The issue in Fitzpatrick’s Fuel was whether despite the care exercised by its sole officer director, and shareholder, should the company still be held liable for the wrongful actions of Parviz Zamzam?
The Crown said yes, and submitted that a correct application of the “identification theory” would prove as much.
Using the parameters delineated in Canadian Dredge, the Court held that when Zamzam sold the beer to the minor, the transaction fell within the meaning of the identification theory because of the below three points:
- Within the field of operation assigned to him;
- Not totally in fraud of the corporation, and;
- By design or result partly for the benefit of the company.
However, the same could be said about Captain K. in Rhone. The issue the SCC was asked to consider in the Rhone v The Peter A.B. Widener was whether Captain Kelch’s faults were essentially the actual fault of Great Lakes by reason of his position within the corporate hierarchy of Great Lakes.
If we apply the same three elements from the Canadian Dredge analysis we could argue that Captain K acted
- WIthin the field of operation assigned to him;
- Not totally in fraud of the corporation, and;
- By design or result partly for benefit of the company.
Comparing these cases in the study of the “identification theory” can therefore be somewhat unclear.
The difficulty in reconciling these two decisions is the way that they understood the difference between directing minds and normal employees. In Rhone the key difference between employees and directing mind is the capacity to exercise decision making authority on matters of corporate policy, rather than to merely give effect to such policy on an operational basis, whether at head office or across the sea. In Rhone it was found that captain K was merely giving effect to corporate policy and was not exercising decision making authority. The same can be said of the employee in Fitzpatrick’s Fuel.
Tesco Supermarkets was a case discussed in Rhone. In Tesco, a manager of one store in a chain of supermarkets was found to have been negligent in supervising an employee who placed improperly priced goods for sale, thereby committing a price offence under the Trade Descriptions Act 1968. The court held that the mere fact that the manager exercised limited discretion in the performance of his assigned role did not render him part of the directing mind of the company.
The reasons given by the court stated that:
- There was no delegation of the duty of taking precautions and exercising diligence.
- There was no such delegation to the manager of a particular store.
- He did not function as the directing mind or will of the company.
- His duties as the manager of one store did not involve managing the company.
- He was one who was being directed.
- He was one who was employed but was not a delegate to whom the company passed on its responsibility.
- He had certain duties which were the result of the taking by the company of all reasonable precautions and of the exercising by the company of all due diligence.
- He was a person under the control of the company.
- He was so to speak, a cog in the machine which was devised: it was not left to him to devise it.
If we apply that analysis to Fitzpatrick’s Fuel we could come up with a different answer as the employee’s circumstances fit all of the elements in Tesco.
Where it gets tricky, is when looking at what Iacobucci in Rhone found to be the key question about corporate identification.
He said, “[t]he governing question must be whether the impugned individual has been delegated the “governing executive authority” of the company within the scope of his or her authority. The courts must consider who has been left with the decision making power in a relevant sphere of corporate activity.”
It could be argued that the employee in Fitzpatrick’s Fuel was delegated the authority over the management and supervision of the convenience store and it was up to him to decide who he would sell to. This is distinguished from Rhone where the court found that Captain Kelch was a port captain below the supervision and direction of captain Lloyd. Captain Kelch was not delegated the authority over the management and supervision of the Great Lake’s fleet.
So, comparing these two decisions can provide different responses but there are, however, important differences that may have resulted in the opposite decisions.
Great Lakes sought to limit its liability by using s. 647(2) of the Canadian Shipping Act which allows a ship owner to limit the tort liability that would normally attach to it under the principle of vicarious liability.
The provision limits the VL only if the damage was caused without the actual fault or privity of the owner of the ship. If the owner of the ship was at actual fault it would carry unlimited liability.
Another difference is that there was nobody in between of the employee and Fitzpatrick as there was in Rhone.
And perhaps, most importantly, the policy reasons that inform these decisions are different. The Liquor Control Act is a public welfare legislation regulating acts that Parliament has deemed as deleterious to society as a whole.
Really great and thorough analysis Claudia, the policy piece was one I didn’t think of and it certainly seems like something that would inform the results.
The way I read the cases, the delegation of authority/directing will piece was perhaps the most common-sense distinction between the two. Directing will implies to me a kind of integrality with the purpose of the business, and clearly the sale of goods is the fundamental part of the convenience store business. While captaining the Rhone is clearly an important part of that business, managing the superstructure of the business seems to encompass more duties and obligations. (That being said, it’s kind of easy to make such reductionist judgments in hindsight!)
I agree that this is a very thoughtful and thorough analysis. While I appreciate the public policy justification argument that you’ve made in respect to Fitzpatrick, I feel nonetheless that the decision in Fitzpatrick is ultimately inconsistent and irreconcilable with the principles set out in ‘Rhone’ where the court said the test for the “directing mind and will” was to establish who had ” governing authority over the management and operations”. I believe that extending the ‘governing mind’ concept to the cashier in this instance erodes this concept to the point of meaninglessness. In contrast, the decision in ‘Beverly Corners Liquor Stores’ offers a much more reasoned application of the governing mind principle: “The authority to determine whether a customer was of legal age and then to refuse sale, as necessary, was part of the discretion given to exercise responsibility in the performance of her job function. This was an operational matter. It does not establish governing authority for a corporation. While she had discretion and certain responsibility on the night in question to close the store and perform individual sales, she was not a directing mind of the licensee as it related to the sale of liquor to minors.” As you rightly pointed out, there are compelling public policy reasons at play, something that’s evident in the fact that Legislature chose to enact strict liability offences. It was posited in the casebook (pg 243 note 3) that “…[s]ince it was a strict liability offence, the crown only had to prove that the corporation committed the actus reus. Although mens rea cannot be attributed to a principal or an employer via the doctrine of vicarious liability, perhaps an act can”. In Fitzpatrick, should the analysis have been focused simply on whether the employee had committed the actus reus? Given the lack of a mean rea requirement in for these types of offences, it can be argued that the governing mind concept should apply only to offences involving a mens rea element. Personally I think this may be a more appropriate way of addressing the policy considerations without extending the concept of governing mind too far.