The Doctrine of Public Policy in Canadian Contract Law

The Doctrine of Public Policy in Canadian Contract Law 1 21
of the proceedings), 1"2 an agreement to procure evidence for use at a civil trial,'"'
and an agreement which prevented a witness from giving evidence at future
civil actions.'°4 A contract which seeks to conceal a statutory offence has also
been deemed to fall within this head of public policy.'05 However, the principal
type of contract which has been found invalid on this ground is an agreement
which involves as consideration the promise to "stifle" or suppress the prosecution
of an offence.'°6
The second head of the category of contracts which are injurious to the
judiciary involves agreements that seek to oust the jurisdiction of the court.'°7
102 Symington v. Vancouver Breweries Ltd., [1931] 1 D.L.R. 935 (B.C. C.A.).
103 Pay v. Kaboly-Zadeh, 2006 BCSC 925 at paras. 139-145.
104 Flexi-Coil Ltd. v. Smith Roles Ltd. (1980), 50 C.P.R. (2d) 29 (Fed. T.D.), affirmed
(1981), [1982] 1 F.C. 533 (C.A.). An agreement whereby one defendant refuses to
voluntarily co-operate with another defendant in the plaintiff's action against the latter
is not contrary to public policy where it does not require the first defendant to suppress
evidence: Northland Bank v. Willson (1994), 157 A.R. 172, [1994] A.J. No. 729 (C.A.),
leave to appeal refused (1994), 26 Alta. L.R. (3d) 1 (note) (S.C.C.) at paras. 2-3 [QL].
Similarly, an agreement not to discuss evidence with another party prior to trial will not
violate public policy where the agreement provides that the contracting party will respond
truthfully to a subpoena if called upon to do so: Bains v. Bhandar, 2000 BCCA 466
(C.A.), leave to appeal refused (2001), 269 N.R. 206 (note), [2000] S.C.C.A. No. 528
(S.C.C.) at paras. 41-43.
105 See Initial Services v. Putterill (1967), [1968] 1 Q.B. 396 (Eng. C.A).
106 Although the offence for which the prosecution has been suppressed need not be criminal,
it must be of a sufficiently "public" character to fall within the scope of the principle:
see Johnson v. Musselman (1917), 37 D.L.R. 162 (Alta. S.C. (App. Div.)). There is a
comparatively large body of jurisprudence which considers when an offence will be
"public" in this sense. In People's Bank of Halifax v. Johnson (1892), 20 S.C.R. 541,
1982 CarswellNS 77, the Supreme Court of Canada relied upon this branch of the public
policy doctrine in declaring void a bond which was provided to a bank in consideration
for its agreement not to prosecute one of its former agents, who had embezzled bank
funds and subsequently married the daughter of the surety. Ritchie C.I., who delivered
the leading judgment, stated (at para. 9) that: "[t]he allowance of such an objection as
this is not for the sake of the party who raises it but is grounded on general principles of
policy. Where the fact comes to the knowledge of a party, as this most assuredly did,
that a felony has been committed, if it is not his duty to prosecute it certainly is contrary
to his duty to compromise or compound the felony. . ." A recent example of an agreement
being held invalid on similar facts can be found in Newell v. Royal Bank (1997), 147
D.L.R. (4th) 268, [1997] N.S.J. No. 13 (N.S. C.A.) at para. 20.
107 There is also an interesting strain of public policy which may be interpreted as addressing
contracts that oust the jurisdiction of the legislature (although some authors, such as
Fridman, supra note 5 at 349, treat this as an instance of statutory illegality, albeit one
infused with public policy considerations). This involves cases in which the courts have
declared invalid contracts which purport to preclude the application of a specific statutory
regime. In order for this principle to be engaged, it would appear that the statutory regime
in question must possess a sufficiently "public" character and apply to circumstances
involving an asymmetry of bargaining power. The contract should also give one party a
lesser right than it would otherwise be entitled to. See generally: Ontario (Human Rights
Commission) v. Etobicoke (Borough), [1982] 1 S.C.R. 202, 1982 CarswellOnt 730 at