Kenora (Town) Hydro Electric Commission v. Vacationland Dairy Co-operative Ltd.

Kenora (Town) Hydro Electric Commission v. Vacationland Dairy Co-operative Ltd.
Collection
Supreme Court Judgments
Date
1994-01-27
Report
[1994] 1 SCR 80
Case number
22947
Judges
Lamer, Antonio; La Forest, Gérard V.; L'Heureux-Dubé, Claire; Sopinka, John; Gonthier, Charles Doherty; Cory, Peter deCarteret; McLachlin, Beverley; Iacobucci, Frank; Major, John C.
On appeal from
Ontario
Subjects
Public utilities
Notes
SCC Case Information: 22947
Decision Content
Kenora (Town) Hydro Electric Commission v. Vacationland Dairy Co‑operative Ltd., [1994] 1 S.C.R. 80
The Hydro Electric Commission of the
Town of Kenora and the Corporation
of the Town of Kenora Appellants
v.
Vacationland Dairy Co‑operative Ltd. Respondent
Indexed as: Kenora (Town) Hydro Electric Commission v. Vacationland Dairy Co‑operative Ltd.
File No.: 22947.
1993: October 6; 1994: January 27.
Present: Lamer C.J. and La Forest, L'Heureux‑Dubé, Sopinka, Gonthier, Cory, McLachlin, Iacobucci and Major JJ.
on appeal from the court of appeal for ontario
Public utilities ‑‑ Claims ‑‑ Quantum meruit ‑‑ Equitable estoppel ‑‑ Electrical utility underbilling for power supplied to customer ‑‑ Customer claiming that utility estopped from recovering by its own negligence ‑‑ Equitable estoppel unavailable as defence where it would interfere with ability of public authority to carry out positive statutory duty ‑‑ Whether Ontario utilities legislation imposes positive duty ‑‑ Power Corporation Act, R.S.O. 1980, c. 384, s. 99.
Vacationland purchases electrical power from Kenora Hydro, which in 1979 upgraded Vacationland's power service and installed a new meter. The new meter was embossed with a multiplier of 2 to be used in calculating power consumed for billing purposes. Kenora Hydro advised the Town of Kenora, which is responsible for billing and collecting accounts, of the proper multiplier, but through a clerical error the multiplier was not transferred to the billing card. As a result, Vacationland was billed for only half its actual power consumption. In 1986, during an inspection of the plant requested by Vacationland in preparation for expansion, Kenora Hydro discovered that the multiplier was not being used in calculating the billings. The trial judge dismissed the action brought by Kenora Hydro and the Town to recover the amount by which Vacationland had been underbilled between 1979 and 1986. He found that there was no contract between Vacationland and Kenora Hydro for the supply of power, and that while Kenora Hydro had made out its claim on a quantum meruit basis, Vacationland was entitled to raise estoppel in defence. The Court of Appeal upheld the judgment.
Held (Lamer C.J. and La Forest, McLachlin and Iacobucci JJ. dissenting): The appeal should be dismissed.
Per L'Heureux‑Dubé, Sopinka, Gonthier, Cory and Major JJ.: This case is distinguishable from Maritime Electric Co. v. General Dairies Ltd., where the Privy Council held that estoppel was not available where it would nullify a statutory provision requiring a public utility to collect amounts owing. Like the statute at issue in that case, s. 99 of the Ontario Power Corporation Act makes it an offence for a public utility to charge an unauthorized rate. Under the Ontario Act, however, no penalty is imposed on municipal council members where an employee's inadvertent error resulted in a customer effectively receiving power on better terms, and customers have no express duty to pay and are not fined for insufficient payment. The Ontario legislation is thus designed to prevent deliberate, unauthorized discrimination among power customers, and is not directed against simple negligent mistakes. A statute can only affect the operation of the common law principles of restitution and bar the defence of estoppel or change of position where there exists a clear positive duty on the public utility which is incompatible with the operation of those principles. Here the Power Corporation Act does not express a policy of rate non‑discrimination that excludes estoppel or change of position. Compelling payment to correct an error in these circumstances introduces costly uncertainty for power consumers and makes them individually bear the burden of the appellants' mistake. Such a harsh public policy should clearly appear in the statute, which is not the case in the Power Corporation Act.
