WASTECH – Limits To Discretionary Power

Often contracts provide one party with a discretionary power. The limits of that discretionary power were recently considered by the Supreme Court of Canada in Wastech Services Ltd. v. Vancouver Sewerage and Drainage District, 2021 SCC 7. In particular, Wastech considers when a party can act in its own self-interest and when the act amounts to bad faith. While the Supreme Court of Canada recognized a duty to exercise contractual discretion in good faith in 2014¹, until Wastech the limits of that duty were not identified.

Wastech considered an appeal from an arbitral decision arising from a contractual dispute. The Greater Vancouver Sewerage and Drainage District ("Metro") entered into a long-term relational contract with Wastech Services Ltd. ("Wastech") for the removal and transportation of waste to one of three disposal sites. The contract provided that Metro would be paid a different rate depending on which site waste was transported to, and granted it absolute