Winnipeg Fish Co. v. Whitman Fish Co., (1909) 41 SCR 453

Supreme Court of Canada

Winnipeg Fish Co. v. Whitman Fish Co., (1909) 41 S.C.R. 453

Date: 1909-03-29

The Winnipeg Fish Company (Defendants) Appellants;

and

The Whitman Fish Company (Plaintiffs) Respondents.

1909: February 25; 1909: March 29.

Present: Sir Charles Fitzpatrick C.J. and Girouard, Davies, Idington and Duff JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR MANITOBA.

Sale of goods by sample—Delivery—Condition f.o.b.—"Sale of Goods Act," R.S.M. (1902) c. 152—Notice of rejection—Reasonable time —Breach of warranty—Damages.

By contract made at Winnipeg, Man., plaintiffs sold to the defendants, by sample, a carload of cured fish to be shipped during the winter from their warehouse at Canso, N.S., "f.o.b. Winnipeg." The sample was sound and satisfactory. The fish arrived in Winnipeg in a frozen state and were received by the defendants and kept by them in an outhouse for several weeks before being placed in the freezer, the atmospheric conditions being such that the fish could not, in the meantime, have deteriorated by thawing. Some of the fish when sold proved unsound, were returned by customers and the whole shipment was found not up to sample and unfit for food. On inspection the health inspector condemned the whole carload and it was destroyed. About six weeks after the fish had been received by them, the defendants notified the plaintiffs of the rejection of the carload so delivered. In an action for the price at which the fish had been sold, the defendants counterclaimed for damages for breach of warranty and consequent loss in their business.

Held, reversing the judgment appealed from (17 Man. R. 620), that the sale had been made subject to delivery at Winnipeg, that any loss occasioned by deterioration in transit not necessarily incident to the course of transit should be borne by the sellers, that the loss in this case was not so incident, and that, under the circumstances, the purchasers had notified the sellers of the rejection within a reasonable time, as contemplated by the "Sale of Goods Act," R.S.M. (1902) ch. 152; that the plaintiffs could not recover and that the defendants were entitled to have damages on their counterclaim.

[Page 454]

Appeal from the judgment of the Court of Appeal for Manitoba[1], reversing the judgment of Cameron J., at the trial, and maintaining the plaintiff's action with costs.

The plaintiffs brought their action to recover the price of 800 boxes of fish sold by them to the defendants, to be delivered at Winnipeg, the plaintiffs agreeing to re-pay to the defendants any freight payable on the carload of fish shipped from Canso, N.S., to the defendants at Winnipeg, Man. The defendants pleaded, amongst other things, that the fish had been sold to them at Winnipeg, by sample, that they did not correspond with that sample and they had rejected and refused to accept the fish, and counter-claimed alleging breaches of warranty and claiming damages. At the trial, Mr. Justice Cameron found, on the evidence, that the sale had been made by sample, that the carload of fish did not correspond with the sample when delivered either at Canso or Winnipeg, and dismissed the action. He also held that the defendants were entitled to judgment on their counterclaim and made a reference to the master to ascertain the amount of the damages. By the judgment now appealed from, the Court of Appeal for Manitoba reversed this judgment, maintained the action to the extent of $1,393.70, and dismissed the counterclaim with costs.

Newcombe K.C. for the appellants

Ewart K.C. for the respondents.

[Page 455]

The Chief Justice.—One Connor, agent of the plaintiffs (respondents) a fish company having their principal place of business at Canso, in Nova Scotia, sold to the defendants (appellants) wholesale and retail dealers in fish at Winnipeg, two carloads of fish. The order for the first car was given on the 13th November, 1906, and the fish arrived in Winnipeg on the 18th of January, 1907. The second car ordered on the 14th of November, 1906, arrived on the 1st of February, 1907, and was taken into store on the 4th of the same month. The sale of the second carload was by sample and it is admitted that the sample produced was one of the finest. In the letter written by Connor, at Winnipeg, enclosing the order for this car to the plaintiffs at Canso, he (Connor) says that the carload was ordered "on condition you ship them the same quality haddies as sample." Before the fish arrived and was taken into store, trouble arose about the quality of the first carload and another shipment of some 400 boxes had also gone bad. The haddie was intended for sale among the appellants' customers in both their retail and wholesale trade and was bought, as I gather from the evidence, because if in accordance with the sample it would suit the taste of these customers. The preliminary precaution of effectively testing the quality of the sample by cooking and eating it was taken by respondents' managers. It is, I think, admitted that finnan haddie cannot be properly inspected when frozen. In fact, it would appear from the evidence that the only effective test is to thaw and cook the fish. Be that as it may, on the 23rd of February, the defendants' manager Wall wrote complaining of the fish and requesting the plaintiffs to

