The Continental Oil Company (Defendants) Appellants;
and
The Canadian Pacific Railway Company (Plaintiffs) Respondents
1915: October 28; 1916: February 1.
Present:—Sir Charles Fitzpatrick C.J. and Idington, Duff, Anglin and Brodeur JJ.
ON APPEAL FROM THE APPELLATE DIVISION OF THE SUPREME COURT OF ALBERTA
Esttoppel—Principal and agent—Receipt delivered before payment.
[Page 605]
The local agent of the railway company received the personal cheque of the defendants' agent in settlement of freight charges due by the defendants and thereupon receipted the freight bills. By means of these receipted bills the defendants' agent was enabled to obtain the amount of the freight charges from his employers and absconded, leaving no funds to meet his cheque which was dishonoured. In an action for the recovery of the amount of the freight charges,
Held, reversing the judgment appealed from (8 Alta. L.R. 363), Duff and Brodeur JJ. dissenting, that the delivery of the receipts in advance of payment afforded means of inducing the defendants to pay over the amount represented by them to their agent and, consequently, the plaintiffs were estopped from denying actual receipt of payment of the freight charges.
Per Duff J. dissenting.—In the circumstances disclosed by the evidence in the case the principle of estoppel could not be applied. Gentles v. Canadian Pacific Railway Co. (14 Ont. L.R. 286), distinguished.
APPEAL from the judgment of the Appellate Division of the Supreme Court of Alberta, affirming the judgment of McCarthy J., at the trial, by which the plaintiffs' action was maintained with costs.
The material circumstances of the case are stated in the head-note.
[Page 606]
Wallace Nesbitt K.C. for the appellants.
O. M. Biggar K.C. and George A. Walker for the respondents.
THE CHIEF JUSTICE.—I agree with the judgment of Chief Justice Harvey in the Alberta Appellate Division and would allow this appeal.
I was myself at first somewhat prejudiced in favour of the respondents by the fact that the appellants suspected their agent's honesty and did not communicate that fact to the respondents. There was, however, no occasion for the appellants to make any such communication. They did not hold their agent out to the respondents as a man to be trusted and were not bound to advertise any doubts they might entertain of his honesty to everyone with whom he had to do business. The action of the respondents would have been improper whether the agent was an honest or dishonest man.
The appellants made very proper and businesslike arrangements for the transaction of their affairs at their sales branch at Lethbridge. Not desiring to place a large sum of money at their agent's absolute disposal, they only placed in his hands, from time to time as required, a sum of $100 to meet petty disbursements and arranged that larger payments should be made at the local branch of the Molsons Bank whose drafts for such payments they would accept when forwarded with the receipted bill attached.
Subsequently, at the request of their agent, the appellants wrote the Imperial Bank at Lethbridge that they would honour their agent's drafts when receipted railway bills were attached. I do not think
[Page 607]
the arrangements with the two banks differed materially. The appellants may have concluded that their agent had arranged with the Imperial Bank to pay these 'bills or had paid them himself, It was only material as far as the appellants were concerned that they should have been actually paid and what better evidence could be had of this than the receipted bills.
I do not think it makes much difference whether the respondents gave the receipted bills for a mere personal post-dated cheque of the agent or on his assurance that he would pay the money subsequently. It was clearly not the correct thing to give receipts for the appellants' debts in exchange for a cheque which there was no reason to suppose he was authorized to give and which the respondents knew was of doubtful value as several cheques which he had previously given in similar manner, had been dishonoured. If any loss occurred through such irregularity the respondents must be prepared to accept the consequences of their own action.
The law governing the matter as it is to be gathered from decided cases is, I think, clear.
In the case of Graves v. Key, Lord Chief Justice Tenterden said:—
A receipt is an admission only, and the general rule is, that an admission, though evidence against the person who made it and those claiming under him, is not conclusive evidence, except as to the person who may have been induced by it to alter his condition; Straton v. Rastal; Wyatt v. Marquis of Hertford; Heane v. Rogers, at p. 586.
In the last mentioned case it was said:—
There is no doubt but that the express admissions of a party to a suit, or admissions implied from his conduct, are evidence, and
[Page 608]
strong evidence, against him; but we think that he is at liberty to prove that such admissions were mistaken or were untrue, and is not estopped or concluded by them, unless another person has been induced by them to alter his condition; in such a case the party is estopped from disputing their truth with respect to that person * * * and that transaction.
