Quebec and Lake St. John Ry. Co. v. Kennedy, (1913) 48 SCR 520

Supreme Court of Canada

Quebec and Lake St. John Ry. Co. v. Kennedy, (1913) 48 S.C.R. 520

Date: 1913-10-14

The Quebec and Lake St. John Railway Company (Defendants) Appellants;

and

Harold Kennedy (Plaintiff) Respondent.

1913: March 26, 27; 1913: October 14.

Present: Davies, Idington, Duff, Anglin and Brodeur JJ.

ON APPEAL FROM THE COURT OF KING’S BENCH, APPEAL SIDE, PROVINCE OF QUEBEC.

Railways—Freight rates—Discrimination—Rebate—Construction of statute—Quebec Railway Act, R.S.Q., 1888, art. 5172—Company —Contract by directors—Powers—Approval of tariffs.

An agreement by which a railway company undertakes to grant a rebate upon shipments of car lots of goods made by a manufacturer who engages to bear the cost of loading and unloading his freight, unless shewn to be an artifice to secure unjust discrimination, is not in contravention of the provisions of article 5172 of the Quebec Railway Act, R.S.Q., 1888, prohibiting undue advantage, privilege or monopoly being afforded to any person or class of persons in relation to tolls. Judgment appealed from (Q.R. 21 K.B. 85) affirmed, Idington and Anglin JJ. dissenting.

Per Brodeur J. (approving the judgment appealed from)—The directors of a railway company may bind the company by such an agreement in relation to the business of the railway without having special sanction therefor by the shareholders.

APPEAL from the judgment of the Court of King’s Bench, appeal side[1], reversing the judgment of Lemieux J., in the Superior Court, District of Quebec[2], and maintaining the plaintiff’s action with costs.

The action was brought by the respondent to recover $4,533.13, being the amount of rebate claimed

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under an agreement made between him and the directors of the railway company granting him a rebate of one dollar per car, payable every six months during a period of five years from the month of August, 1903, on all car-loads of certain kinds of manufactured lumber shipped by him from his mills and timber limits upon the line of the company’s railway.

In the Superior Court, at the trial, the action was dismissed by Mr. Justice Lemieux. This judgment was reversed and the action was maintained, by the judgment now appealed from, on an appeal to the Court of King’s Bench.

The questions at issue on the present appeal are stated in the judgments now reported.

L. A. Taschereau K.C. for the appellants.

G. G. Stuart K.C. for the respondent.

Davies J.—This is an action brought by the plaintiff, respondent, against the appellant company to recover the sum of $4,533.13. It was brought on a contract made between the parties for the carriage by the company of the respondent plaintiff’s wood and lumber for the term of five years, made in August, 1903, and certain modifications to the same to be found in letters passed between the parties in the months of September and October, 1903. The claim was for a rebate of one dollar per car every six months during the term of the contract on all cars of wood shipped and loaded on the company’s cars by the plaintiff on the company’s line of railway from plaintiff’s mills and limits except on pulpwood, the freight on which was to be net.

There was no dispute as to the amount recoverable

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if the plaintiff had a right to recover at all. The claim was for the rebate payable under the contract on the carriage of the plaintiff’s lumber during the last two years of the contract. The rebate on the first three years the contract was in force had been settled for and paid, but after the 1st of November, 1906, the appellant company refused to pay the rebate, although respondent had shipped and loaded 4,310 cars.

There were a number of minor grounds on which the appellants contended that they were not liable to pay the rebate earned under the contract during the last two years of its existence. But the substantial ones urged at bar against the judgment appealed from were that, under the Quebec statute passed in 1906, and which was in force during the two years in question, the rebate contended for amounted to discrimination against other shippers on the same railway and, therefore, violated the statute, and,—secondly, that no tariff of tolls had been approved of in the manner provided for by the Act of 1906.

In my judgment these contentions of the appellant company should not be allowed to prevail as against the plaintiff’s claim.

