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Canadian Laboratory Supplies v Engelhard Industries
Supreme Court of Canada
Hearing: Judgment:
Holding
If a third party contacts a principal to inquire about an agent’s authority to enter into a particular kind of contract, and the principal implies through its response that the agent has the requisite authority, then the third party can rely on this and can enforce any contracts it enters into with the agent against the principal.
Court membership
Reasons given

Canadian Laboratory Supplies v. Engelhard Industries is a Supreme Court of Canada decision on ostensible authority.

Background

The plaintiff, Canadian Laboratory Supplies or Canlab, sued the defendant, Engelhard Industries, for conversion. Cook, an employee of the plaintiff, procured purchases of platinum by Canlab from the defendant, and then resold them to a fictitious individual, who in turn sold the scraps back to the defendant. Overall, it was clear that Cook had stolen the platinum scraps from his employer, and that the defendant was prima facie guilty of conversion unless Cook was authorized to resell the scraps to the defendant. The issue was whether Cook had ostensible authority to sell the scraps to the defendant.

Opinion of the Court

Laskin C.J. said that there was nothing in the evidence showing that Canlab had placed Cook in a position with the authority he would have needed to make these sales legitimate. The representations that he made were without any support from Canlab management. However, at one point the defendant’s manager called Canlab to ensure that Cook had authority to make the sales. Cook called them back and ensured them that he did, but someone else in the company had been alerted to the sales. Laskin, the minority, finds that from this point onwards the defendant was not liable for any conversion as Cook had apparent authority to continue the sales.

The majority agreed with Laskin’s reasoning, but came to a different conclusion as to when Canlab represented that Cook had apparent authority to continue the sales. They found that an earlier interaction between the defendant and someone in Canlab amounted to giving Cook apparent authority.

The defendant was liable for damages from conversion up to the point when they were entitled to believe that Cook had apparent authority.

References

Category:Supreme Court of Canada cases Category:1979 in Canadian case law Category:Canadian contract law Category:Canadian corporation case law