See also the case of Irwine v. Watson, and Davison v. Donaldson.
It is impossible to suggest that the appellants made payment to their agent otherwise than on the faith of the receipted bills. The appellants were indisputably induced by these to alter their condition and the respondents are, therefore, estopped from disputing them with respect to the appellants.
Chief Justice Harvey refers to the case of Wyatt v. The Marquis of Hertford, in which the plaintiff recovered and says that the facts of that case are not very dissimilar to those of the present. What he means, no doubt, is that they are similar with the difference which, if it had been present in the former case, Lord Ellenborough pointed out would have discharged the defendant. This difference is far more emphasized in the present case for Lord Ellenborough can only suggest
that if it had appeared that the defendant had in the interval (i.e., between the giving by the steward of his cheque and its dishonour) inspected the steward's accounts and had in any manner dealt differently with him on the supposition that his demand had been satisfied as the receipt imported no doubt the defendant would have been discharged.
In the present case it is unquestionable that the defendant paid the draft on them solely on the supposition
[Page 609]
that the railway bills had been discharged as the receipts imported.
The appeal must be allowed with costs.
IDINGTON J.—I so entirely agree herein with the opinion of Chief Justice Harvey, concurred in by Mr. Justice Scott in the court of appeal, that perhaps I should say no more than express my adoption thereof.
In deference to the argument here, I may, however, point out in addition to what has been so well said that when we are asked, for example, to hold the appellant company more to blame than the other, or that Willison was the agent of the appellant and it responsible for his misconduct, I cannot find in the evidence anything to support such positions.
It seems to me when any one departs so far from ordinary rules of business and common sense as to give any one receipts which he could use as Willison did", the onus rests upon the party so acting to prove, to the hilt, that he had some reasonable ground, known to and furnished by the other party sought to be blamed, for taking such a course.
I have sought in vain in the evidence to find any attempt made to shew anything of the kind, beyond the bare fact that Willison was "a salesman and collector" and that he is described in the statement of defence as "manager" at Lethbridge. What the term "manager" means is unexplained, except by the other phrase "salesman and collector" equally and perhaps still more indefinite.
When any one relies upon the acts of an agent as binding his principal he must shew either that the agent has been directly authorized by his principal, to
[Page 610]
do what is relied upon, or that he has been employed by such party in such capacity as necessarily implies the authority to do so, or held out by the principal in some way as having it. Strangers to the actual terms of an agent's engagement, knowing only what the principal may be reasonably presumed to have recognized, may become entitled to say the agent had been held out as having the ostensible authority of his principal for doing as he did. That is not this case.
We have before us the uncontradicted evidence on behalf of appellant as to what 'both the actual authority was and recognized course of conduct or dealing was so far as shewn; and nothing therein is shewn to justify respondent in acting as it did.
And when it comes to a description of this alleged agent's capacity, it is about as illuminating as if one tried to hold a municipality, for example, liable for the acts of the manager of the town pump if he presumed to act as tax collector. The term "manager" is applied as descriptive of so many things now, that we must ask in what sense it is used and then we are back to the recognized course of conduct which, so far as the evidence goes, fails herein to help.
I should be inclined to suspect that the agent, Willison, was merely a canvasser for customers to buy oil, and a collector to get in proceeds of such sales and deposit in the bank such proceeds. For his conduct in this latter regard the appellant relied on a fidelity insurance bond.
And as to the specific business out of which this action arises, he had been in fact so fenced in and guarded against, and his authority so limited that it was hard to conceive how, if respondent's agents acted
[Page 611]
with ordinary sense, he could have defrauded any one.
As to the method of carrying out this very limited authority, I should have desired to know a great deal more than we are told. For example, we have nothing to guide us as to the ordinary course of handling weekly freight bills. Was the railway agent accustomed to call on such customers to receive payment? Or was the shipper expected to call on the freight agent? Again; why was Willison's own personal cheque ever taken? And above all things why was it taken after it had been once protested, and more than once found no good, and no report made to his employers, especially in light of the terms of the latter granting a weekly credit which ended thus:—
Wish to advise you that Mr. Ogden has granted your company a weekly credit account at this station.