So far as illegal discrimination constituting

an unjust advantage over the other shippers on the same railway

is concerned it is sufficient to say that such discrimination has not been proved. Neither the trial judge nor any of the judges in the court of appeal found that there was such discrimination and, on the facts as I understand them, I think the finding on this point was right. I agree that so far as the statute which was in force at the time of the carriage of the

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lumber in question was concerned, that is, for the last two years of the contract, it should be held applicable to such carriage, notwithstanding the lumber was carried under a contract entered into before the statute came into force. I see no ground for holding the statute inapplicable to such carriage of goods. The language of the statute is clear and definite and embracing, and covers the carriage of all goods after the statute came into force, whether carried by virtue of a previous contract or not. I agree that no tolls having been approved of by the proper authorities after the coming into force of the Act of 1906 none could, in consequence of the prohibitive provisions of section 6608 (R.S.Q., 1909,) be charged by the company for the carriage of goods on its railway. That section also prohibits the charging of any money for any services as a common carrier except under its provisions.

The result was that, in consequence of the legislature having omitted to insert in the Act any provision such as that in the Dominion “Railway Act”— enabling the company to continue charging the old tolls, or reasonable tolls, until a tariff of tolls under the new Act was approved by the Railway Committee, the company could not legally charge any tolls or money by way of a quantum meruit for the carriage of goods or freight until such tariff of tolls Was approved.

But this extraordinary condition of matters did not prevent parties who had goods carried by the railway from voluntarily paying the company fair and reasonable freight for the goods carried. As a matter of common honesty they would do so. And so, in the case under consideration, the respondent continued voluntarily to pay under the contract and

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agreement he had previously entered into with the company certain agreed freight charges.

But these voluntary payments were made on the clear understanding that the rebate claimed in this action should, on the adjustment of the accounts at the end of the year, be returned to the plaintiff, respondent, as provided for in their agreement. As a matter of fact this rebate was credited to him in the company’s books and had been paid in each of the previous three years. So long as this agreed rebate did not constitute discrimination within the meaning of the statute there was nothing illegal in it and, as I have said, all the judges below have held, and I agree with them, that it did not constitute discrimination under the circumstances as proved.

It would be against all equity and good conscience to permit the company to receive this voluntary payment made by the plaintiff, respondent, for the carriage of his lumber, a payment made and received conditionally on the understanding and agreement that a specified rebate should be made when the accounts were adjusted, and then lend the aid of the courts to the company in their repudiation of the terms of the agreement under which they received the money and had contracted to make the rebate.

If, as I say, the rebate agreed to be made constituted discrimination and violated the statute in force at the time, that would be quite another matter. As it did not, then I think the defence which is purely technical and has no merits whatever fails and the appeal should be dismissed with costs.

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fixed pursuant to a statute then in force) which respondent had induced appellant’s manager to agree to for a term of five years and which he got until the law was changed.

Such arrangements have always been looked upon with suspicion, and the fact that these parties did not put this one in their contract but in a side-arrangement evidenced by a letter shews that they were quite aware of this suspicion and conscious that the law which permitted it, if it did permit it which I much doubt, was unlikely to continue in face of the rising tide of public opinion against it.

The Act was changed. I see no reason for the amendment made unless it was to cure this evil. I am, therefore, prepared “to suppress the mischief and advance the remedy” by holding that the moment this amendment now in question became law it became impossible for the appellant legally to continue paying the rebates.

Sometimes the purpose of a statute has been such that it has not been permitted to have retrospective effect in its bearing upon contracts.

This statute as amended was intended to be operative without any exception or reservation and to destroy an abuse of which the facts in evidence herein present one of the typical forms.

Hence, there is no room for any such implication as has been sometimes imported by interpretation to save retrospective effects.

The formation of the contract alleged in this case was such, and its legality of such dubious character, that such implications might have been difficult, even if the statute had been less express than I read it.

The appeal should be allowed with costs throughout and the trial judge’s order of dismissal restored.

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Duff J.—I concur in dismissing the appeal with costs.