take the matter of this haddie proposition up with their agent (Connor) who had made the sale, at once, in order that same may be

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taken off your hands as we will not, as we have already said, endeavour to dispose of the goods.

A previous letter had been written on the 21st of the same month, and the defendants had also refused to accept a draft for the value of the fish. There is very little, if any, dispute or difference between the witnesses as to the quality of these fish after they reached Winnipeg. No answer was given to the letters of the 21st and 23rd February; but, on the 6th March, Connor, the selling agent, called at the defendants' store presumably to investigate the complaints made as to the quality of the fish and it was then agreed to have it examined, and one Guest was by mutual consent selected for that purpose. Guest says that some of the fish was not fit for use, and finally being pressed for details says:

I mentioned to Mr. Wall and Mr. Connor that although the fish were not first-class there was nothing to prevent people from using them. That was my opinion of the haddies at the time.

Eliminating all the other evidence adduced by the defendants, can it be said that this finding was favourable to the plaintiffs? I think not. In the civil law, which counsel for the respondents says is applicable to this case, when a sale is made by sample, there is an implied warranty that the goods will, in all respects, be equal or conform to the sample, and any defect or inferiority, however slight, in the goods is sufficient to justify the purchaser in refusing to accept. Dalloz, 1873, 2, 100; Durocher v. Leitch[2]; R.S.M. ch. 152, see. 17.

My conclusion is that it was the intention of the parties to enter into a contract for the delivery in Winnipeg

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of fish fit for the trade for which to the knowledge of the sellers it was intended and equal in all respects to the sample exhibited by the plaintiffs' selling agent when the sale was made and the subsequent delivery of the fish and the taking of it into store by the defendants does not in the circumstances imply acceptance. The defendants (purchasers) were entitled to reasonable time and opportunity for inspection (section 33, "Sale of Goods Act") to ascertain if the fish corresponded with the sample and I agree with the trial judge that there was no improper delay in discovering the defective quality of the fish nor in the offer to return it. The fish was frozen and it is admitted that effective inspection was impossible except by adopting methods which would destroy its commercial value, and the defendants (now appellants) seem to me to have shewn every anxiety to give the shipment a fair test by the only effective means, that is, by sale to their customers, although in so doing they ran the risk of serious injury to their trade. With respect to acceptance and rejection, I hold this to be one of those cases in which one should apply the principle stated by the Geneva Court of Appeal:

Sortent du cadre des vérifications usuelles auxquelles l'acheteur est tenu, celles qui ne peuvent se faire sans modifier l'état et l'apparence de la merchandise et sans diminuer sensiblement la valeur de celle-ci.

Tribunal fédéral Suisse, Journal des tribunaux, juillet, 1904.

As it was argued for the respondents that the Manitoba "Sale of Goods Act" was a mere codification of the principles of the Civil Law, I would refer in addition to 24 Laurent, No. 143, par. 2.

As to the counterclaim for damages, I find with the trial judge that there was an express agreement between

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the parties at the time of the settlement for the price of the first carload of fish fully reserving the defendants' rights and that allowances for any of the unsold portion which might thereafter be found not of first quality would be made. In the Court of Appeal, the Chief Justice agrees that there was evidence to justify this finding. The case of Beer v. Walker[3] is, in my opinion, applicable in one aspect of the case. That is the case about the Ostende rabbits in which it was held that there is an implied warranty that goods sold for human consumption shall reach the buyer in condition fit for food and to continue so until the buyer can reasonably dispose of them in reasonable course of business, and it is no answer to say that they became unfit for food in the ordinary course of transit. In my view of the case it is not necessary to rely upon that authority. Here the seller contracted to deliver the goods at their destination, Winnipeg, equal to sample, and reasonable time for inspection and rejection must be allowed the buyer.