Our weeks close the 7th, 14th, 21st and last day of each month. It is absolutely necessary that payment of your account be made on these days, otherwise, credit will be immediately discontinued.
Yours truly,
S. E. Mitchell, Agent.
This omission to act promptly should have been explained; especially in face of the positive evidence of Wilbert, the secretary-treasurer of appellant, who seems never to have heard of such remarkable conduct as had been carried on by Willison to the knowledge and detriment of respondent, without complaint.
Then Wilbert says:—
Q. How were those to be treated ?
A. Our arrangement was with the bills of large amount that the railway company take the freight bills to the bank and get their money and the bank in turn should draw on us. Willison would O.K. the bills, get a draft on us and we would honour the draft provided the freight bills were receipted and in order.
[Page 612]
That implies the agent of respondent was to do what he did not apparently do and the matter rests there.
And the evidence from Long, the respondent's local freight agent, is as follows:—
Q. Have you any instructions from your company to accept personal cheques?
A. I do not think that the company would have any objection so long as the cheque was O.K.
Q. Have you any instructions that would allow you to accept a personal cheque and give receipted bills to a company for their freight?
A. No, we have no instructions to that effect.
Q. You had taken personal cheque from Mr. Willison before?
A. Well, I cannot just say whether his cheque were made out similar to that.
Q. Which were protested?
A. Yes, we had several which were protested.
Q. So that you knew his cheques were not liable to be good?
A. Well, we figured the Continental Oil Co. were good enough when we granted them that weekly credit.
Q. So that you could afford to take personal cheques and sign receipts and turn them over.
A.. Well, the receipts were just given in the ordinary way, the same as this cheque here.
Q. But you had several cheques of Mr. Willison's turned down?
A. Yes, several had been turned down.
Q. Then when you received a cheque like that what did you do with it?
A. Remitted it to Winnipeg.
Evidently he had no right to act as he did in taking these uncertified personal cheques which turned out so often worthless.
If it had been brought out in evidence that this course of dealing was known and recognized and tolerated by the appellant, there should then have been an end of the defence.
No attempt was made to do so. If the onus rested on appellant, it, of course, should have explained all
[Page 613]
these and many other things. But in my view the onus resting upon respondent has not been discharged.
How then can respondent seek to shift the onus resting upon it under such circumstances; or blame the other company instead of its own agents for trusting one so evidently untrustworthy?
I do not think this is a case wherein such authorities as Lloyd v. Grace, Smith & Co. can be relied upon as at all applicable. They never were intended to protect people discarding the ordinary rules or precautions of business men, as the respondent did in handing over to such an untrustworthy instrument as the agents of the respondent knew Willison to be from their own experience of him.
The authorities needed to be relied upon apart from all this appear in the opinion of Chief Justice Harvey.
I think the appeal should be allowed with costs throughout.
DUFF J. (dissenting).—I concur in the conclusion of the learned trial judge, Mr. Justice McCarthy, as well as in the (reasoning upon which his conclusion is based; the litigation, however, has given rise to much difference of judicial opinion and it is perhaps desirable that I should put in my own way the considerations which more particularly influence my mind.
The appellants had their head office at Winnipeg, had branches in Alberta, and, among other places, at Lethbridge, where they were represented by one Willison. They had with the respondent company what is known as a weekly credit account according to which
[Page 614]
shipments were received and delivered for them without concurrent payment of the freight charges, settlements being made weekly. The action is brought for charges on certain shipments in August and September, 1912. It is not disputed that the charges were properly earned and lawfully payable and it is admitted that, in fact, they have not been paid; the appellants' defence to the action being that by reason of certain dealings between their agent Willison and the respondent company (by which it is alleged that the appellants were induced to settle with Willison on the footing of the charges having been paid by him) the respondent company is estopped from denying that they were in fact paid.
