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The Courts and the Development of Trade in Upper Canada, 1830–1860

Published online by Cambridge University Press:  11 June 2012

Peter George  and
Philip Sworden
Peter George
Affiliation:
Peter George is dean of social sciences and professor of economics atMcMaster University
Philip Sworden
Affiliation:
Philip Sworden is a lawyer practicing in Hamilton, Ontario
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Abstract

The centrality of transportation improvements and financial institutions to the economic development of Upper Canada in the first half of the nineteenth century is well known. In this article, Professor George and Mr. Sworden argue that the evolving legal system and legal institutions also played an important role as part of the infrastructure contributing to increased economic efficiency. In support of their thesis, they draw on court decisions on contract and property law, primarily from the judicial career of Sir John Beverley Robinson, chief justice of the Court of Queen's Bench for Upper Canada from 1829 to 1862.

Type
Articles
Information
Business History Review , Volume 60 , Issue 2 , Summer 1986 , pp. 258 - 280
Copyright
Copyright © The President and Fellows of Harvard College 1986

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References

1 A recent contribution is McCallum, John, Unequal Beginnings: Agriculture and Economic Development in Quebec and Ontario Until 1870 (Toronto, 1980)CrossRefGoogle Scholar. For a more skeptical assessment of the staples model, see McCalla, Douglas and George, Peter, “Measurement, Myth, and Reality: Reflections on Approaches to the Economic History of Nineteenth-Century Ontario,” Research Program for Quantitative Studies in Economics and Population Working Paper No. 138, McMaster University (July 1985): 2–6Google Scholar.

2 In the conduct of business, real resources are employed in obtaining information and enforcing contracts. Much of the economics of allocative efficiency is predicated on the assumption that transactions are costless, and that information about costs and prices is freely available. In fact, transaction costs are positive and represent an impediment to the working of competitive markets and the achievement of economic efficiency—hence, the recent upsurge of interest in transaction cost economics. The most interesting application, from the perspective of a business historian, is Oliver E. Williamson's examination of the bases of vertical integration. See, in particular, Markets and Hierarchies: Analysis and Antitrust Implications (New York, 1975)Google Scholar and “The Modern Corporation: Origins, Evolution, Attributes,” Journal of Economic Literature 19 (1981): 1537–68Google Scholar.

3 When resources are being employed where their value is highest, they are being employed efficiently; they are producing the largest possible output. Transaction costs are sources of inefficiency.

4 See, among others, Horwitz, Morton J., The Transformation of American Law 1780–1860 (Cambridge, Mass., 1977)Google Scholar and Hurst, James Willard, Law and Markets in United States History (Madison, Wis., 1982)Google Scholar. Posner, Richard A., Economic Analysis of Law, 2d ed. (Boston, 1977)Google Scholar provides an excellent standard treatment of the relationship between the law and economic reasoning.

5 Risk, R. C. B., “The Nineteenth-Century Foundations of the Business Corporation in Ontario,” University of Toronto Law Journal 23 (1973): 270–306CrossRefGoogle Scholar; “The Golden Age: The Law about the Market in Nineteenth-Century Ontario,” ibid. 26 (1976): 307–46; “The Last Golden Age: Property and the Allocation of Losses in Ontario in the Nineteenth Century,” ibid. 27 (1977): 199-239; “The Law and the Economy in Mid-nineteenth Century Ontario: A Perspective,” ibid.: 403–38. More recently, David Flaherty has provided a comprehensive assessment of the state of Canadian legal history, including some pointed comments on the legal history of Upper Canada in particular. Sec Flaherty, David H., ed., Essays in the History of Canadian Law (Toronto, 1981), 1:3–42Google Scholar.

6 Risk, “The Law and the Economy,” 420; Risk's view supports the Hurstian notion that the law is essentially responsive to social and economic needs and serves to legitimate changes that are initiated outside the law, and denies Horwitz's emphasis on “instrumentalism” wherehy legal institutions were adapted consciously to expedite the process of economic change. A persuasive attack on “instrumentalism” is Griffiths, John, “Is Law Important?” New York University Law Review 54 (1979): 339–74Google Scholar.

7 Little has been written about Robinson. Most recent is Brode, Patrick, Sir John Beverley Robinson: Bone and Sinew of the Compact (Toronto, 1984)CrossRefGoogle Scholar. Also see Robinson, C. W., Life of Sir John Beverley Rohinson (Edinburgh, 1904)Google Scholar; the chapter on Robinson in Read, D. B., The Lives of the Judges of Upper Canada and Ontario (Toronto, 1888)Google Scholar; and Jarvis, Julia, Three Centuries of Robinsons: The Story of a Family (Don Mills, Ont., 1967)Google Scholar. Cook, T., “John Beverley Robinson and the Conservative Blueprint for the Upper Canadian Community,” Ontario History 64 (1972): 79–99Google Scholar, is an interesting account of Robinson's social and political views.