I would allow the appeal with costs and restore the judgment of the trial judge.

Girouard J. agreed with the Chief Justice.

Davies J.—This was an action brought to recover the price of two separate carloads of finnan haddies sold by the plaintiffs to the defendants at different times. The defendants carry on the fish business in a large way in Winnipeg, and the plaintiffs catch, cure and ship their fish from Canso in Nova Scotia. They had an agent, Mr. Connor, at Winnipeg, and the sale of both cars of fish were made in that city by him.

[Page 459]

The trial judge found that the second carload was sold by sample and that it did not correspond with the sample when delivered either at Canso or Winnipeg. He further held that when defendants paid for the first carload of fish "there was an express agreement fully reserving the defendants' rights" to recover back for any fish in that car which they might shew were bad and unmerchantable. On his findings he dismissed plaintiffs' claim and gave judgment for defendants on their counterclaim, referring the question of the damages to which they were entitled on both cars to the master for assessment.

On appeal it was held that construing the language of the contract for the sale of the second car of fish sued for in the light of the plaintiffs' statement of claim that the goods were "to be delivered at Winnipeg" the contract must be held to have required delivery there and the property did not pass till such delivery.

The Court of Appeal also found that the defendants had the right to reject the goods in Winnipeg as not up to the contract if on inspection they were so found wanting, but after a lengthy review of the facts they determined that the defendants retained the goods for an unreasonable time after receiving them without rejecting them and after being aware of the defects in the fish, did acts in relation to them inconsistent with the ownership of the seller, and that there had, therefore, been an acceptance of the goods which became thereupon defendants' property entitling plaintiffs to a verdict for the price; that such acceptance of the fish threw upon the defendants the onus of proving their counterclaim for damages arising from the defective character of the fish; that the fish were of

[Page 460]

good quality and condition when delivered to the carrier at Canso, and that as defendants

had not shewn what the condition or character of the fish was when it reached Winnipeg or what caused the damage or when or where the fish spoiled whether during transit or afterwards, but kept possession of the fish until climatic conditions made the holding of them precarious, the loss must be held to have been largely caused by their own negligence.

I agree with the holding of the Court of Appeal that the contract in the case must in the circumstances under which it was made be held to have

required delivery of the fish in Winnipeg, and that the property in the fish did not pass till such delivery.

Such a determination does not necessarily follow from the use of the letters and words "f.o.b. Winnipeg" in the contract made. There is room for much contention as to their real effect and the language may be said to be ambiguous. But when we consider the circumstances surrounding the making of the contract, that the agent of the plaintiffs and of the defendants both were in Winnipeg when they made it that the fish. were to be shipped from Canso, Nova Scotia, thousands of miles from Winnipeg, and delivered "f.o.b. Winnipeg,"' that they were to be in accordance with a sample then and there produced and that the plaintiffs in suing upon the contract expressly set forth in their claim that the goods were to be delivered in Winnipeg, I agree that the contention of the parties must fairly be determined to have been that the property in the fish should not pass until they were in Winnipeg ready for delivery to the defendants.

I also agree with the finding of the trial judge, approved, as I understand from their judgment, by the Court of Appeal, that the contract was one for sale of goods by sample.

[Page 461]

The property in the fish did not, therefore, pass to the defendants until it was delivered to them in Winnipeg between the 1st and 4th February. The car seems to have reached Winnipeg on the first of February, but was not delivered over to the defendants till the 4th, and it is not shewn clearly on which day their agents, the cartage company, received the car from the railway company. It does not seem to me under the proved climatic conditions which then existed at Winnipeg a matter of any importance whether the car was delivered to the defendants' agents on the 2nd, 3rd, or 4th as the fish could not have been injured during that time they being then in a solid frozen condition.