On the 21st September, 1912, Willison gave the respondent company his cheque for the amount of these charges, which was afterwards dishonoured and which, for the present, may conveniently be referred to as his personal cheque. This cheque was given in exchange for the freight bills receipted; and these receipted freight bills were attached by Willison to a draft which was discounted by the Imperial Bank and paid by the appellants, the proceeds being placed to Willison's credit. Willison is described in the statement of defence as the appellants' manager at Lethbridge, and whatever limitations were in fact imposed upon Willison's liberty of action by instructions from the appellants, it is not, I think, open to doubt that Willison's apparent status was that of local manager of their business. He was salesman for the district, he was collector in the district, he incurred debts on 'behalf of his principals and paid them. It is quite true that the moneys collected by him were de-
[Page 615]
posited in an account in the appellants' name and he had no authority to draw on that account. But although Willison was not in the habit of signing cheques in the appellants' name it is, I think, a fair description of his apparent relation to the appellants as disclosed by the evidence to say, as the statement of defence says, that he was their local manager. Willison, as the learned trial judge has found, was in the habit of paying debts incurred by him on behalf of the appellants by cheques drawn upon an account standing in his own name. This course of business had the sanction of the appellants who remitted him from time to time sums of money to be applied by him in payment of what are called petty cash accounts.
It is also established that, in fact, the weekly settlement of freight charges was made by cheques drawn by Willison on this account. For the present it is immaterial, but I shall give my reasons later for thinking that the appellants have not given convincing evidence to shew that this course of business was not known to, and (at least impliedly) sanctioned by them. Evidence is given, remarkable for vagueness, which is relied upon by the respondents as shewing that Willison was strictly limited by his instructions to pay these freight bills by a particular method and that these instructions were adopted for the purpose of protecting the appellants against Willison's possible frauds and that the appellants were deprived of this protection by the loose methods of the respondent company which enabled Willison to make use of the receipted bills for the purpose of defrauding his principals. This contention I shall have to analyze and comment on in detail; I mention it now for the purpose of saying that, at this point, it is immaterial
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because the first stage in the examination of the appellants' contention is to ascertain whether or not in view of Willison's position as it appeared to the world, the Canadian Pacific Railway Company, as reasonable people of business, ought to have known that the delivery to Willison of the receipted freight bills in exchange for his cheque was calculated to lead the appellants into the belief either that the freight bills had been paid in actual cash or that the railway company had elected to look to Willison instead of the appellants as their debtor. This question is, of course, a question of fact, the onus being on the appellants to establish the proposition that the conduct of the respondent company was calculated to mislead them—this being as I have said the first essential step in the progress of their argument.
I think that question must be answered in the negative. Having regard to the position of Willison the, respondent company was, I think, entitled to assume that, in paying by cheque in the way he did pay weekly during the period of about a year's duration, he acted entirely in conformity with his duty as agent of the appellants and, consequently, that his act in paying in that particular way was the appellants' act. I say I think the respondent company was entitled to assume that, for this reason, considerable sums of money such as the amount sued for here are not in the ordinary course of business paid in currency or bank notes. The respondent company was, of course, entitled to assume that some provision for the payment of the freight bills had been made by the appellants and they would be entitled to assume as a matter of business that nobody else "(the Molsons Bank, for example) had been made the agent for the purpose of
[Page 617]
making such payments; and they were equally entitled to assume that the appellants must be aware that the payments were not being made out of any account standing in the appellants' own name.
That being so, I confess I am quite unable to understand why anybody in the position of the respondent company ought to have supposed that delivery of the receipted bills could in any way mislead the appellants. On the assumption on which, I repeat, the respondent company was entitled to proceed that the appellants were aware of the practice followed by Willison, the delivery of the receipted bills could signify nothing but the fact that Willison's cheque had been accepted as conditional payment in the usual course.
There is another way of putting the respondent company's case and it is this—Willison being the ostensible agent of the appellants what he did within the scope of his ostensible agency, which as I have pointed out extended to payment in the manner in which he did pay, and what came to his knowledge as arising out of the dealings in the execution of his ostensible authority were the acts and the knowledge of the appellants themselves. The appellants, in other words, through Willison, knew the facts; consequently there could be no question of estoppel. This way of putting the case might not be so convincing if it had appeared that the plan of paying with his own cheque was a plan concocted in his own interest for the purpose of enabling him to commit fraud upon the company. There is not the slightest ground for any such suggestion and I shall proceed to give my reasons for thinking that the respondents have quite failed to satisfy the onus on them of shewing that they were not in fact
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aware of the course of business followed by Willison —the onus being, of course, upon them.
