By J. Kendrick Sproule
(Originally published in Seaports and the Shipping World – October 1989 Issue)
On September 28th, 1989 the Supreme Court of Canada handed down its Judgment in Chartwell Shipping Limited v. Q.N.S. Paper Company Limited. This decision is a key development in the law of agency in Quebec and bears important implications for ship’s agents, brokers and other intermediaries. Before summarizing the effect of the Chartwell decision, a brief review of the facts is in order.
In November, 1972 Chartwell arranged for certain agency and stevedoring services to be rendered by Q.N.S. for the M.V . “APJ PRIV A” and the M.V . “LONDON CITIZEN”. In performing its services as an agent Chartwell consistently identified itself to Q.N.S. as “Managing Operators for the charterers” and as acting “On behalf of our principals”. It also signed “as Managing Operators only”. In January, 1973 Q.N.S. sent two accounts for the stevedoring and other services rendered which Chartwell forwarded to its principal, the charterer of the two vessels. The charterer, however, had become insolvent and Q.N.S.’s bills were not paid. Q.N.S. sued Chartwell. Chartwell maintained that it could not be held liable as it had always acted as an agent only.
Q.N.S. chose to litigate the matter before the Quebec Courts. The decisions at both Superior Court and Court of Appeal levels turned on the interpretation of Articles 1715 and 1716 of the Civil Code which govern Quebec’s law of agency. Hitherto the law of agency in Quebec required that an agent name, or otherwise identify, his principal in order to avoid personal responsibility. In rendering its decision in the Chartwell case the Supreme Court of Canada has not only altered Quebec law in this regard but it has also clarified the legal regime to which agents acting in the maritime arena are subject.
To understand the context and the impact of the Chartwell decision we must turn the pages back a few years to the Supreme Court of Canada’s decision in the “BUENOS AIRES MARU” case. Apart from upholding the validity of the Himalaya clause found in bill of lading standard terms and conditions, the Supreme Court defined the parameters of the Federal Court’s jurisdiction and analyzed the meaning and content of “Canadian maritime law”. It was held that Canadian maritime law is “a body of federal law encompassing the common law principles of tort, contract and bailment… and that (it) is uniform throughout Canada…”. Accordingly, if a dispute arose that involved navigation and shipping and matters maritime then one would look to the common law of Canada to find the rules for resolution and not to the law of any province.
How, it might be asked, does the “BUENOS AIRES MARU” case which deals with the jurisdiction of the Federal Court and the meaning and scope of Canadian maritime law affect an agent such as the managing operator in the Chartwell case? The answer is that if a dispute can properly be characterized as having a maritime nature then common law principles apply thereby rendering irrelevant the Civil Code of Quebec. As a result, the Chartwell case puts agents and other intermediaries working in shipping and navigation on the same footing as agents otherwise governed by common law principles. What this means for marine intermediaries is as follows.
Firstly, where an agent makes a contract for a named principal, the third party is thereby aware of the principal’s identity and, accordingly, the agent cannot be held personally responsible for the debts of his principal.
Secondly, where the agent contracts for a disclosed principal, that is the third party is aware that he is acting with an agent but does not know the identity of the principal, then again, the agent is not personally liable on the contract. The words “as agents”, “on account of”, “on behalf of”, and “for” are sufficient when qualifying the signature of the agent to avoid contractual responsibility (so long, of course, as the agent is in fact an agent and not, in fact, the principal).
Thirdly, where the agent acts for and contracts on behalf of an undisclosed principal, in other words where the third party is unaware of either the name or existence of the principal then, under the common law, the agent is personally liable on the contract to the contracting party. This is the case even if the agent is, in fact, acting on behalf of a principal.
Turning back to the Chartwell decision its basic point is that because the agent in that case performed its functions in the maritime context, it is governed by Canadian maritime law which is uniform throughout the country (in other words, not the local law of Quebec, the Civil Code). This, in turn, means common law principles apply. The nub of the matter then is whether or not one can properly characterize the function or service performed by the agent as being of a maritime character. If it is not marine then one would look to the local law, being provincial law, to find the governing substantive rules.
Apart from ruling that managing operators and other such intermediaries are subject to Canadian maritime law, the Chartwell decision has probably changed the law of agency in Quebec. The reason why one must qualify this conclusion by using the word “probably” is that only one of the Supreme Court Justices sitting on the Chartwell decision dealt specifically and at length with Articles 1715 and 1716 of the Civil Code. That Judge, Mme Justice L’Heureux-Dubé, was of the opinion that the law of Quebec was no longer to the effect that an agent must specifically name his principal in order to avoid personal responsibility. This would indicate that the law of Quebec has changed but, because this conclusion was reached by only one of the seven Judges sitting, one cannot predict with absolute certainty how Quebec Judges will view the Chartwell decision.
The lesson to be learned from the Chartwell decision is that if an agent’s function can be characterized as maritime in nature then common law principles of agency would apply. However, if the situation is not clear-cut and there is the possibility that Quebec law applies, then one must question whether Quebec Courts will follow the lead of Mme Justice L’Heureux-Dubé in her interpretation of Articles 1715 and 1716 of the Civil Code. Until the issue is clarified by a non-marine case taken before a Quebec Court, the safest possible course for an agent contracting in Quebec in matters not governed by Canadian maritime law would therefore be to name the principal for whom the agent acts.
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