Anglin J. (dissenting).—In my opinion the railway company’s undertaking to give the respondent a rebate of $1 a car upon his shipments was an alteration of its duly sanctioned existing tariff of tolls which it was not within its power to effect without the approval of the Lieutenant-Governor-in-Council, which was not obtained.

Under the statute of 1888, the company was prohibited from levying or taking any tolls not approved by the Lieutenant-Governor in Council; (sec. 9, art. 5172, R.S.Q.). Tolls could be reduced only by a bylaw so approved (sec. 6); and a by-law altering tolls had no force until so approved (sec. 12). If the case were governed by this legislation I doubt whether the respondent could justify the bargain made with him by the company.

But, during the last two years of the term of the contract— and it is in respect of them that this action was brought— certain amendments to the statute of 1888, passed in 1906, were in force. In my opinion the legality of the contract— or rather the right of the parties to claim the benefit of its terms in respect of freight carried after the legislation of 1906 came into force—must be determined by it. What it prohibited and declared to be illegal cannot be enforced merely because it had been provided for by a private agreement made before the statute was passed.

Where an Act of Parliament compels a breach of a private contract the contract is impliedly repealed by the Act, so far as the latter extends; or the breach is excused or is considered as not falling within the contract. The intervention of the legislature, in altering the situation of the contracting parties, is analogous to a convulsion

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of nature against which they, no doubt, may provide; but, if they have not provided, it is generally to be considered as excepted out of the contract. Maxwell on Statutes (12 ed.), p. 632, and cases there cited: West v. Gwynne[3].

It is, I think, abundantly clear that such an agreement as that sued upon in this action is forbidden by article 6608, R.S.Q., 1909, enacted by the legislation of 1906. The company is prohibited from charging or collecting tolls not authorized by a by-law duly approved (sec. 1). It is required always to exact the same tolls under circumstances and conditions substantially similar; and any reduction in favour of any person, whether made directly or indirectly, in tolls authorized by the Lieutenant-Governor-in-Council is forbidden (sec. 2). Alterations in tolls can be made only by by-law sanctioned by the Lieutenant-Governor-in-Council (art. 6622). The agreement under which the rebate is claimed by the plaintiff in this action was an indirect, if not a direct, alteration in his favour of tolls which had been duly sanctioned. Not having been provided for by a by-law approved by the Lieutenant-Governor-in-Council it is not binding. Indeed, it cannot be carried out by the company without violating the law.

Whatever may be thought of the propriety of the appellants’ attitude in this action from an ethical point of view, courts of law are obliged upon grounds of public policy to refuse their aid to the enforcement of contracts which the legislature has forbidden. Mr. Justice Cross would support the agreement on the ground that what the statute forbids is not a nominal but a real reduction in approved tariff rates, and he says that, taking into account the stipulations in favour of the company to which the plaintiff submitted,

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it has not been proved that the rates charged to the plaintiff were, in money’s worth, different from the tariff rates.

The learned judge assumes that the burden of proving that there was such a difference rested on the company. With deference, I cannot assent to that view.

The agreement relied on by the plaintiff shewed, on its mere production, & primâ facie special reduction in his favour forbidden by the statute. It was, certainly, for him to prove, if that would afford an answer to the defence of illegality, that other considerations to be given by him to the company under the contract equalled “in money’s worth” the reduction in rates which he obtained. That he has not attempted to do and the judgment of the learned trial judge is, at least impliedly, adverse to his contention on this question of fact.

For these reasons I would, with respect, allow this appeal with costs in this court and in the Court of King’s Bench and would restore the judgment of the learned trial judge.

Brodeur J.— L’intimé a poursuivi l’appelante pour réclamer une remise (rebate) d’une piastre par char qu’elle s’était emgagée de lui payer par un contrat du 26 août, 1903. Ce contrat était pour l’espace de cinq ans et devait se terminer en novembre, 1908. Pendant trois ans la compagnie paya cette remise mais elle négligea de payer pour les deux dernières années quoiqu’elle donnât crédit au demandeur dans ses livres. Vers ce temps-là la compagnie passa sous le contrôle de nouveaux administrateurs qui répudièrent le contrat et refusèrent de payer.

