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CCCA_V4No4_Col-McCarthys-FIN.qxd:CCCA_V1No2_Col-Litigat-V1.qxd 10/27/10 3:46 PM Page 44 Legal Update – McCarthy Tétrault LLP Exclusion clauses post-Tercon So far, it’s do as the Supreme Court said, not as it did. hen the Supreme Court of Canada application.The result was hard to distin- most likely to drift from black letter law Wdecided Tercon Contractors Ltd.v.British guish from the former fundamental in order to enable consumer claims to Columbia (Transportation and Highways),2010 breach approach, in that it seemed to be succeed. Moreover, these cases show that SCC 4, [2010] 1 S.C.R. 69 in February searching for a way not to give effect to circumstances which formerly would 2010, it was widely touted as marking the the exclusion clause. have militated against enforcement of death of the doctrine of fundamental So the proof will be in the application exclusion clauses are now being treated as breach. Indeed, the court noted that it was of Tercon by lower courts: will they do as reasons in favour of enforcement. seeking to“shut the coffin”on the doctrine. the Supreme Court said and enforce For example, Arnold involved the death Reflecting a longstanding judicial hos- exclusion clauses except in exceptional of a beloved pet dog while the pet was in tility towards exclusion clauses, the doc- circumstances, or will they do as the the care of a kennel.“It seems reasonable to trine had precluded a party which had Supreme Court did and continue to find me that,through a relatively simple [exclu- committed a “fundamental” breach of a ways to avoid applying them? sion] clause in a contract such as the one contract from relying on an exclusion The evidence is still sparse, but so far it here,such a kennel should be able to try to clause. Tercon unanimously held that the appears that the lower courts are, for the avoid potential costly exposure to pro- application of a limitation of liability pro- most part,doing as the Supreme Court said. longed litigation about the standard of care vision involves a three-stage analysis: By simple count,the“do as the Supreme in relation to the loss of someone’s pet.” Court said”camp is ahead of the“do as the The orientation of the law has clearly i. As a matter of ordinary contractual Supreme Court did”camp by four cases to shifted: one can only imagine how differ- interpretation, does the exclusion clause two: reasonable interpretations of exclu- ently Lord Denning, the main architect of apply to the circumstances established in sion clauses led to enforceability in Calder the fundamental breach doctrine, would the evidence? v. Jones, 2010 BCPC 77, Campbell (c.o.b. have treated the same circumstances. ii. If yes, was the exclusion clause uncon- Soup’s Welding) v. 0698900 BC Ltd., 2010 It is obviously still early days, the sam- scionable at the time the contract was BCPC 135, Arnold v. Bekkers Pet Care Inc., ple is obviously small, and its jurispruden- made? [2010] O.J. No. 2153 and Dennis v. Ontario tial weight is eroded by the presence of iii. If no, should the court decline to Lottery and Gaming Corp., 2010 ONSC several small claims court decisions, but so enforce the exclusion clause because of 1332. Somewhat strained interpretations far it appears that the trend in the lower an overriding public policy concern were adopted in order to find exclusion courts is to follow the word of the which outweighs the very strong public clauses inapplicable in Petrelli v. Lindell Supreme Court rather than its deed, and interest in the enforcement of contracts? Beach Holiday Resort Ltd., 2010 BCSC 956 enforce exclusion clauses in most circum- and Schiltroth v. RDS Enterprises (c.o.b. stances. Only further time will tell for This formulation would seem to jetti- Home-Anyze), 2010 SKPC 47. sure whether Tercon has in fact nailed the son the courts’ former hostility to exclu- Most striking are Calder, Campbell and coffin on fundamental breach,but so far it sion clauses and mandate the enforcement Arnold, small claims court cases in which seems that the coffin is staying shut. of such clauses in most circumstances.Yet exclusion clauses in standard-form con- the actual holding in Tercon is hard to rec- tracts entered into in consumer-type set- Geoff R. Hall is a partner in McCarthy oncile with its expression of the law. tings were found to be enforceable. Tétrault LLP's Litigation Group in Toronto. The court split on the application of Normally, small claims court decisions His practice focuses primarily on corpo- the three-part test to the facts of the case, would merit little or no jurisprudential rate/commercial litigation. His book Canadian with a five-to-four majority adopting a weight, but in this context it is striking Contractual Interpretation Law was cited by highly strained interpretation of the that Tercon is being applied to uphold the Supreme Court of Canada in Tercon. exclusion clause at issue so as to avoid its exclusion clauses in courts which are the (ghall@mccarthy.ca) 44 CCCA Canadian Corporate Counsel Association WINTER 2010