It has been put to me that my June 5, 2019 post on the possibility of a breach-of-contract action as a remedy for the government’s refusal of expected reappointments has a potential flaw.  A reader has suggested that I might not have given sufficient weight to the limitation to the appointees’ contractual rights arising from the Appointments Directive’s explicit reservation to the government of the right to refuse any reappointment with four months notice. 

Of course, the June 5th post did anticipate the latter argument, and the reply which that post proposed to that argument reads as follows:

The short reply to that [argument] is that the Government could not have intended, and cannot be taken to have intended, to reserve the right to refuse the expected reappointments other than in the circumstances where there have arisen significant, relevant, and unexpected circumstances sufficient to reasonably justify exercising that right notwithstanding the rightful expectations of the appointees and the chair recommendations.  The Government appears to have made no effort to justify the refusals.

Also, the Government’s reliance on a contractual right to refuse a reappointment would involve the exercise of its appointment powers and it has no authority to exercise that power for an irrelevant or improper purpose. Given the context in which these refusals occurred, it is difficult to imagine factors motivating the government’s refusals that a court would consider proper.

What my commentator pointed out, however, was that since the refused appointees would be asserting contractual rights, surely the government’s reservation of its power to refuse reappointments would also be seen as part of the contract. Viewed in that light, the exercise of that power would not be the exercise of a statutory power governed by the improper purpose doctrine but the exercise of a contractual right.

And the question then is: does the improper purpose doctrine or something similar, apply to a government’s exercise of a contractual discretionary power?

With this question in mind, I had the good fortune to read a post written by Professor Paul Daly in his well-known  and highly respected  blog, Administrative Law Matters, to which a reader of mine had directed me.  In that post, there is a reference to a recent UK Supreme Court decision in which the Court examines the UK common law concerning the very question – viz., the application of what amounts to an improper-purpose doctrine, to the exercise of an apparently unrestricted contractual power.

See: Paul Daly, The Limits of Public Law: J.W. v. Canada (Attorney General), 2019 SCC 20, second-last paragraph.

The UK decision to which Daly refers is Braganza (Appellant) v BP Shipping Limited and another (Respondents), [2015] UKSC 17.

Mr. Braganza was the Chief Engineer on a BP oil tanker who “disappeared” while the tanker was at sea and his widow claimed the death benefits provided for in his contract of employment.

The benefits provision in Mr. Braganza’s employment contract with BP authorized BP to refuse a claim for benefits “if, in its opinion, the death, accidental injury or illness resulted from amongst other things, the [employee’s] wilful act, default or misconduct.”  [Emphasis added.]

After an investigation, BP concluded that Mr. Braganza had committed suicide by jumping overboard and denied the claim for benefits.

Mr. Braganza’s widow brought an action in the High Court against BP for breach of the employment contract.   The action was successful.  The Court engaged in a merit-review of the reasons for BP’s rejection of the claim, and held that the opinion formed by BP was not reasonable because it had not recognized that cogent evidence commensurate with the seriousness of a finding of suicide was necessary, and had failed to take into account the real possibility that Mr. Braganza had suffered an accident.

On appeal, the Court of Appeal in its turn allowed the appeal and dismissed the claim on the basis that the employer’s grounds for its suicide opinion were “reasonable”.

That decision was appealed to the UK Supreme Court where the claim was allowed, with the Court examining at length the jurisprudence respecting the limits to the exercise by one contracting party of an apparently unfettered discretion conferred on that party by agreement of the other party.

This jurisprudence included the following from the judgment of Legatt LJ in Abu Dhabi National Tanker Co v Product Star Shipping Ltd (The “Product Star”) (No 2) [1993] 1 Lloyd’s Rep 397, 404: [See para. 20 of Lady Hales judgment in Braganza]

The essential question is always whether the relevant power has been abused. Where A and B contract with each other to confer a discretion upon A, that does not render B subject to A’s uninhibited whim. In my judgment, the authorities show that not only must the discretion be exercised honestly and in good faith, but, having regard to the provisions of the contract by which it is conferred, it must not be exercised arbitrarily, capriciously or unreasonably.

And this from Dyson LJ in Paragon Finance plc v Nash [2001] EWCA Civ 1466, [2002] 1 WLR 685: [Also in paragraph 20 of Lady Hale’s judgment.]

“… it was necessary, in order to give effect to the reasonable expectations of the parties, to imply a term that the power would not be exercised dishonestly, for an improper purpose, capriciously or arbitrarily.”

I have been unable to find Canadian authorities dealing explicitly with improper-purpose limitations to the exercise of an unfettered contractual discretion.  However, the UK authorities are persuasive.  They are based on implicit principles of contract interpretation in the determination of the parties’ intent which echo the statutory-interpretation analysis of the legislature’s intent relied on by the SCC in its recognition of improper purpose limitations on the exercise of statutory powers in Roncarelli and in CUPE.

And note the similarity between the analysis in the foregoing UK decisions and the analysis in the first of the two paragraphs responding to the anticipated government argument in the original post as quoted above. 


PPS – Do not forget the constitutional arguments.

Do not forget to remember that if the government should by any chance be seen to have successfully reserved to itself an unfettered right to arbitrarily refuse any reappointment at any time, that reservation will be found to be unauthorized as incompatible with the common law principle of judicial independence and not explicitly authorized by statute; or, if found to be authorized by statute then invalid because Ocean Port should not be seen to be applicable to adjudicative tribunals and a statute so interpreted is itself constitutionally invalid as being contrary to the Valente principles of judicial independence; or, if Ocean Port prevails, invalid as being at least inconsistent with the “measure of constitutionally protected independence” recognized in the BC Court of Appeal’s decision in Walter as necessary for most adjudicative tribunals, despite Ocean Port.

For a case comment on the Walter appeal decision which clears all that up, see a later post.




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