The Queen v. Levy Brothers Co. Ltd. and The Western Assurance Co., [1961] SCR 189

Supreme Court of Canada

The Queen v. Levy Brothers Co. Ltd. and The Western Assurance Co., [1961] S.C.R. 189

Date: 1961-01-24

Her Majesty The Queen Appellant;

and

Levy Brothers Company Limited and The Western Assurance Company Respondents.

1960: November 4; 1961: January 24.

Present: Taschereau, Locke, Martland, Judson and Ritchie JJ.

ON APPEAL FROM THE EXCHEQUER COURT OF CANADA.

Crown—Petition of Right—Conversion of parcel of diamonds by employee or employees of the Crown—Crown liable—Customs Act, R.S.C. 1952, c. 58, ss. 19, 23(1)—Post Office Act, R.S.C. 1952, c. 12, ss. 40, 44(1) (3)— Crown Liability Act, 1952-53 (Can.), c. 30, ss. 3 and 4.

A parcel of diamonds imported from Belgium by the appellant Levy Brothers Company Limited was lost in the premises of the Customs Postal Branch at Hamilton, Ontario. It was admitted that the parcel arrived by prepaid registered air mail at the Hamilton Post Office on or before Saturday, October 15, 1955, and was transferred to the Customs Postal Branch, where it was deposited in a bin to which members of the public were not permitted access. Notice of the arrival of the package of diamonds was sent to Levy Brothers Company Limited, and was received by it in due course. On October 18th it attended at the Customs Postal Branch to make due entry but the parcel could not be found. Levy Brothers brought a petition of right to recover from the Crown the value of the parcel of diamonds. The trial judge concluded that it was "a fair inference that the parcel was unlawfully converted by some one or more of the Crown employees who had access to the bin during working hours" and that "… the preponderance of probability, though slight, favours the view that the conversion occurred on the Saturday or Monday, during a time when both the office and the bunks were open and access to the bins could be had by an employee without using a key". He found that the Crown was liable to make good the loss. The Crown appealed to this Court.

Held: The appeal should be dismissed.

In the course of dealing with the respondent's parcel of diamonds the employee or employees of the Crown converted them to his or their own use. The employee or employees concerned were thus doing fraudulently that which, under s. 44(3) of the Post Office Act, they were employed to do honestly and the theft was, therefore, committed under such circumstances as to render the employer liable for the loss. Lloyd v. Grace, Smith & Company, [1912] A.C. 716; Lockhart v. Canadian Pacific Railway Company, [1941] S.C.R. 278; W. W. Sales Limited v. City of Edmonton, [1942] S.C.R. 467; R. v. Spence, [1952] 2 S.C.R. 517; Percy v. Corporation of the City of Glasgow, [1922] 2 A.C. 299; United Africa Company Limited v. Saka Owoade, [1955] A.C. 130, referred to. The liability of the Crown for the torts of its servants is now clearly established by ss. 3 and 4 of the Crown Liability Act.

The provisions of s. 40 of the Post Office Act were not applicable as at the time of the loss the diamonds in question were neither "deposited in a post office" nor "in the course of mail".

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In order to invoke the provisions of s. 23(1) of the Customs Act under the circumstances disclosed in this case, it is "default of … entry … or payment of duty" by Levy Brothers which must be shown. The fact that the statement of agreed facts disclosed no default of any kind by Levy Brothers was sufficient to exclude the application of this subsection.

APPEAL from a judgment of Thurlow J. of the Exchequer Court of Canada1, granting a petition of right. Appeal dismissed.

C. R. O. Munro and J. D. Lambert, for the appellant.

L. A. Fitspatrick, for the respondents.

The judgment of the Court was delivered by

Ritchie J.:—This is an appeal from a judgment of Mr. Justice Thurlow of the Exchequer Court2 whereby it is determined that the respondent, Levy Brothers Company Limited (hereinafter referred to as "Levy Brothers") is entitled to recover the sum of $3,191 from the appellant in respect of the loss of a parcel of diamonds shipped to it from Antwerp by prepaid registered air mail and presumably stolen by a person or persons unknown from the office of the Customs Postal Branch of the Department of National Revenue at Hamilton. By the same judgment the claim of the Western Assurance Company was dismissed and no cross-appeal has been asserted in this regard.