To come then to the last mentioned point. The chief evidence is that of Wilbert, the secretary-treasurer of the appellants, which must be examined with some care in view of the general terms and, I am afraid, convenient vagueness in which it is expressed. This witness, no doubt, uses language which is capable of being read as amounting to an asseveration that for the purpose of protecting themselves against the possible dishonesty of Willison, the appellants had instructed Willison and the Molsons Bank that all payments made by the respondent company for freight bils were to be made by the bank to the respondent company on behalf of the appellants and covered by a draft upon them. Willison's functions were to be limited according to this interpretation of the evidence to the production of the receipted freight bills and passing them as correct. This evidence was not contradicted, but, when read as a whole, it is far from unequivocal and, I think, the overwhelming weight of probability stands against it if read in this sense and that the appellants, on whom the burden of establishing the issue lies, have failed satisfactorily to shew that such instructions were given either to Willison or to the bank. The point of the secretary's story (according to the interpretation relied upon) is, of course, that the instructions specifically provided that the payment of freight bills was to be made by the bank and not by Willison. Against this there are some very significant facts; there is the fact, in the first place, that the railway company was never informed that payments of its freight bills were to be
[Page 619]
made by the agents of the Molsons Bank on behalf of the appellants and not by their own local manager. There is the circumstance that, as the learned trial judge has found, no payment to the railway company was in fact made toy the bank, and one gathers from the evidence that no draft was ever drawn by the bank on the appellants. There is the fact also that the local manager of the bank was called by the appellants and gave evidence as to instructions respecting their bank account and the correspondence between the appellants and the bank is produced; nevertheless the bank manager (who according to this theory was appointed their agent for the purpose of making these payments) is not examined as to any instructions received by him touching this subject. There is the fact that in September, 1912, when inquiries were made by the Imperial Bank (at the suggestion of Willison be it observed) the Imperial Bank is told the drafts with accepted freight bills attached may be discounted and will be paid on presentation to the respondents. The precaution is not that freight bills should be paid by the bank to the respondent company, but that the agent's draft should be discounted only on the condition that the receipted freight bills were attached. No suggestion is offered in the evidence to explain why, if the appellants had appointed Molsons Bank for the reasons suggested, they should be so readily have given the instructions that were given to the Imperial Bank which contemplated payment by the agent himself. The truth is that when one comes to read Wilbert's evidence closely one finds that his mind is far from fixed upon the point that the bank was to make the payments, or that any other precaution was to be taken by the bank
[Page 620]
other than seeing that receipted freight bills were produced. When he is asked the question whether the appellants had any knowledge that Wilbert was paying freight by his private cheque, he answers:—
Well, we knew he had to handle it some way; we didn't know whether he used his cheque or whether the bank turned it over to the company, our instructions were to pay it to the company.
He says again that the instructions given to the Molsons Bank were the same as those given to the Imperial Bank.
He adds in another place, "the bank was to see to it." The impression one gets from the evidence as a whole, assuming that it can be relied upon at all in the absence of any particulars and in view of the fact that the local manager of the bank was not examined on the point, is that it was left to the local manager of the bank to exercise his discretion as to the manner in which payment was made to the respondent company. If that were in truth the state of affairs it would follow that the local bank manager was put in the place of the appellants to superintend the appellants' local manager in respect of these payments and, consequently, that what the manager of the bank did in the matter was done by the appellants and what the manager of the bank approved was approved by the appellants and, consequently, that the act of their local manager in paying by his own cheque was the act of the appellants. It would follow that, down to the time of the particular payment now in question, the local manager of the appellants had, with the permission of the appellants, been paying the appellants' obligations validly incurred by him with his own cheques; in other words, to pay such obligations with his own cheque was
[Page 621]
within the scope of his ostensible authority and, therefore, binding on the appellants as their act notwithstanding any private instructions to the contrary.
To sum up, the defence of estoppel fails for want of satisfactory evidence to shew that, in the circumstances, a receipt amounted to a representation to the effect contended for; secondly, what was done by the local manager was done within the scope of his ostensible authority and was, therefore, an act of the appellants.
