Sir Lancelot Sanderson vs Corporation of the District of Matsqui

Headnote Court Copy Facts Arguments Court observation Judicial Analysis Case Map Category Hierarchy Table of Content

1934 Supreme(SC) 4

Privy Council At Columbia
Sir Lancelot Sanderson, Wright , Macmillan, Russell of Killowen, Justice Lords Atkin, JJ.
Sir Lancelot Sanderson -Appellant
Versus
Corporation of the District of Matsqui -Resopndent
Appeal No.76 of 1933
Decided On : 24-01-1934

Important Points

In utility contracts, "similar service" refers to the category of energy supplied (e.g., domestic or industrial) rather than the supplier's cost of distribution. Contractual limitations cannot be implied unless they are necessary to the contract's purpose or nature.

Subject

Contract Law - Interpretation of Contracts

Act Referred

Municipalities Incorporation Act of British Columbia
Water Act, 1909: S.278, S.279
Electric Lighting Act, 1882: S.19, S.20

Headnote

(A) Municipalities Incorporation Act - Distinction between city and district municipalities - Water Act - Sections 278 and 279 - Publication and approval of rate schedules - Contractual interpretation - Covenant against charging higher rates than other municipalities for similar service.

(B) Construction of Contracts - Implied terms - Words cannot be added by necessary implication to limit a covenant unless the language as a whole carries that meaning - A reasonable geographical limitation may be inferred from the nature and purpose of the contract without express words.

(C) Interpretation of "Similar Service" - In the context of electricity supply, "similar service" refers to well-known categories of demand (e.g., domestic, commercial, industrial) as reflected in rate schedules, rather than the effort or cost incurred by the supplier due to local conditions.

Facts of the case:
A supplier of electrical energy entered into a contract with a municipality granting the right to sell energy for 40 years. The contract contained a covenant that the supplier would not charge the municipality or its inhabitants rates higher than those paid for similar service by any other municipality, excluding cities. The municipality alleged a breach because the supplier charged higher rates than those charged to another district municipality. The supplier argued that the comparison should only be against its own charges and that "similar service" should account for the higher cost of supplying rural areas compared to suburban ones.

Findings of Court:
The court found that the covenant was not limited to charges made by the supplier itself but extended to charges paid to any supplier within the province. Furthermore, "similar service" refers to the classification of the energy supplied and not the cost of distribution.

Issues: Whether the term "paid" in the contract implied payment only to the supplier, and whether "similar service" refers to the cost and effort of supply or the nature of the energy demand.

Ratio Decidendi: Specific limitations cannot be implied into a contract if they are not expressed or clearly inferred from the general tenor. A geographical limitation to the province is reasonable given the contract's nature. "Similar service" is construed in its natural sense as referring to categories of use in rate schedules to provide a simple basis for comparison and prevent unfair pricing.

Result: Appeal dismissed.

Legal Category Hierarchy

Advocates Appeared:
Grand, C.W. Measor, Pritt , Wilfrid Barton, J. W. de B. Farris

Lord Wright:-

This appeal is from a portion of a judgment given against the appellant, who was defendant in the Court below, in the Supreme Court of British Columbia and affirmed by the Court of appeal of British Columbia. The portion of the judgment appealed from is in these terms:

"this Court doth declare that the defendant has committed a breach of the contract in the pleadings mentioned, dated 29th March 1913, and made between the plaintiff (now the respondent) and the Western Canada Power Company, Ltd., which contract was assigned by the Western Canada Power Company, Ltd., to the defendant on 1st November 1916, in that it has made charges for the supply of electrical energy to the plaintiff and to the inhabitants of the plaintiff Municipality greater than that paid by the District Municipality of Burnaby, in the province of British Columbia, and its inhabitants, for the supplying of electrical energy for similar services.

And this Court doth adjudge that the defendant be and is hereby restrained and ordered to desist from charging for the supply of electrical energy to the plaintiff and to the inhabitants of the plaintiff municipality, rates greater than that paid by any other municipality or the inhabitants thereof other than a city for the supplying of electrical energy for similar services."

The question in the appeal depends on the true construction of Cl. 11 of the contract, dated 29th March 1913, which was made between the respondent, who was plaintiff in the action, and the predecessors-in-title of the appellant. The term appellant is used herein indifferently to describe either the actual appellant or its predecessors-in-title, since no distinction need be drawn for purposes of this appeal. The appellant is and was a company making and supplying electric energy for light and power in British Columbia in the vicinity of Vancouver City. In the territory served by it is the respondent Municipality. By the contract in question the respondent granted to the appellant the right and privileges to sell electrical energy for lighting, heating, power and industrial and other purposes incidental thereto within the respondent's limits for a period of 40 years from the date of the contract; the appellant was given power within the respondent Municipality to erect steel towers, poles and other apparatus along streets and across or under highways

"and to do all things which may be necessary in the supplying of electrical energy for lighting, industrial power, heating or other purposes,"

subject to the approval of the respondent's board of works. No monopoly rights were granted to the appellant. Cl. 11 of the contract on which the present dispute turns was in these terms:

"The Company covenants and agrees with the Corporation that the Company will not make any charge for the supplying of electric energy to the Corporation or any of the inhabitants of the Municipality greater than that paid for similar service by any Municipality or the inhabitants thereof other than a city, and will not in any way discriminate against the Corporation or residents of the Municipality."

The respondent's complaint in the action was that in breach of that stipulation the appellant had charged and was charging to the inhabitants of Matsqui a higher rate for electrical energy than was being charged to the inhabitants of the Municipality of Burnaby. Before dealing with the construction of the clause some facts may be stated. Matsqui and Burnaby are both Municipalities under Municipalities Incorporation Act of British Columbia : in that Act a distinction is made between city municipalities and township or district municipalities, the former class consisting of municipalities of an area not exceeding 2,000 acres and of a population of not less than 100 male British subjects, the latter class consisting of municipalities of an area not defined by the Act and of at least 30 male British subjects. Both Matsqui and Burnaby are of the latter class: neither is a city