, 1993 CanLII 146, the SCC found that statements made by an employer to a prospective employee in the course of an interview, which ultimately led to a contract of employment, could amount to negligent misrepresentation. There is no doubt a claim in fraudulent misrepresentation can also be made in appropriate circumstances during the negotiation of a contract, including a contract of employment. Both torts are based on a contracting party being wrongfully misled by statements made leading to the formation of a contract.
Because the plaintiffs had plead that the dishonest conduct occurred in the course of pre-contractual negotiations, before the casual agreements were entered into, this could not form the basis for a claim of the breach of the duty of honest performance.
Curative amendments
After concluding that the claim should not be certified as plead, the Court considered the representative plaintiffs’ right to amend their pleadings to correct the defects identified.
The plaintiffs sought an amendment to the pleadings alleging a breach of the duty of honest performance of the employees’ existing contracts of employment, rather than the casual agreements. As a first step, the Court assessed whether the proposed amendment would be sufficient to plead the essentials of a cause of action which would justify certification of the claim. They concluded that it did not; notwithstanding that the amendment attempted to tie the duty of honest performance to existing contracts, it fell short of appropriately making out a claim for breach of contract. In order to sufficiently make out the claim, the Court found that any allowable amendment must clearly plead the existence and material terms of the existing contracts between the class members and defendant as well as clearly plead the manner in which those contracts were allegedly breached.
Regardless of the conclusion that the proposed amendments failed to make out a certifiable cause of action, the Court granted the plaintiffs the opportunity to further amend their pleadings with the benefit of the Court’s analysis on what would constitute a successful amendment.
In coming to this conclusion, the Court stated that amendments to pleadings should be granted generously to allow plaintiffs to appropriately frame their claim on behalf of the class members. However, the Court made clear that while the Class Proceedings Act’s overarching purpose, access to justice, should govern, access to justice issues and questions of fairness may accrue to the benefit of the defendant rather than only the plaintiff. The decision should take into consideration the length of time the plaintiff has had to sufficiently amend their pleadings, the number of insufficient attempts made and whether it is clear what specific amendments the plaintiffs would need to make in order to properly plead their claim.
For more information on this case or any questions related to the legal implications of this decision on your business, please contact the authors, Emma Irving or Jaclyn Vanstone.