In this condition they were delivered to the defendants on the 4th and were stored in their winter shed adjoining their freezer where the defendants store all their fish during the cold weather. In this shed they remained until the 18th March when they were transferred to their freezer.

The conclusion of fact which I have reached from a close examination of the evidence respecting the temperature which existed from day to day and from the condition of the shed where the fish were kept from the 4th February until the 18th March when they were transferred to the freezer, and from the condition of a lot of other fish of defendants kept in the shed at the same time, and from the temperature of the freezer from that date of the 18th of March till the fish were examined and condemned by the sanitary authorities and destroyed as unfit for human food, is, that the fish were kept under conditions which would not and did not allow of their thawing out, and that the bad condition in which the fish were ultimately found to be in by the sanitary authorities must, therefore, have existed

[Page 462]

at the time they were delivered to the defendants at Winnipeg in a solidly frozen condition.

At the time of its delivery, therefore, although not known to the defendants and not capable of being known by any inspection or examination short of one which involved thawing of each box of fish out, the fish were not merchantable or up to sample.

The questions then arise as to what were the risks of deterioration which defendants were liable for before delivery to them at Winnipeg. The Manitoba "Sales of Goods Act" says those "which were necessarily incident to the transit." Did these risks embrace deterioration caused by the freezing of the fish and their thawing and freezing again?

The trial judge held that the fish could not have been, from the condition in which they were proved to have been when thawed out, in good condition when delivered by the plaintiffs in Canso.

The appellants on the contrary hold that the evidence shews the fish to have been in good condition when so delivered in Canso and apparently fit for transit to Winnipeg, and that there was no evidence given by either side as to the treatment of the carload for the twenty-two days between delivery to the carrier and its arrival in Winnipeg, nor during the four days it was in Winnipeg before reaching defendants' warehouse.

I do not feel obliged to determine whether or not the finding of the trial judge or that of the Court of Appeal as to the condition of the fish when delivered by the plaintiffs at Canso is a proper one, because it seems to me that, even assuming the goods to have been in good condition when delivered to the carrier there, unless the unmerchantable condition in which they

[Page 463]

were found in March and for which they were condemned and destroyed is necessarily attributable to risks which the buyer assumed under the 33rd section of the Manitoba "Sale of Goods Act," then such condition must be held attributable to other risks for which the sellers alone would be liable. That section reads as follows:

33. Where the seller of goods agrees to deliver them at his own risk at a place other than that where they are when sold, the buyer must, nevertheless, unless otherwise agreed, take any risk of deterioration in the goods necessarily incident to the course of transit.

That section adopts the rule stated in Bull v. Robison, in 1854[4]. It is limited expressly to cases where the risk would otherwise be the seller's as, under my construction of the contract, is the case before us where the goods were to be delivered in Winnipeg. The risks which, unless otherwise agreed, the buyer assumed are in the express language of the section "any risk of deterioration in the goods necessarily incident to the course of transit." All other risks the vendor assumes. As said by Alderson B., in delivering the judgment of the court, in Bull v. Robison4:

A manufacturer who contracts to deliver a manufactured article at a distant place must indeed stand the risk of any extraordinary or unusual deterioration, but we think that the vendee is bound to accept the article if only deteriorated to the extent that it is necessarily subject to in course of transit from the one place to the other, or in other words that he is subject to and must bear the risk of the deterioration necessarily consequent upon the transmission.

As so expressed the rule does not seem an unreasonable one. But I cannot think that the deterioration found in these fish was "necessarily incident to the course of transit" or necessarily consequent upon such transit. It might have occurred during the transit;

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it might not. It was not necessarily incident to it. To hold so would be to throw the entire risk in the case of perishable goods upon the purchaser who in a case like the present did not own the property till it was delivered to him in Winnipeg, and who under the contract had no right to dictate how the goods should be forwarded. The deterioration I hold in this case comes within the extraordinary or unusual deterioration exceptional or accidental for which the vendor assumes the risk as stated by Baron Alderson in the case referred to. The vendor was to deliver the fish "free on board" at Winnipeg. He was to pay the freight. He could send the fish in a refrigerator car and reduce the risk arising from changing climatic conditions to a minimum, or he could send them at a cheaper rate by ordinary car taking the risk himself, and in this case he chose to do so.