Per Lamer C.J. and La Forest, McLachlin and Iacobucci JJ. (dissenting): This case falls squarely within the rule enunciated in Maritime Electric that estoppel cannot operate so as to impede a statutory obligation on a public utility to collect amounts owing. The duty may be express or implied. Moreover, an express statutory duty exists here in s. 99 of the Power Corporation Act, which clearly appears to prohibit the charging of preferential or discriminatory rates. By negligently charging Vacationland for only half of the power it consumed during the relevant six‑year period, Kenora Hydro has reduced the cost of electrical power to Vacationland so that it is, in effect, supplied at a lower rate or on better terms. Failure to collect the amount underbilled contravenes the statutory imperative of rate non‑discrimination. The nature of the penalty provided for the offence, or the mischief which it seeks to remedy through that penalty, is irrelevant to the issue of whether the positive statutory duty exists. Further, s. 99 does not waive the penalty in the case of inadvertent error or negligence. Kenora Hydro's status as a public utility means that it cannot charge a customer less than others in the same class. This statutory mandate is contravened by a negligent mistake as much as by an intentional preference. There is a public interest in seeing that a highly regulated, essential public resource is distributed with a measure of equality. This policy of equality cannot be overlooked simply because it imposes hardship on an individual consumer. The negative aspects of imposing these costs on the underbilled customer must be balanced against the result of that customer receiving a windfall at the expense of a company operating for the benefit of the public as a whole.
Cases Cited
By Major J.
Distinguished: Maritime Electric Co. v. General Dairies Ltd., [1937] 1 D.L.R. 609.
By Iacobucci J. (dissenting)
Maritime Electric Co. v. General Dairies Ltd., [1937] 1 D.L.R. 609 (P.C.), rev'g [1935] S.C.R. 519, rev'g [1934] 4 D.L.R. 436 (N.B.S.C.A.D.); Re Inter‑City Gas Utilities Ltd. and Ebner (1977), 76 D.L.R. (3d) 708; Roma Electric Light and Power Co. v. Hair, [1955] St.R.Qd. 311; Chesapeake and Potomac Telephone Co. of Virginia v. Bles, 243 S.E.2d 473 (1978); Corp. de Gestion Ste‑Foy, Inc. v. Florida Power and Light Co., 385 So.2d 124 (1980); Boone County Sand & Gravel Co. v. Owen County Rural Electric Cooperative Corp., 779 S.W.2d 224 (1989); Memphis Light, Gas & Water Division v. Auburndale School System, 705 S.W.2d 652 (1986); Sigal v. City of Detroit, 362 N.W.2d 886 (1985); Capital Properties Co. v. Public Service Commission, 457 N.Y.S.2d 635 (1982); Goddard v. Public Service Co. of Colorado, 599 P.2d 278 (1979); Laclede Gas Co. v. Solon Gershman, Inc., 539 S.W.2d 574 (1976); Illinois Power Co. v. Champaign Asphalt Co., 310 N.E.2d 463 (1974); Taranaki Electric-Power Board v. Proprietors of Puketapu 3A Block, Inc., [1958] N.Z.L.R. 297; Ontario Hydro v. Ram's Horn Holding Ltd., Ont. Dist. Ct., No. 256034/85, June 25, 1987.
Statutes and Regulations Cited
Power Corporation Act, R.S.O. 1980, c. 384, ss. 95, 98, 99.
Power Corporation Act, R.S.O. 1990, c. P.18, ss. 113, 117, 118.
Public Utilities Act, R.S.O. 1980, c. 423, s. 27(2), (3), (6).
Public Utilities Act, R.S.O. 1990, c. P.52, s. 28(2), (3).
APPEAL from a judgment of the Ontario Court of Appeal (1992), 7 O.R. (3d) 385, 88 D.L.R. (4th) 725, 53 O.A.C. 192, affirming a judgment of Kinsman Dist. Ct. J. dismissing the appellants' action. Appeal dismissed, Lamer C.J. and La Forest, McLachlin and Iacobucci JJ. dissenting.
Alan H. Mark and Joe Conforti, for the appellants.
Maurice J. Neirinck, for the respondent.
