ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT OF APPEAL
B E T W E E N:
Petro Canada
Bridget Jokitalo, for the Appellant/Plaintiff
Appellant/Plaintiff
- and -
775067 Ontario Inc., Operating as Aquatech
Leo Arseneau, for the Respondent/Defendant
Respondent/Defendant
HEARD: October 22, 2008
Robbie D. Gordon, S.C.J.
Background
1The Appellant, Petro Canada, provided the Defendant Aquatech with a commercial credit account by way of six “Superpass Credit Cards” for use at Petro Canada retail outlets.
2The cards were obtained by Aquatech after first applying to Petro Canada through submission of a Petro Canada Superpass Credit Card Application. The Application indicated that use of the cards would constitute acceptance of the Agreement which would accompany the cards when issued.
3On various dates between March 9, 2005 and March 29, 2005, and at various locations, purchases were made with the use of one of the cards that had been issued to Aquatech. It appears that one of Aquatech’s employees took a card and PIN number from the desk in which they were kept. The desk was located in Aquatech’s administrative office which was generally left unlocked. He used the card to purchase some $5,320.04 of cigarettes over the twenty day period in March referred to above.
4An employee of the Petro Canada retail outlet where the purchase was made on March 29 thought it to be suspicious and contacted Aquatech. The card was cancelled immediately and further purchases on it were avoided. However, there arose a dispute as to payment for the various charges incurred in March. That dispute is at the centre of the action brought by Petro Canada against Aquatech.
5Petro Canada points to the cardholder agreement which provides in paragraph 3 that the customer shall be responsible for all purchases made with the card, regardless of whether or not such purchases were made under the authority of the customer until such time as the customer reports the card lost or stolen. As all charges were made before the card was reported lost or stolen, it argues that all charges are properly for the account of Aquatech.
6Aquatech argues that it thought it was getting a card for use in purchasing fuel only. It argues that there was no proof before the court that Aquatech was ever provided with the cardholder agreement and therefore is not bound by it. It takes the position that if Petro Canada accepted the card for non-fuel purchases it did so at its own risk. It also argues that Petro Canada ought not be able to collect, as it put no security measures into place to detect unauthorized purchases made on the card.
Decision of the Trial Judge
7The Trial Judge found that Aquatech had applied for a card that would be used for the purchase of fuel and that Aquatech was not aware that the card could be used for the purchase of cigarettes. He found that had Aquatech been aware that the card could be used for such purchases, it likely would have made greater efforts to ensure the proper safekeeping of the cards and PIN numbers.
8The Trial Judge also found that Petro Canada could not impose upon Aquatech the responsibility for purchases made without its authorization prior to notice being given to Petro Canada without having Aquatech specifically acknowledge that responsibility and without Petro Canada taking steps to ensure that it had systems in place to avoid such unauthorized purchases.
9In the end, he held Aquatech responsible for the gas purchases made over the month of March, 2005, but did not give Petro Canada relief with respect to the various cigarette purchases.
Petro Canada’s Position on Appeal
10The arguments made by Petro Canada on this appeal were fourfold and can be summarized as follows:
That the Trial Judge made a palpable and overriding error in finding that Aquatech had obtained the cards on the understanding that purchases would be restricted to fuel products only and inferring that had Aquatech been aware that the card could be used for other purchases it would have implemented a better security protocol for the use of the cards.
That the Trial Judge was incorrect in law in finding that the contractual provision placing responsibility for unauthorized purchases on Aquatech required that certain prerequisites be met by Petro Canada.
That the Trial Judge was incorrect in law in failing to apply section 1 of the Negligence Act and failing to apportion fault between the parties when he found that each of them had acted negligently.
That the Trial Judge was incorrect in law in failing to consider the argument of Petro Canada that Aquatech was vicariously responsible for the actions of its employee.
I will consider each ground of appeal in turn.
Palpable and Overriding Errors of Fact and Inference
11With respect to the first ground of appeal, the Trial Judge based his finding of fact that Aquatech had acquired a card restricted to gas purchases by reviewing the Application for credit which had been submitted, by reviewing the Cardholder Agreement, and by listening to the testimony of the witnesses before him. He drew the inference from that finding that Aquatech would have implemented greater security measures had it known the cards would be used to purchase other than fuel. Having reviewed that same evidence and having considered the arguments of the Appellant, I can see where there is room to debate the Trial Judge’s decision; however, I cannot say that he made a palpable and overriding error in coming to that conclusion such as would warrant appellate intervention.
Error of Law
12With respect to the second ground of appeal, I should comment first on the issue of whether or not the Cardholder Agreement was ever provided to Aquatech. As I understand it, a representative of Petro Canada gave evidence that the Cardholder Agreement is sent out to the customer every time a credit card is issued and that it accompanies the credit card when it is sent. Although he could not give evidence that this particular Defendant was sent the agreement, he was certain that it would have been sent in the usual course of business. As earlier indicated, the credit application specifically refers to the agreement which would accompany the cards when sent. On Cross-examination, Mrs. Larocque, who represented Aquatech, testified that it was probably received. Although the Trial Judge did not make a finding of whether or not it was sent by Petro Canada and received by Aquatech, on a balance of probabilities, the evidence establishes that it was.
13On the assumption that it was sent, and given that the Defendant accepted the card by using it, it was bound by the terms of the contract. As pointed out by Petro Canada, paragraph 3 of that contract provides that the customer is responsible for the unauthorized use of the card until the loss or theft of the card is brought to the attention of Petro Canada. Paragraph 7 of the agreement provides that Petro Canada cannot be responsible for purchases exceeding any purchase restrictions placed by the customer.