This action was tried on the basis of a statement of agreed facts which was signed by counsel for the respective parties and which stipulated that the parcel of diamonds in question, shipped and valued in manner aforesaid, arrived at Hamilton on or before Saturday, the 15th of October, 1955, on which day the Customs Postal Branch was not open to the public and that a skeleton staff of four employees of that branch sorted 213 dutiable items of mail (including the parcel of diamonds) from the non-dutiable, and having entered these items on a form headed "PACKAGES RECEIVED FROM POST OFFICE BY CUSTOMS POSTAL BRANCH" transferred them to the Customs Postal Branch office which was not open at all on Sunday, October 16th, and where they were deposited in bins situate in two large steel bunks to which members of the public are not permitted access and which face each other and

[Page 191]

are covered with wires and enclosed at each end by wire doors with locks on them. It is further agreed that there was mailed to Levy Brothers on Saturday, October 15th, a printed notice over the name of the Collector of Customs and Excise describing the package in question and stating in effect that it was liable to duty and had arrived at the office of the Customs Postal Branch at the Dominion Government Building, King and John Streets, Hamilton, Ontario, there to be opened, formally entered for customs and delivered to the addressee or its attorney on receipt of payment of duty if any were found to be payable. Having received this advice notice, in due course on Tuesday, October 18th, Levy Brothers attended at the office in question for the purpose of making due entry of the parcel but the parcel could not be found, and in spite of a thorough search by the R.C.M.P. and officers of the Department of National Revenue it had not been found at the time of the hearing of this appeal and is presumed to have been stolen.

Without further recitation of the facts, it is enough for me to say that I agree with the conclusion reached by the learned trial judge that it is

… a fair inference that the parcel was unlawfully converted by some one or more of the Crown employees who had access to the bin during working hours.

and I also agree that

… the preponderance of probability, though slight, favours the view that the conversion occurred on the Saturday or Monday, during a time when both the office and the bunks were open and access to the bins could be had by an employee without using a key.

Customs officers are required by s. 44(3) of the Post Office Act, R.S.C. 1952, c. 12, to "deal with" dutiable mail in accordance with the laws relating to customs pending delivery to the addressee or return to the Canada Post Office, and it was in the course of so dealing with the respondent's parcel of diamonds that an employee or employees of the Crown converted them to his or their own use. The employee or employees concerned were thus doing fraudulently that which they were employed to do honestly and the theft was, therefore, in my view, committed under such circumstances as to render the employer liable for the loss. The law governing these circumstances has been stated in Story on

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Agency, 7th ed., para. 452, in terms which have been approved in this Court on more than one occasion. It is there said:

… he (the principal) is held liable to third persons in a civil suit for the frauds, deceits, concealments, misrepresentations, torts, negligences, and other malfeasances, or misfeasances, and omissions of duty, of his agent, in the course of his employment, although the principal did not authorize, or justify, or participate in, or, indeed, know of such misconduct, or even if he forbade the acts, or disapproved of them.

This language was adopted as applicable to the relationship between master and servant by Lord Macnaghten in Lloyd v. Grace, Smith & Company3, and by this Court in Lockhart v. Canadian Pacific Railway Company4, per Duff C.J., W. W. Sales Limited v. City of Edmonton5, and The Queen v. Spence6. See also Percy v. Corporation of the City of Glasgow7, and United Africa Company Limited v. Saka Owoade8.

The liability of the Crown for the torts of its servants is now clearly established by the Crown Liability Act, Statutes of Canada, 1952-53, c. 30, ss. 3 and 4, by which it is provided that:

3. (1) The Crown is liable in tort for the damages from which, if it were a private person of full age and capacity, it would be liable

(a) in respect of a tort committed by a servant of the Crown, or

(b) in respect of a breach of duty attaching to the ownership, occupation, possession or control of property.