The reasons of Lamer C.J. and La Forest, McLachlin and Iacobucci JJ. were delivered by
Iacobucci J. (dissenting) -- I have had the benefit of reading the reasons of my colleague, Justice Major, but I find that I am unable to agree with his disposition of the appeal and his supporting reasons. Although I do not disagree with my colleague's description of the facts and events leading up to this appeal, I prefer to set forth briefly the background and other related matters, because of the views I hold on the issues in this appeal.
I. Background
This appeal concerns the validity of the defence of equitable estoppel to a claim by a public utility in quantum meruit to recover amounts not collected because of a billing error. In particular, it involves an application of the decision of the Privy Council in Maritime Electric Co. v. General Dairies Ltd., [1937] 1 D.L.R. 609, which held that the defence of equitable estoppel cannot lie where it would interfere with the ability of a public authority to carry out a statutory duty to collect money owing by a ratepayer. In this case, the Ontario Court of Appeal unanimously dismissed an appeal by the appellants the Hydro Electric Commission of the Town of Kenora ("Kenora Hydro") and the Corporation of the Town of Kenora ("the Town") from the decision of the trial judge, who had held that Kenora Hydro was estopped from recovering from the respondent Vacationland Dairy Co-operative Ltd. ("the Co-op") because of its own negligence in miscalculating the amounts owing. I pause to add that the appellant Town retains the responsibility for billing and collecting accounts on behalf of Kenora Hydro, and is for that reason a party to this appeal.
The elements of a claim in quantum meruit, and of the corresponding defence of equitable estoppel, are conceded by the parties. The issue in this appeal is whether the absence of an express statutory duty to "collect and receive" all moneys owing should mean that the principle set out in Maritime Electric is inapplicable.
The facts of this case are summarized in the reasons of my colleague, who concludes that, in the absence of an express duty to collect arrears, the provisions of the legislation permit the defence of estoppel to be raised. As I will discuss, I do not, however, come to the same conclusion in respect of the application of the principles set out by the Privy Council in its decision in Maritime Electric to the facts of this case. In my view, this case falls squarely within the rule enunciated in Maritime Electric that estoppel cannot operate so as to impede a statutory obligation on a public utility to collect amounts owing.
II.Relevant Legislation
Public Utilities Act, R.S.O. 1980, c. 423
27. ...
(2) In fixing the rents, rates or prices to be paid for the supply of a public utility the [municipal] corporation may use its discretion as to the rents, rates or prices to be charged to the various classes of consumers and also as to the rents, rates or prices at which a public utility shall be supplied for the different purposes for which it may be supplied or required.
(3) In default of payment, the corporation may shut off the supply but the rents or rates in default are, nevertheless, recoverable.
. . .
(6) The amount payable to a municipal corporation [e.g., the Town of Kenora] or to a public utility or hydro-electric commission of a municipality [e.g., Kenora Hydro] or to Ontario Hydro is a debt and may be recovered by action in a court of competent jurisdiction.
(Now R.S.O. 1990, c. P.52, s. 28(2), (3) and (6).)
Power Corporation Act, R.S.O. 1980, c. 384
95. -- (1) The rates and charges for supplying power, and the rents and charges to meet the cost of any work or service done or furnished for the purposes of a supply of power, chargeable by any municipal corporation generating or receiving and distributing power are subject at all times to the approval and control of the Corporation, and the rates, and such rents and charges, charged by any company or individual receiving power from the Corporation for the supply of power are subject at all times to such approval and control.
(2) Notwithstanding this Act, the Corporation may from time to time, when in its opinion it is in the interests of the municipal corporations under contract with the Corporation so to do, make orders fixing the rates to be charged by the corporation or commission of any municipality ... for power supplied by the Corporation.
. . .
98. Where it appears to the Corporation upon examination of the accounts of a municipal corporation or municipal commission receiving power from the Corporation under a contract between the municipal corporation and the Corporation under this Act that there are arrears due and owing for electrical power supplied by the municipal corporation or municipal commission, or for rents, rates, costs and charges in connection with the service or supply of such power or for the installation of any works for such service or supply, and that the municipal corporation or municipal commission has not taken the necessary proceedings for the collection of such arrears, the Corporation may give, in writing, such directions as it considers proper, signed by the chairman or secretary, for the collection of the arrears by any method by which they may be collected, and it is the duty of the municipal corporation or municipal commission forthwith after receiving such directions to take all proceedings necessary to carry them into effect.
