An article on Justice Rand's commercial law jurisprudence provides a number of challenges. Much has been made of his contributions in constitutional law and the impact of "policy considerations" on freedoms of speech and religion. (1) His voice, it has been said, "reverberates even in our most recent constitutional jurisprudence, be it federalism, civil liberty or social justice." (2) His decision in Roncarelli v. Duplessis (3) stands as a classic in constitutional law, leading one author to conclude that "during his time on the Supreme Court of Canada, Justice Rand almost stands alone among Canadian judges as the most aggressive and assertive defender of individual liberties." (4) Yet little has been said of his contribution to the commercial field. Justice Rand participated in sixty-nine broadly classed commercial law and contracts cases. (5) Does Justice Rand's commercial law jurisprudence have a legacy? This essay seeks to answer that question.
What constitutes "commercial law" is open to debate. (6) In Canadian law schools, there are a variety of approaches to its teaching. Sales, consumer protection, secured transactions, banking and bankruptcy may all find a home in a broad commercial law survey course. Alternatively, instructors may teach each of these topics as stand-alone courses. This paper does not examine every facet of commercial law. Nor does it purport to cover corporate law, (7) banking law (8), intellectual property (9) or restitution. (10) Roy Goode suggests that commercial law is "that branch of law which is concerned with rights and duties arising from the supply of goods and services in the way of trade." (11) This definition implies that commercial law's core consists of sales, secured transactions along with underlying contract principles. To this list, one can add bankruptcy law, as each commercial transaction raises the possibility of the financial failure of one of the parties. (12)
Even after narrowing a definition of commercial law to contracts, sales, secured transactions and bankruptcy law, one must consider the impact of significant statutory reform since Justice Rand's time on the Supreme Court of Canada. Thus, what he had to say about conditional sales contracts will be mere history to a twenty-first century commercial lawyer practicing secured transactions. Personal property security legislation has revolutionized the law of conditional sales, floating charges and chattel mortgages in each of the common law provinces and territories. (13) Thus, this essay need not consider cases (14) involving the various statutory and common law regimes governing secured transactions prior to such enactments or other commercial statutes or regulations that have long been repealed. (15) Finally, there are too few sales cases to identify any trends. The Supreme Court of Canada did not consider any general principles arising under provincial Sale of Goods legislation. (16) Therefore, the law of contracts and of bankruptcy will be the focus of this article.
A final challenge is that Justice Rand's commercial law decisions may not have raised matters of national importance, given that Rand's time on the bench predated the 1975 abolition of appeals as of right in civil matters. (17) The unrestricted right of appeal had led the court to devote a "disproportionate amount of its time and effort disposing of issues which raised no new or important questions for the country." (18) Despite these restrictions, a commentary on Justice Rand's commercial law jurisprudence helps "complete the judicial profile" of one of Canada's most important jurists. (19) It offers insights into a largely ignored aspect of Justice Rand's opinions and a perspective on Canadian commercial law in his time.
A) LAW OF CONTRACTS
One work suggested that, although Justice Rand had a "well-defined and developed background theory" in civil rights cases, in common law matters "there appears to be no background theory and, perhaps because of this, very few notable accomplishments." He was according to this same work, "a member of a court which was not noted for breathtaking advances in the common law." (20)
There are few extra-judicial writings to discern Justice Rand's approach to the common law. He articulated his vision of the common law and the role of the courts, asking "what means are there which justify modifications of the common law?" Justice Rand presented a more modern conception of common law thinking than existed in nineteenth century England:
Today we have something else. We are introducing social considerations. We are beginning to see that the common law really is pushing forward under the urge of changing social demands and as it pushes ahead, it has behind it the accumulated judicial experience. (21) ... Because the laws cannot change every day and the courts are bound to be proceeding backwards, they are looking at the past and are not anticipating possible changes but are viewing actual changes. We then come to see the scope that is open to any Court of Appeal as well as the Supreme Court of Canada to modify the law. (22)
Justice Rand concluded, "we are reaching the stage where we can safely trust our highest tribunal to the exercise, the application of our common law as an instrument of modification." (23)
One might expect this judicial philosophy to pervade his common law decisions. This openness to modifications in the common law was best articulated in his two landmark judgments in Union Steamships Ltd. v. Barnes (24) and Dawson v. Helicopter Exploration Co. Ltd. (25) In Barnes, Justice Rand found himself in dissent; and yet the principles he articulated have found implicit resonance with more recent developments in exclusion clauses. Modern courts have come to rely upon Dawson, which is perhaps Justice Rand's signature contracts case. That decision continues to be cited for the principle that courts should seek to find a promissory bilateral agreement, binding on both parties, rather than an offer of a unilateral contract. These two decisions will be discussed below. However, Barnes and Dawson remain exceptions.