4. (2) No proceedings lie against the Crown by virtue of paragraph (a) of subsection (i) of section 3 in respect of any act or omission of a servant of the Crown unless the act or omission would apart from the provisions of this Act have given rise to a cause of action in tort against that servant or his personal representative.

It is, however, argued on behalf of the appellant that the Crown is exempt from liability under the present circumstances by reason of the provisions of s. 40 of the Post Office Act, R.S.C. 1952, c. 12, and s. 23(1) of the Customs Act, R.S.C. 1952, c. 58.

Section 40 of the Post Office Act provides that:

40. Neither Her Majesty nor the Postmaster General is liable to any person for any claim arising from the loss, delay or mishandling of anything deposited in a post office, except as provided in this Act or the regulations.

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It was pointed out by counsel for the appellant that by s. 2(1) (c) of the same Act the words "deposit at a post office" are defined as meaning "to leave in a post office or with a person authorized by the Postmaster General to receive mailable matter" and that s. 2(2) provides that "an article shall be deemed to be in the course of post from the time it is deposited at a post office until it is delivered".

It was contended on behalf of the appellant that the application of s. 40 should not be limited to articles which are actually "in a post office" or in the custody of a person authorized by the Postmaster General to receive mail, but that it should be construed as referring to an article from the time it is deposited in a post office until it is delivered and that the parcel here in question, having been deposited in a post office and having been lost before it was delivered to the addressee must be taken to have been lost "in the course of post" and that the loss is, therefore, one for which the Crown is not liable by reason of the provisions of s. 40.

Section 44(1) of the Post Office Act requires that:

All mail from a country other than Canada containing or suspected to contain anything subject to customs or other import duties … shall be submitted to a customs officer for examination.

and by s. 44(3) it is provided that:

A customs officer shall, in accordance with the laws relating to customs and the importation of goods, deal with all mail submitted to him under this section, and upon compliance with such laws, may deliver such mail to the addressee, subject to the payment of any postage due thereon, or may return it to the Canada Post Office for transmission through the post in the usual way.

The parcel in question contained goods subject to duty, and at the time of its conversion it had been submitted to the Customs Postal Branch and had not been returned "to the Canada Post Office for transmission through the post in the usual way", but was in the course of being dealt with by customs officials pending delivery to the addressee upon payment of duty. In my view, at the time of the loss the diamonds in question were neither "deposited in a post office" nor "in the course of mail" and, accordingly, I agree with the learned trial judge that the provisions of s. 40 of the Post Office Act have no application to the present case.

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It was submitted, however, that the parcel in question was being kept in the Customs Postal Branch "at the risk and charge of the owner", and in this regard reliance was placed upon s. 23(1) of the Customs Act which reads:

In default of such entry and landing, or production of the goods, or payment of duty, the officer may convey the goods to a customs warehouse, or some secure place appointed by the Collector for such purpose, there to be kept at the risk and charge of the owner.

The application of this subsection is, in my view, limited by its opening words to cases in which there has been a "default" in one or more of the ways specified therein. The words "landing, or production of the goods" appear to be referable to goods imported by sea or by inland navigation as will be seen by reference to s. 19 of the present Customs Act and s. 15 of the Customs Act, 1877, 40 Vict., c. 10, and it is "default of … entry … or payment of duty" by Levy Brothers which must be shown in order to invoke the provisions of this subsection under the circumstances here disclosed. The fact that the statement of agreed facts discloses no default of any kind by Levy Brothers is, in my view, sufficient to exclude the application of this subsection.

In its petition of right Levy Brothers did not base its claim on a conversion by a servant of the Crown in the course of his employment, but as the learned trial judge granted it leave to make the amendment necessary to include such a claim, and as the appellant in this Court agreed that the case should be treated as if such an amendment had been made, it becomes unnecessary to express any view as to the validity of the contention made by the respondent in the Court below that the provisions of s. 3(1) (b) of the Crown Liability Act have the effect of making the Crown liable as a bailee of goods in its possession under the circumstances here disclosed.

I would dismiss this appeal with costs.

Appeal dismissed with costs.

Solicitor for the appellant: W. R. Jackett, Ottawa.

Solicitor for the respondents: H. L. Rowntree, Toronto.