Introduction
A number of important class action decisions were released in the first quarter of 2025. In particular:
- Ocean Pacific Hotels Ltd. v. Lee 2025 BCCA 57: The British Columbia Court of Appeal ruled that pre-contractual dishonesty does not support a reasonable cause of action for breach of the duty of honest performance;
- Knisley v. Canada (Attorney General), 2025 ONCA 185: The Ontario Court of Appeal held that class proceedings cannot be "conditionally certified" on a certification motion;
- Tataryn v. Diamond & Diamond Lawyers LLP, 2025 ONCA 5: The Ontario Court of Appeal provided its first interpretation of the new mandatory dismissal for delay provision under the Class Proceedings Act 1992;
- Lochan v. Binance Holdings Limited, 2025 ONCA 221: The Ontario Court of Appeal upheld the certification of a securities class action against cryptocurrency company Binance Holdings Limited and its Canadian affiliates in an action brought on behalf of Canadian investors;
- Zanin v. Ooma, Inc., 2025 FC 51: The Federal Court stayed a proposed class proceeding advancing claims under the Competition Act and the Trademarks Act, broughton behalf of Canadian consumers, due to the presence of an arbitration clause found in the defendant's standard form terms and conditions; and
- InvestorCOM Inc. v. L'Anton 2025 BCCA 40: The British Columbia Court of Appeal refused to strike a proposed privacy class action on the basis of it being an abuse of process, despite a parallel class proceeding already having been commenced in Ontario.
B.C. Court of Appeal Rules That Pre-Contractual Breach of Duty of Honest Performance Is Not Reasonable Cause of Action
In Ocean Pacific Hotels Ltd. v. Lee, 2025 BCCA 57 ("Ocean Pacific"), the British Columbia Court of Appeal (the "BCCA") held that a breach of the duty of honest performance does not extend to dishonest representations that occur before a contract is entered into. The decision provides helpful guidance for litigants and contracting parties on when the duty of honest performance begins to apply in the life cycle of a contractual relationship.
(i) Background
The plaintiffs were former employees of the defendant, a hotel operator in Vancouver. In 2020, the defendant's hotel business suffered as a result of the COVID-19 pandemic, and it could no longer provide its employees with regular work hours. Consequently, the defendant offered to replace the plaintiffs' contracts of regular employment with casual employment contracts. Though the casual contracts eliminated employees' entitlement to shift hours and severance pay upon termination, they provided extended benefits coverage to casual workers, subject to the policies and terms and conditions of the hotel's benefits carrier.
In total, 93 employees opted to enter into the casual employment contracts. However, months later, the extended benefits coverage was terminated for many of those same employees.
As a result, the plaintiffs brought a proposed class action on behalf of the employees who entered into casual employment contracts with the defendant. The plaintiffs alleged, among other things, that the defendant breached its contractual duty of honest performance by misleading the plaintiffs about the extended benefits coverage during the parties' pre-contractual negotiations.
The class action was certified in 2023. At the certification motion, the motion judge acknowledged that the claim for breach of the duty of honest performance was a novel one but held that it nonetheless met the certification requirement of disclosing a reasonable cause of action. The defendant appealed this finding.
(ii) No breach of duty of honest performance during pre-contractual negotiations
The BCCA allowed the appeal, finding that the motion judge erred in holding that the breach of the duty of honest performance during pre-contractual negotiations was a reasonable cause of action. In doing so, the BCCA held that dishonest conduct during pre-contractual negotiations could not support such a claim, as the duty of honest performance does not extend to dishonesty before the contract at issue is entered into.
The BCCA noted that in both of the seminal cases on the duty of honest performance from the Supreme Court of Canada (the "SCC"), Bhasin v. Hyrnew, 2014 SCC 71 ("Bhasin") and C.M. Callow Inc. v. Zollinger, 2020 SCC 45 ("Callow"), the SCC required dishonest conduct to be "directly linked" to the performance of a contract to support a breach of the duty of honest performance. However, although the decisions in Bhasin and Callow suggest that the dishonesty must take place during the life of a contract (i.e., after it is entered into) to serve as the basis of a breach of the duty, the SCC did not conclusively rule out the possibility of a breach occurring during pre-contractual negotiations.
Despite the lack of clarity on the temporal limits of the duty of honest performance from Bhasin and Callow, the BCCA commented there is a "developing consensus" among courts that conduct during pre-contractual negotiations cannot form the basis of a breach of the duty.
The BCCA was of the view that the SCC had not intended to extend the duty of honest performance to pre-contractual negotiations in Bhasin and Callow. It noted there was no need to recognize the duty before the contract was formed - other causes of action, namely negligent and fraudulent misrepresentation, already give plaintiffs a remedy for dishonest conduct during pre-contractual negotiations.
The BCCA rejected the plaintiffs' argument that it was appropriate for the court to find that such a duty applied, given that the parties' long-term employment relationship was built on "mutual cooperation and trust," which distinguished the nature of their contracts from a mere business transaction. The BCCA acknowledged that employment contracts are unique, given the vulnerable position of employees relative to employers, but that the special nature of the relationship does not support a finding that the duty of honest performance extends to pre-contractual negotiations in the employment context.
Lastly, the BCCA rejected the motion judge's finding that "the [existing] employment agreement and the Casual Agreement must be taken together collectively," holding that neither Bhasin nor Callow supported such a proposition. The BCCA held that the SCC's decision in Bhasin requires a direct link between the alleged dishonesty and the performance of a "particular" contract to find a breach of the duty. The BCCA added that confusion would be created if the duty of honest performance could be applied to both a present and a future contract collectively.
In the result, the court ruled that dishonesty intended to influence a counterparty to enter a contract during negotiations was outside of the scope of the duty of honest performance. The court added that, if the opposite were true, floodgates would open to claims for breach of the duty in the context of pre-contractual negotiations because the duty of honest performance operates irrespective of a defendant's intentions. Accordingly, plaintiffs would be able to advance claims for breaches of the duty that occurred during pre-contractual negotiations regardless of whether the alleged dishonesty was intentional.
(iii) Breach of the duty of honest performance under existing agreements
Notwithstanding that the claim for a breach of the duty of honest performance under the casual employment contracts could not succeed, the BCCA held that the plaintiffs were permitted to amend their claim to allege a breach of the duty solely in connection with the regular employment contracts. The BCCA found that the plaintiffs were not barred from framing their claim in this manner because the alleged dishonesty that occurred during negotiations would not be pre-contractual if it was linked to the regular employment contracts - unlike the casual contracts, the plaintiffs' regular contracts of employment were in effect during the negotiations.
The court held that the proposed amendments were supported by the SCC's...