99. Where a municipal corporation or a municipal commission receiving electrical power from the Corporation under a contract made with the Corporation under this Act,
(a)supplies electrical power to any person upon terms and at rates other than those that have been approved of by the Corporation;
(b)grants to any person to whom electrical power is supplied by the municipality or commission, special terms by way of bonus or otherwise as to the rates to be paid for electrical power or as to the terms at which they are to be supplied;
(c)neglects or refuses to carry out any direction of the Corporation given under section 98;
(d)by any means whatsoever, directly or indirectly reduces the cost of electrical power to any person so that it is supplied to such person at a lower rate or upon better terms than those approved of by the Corporation;
(e)fails to keep accounts in the manner prescribed by the Corporation or makes improper entries therein, or charges against any account items not properly chargeable thereto,
such municipal corporation or municipal commission is guilty of an offence, and every member of the municipal council of such municipal corporation or every member of the municipal commission, as the case may be, is disqualified from sitting and voting in the council or from election thereto, or from acting as a member of the municipal commission or being appointed thereto, and from holding any other municipal office for a period of five years from the date of the judgment or order declaring his disqualification, and proceedings may be taken against him in the same manner as in the case of a member of a municipal council who has become disqualified or has forfeited his seat under the Municipal Act, but no member of the municipal council or of the municipal commission, as the case may be, shall be found to be so disqualified who proves to the satisfaction of the court or judge before whom the application for a declaration of his disqualification is made, that he was not a party to the offence and that he did everything in his power to prevent the commission of the offence.
(Now R.S.O. 1990, c. P.18, ss. 113(1) and (2), 117 and 118.)
III.Judgments Below
A.Ontario District Court (Kinsman Dist. Ct. J.)
The trial judge found that the original application for the provision of electrical services to the Co-op by the Town, signed in 1954, was a contract, but that this contract ended in 1966 with the creation of the Hydro Electric Commission of Kenora, since the Town was no longer authorized to supply electricity. In the result, Kenora Hydro could not claim in breach of contract.
The trial judge did find, however, that the facts supported a claim in quantum meruit, in that there had been a request for services, and the provision of those services in circumstances in which it was reasonable to expect reimbursement. The Co-op argued that Kenora Hydro was estopped by its own negligence from recovering on this basis. The trial judge agreed, holding that Kenora Hydro was negligent in exchanging billing information by telephone without written confirmation and in failing to have any policy to check the accuracy of billings. Given that the prices for dairy products were set by the milk marketing board, it was not possible for the Co-op to raise its prices to offset this debt. To require the Co-op to reimburse Kenora Hydro for an error caused by Kenora Hydro's own carelessness would be to impose an unjust burden on the Co-op.
The trial judge rejected the argument of Kenora Hydro that, following Maritime Electric, supra, the Co-op was barred from arguing estoppel, given that a positive statutory duty existed which compelled Kenora Hydro to collect the amounts erroneously not charged. The trial judge noted that this case was distinguishable from Maritime Electric in that negligence was there neither argued nor found. Moreover, in this case there was no statutory imperative in any of the relevant Ontario legislation that could be said to impose an "absolute duty to charge for all electricity supplied, regardless of human errors in calculation of the account to be charged". While any municipal commission which supplied electricity at a rate lower than that approved by Ontario Hydro was guilty of an offence, it could not be said that Kenora Hydro had deliberately charged a lesser rate than those prescribed. It was the multiplier used to determine the level of consumption that was incorrect, not the charge per kilowatt hour of power consumed. In the result, the trial judge dismissed the appellant's claim.
B.Ontario Court of Appeal (1992), 7 O.R. (3d) 385 (Robins, McKinlay and Arbour JJ.A.)
Arbour J.A., for the court, noted that the appellant Kenora Hydro had conceded that the only possible bar to the respondent Co-op's reliance on the doctrine of estoppel was the application of the rule in Maritime Electric. Arbour J.A. framed the issue on the appeal in the following terms (at p. 390):
The issue, therefore, in this appeal is whether the legislation declares a public policy of rate non-discrimination which imposes an obligation on the appellant to collect the same charges from all customers of the same class. In other words, would the application of the doctrine of estoppel in favour of the respondent have the effect, indirectly, of providing the respondent with a rate different than the rate charged to other consumers of the same class and, if so, would that be in contravention of the public policy expressed by the combined effect of the Public Utilities Act, R.S.O. 1980, c. 423 (now R.S.O. 1990, c. P.52) and the Power Corporation Act, R.S.O. 1980, c. 384 (now R.S.O. 1990, c. P.18)?