La compagnie prétend qu’elle n’est pas tenue de remplir son contrat pour trois raisons:—

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1. Parce que la remise constitue un avantage ou un privilège injuste;

2. Parce que la stipulation n’a pas été faite avec l’autorisation des actionnaires de la compagnie et des autorités publiques;

3. Parce que Kennedy n’a pas rempli lui-même ses obligations en ne faisant pas transporter par l’appelants la quantité de marchandizes qu’il s’était engagé de faire.

I.

Sur la première objection je vois que le juge instructeur et tous les juges de la cour d’appel sont unanimes à dire que la preuve ne démontre pas qu’il y ait eu avantage injuste. La preuve a démontré que d’autres expéditeurs avaient, comme Kennedy, des tarifs spéciaux, mais que ces taux ne différaient pas matériellement de ceux qu’il avait alors. Il a été déclaré par le juge instructeur

que les taux accordés à Kennedy ne constituent pas un avantage ni un monopole injuste envers les autres commerçants.

C’est là une question de fait que de savoir s’il y avait préférence ou avantage injuste et du moment que les tribunaux inférieurs sont unanimes il n’y a pas de raison d’intervenir. Voir Paquet v. Dufour[4].

Cette première objection doit donc être écartée.

II.

La loi édicté que les compagnies de chemin de fer doivent faire approuver leurs taux avant de pouvoir en réclamer le montant. Art. 5172, par 9, S.R.Q., 1888, maintenant 6620 S.R.Q., 1909.

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La section 6623 S.R.Q. de 1909, déclare que si la compagnie fait un contrat illégal ou viole les dispositions de la loi ou omet d’accomplir quelques dispositions de la loi quant aux taux, elle est passible d’une amende de $1,000.

Dans le cas actuel le compagnie avait un tarif général qui avait été régulièrement approuvé en 1902. Elle juge à propos, en 1903, de diminuer ce tarif. Elle avait parfaitement le droit de le faire; elle aurait dû cependant faire approuver cette réduction; mais elle a négligé de le faire. Elle fait tout de même un contrat avec Kennedy par lequel il s’engage de lui donner tout son transport pourvu qu’il jouisse de cette réduction de fret. La compagnie néglige de faire approuver cette réduction dans ses taux et maintenant quand le demandeur, intimé, demandé qu’elle exécute son obligation et qu’elle lui rembourse la remise stipulée elle se prévaut de sa propre inaction et de sa propre négligence et demande à être déchargée de son obligation. C’est une proposition injuste que les tribunaux ne sauraient sanctionner.

L’appelante allègue aussi que la réduction n’a pas été approuvée par la compagnie elle-même, mais que le contrat n’est que l’œuvre des directeurs.

Lorsque les directeurs d’une compagnie agissent en son nom dans les limites de ses pouvoirs ils sont censés avoir été autorizés. Lindley, Law of Companies, p. 219, dit:—

It may be taken as now settled that persons dealing with directors bonâ fide and without notice of an irregular or improper exercise of their powers are not affected by such irregularity or impropriety.

III.

L’appellante prétend en troisième lieu que l’intimé

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n’a pas exécuté sa part d’obligation en ne faisant pas transporter 3,500 chars de bois par année.

Naturellement si l’intimé s’était obligé à cela il y aurait lieu de donner raison à l’appelante. Mais la correspondance qui a été produite nous révèle que la compagnie a voulu que l’intimé s’engageât ferme de lui faire transporter 3,500 chars et il a positivement refusé de contracter une telle obligation. Ce troisième point est donc mal fondé.

Sur le tout je suis d’opinion de renvoyer l’appel avec dépens.

Appeal dismissed with costs.

Solicitors for the appellants: Taschereau, Roy, Canon, Parent & Fitzpatrick.

Solicitors for the respondent: Pentland, Stuart, Gravel & Thompson.