The remaining and the main question is whether or not the appellants accepted the goods within the meaning of the 35th section of the Act. That section reads:

35. The buyer is deemed to have accepted the goods when he intimates to the seller that he has accepted them, or when the goods have been delivered to him, and he does any act in relation to them which is inconsistent with the ownership of the seller, or when, after the lapse of a reasonable time, he retains the goods without intimating to the seller that he has rejected them.

There was, of course, no intimation of acceptance and the questions remain as to acts of ownership inconsistent with ownership of seller or undue detention of the goods without notice of rejection.

These are questions of fact determinable in each case upon its own peculiar facts. Here we have a carload of fish in boxes delivered to defendants in a solid

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frozen condition. No mere outward examination or inspection would afford any clue to their real condition nor would indeed the removal of the box or package enclosing them do so. The only examination which would or could be in any sense effective to determine the condition of the fish would be by thawing out the contents of the boxes. But why should defendants be compelled to resort to that mode of inspection which necessarily destroyed all the boxes tested when there remained what has been shewn to have been the customary method of selling the frozen boxes of fish to customers who would properly and effectively determine their true condition by thawing out and cooking the fish. The defendants, pursuant to this mode of testing the fish, on February 9th sent ten boxes to their retail store. The result was most unsatisfactory and was probably known to defendants to have been so within a few days afterwards. On 23rd February defendants' manager, thinking that possibly he had not given the fish as fair a test as he should have done, shipped out seven boxes more of the fish to customers, and on the 26th four boxes and on the 27th four boxes, in all fifteen boxes. On March 5th plaintiffs' agent, Connor, returned to Winnipeg, from a business visit to the West and between that date and the 6th he saw Wall, defendant's manager, and after discussing the facts connected with the receipt of the goods by defendants and their condition asked him to make another test of the goods. It was not then contended on plaintiffs' part that defendants had by any undue delay on their part accepted the goods, but the two men ultimately agreed that one Guest, as a disinterested party, should test them and a number of boxes were thawed out at defendants' freezer and examined by Guest. His opinion was that

[Page 466]

some of the haddies were not good; some smelt quite strong and others were all right as far as he could see.

The result of this test was to confirm Wall in his conclusion not to accept or sell the fish and he so informed Connor, but after some conversation he agreed with Connor, who was not from Guest's examination satisfied the fish were bad, to give them another test and in consequence shipped out to customers the balance of about 120 or 125 boxes. All these fish sent out after the interview between Wall and Connor were so sent at Connor's request and after these further tests had been made and the results known the defendants wrote the letter of the 19th March rejecting the fish as being in a uniformly bad condition. Mr. Newcombe contended that there had been an absolute rejection by the 5th of March when the telegram of that date was sent by defendants to plaintiffs refusing to accept plaintiffs' draft for the price of the fish and asking for "instructions as to the disposition of your fish." The telegram he contended read in the light of defendants' previous letter to plaintiffs shewed a clear rejection of the fish. The rule of law on the subject is clearly laid down on the point in Grimoldby v. Wells[5], where it was held that with regard to goods sold by sample the purchaser might reject them by giving notice to the vendor that he would not accept them and that they were at vendor's risk, but that such notice must, of course, be clear and unequivocal.

It does not appear, however, to be important to determine whether or not there was an unequivocal act of rejection on that day because within a day or so afterwards, sometime between the 6th and 9th March,

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the interview between Wall, defendants' manager, and Connor, plaintiffs' agent, took place on the latter's return from the West, at which interview Wall at first clearly rejected the goods, though he subsequently agreed with Connor to a further test being made of them by a disinterested party, Guest, and this test not being satisfactory to both parties ultimately agreed to give them another test by further shipments to his customers. The time lost in these several tests and trials of the fish made at the express request of plaintiffs' agent cannot certainly be counted as against the defendants, while in my opinion the fact that plaintiffs' agent, so far from contending that there had been an acceptance of the fish, urged the defendants to give them further trials is important in determining whether there had or had not been a lapse of a reasonable time in the retention of the goods by defendants without intimation to the seller that they had rejected them.