A word only as to the decisions relied upon. The truth of the matter is that this appeal involves no question of law. It is simply a question of an application of the principle of estoppel. The disputed questions are questions of fact. The cases referred to really have no bearing except as illustrations of the principle. In Gentles v. Canadian Pacific Railway Co., for example, the Court of Appeal held that the receipts given were calculated to mislead the principal into thinking and, in fact, did so mislead him, that the accounts had been paid and that he was induced thereby to settle with the agent on that basis. In fact in that case it was not disputed, as the learned trial judge points out, that the receipts were given with that very object. The conclusion of the Court of Appeal was strictly a conclusion of fact and the decision is strictly not within the category of judicial precedent. When the facts of the case are looked at particularly with reference to the status of the agent one sees, beneath a superficial similarity, differences between that case and this which are of decisive importance in their bearing upon that particular point.
[Page 622]
It cannot help us at all in the decision of this case to consider whether or not, if one had had facts of that character to deal with, one would have come to the same conclusion as the Court of Appeal.
The appeal should be dismissed with costs.
ANGLIN J.—I concur in the opinion of my Lord the Chief Justice and would only add that this case seems tome to fall within the language of Lord Cranworth in Jorden v. Money, at pages 210, 212, quoted by Lord Macnaghten in Balkis Consolidated Company v. Tomkinson, at page 410.
BRODEUR J. (dissenting).—A misappropriation of funds has been made by the manager of the branch office of the appellant company at Lethbridge to the detriment of the respondents and we have to determine which of the appellant or the respondent companies should stand the loss.
The facts are these: The appellant company opened a branch office in Lethbridge and appointed as their manager, as they are calling him in their statement of defence, a man named Willison. They were shipping oil by the Canadian Pacific Railway from and to that place and the freight charges were to be paid at Lethbridge every week. When the charges were small they could be paid by the personal cheque of Willison drawn upon his small credit account provided by the appellant. But, in the case of large freight bills, the appellant company made with the Molsons Bank at Lethbridge an arrangement by which the railway company should take the freight bills to
[Page 623]
the bank, get their money and the bank in turn should draw upon them with the receipted bills attached. Those bills had to be vouched by Willison.
If that arrangement had been carried out there would have been no loss of money. But the oil company failed, which is on its part a very gross piece of negligence, to notify the railway company of that arrangement and then the bills, whether small or large, were paid by the personal cheque of Willison.
Later on, it is not very clear at whose request, the banking arrangements for the payment of those bills were transferred to the branch of the Imperial Bank at Lethbridge. But this time instead of having drafts drawn by the bank itself, it was stipulated that the drafts would be made by Willison himself with the freight bills attached and vouched for by him.
This new arrangement also was not communicated to the railway company. So the railway company continued every week to present its bills to the branch office of the oil company at Lethbridge and was receiving Willison's cheques in payment.
On the 21st September, 1912, a cheque of $1,412.92 was given by Willison, the bills were receipted and handed to him, and with those bills so receipted, without, of course, the knowledge of the Canadian Pacific Railway Co., he drew a draft through the Imperial Bank on his principals.
The amount was put to his credit but was withdrawn by him since; when his cheque came from the Canadian Pacific Railway Company's Winnipeg office, there were no more funds and the man had disappeared.
The question then is: Who is to be liable for that fraud of Willison?
[Page 624]
It seems to me that the oil 'company has been acting negligently in not mentioning to the railway company the arrangements which had been made for the payment of those freight bills. The arrangements were certainly good ones; but it was not sufficient to make them, but the railway company should have been notified as to their existence and the way they wanted those bills paid.
Since they had no confidence in their manager, they should have been very careful to see that he would not defraud them or the railway company.
It has been decided by the House of Lords in the case of Lloyd v. Grace, Smith & Co. that a principal was responsible for the fraud committed by his representative in the course of his employment.
It seems to me only fair that in a case of that kind the principals should be responsible for the misdeeds of their agents, unless there is negligence on the part of the other party or unless that party has by words, or conduct, made a representation of fact either with a knowledge of its falsehood or with the intention that it should be acted upon. Those elements cannot be found in this case and it seems to me inequitable without discussing the cases which have been so fully discussed in the judgment of the courts below, that the railway company should lose in those circumstances.
For these reasons the appeal should be dismissed with costs.
Appeal allowed with costs.
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