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Laurie Livingstone and Arthur Hamilton Defeat Bad Faith Claim and Stay Proceedings

Published: 12/04/2018

Team: Laurie Livingstone, Arthur L. Hamilton

In a recently released decision of Madam Justices Sachs, our client, Western Life Assurance Company (“Western”), defeated an attempt by short term lender Loan Away Inc. (“Loan Away”) to obtain a mandatory injunction that would have required Western to rescind a valid notice of termination of a group insurance policy.  In the statement of claim, Loan Away had asserted numerous allegations of bad faith, while seeking in excess of $6 million in damages.

In dismissing Loan Away’s request for injunctive relief, Justice Sachs expressly rejected that bad faith conduct had occurred.  Justice Sachs accepted the evidence of Western that its actions were in accordance with express contractual provisions, and further noted it was not surprising that Western wished to end its business relationship with Loan Away, given the numerous breaches of contract by Loan Away.

This is the first common law case to apply the principles set out in the Supreme Court of Canada’s recent Churchill Falls decision.  Relying on Churchill Falls, Justice Sachs confirmed that the concept of good faith between contracting parties cannot be used to undermine the essential paradigm of a contract.

In her decision, Justice Sachs also granted Western’s motion to stay the proceeding because the contract between Loan Away and Western contained a dispute resolution clause that required disputes to be arbitrated in a jurisdiction other than Ontario.

A copy of the decision is avaliable here.