The 35th section of the "Sales of Goods Act," already cited and set out, states what constitutes acceptance of goods by the buyer.

The only question which can arise under this section is whether or not there was undue detention by the buyers without notice of rejection.

This question of fact the Court of Appeal determined in the affirmative. Looking at all the circumstances of the case, the time when the goods were delivered, the then condition of these goods, frozen solid, the impossibility of testing their condition unless by the thawing out of each box or by sale to customers who would do this, the sale of the ten boxes on the 9th February and the subsequent sales of the fifteen boxes between the 25th and 27th February, the

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notice to Connor on or about the 6th March, when he returned to Winnipeg, of defendants' rejection of the goods, coupled with the subsequent agreement at the same interview between the two agents to have the fish further tested by Guest as an independent person, and the subsequent shipments by defendants to their customers at Mr. Connor's request after Guest had made his examination, the places and temperature in which the fish were kept from the time they were received by defendants till they were condemned and destroyed by the health authorities, I am satisfied that there was no such "undue detention of the goods," that the defendants never accepted them, that nothing was done by the buyer with or to the goods inconsistent with the ownership of the seller, and that they were rejected within what under the peculiar facts and circumstances was a not unreasonable time for testing and ascertaining their condition.

The subsequent discovery by the health authorities of the absolute unsoundness of the fish convinces me that no prejudice could have been caused to the plaintiffs by the delay, and the conduct of defendants' agent on or about February 6th in having first an independent test made by Guest and in afterwards inducing defendants to send out further samples to their customers to further test them, satisfies me that at that time at any rate he at least did not think the fish had been accepted.

Coupled with what I have already said of the temperature and conditions under which the fish were kept by defendants until they were condemned and destroyed I am satisfied that their condition was attributable to something which happened to them before or during transit and "not necessarily incident to the

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course of transit," and that the delay of the defendants in rejecting them was not unreasonable under all the circumstances.

Summing up my conclusions I would say: 1. That I agree with the Court of Appeal that the true construction of the contract provided for delivery by the seller to the buyer in Winnipeg; that the property did not pass until that delivery and that the sale was one by sample; that the "risks of deterioration in the fish necessarily incident to the course of transit" fall under section 33 of the "Sale of Goods Act" upon the purchaser, and all other risks upon the seller, and that, assuming the goods to have been delivered to the carrier at Canso in good and suitable condition, as found by the Court of Appeal, but upon which I do not express any opinion, any damage causing deterioration to the fish arising from their having been frozen and thawed during transit not being necessarily incident to such transit must under the circumstances of this case be held to have been accidental and exceptional and so must fall on the seller; that the fish when delivered to the purchasers' agent or carters in Winnipeg was in a frozen condition and was kept in such temperature and condition by the defendants after receipt by them as precluded their being deteriorated any further than they were when received, up to the time they were condemned and destroyed; that consequently the delay in repudiating acceptance of the fish, such as it was, did not operate to the plaintiffs' prejudice and was not under the circumstances unreasonable, and that therefore the defendants having finally rejected the fish on the 23rd March as unmerchantable and not in accordance with sample no right of action existed for the price of the second carload; that the claim of the

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defendants for such damages as they may reason- ably have sustained by reason of the plaintiffs' breach of contract was a good one with respect to both car- loads and had been preserved as far as the first carload was concerned by express agreement when that car was settled for and that therefore the judgment of the Court of Appeal should be reversed and that of the trial judge restored.

Idington J. agreed in the judgment allowing the appeal with costs.

Duff J. agreed with Davies J.

Appeal allowed with costs.

Solicitors for the appellants: Aikins, Robson & Co.

Solicitors for the respondents: Tupper, Gait, Tupper, Minty & McTavish.