Arbour J.A. also noted that the case law following Maritime Electric had affirmed the proposition that a defendant will be precluded from setting up a defence of estoppel if the estoppel would operate so as to defeat a positive statutory obligation or effect results which contravene public policy. After setting out the relevant statutory provisions, Arbour J.A. held that the requirement to charge only rates approved by Ontario Hydro was irrelevant to the issue in the case before her, since Kenora Hydro had not purported to charge the Co-op at a rate other than those approved.
Arbour J.A. held that the relevant statutory provisions were those dealing not with charging for the supply of power, but rather with the collection of arrears. Arbour J.A. found no statutory duty on Kenora Hydro to collect all arrears, and no offence for the failure to collect them. It was only an offence to fail to follow the directions of Ontario Hydro to collect, should it choose to give such directions. She concluded (at pp. 393-94):
It must then follow that the failure to collect arrears, unless so ordered by Ontario Hydro, does not amount to supplying power "at a lower rate or upon better terms" than those approved by Ontario Hydro. I think that the failure to recover the amount by which a customer was mistakenly underbilled does not amount to giving that customer a lower rate or better terms than other customers in the same class, in the context of a statutory scheme which leaves the collection of arrears, which are due and owing under s. 27(3) of the Public Utilities Act, in the discretion of the body empowered to supervise and approve rates and charges.
The appeal was dismissed.
IV.Analysis
Public utilities in Canada operate as highly regulated monopolies which exist for the benefit of the public. The fact, therefore, that this appeal involves such an entity, rather than two private litigants, affects the assessment of the policy concerns which inform the applicable legal principles. In other words, there is a statutory regime operating here which impresses the private dispute with a public interest component.
In my opinion, a review of the relevant case law confirms both that the statutory duty is paramount, and that the public interest is best served by a reading of the statute which recognizes the nature and function of a public utility. The starting point for this review is the judgment of the Privy Council in Maritime Electric, supra.
In Maritime Electric, the defendant dairy purchased its electricity from the plaintiff utility. Owing to the failure of the utility to incorporate the requisite multiplier of 10, embossed on the meter, into its calculation of the defendant's bill, the dairy was charged for only one-tenth of the electricity it actually consumed. The error went undiscovered for 29 months. I agree with my colleague that the factual situation in Maritime Electric is in all material respects identical to the facts of this appeal, save for the wording of the statutes governing the acts of the utility and of its customers.
At trial, Richards J. of the New Brunswick Supreme Court allowed the utility's claim, holding that the statutory duty precluded the defence of estoppel. The New Brunswick Court of Appeal agreed with the conclusion of the trial judge on the operation of the statute: [1934] 4 D.L.R. 436.
The Supreme Court of Canada unanimously allowed the dairy's appeal: [1935] S.C.R. 519. The Court considered the effect of the statutory scheme, and concluded that it did not operate as a bar to the effectiveness of the defence of estoppel. Section 16 of The Public Utilities Act, R.S.N.B. 1927, c. 127, provided:
16. No public utility shall charge, demand, collect or receive a greater or less compensation for any service, than is prescribed in such schedules as are at the time established, or demand, collect or receive any rates, tolls or charges not specified in such schedules.
Section 18 of that Act provided that any public utility charging or receiving more or less than the prescribed compensation was guilty of unjust discrimination and liable to a penalty. Section 19 made it an offence for the customer knowingly to receive power at a lesser rate.
Dysart J., for the Court, held that there was nothing in the intent or wording of the statute that precluded reliance on the defence of estoppel as an evidentiary rule (at p. 527):
The foregoing cases show that, however imperative may be a statutory duty, the proof of any alleged violation thereof must be made in accordance with the established rules of evidence, and that by one of these rules -- that is, estoppel -- claims, otherwise sound, may not be susceptible to proof at all.