Many of the Court's contracts cases made modest and somewhat unremarkable contributions to contracts jurisprudence. Judgments were short and in many instances, the Court cited few authorities. Other cases involved interpretation of a detailed set of facts or contractual terms, (26) leaving little room to break new ground or establish path breaking contract principles. (27)
Some decisions pre-dated significant common law developments. For example, Salmon River Logging Co. v. Burt (28) considered the scope of an exclusion clause. This 1953 decision came well before the judicial debate in England over the doctrine of fundamental breach and its effect on exclusion clauses. (29) The Supreme Court of Canada in Tercon Contractors Ltd. v. British Columbia (Transportation and Highways). (30) would later adopt a new framework for exclusion clauses. The Court in Tercon (2010) has concluded that the time had come to lay the doctrine of fundamental breach "to rest'. (31) Under the new three-part test the Court first asked whether the exclusion clause applied to the circumstances in the case. If the clause did apply, Justice Binnie went further and asked whether or not the exclusion clause was "unconscionable at the time the contract was made". (32) Finally, if the clause was still valid at that stage, the Court could refuse to enforce an otherwise valid clause "because of the existence of an overriding public policy ... that outweighs the very strong public interest in the enforcement of contracts." (33)
In Salmon River, the Court refused to give effect to an exclusion clause and applied a construction approach. In the case, a logging company contracted with a trucking company to haul logs. The negligence of the logging company's employees let a tree fall on one of the trucking company's trucks. When the trucking company pursued a claim in negligence, the logging company relied on an exclusion clause. A majority of the court held that the exclusion clause did not apply. The contractual obligations only involved loading, hauling and dumping of the logs. Although negligence by the logging company's employees damaged the truck, the damage did not arise in the context of loading. Cartwright J. concluded that the loading operation did not "fall within the four comers of the contract", even though "it was being carried on "in the immediate vicinity of the truck." Justice Rand adopted a similar view. The exclusion clause related only to the damage "arising out of the use or operations of the said trucks." (34)
The accident here was not of the nature so envisaged; it arose out of work carried on exclusively by the [logging] Company; the fact that the truck was in its vicinity awaiting loading cannot in any sense stamp the resulting damage as arising out of that fact. (35)
The construction approach would later find favour in the House of Lords in Photo Production. (36) In Salmon, there was no discussion of unconscionability or even the public policy factors found in the recent case of Tercon. Justice Rand's construction approach was in sharp contrast to his judgment in Barnes.
In Barnes the court split 3-2 (37) in favour of upholding an exclusion clause. Justice Rand's dissenting judgment was a stinging commentary on the approach of the majority judgment of Locke J. A steamship operated by the appellant carried passengers and cargo on the west coast of British Columbia. The respondent and family boarded the appellant's vessel to purchase the tickets, because the appellant did not maintain a ticket facility on shore. In cross-examination, the respondent said that on receiving the ticket he knew there was some writing on the front of the ticket but he did not read it. Nor did he look on the back of the ticket. The front of the ticket contained the following in red print:
This ticket is issued subject to the conditions of carriage of passengers and baggage endorsed on the back hereof and those posted in the Company's office.
The following statement appeared on the other side of the ticket, also in red print:
... [T]he person using [the ticket] assumes all risk of loss or injury to person or property while on the vessel or while embarking or disembarking, even though such loss or injury is caused by the negligence or default of the shipowner, its servants or agents, or otherwise howsoever. The holder hereof in accepting this ticket thereby agrees to all the conditions stipulated thereon. (38)
Wanting to retrieve some items out of his luggage the respondent made his way to the ship's hold. En route, the respondent fell down a hatchway and suffered injuries. The appellant had failed to keep the hatchway sufficiently lit.
Locke J. held that the exclusion clause applied. In looking to earlier English authorities, Locke J. found the judgment in Nunan v. Southern Railway Company (39) to best summarize the general principles in this area. In Nunan, Swift J. concluded that when a contract was formed by delivery of a document, stating the terms of the contract and its limits, such a form must be considered the offer of the party who tendered the document. If the form was accepted by the other side without objection, this act amounted to acceptance of the offer, "whether he reads the document or otherwise informs himself of its contents or not." (40) In this situation, the conditions in the document were binding. If there was any dispute about the true intentions of the parties then a court must determine whether the party delivering the form or ticket gave reasonable notice to the other party.