14I do not understand by what authority the Trial Judge placed restrictions on the validity of these contractual provisions. I have been provided with no law that would allow for it. It seems to me to be an improper interference with the private contractual relationship between the parties. In my view, the Trial Judge erred by requiring the specific acknowledgment of these paragraphs by the customer in order to render them effective. He also erred by requiring Petro Canada to have a security system in place in order to render them effective.
15However, this is not to say that the matter is at an end and that Petro Canada obtains full recovery. As indicated above, I defer to the Trial Judge’s finding that the cards as applied for were for fuel purchases only. Given that finding, the acceptance of the card by Petro Canada for purchases of cigarettes was clearly outside of the use of the card sanctioned by Aquatech. That being the case, the applicable provision of the Cardholder Agreement is paragraph 7, which reads as follows:
The Corporation will use reasonable commercial efforts to ensure that all retailers adhere to the purchasing restrictions and limit restrictions on the Superpass Card. It is understood, however, that these restrictions are for the Customer’s convenience only, and the Corporation cannot be held responsible for purchases exceeding these restrictions.
16At first blush, this provision would require Aquatech to make payment, as responsibility for purchases exceeding the card restrictions are deflected from Petro Canada. However, where as here, it has been found that the cards in question were to have been issued for the purposes of fuel purchases only, this provision imposes a contractual obligation on Petro Canada to use reasonable commercial efforts to ensure that its retailers would honour that restriction. In the event such efforts are made, the Customer is made responsible for unauthorized purchases. Where, as in this case, no efforts were made by Petro Canada it is in breach of the Cardholder Agreement.
17This is not a situation where the odd package of cigarettes was purchased by an employee. In this case, thousands of dollars worth of cigarettes, representing hundreds of packages were purchased over a period of twenty days. This represents an average about $250.00 worth of cigarettes purchased each day.
18It has been long accepted that in considering damages for breach of contract, the parties should to the extent possible be placed in the same position as would have existed had the contract been performed. Had Petro Canada met its contractual obligation to make reasonable commercial efforts to ensure that card restrictions were honoured, I have little doubt that the purchases in question would have been identified and rejected. Had that been done, there would be no account outstanding for Aquatech to pay.
19Accordingly, although the Trial Judge erred in his application of the law, I would agree with his ultimate conclusion that Aquatech is not responsible for the cigarette purchases and therefore dismiss this ground of the appeal.
Negligence
20With respect to the third ground of appeal, I confess to being somewhat confused by how the issue of negligence arose in the context of this contractual dispute. In my view, there is no negligence analysis required relative to the actions of Petro Canada as their obligations are entirely defined by the contract entered into with Aquatech and their actions can be quite properly considered in the context of the Cardholder Agreement.
21Although the Trial Judge found Aquatech to have been a bit sloppy in the way it secured the cards and the PIN numbers and although this may have amounted to negligence on the part of Aquatech, such negligence was not the proximate cause of the loss claimed by Petro Canada because it was found by the Trial Judge that the cards were not authorized for non-fuel purchases. Had the amounts claimed by Petro Canada been for unauthorized fuel purchases the situation would be substantially different and some apportionment of responsibility to Aquatech would have been appropriate.
Vicarious Liability
22With respect to the last issue raised by the Appellant, I agree that the issue of vicarious liability was put before the Trial Judge and argued before him. His failure to address this issue in his decision amounts to an error in law. However, in reviewing the facts as found by the Trial Judge and applying the principles of vicarious liability outlined in the cases cited by counsel, I find that even if it had been properly considered it would not result in judgment for Petro Canada.
23In the case of Bazley v Curry, [1999] 2 S.C.R. 534, the Supreme Court of Canada set out the guiding principles in determining whether an employer should be vicariously liable for an employee’s intentional wrong. In brief terms, it was suggested that the court openly confront the question of whether liability should lie against the employer by looking at the fundamental question of whether the wrongful act is sufficiently related to conduct authorized by the employer to justify the imposition of vicarious liability. If there is a significant connection between the creation or enhancement of a risk and the wrong that accrued therefrom, vicarious liability will be appropriate even if the wrong of the employee is unrelated to the employer’s desires.
24In the case before me, it was determined by the trial judge that the use of the credit card was to have been for the purchase of fuel only. The conduct authorized by the employer was the use of a credit card by an employee for the purchase of fuel on the understanding that the card would not be accepted by Petro Canada for anything else. This is different from a situation where an employee is provided with a VISA card that can be used for the purchase of any item almost anywhere. As far as the employer was concerned, the credit card in this case could be used only for the purchase of fuel at a Petro Canada location. The wrong in this case was that the employee used the card for purchases other than fuel. I fail to see how the employer enhanced the risk of this wrong. Again, had the impugned transactions involved the purchase of fuel by the employee for other than company purposes, my decision may well have been different.
25Accordingly, this ground of appeal also unsuccessful.
Conclusion
26In the end, although I am not necessarily in agreement with the means by which the trial judge came to his decision, I am content that he came to the appropriate conclusion and the appeal is dismissed.
27At the end of argument, counsel agreed that the successful party on this appeal be awarded costs in the amount of $4,100.00 all inclusive. Accordingly, costs in that amount are awarded to the Respondent.
Robbie D. Gordon
Superior Court Justice
Released: October 31, 2008
COURT FILE NO.: DV755/07
DATE: 20081031
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Petro Canada
Appellant/Plaintiff
- and –
775067 Ontario Inc., Operating as Aquatech
Respondent/Defendant
DIVISIONAL COURT APPEAL
Robbie D. Gordon, S.C.J.
Released: October 31, 2008