He went on to note (at p. 529):
[Section 16 of the Act] imposes a duty which cannot be avoided "by contract" nor "by any device." It aims, we think, to prevent all "unjust discrimination" and all dishonest evasion. At the same time, there is nothing to suggest that it ought not to be construed in the light of the law of the land, and enforced in courts according to the prevailing law as to evidence and procedure. When viewed in this way, it does not preclude estoppel which, as we have seen, is only a rule of evidence available in courts, and when applied may assist in ascertaining that the statute has been not evaded but fully met in its requirements. [Emphasis in original.]
On appeal to the Privy Council, Lord Maugham, in allowing the appeal, rejected this approach and held that the relevant consideration was the nature of the duty imposed by the statute (at p. 613):
The sections of the Public Utilities Act which are here in question are sections enacted for the benefit of a section of the public, that is, on grounds of public policy in a general sense. In such a case. . . where as here the statute imposes a duty of a positive kind, not avoidable by the performance of any formality, for the doing of the very act which the plaintiff seeks to do, it is not open to the defendant to set up an estoppel to prevent it. This conclusion must follow from the circumstance that an estoppel is only a rule of evidence. . . it cannot therefore avail in such a case to release the plaintiff from an obligation to obey such a statute, nor can it enable the defendant to escape from a statutory obligation of such a kind on his part.
The question, then, is whether it is the statutory obligation, or the plea of estoppel, that is to be treated as paramount. I agree with the reasoning of the Privy Council that it must be the statute which takes priority. The law in this area has been settled for some time and, in my view, the concerns which animated its development in this fashion are arguably no less operative today than they were at the time that Maritime Electric was decided. As noted above, it cannot be overlooked that public utilities are highly regulated monopolies operating for the equal benefit of all citizens such that essential services are furnished on reasonable terms.
When this issue has been considered in other jurisdictions and in subsequent Canadian lower court decisions, the results, with few exceptions, have been an affirmation of these principles, and their application in a liberal and purposive fashion. For example, in Re Inter-City Gas Utilities Ltd. and Ebner (1977), 76 D.L.R. (3d) 708 (Man. Q.B.), Morse J. considered whether the utility could recover for underbilling caused by the negligence of its employee in relying on continuous estimations rather than actual meter readings. In holding that the defendant could not rely on the defence of estoppel, Morse J. noted that the statutory scheme prohibited rate discrimination or preferences, and required that only rates approved by the Board be levied. Specifically, The Public Utilities Board Act, R.S.M. 1970, c. P280, provided that:
82(1) No owner of a public utility shall
(a)make, impose or exact any unjust or unreasonable, unjustly discriminatory, or unduly preferential, individual or joint rate. . . or other special rate, toll, fare, charge, or schedule, for any product or service supplied or rendered by it. . . .
(b)without the written authorization of the board. . . make, impose, exact, or collect, any rate, toll, fare, or charge, or any schedule of rates. . . .
. . .
(e)make or give, directly or indirectly, any undue or unreasonable preference or advantage to any person or corporation, or to any locality . . . or subject any particular person or corporation or locality. . . to any prejudice or disadvantage in any respect whatsoever;
After considering these provisions, Morse J. concluded (at p. 711):
In my opinion, the Act requires a public utility to impose the rates fixed or authorized by the Board, and to collect from its customers the amount determined by those rates. It follows, therefore, that the customers themselves are bound to pay the amount determined by those rates. Penalties are imposed for any violations of the provisions of the Act. . . .
Although the statute in question was not identical in its wording to that considered in Maritime Electric, Morse J. held that it was sufficient that it was the same in its general purpose and effect.
In Roma Electric Light and Power Co. v. Hair, [1955] St.R.Qd. 311 (Cir. Ct.), the defendant sawmill owner argued that it had relied on the bills rendered by the plaintiff utility in setting the prices it would pay to its suppliers for timber. Townley J. held that the utility was not estopped from recovering amounts not billed to a customer arising from negligence on the part of the company's employees in failing to factor in the appropriate multiplier.
The characterization of the statutory scheme required an examination of multiple pieces of legislation. Townley J. noted that The Electric Light and Power Acts, 1896 to 1946, provided that the maximum price charged was to be fixed by Order in Council. The utility was prohibited from showing any undue preference to its customers, but was given the discretion to charge as it wished within the set maximum. In addition, the relevant portions of The State Electricity Acts, 1937 to 1945, mandated that the utility "shall charge or be entitled to receive" the prices for electricity fixed by the State Electricity Commission.
Townley J. held that the statutory scheme was not materially different from the one in Maritime Electric. In the view of Townley J., the result of the multiplier error could be viewed in either of two ways: the defendant was supplied with energy for which it was not charged, or it was charged and paid for the energy supplied at a lower than approved rate. The multiplier error therefore produced discrimination. He allowed the utility's claim.
Significantly, the absence of a provision equivalent to the one in Maritime Electric, which made it an offence for the customer knowingly to receive power at a lesser rate, was not determinative, since "[t]he provisions of the State Electricity Commission Acts to which reference has just been made seem to me to have been enacted just as much for the benefit of the public as the provisions of the Statute under consideration by the Privy Council" (p. 326). There was also no express requirement that the utility collect the amounts that it was entitled to receive. This case, then, provides support for the view that the nature of the obligation imposed by the statute must be arrived at by considering the provisions of the legislation from the perspective of the public policy behind it.
The American position apparently also endorses the principle that estoppel is precluded if it would contradict a statutory duty on the utility to collect amounts owing in full. In Chesapeake and Potomac Telephone Co. of Virginia v. Bles, 243 S.E.2d 473 (Va. 1978), the phone company had undercharged a customer for a special local exchange re-routing. The customer was quoted an erroneous cost before choosing the service, and was thereafter billed at this lower rate. Cochran J. held that, since the statute mandated that customers be charged uniformly, the utility could not be estopped by its negligence from collecting. Cochran J. rejected the argument that estoppel could operate since the statute prohibited overcharging, but not collection of less than the requisite amount. He stated that the purpose of the statute was to prevent discrimination amongst customers, and the effect of permitting an undercharge to stand was therefore to violate the statute.
Similarly, in Corp. de Gestion Ste-Foy, Inc. v. Florida Power and Light Co., 385 So.2d 124 (Fla. Dist. Ct. App. 1980), a power company which had undercharged the owner of an apartment building for three years, because of an employee's misreading of a master electric meter, was held not to be estopped from pleading this error so as to recover the amounts underbilled. The statute prohibited the giving of "any undue or unreasonable preference. . . to any person or locality. . .". Schwartz J. held (at p. 126) that:
The public policy embodied in this and similar statutory provisions precludes a business whose rates are governmentally regulated from granting a rebate or other preferential treatment to any particular individual. Accordingly, it is universally held that a public utility or common carrier is not only permitted but is required to collect undercharges from established rates. . . .
The court concluded that the equitable doctrine of estoppel was not to be used to effect results which were unlawful or otherwise contrary to public policy.
The American case law adopts an approach which goes even further in permitting recovery by the utility, in reliance on general policy reasons for the statutory prohibition of rate discrimination: Boone County Sand & Gravel Co. v. Owen County Rural Electric Cooperative Corp., 779 S.W.2d 224 (Ky. Ct. App. 1989); Memphis Light, Gas & Water Division v. Auburndale School System, 705 S.W.2d 652 (Tenn. 1986); Sigal v. City of Detroit, 362 N.W.2d 886 (Mich. Ct. App. 1985); Capital Properties Co. v. Public Service Commission, 457 N.Y.S.2d 635 (App. Div. 1982); Goddard v. Public Service Co. of Colorado, 599 P.2d 278 (Colo. Ct. App. 1979); Laclede Gas Co. v. Solon Gershman, Inc., 539 S.W.2d 574 (Mo. Ct. App. 1976); but see Illinois Power Co. v. Champaign Asphalt Co., 310 N.E.2d 463 (Ill. App. Ct. 1974).
The principle that a plea of estoppel will not operate to negative a positive statutory obligation on a corporation or public body is both well accepted and sensible. The equitable doctrine of estoppel is a creation of the courts, and should not lead to the result that the utility, or the customer, is forced to break the law by contravening a statute.
The Court of Appeal in this case relied upon the decision of the New Zealand Supreme Court in Taranaki Electric-Power Board v. Proprietors of Puketapu 3A Block, Inc., [1958] N.Z.L.R. 297, in which the utility was held to be estopped from collecting the amounts erroneously underbilled. In that case the defendant sawmill had been underbilled owing to the faulty connection of its meter. North J. applied the reasoning in Maritime Electric to the statute applicable in New Zealand, and concluded that there was no obligation imposed on the utility to collect the full price for all electricity consumed. There was a provision in the Electric Supply Regulations 1935 (1935 New Zealand Gazette, 2946) which mandated that:
21-48. Every consumer within any part of the electrical supply authority's area of supply shall be entitled to a supply of electrical energy on the same terms and conditions as those on which any other consumer within such part of the area is receiving in similar circumstances a corresponding supply.
However, given that this was the only restriction of note on the Power Board, and given that the Board could sell electricity at the rates at which it wished, North J. held that the statutory scheme was insufficient to preclude an estoppel being raised. There was no indication that the defendant had been charged a lower rate than anyone else; the error was in the calculation of the amount of power consumed. Ultimately, the only problem with failing to collect the arrears was that the utility might be open to a claim from another consumer for similar treatment, but that was not an illogical or impermissible result.
In my view, this case is not authority for the proposition that, given the statutory scheme in this appeal, the respondent is entitled to rely on the defence of estoppel. I say this for several reasons.
First, the statute in Taranaki was drafted to prescribe uniformity of rates only within very narrow conditions. There was no provision similarly unequivocal to that contained in s. 99(d) of the Power Corporation Act. Second, on the facts of this appeal, I do not see how it would be possible, within the dictates of the relevant statutes, for other ratepayers to demand treatment similar to that of the respondent Co-op. Third, I disagree with the distinction drawn in Taranaki, and in the reasons of the Court of Appeal, between the supplying of power at a lower rate, and the failure to charge for the entire amount of power consumed. This would mean that Kenora Hydro would be estopped from recovering whenever one of its employees negligently mistranscribed the multiplier on the meter, but would be able to recover if the error was made in selecting and applying the appropriate rate. To me, such a distinction is artificial.
The respondent Co-op cites one other case in which the court allowed the defence of estoppel despite the presence of a regulatory statute. In Ontario Hydro v. Ram's Horn Holding Ltd., Ont. Dist. Ct., No. 256034/85, June 25, 1987, unreported, Campbell Dist. Ct. J. considered a claim for amounts not billed arising from a faulty potential fuse. He dismissed the utility's claim, distinguishing Maritime Electric on the following grounds:
There are two important factual differences between the case before me and the Maritime Electric case. In the latter case the meter was accurate and hence there was a specific and demonstrable quantity of electricity to be charged, with the mistake relating only to a gross arithmetic error in calculating the amount to be charged. Secondly, in the case before me the Plaintiff's governing statute, The Power Corporation Act, R.S.O. 1980, chapter 384, by section 90 empowers the Plaintiff to set rates for charge (all billings to the Defendant conformed to such rates) but nowhere does the statute mandate the absolute duty to charge for all electricity supplied regardless of problems in measurement.
As I have noted above, I find untenable the distinctions among billing errors caused by arithmetic miscalculation, the application of an incorrect rate, and the failure to charge for all power consumed. Moreover, and most importantly, I am of the view that the reasoning of the Privy Council in Maritime Electric simply requires the existence of a positive statutory duty on either the utility, or the customer, or both, that would be contradicted by permitting the defence of estoppel. The specific words or formulation of the duty are not important; it may be express or implied. It need not take the form of an explicit duty to collect, as opposed to a duty to treat all customers of the same class equally. Ultimately, the presence or absence of such a duty must be determined, as the American authorities note, not only in light of the words of the statute, but also with respect to the policy which animates it. So long as the courts continue to follow the rule in Maritime Electric, it is a waste of judicial resources to apply it in such a manner that a parsing of the words of the applicable statute is required in every case.
However, even if the statutory duty must be express, I am satisfied that, in this appeal, such a duty exists in the legislative scheme applicable to the appellant utility and its customers.
Section 99 (now s. 118) of the Power Corporation Act provides:
99. Where a municipal corporation or a municipal commission receiving electrical power from the Corporation under a contract made with the Corporation under this Act,
(a)supplies electrical power to any person upon terms and at rates other than those that have been approved of by the Corporation;
(b)grants to any person to whom electrical power is supplied by the municipality or commission, special terms by way of bonus or otherwise as to the rates to be paid for electrical power or as to the terms at which they are to be supplied;
(c)neglects or refuses to carry out any direction of the Corporation given under section 98;
(d)by any means whatsoever, directly or indirectly reduces the cost of electrical power to any person so that it is supplied to