8 See Creighton, Donald, The Empire of the St. Lawrence (Toronto, 1956)Google Scholar, Tucker, G. N., The Canadian Commercial Revolution, 1847–1851 (Toronto, 1964)CrossRefGoogle Scholar, and Tulchinsky, G. J. J., The River Barons: Montreal Businessmen and the Growth of Industry and Transportation, 1837–53 (Toronto, 1977)Google Scholar. The initial period of economic development after the first Loyalist migration is captured in McCalla, Douglas, “The ‘Loyalist’ Economy of Upper Canada, 1784–1806,” Histoire Sociale/Social History 16 (1983): 279–304Google Scholar. The most persuasive statement of the wheat staple's importance is McCallum, Unequal Beginnings, chaps. 1, 2.

9 This nexus is neatly described in McCalla, Douglas, The Upper Canada Trade 1834–1872: A Study of the Buchanans Business (Toronto, 1979)Google Scholar. McCalla reminds us that the general store was the fundamental economic institution in Canada at the foot of the long-credit pyramid, selling all forms imported merchandise, acting as a conduit for export commodities, and serving as the principal source of local credit. A review of the Buchanans' agents and partners testifies to the uses of family.

10 An interesting analysis of the role of family affiliation in reducing transaction costs and stimulating trade is Ben-Porath, Yoram, “The F-Connection: Families, Friends, and Firms and the Organization of Exchange,” Population and Development Review 6 (1980): 1–30CrossRefGoogle Scholar.

11 North, Douglass C., Structure and Change in Economic History (New York, 1981), 24, 43Google Scholar.

12 Creighton, Empire of the St. Lawrence; Tucker, Canadian Commercial Revolution.

13 Risk, “Foundations of the Business Corporation.”

14 See Banks, Margaret A., “Evolution of the Ontario Courts 1788–1981,” in Essays in the History of Canadian Law, ed. Flaherty, David H. (Toronto, 1983), 2: 492–572Google Scholar.

15 Risk, “Last Golden Age,” 237.

16 Ibid., 239.

17 Risk, “The Law and the Economy,” 407.

18 The Family Compact was a Loyalist elite who shared a common background and ideology: they were pro-British, anti-American, and held conservative political, social, and economic views. See Saunders, R. E., “What Was the Family Compact?” Ontario History 49 (1957): 173–178, for a brief reviewGoogle Scholar.

19 The most significant surviving documents are Robinson, John Beverley, “A letter to the Right Hon. Earl Bathurst, K. G. on the Policy of Uniting the British North-American Colonies” (London, 1825)Google Scholar, reprinted in Four Early Pamphlets on the Subject of Confederation and Union of the Canadas (Toronto, 1967)Google Scholar; three letters from Robinson to the Right Hon. the Marquis of Normanby, Her Majesty's Secretary of State for Colonies, 23 Feb., 9, 29 March 1839, MS 4, reel no. 5, Robinson Papers, Public Archives of Ontario; and Robinson's, Canada and the Canada Bill ([1840], New York, 1967)Google Scholar.

20 Robinson, The Canada Bill, 21.

21 Robinson, letter to Normanby, 9 March 1839, fol. 32; The Canada Bill, 136; Robinson, letter to Normanby, 9 March 1839, fols. 45–47.

22 Brode, Sir John Beverley Robinson, 120–21, 153; C. W. Robinson, Life, 329–31.

23 See Baskerville, Peter A., “Enterpreneurship and the Family Compact: York-Toronto, 1822–1855,” Urban History Review 9 (1981): 15–34CrossRefGoogle Scholar. For a different view, see Romney, Paul, “The Ten Thousand Pound Job': Political Corruption, Equitable Jurisdiction, and the Public Interest in Upper Canada 1852–6,” in Flaherty, , Essays, 2: 143–99Google Scholar.

24 See Gagan, David, Hopeful Travellers: Families, Land, and Social Change in Mid-Victorian Peel County, Canada West (Toronto, 1981), 26–29Google Scholar, and Brode, Sir John Beverley Robinson, 240–41. Romney, “‘The Ten Thousand Pound Job.’” 181–82, points out that Robinson's motives in the Bowes case may not have been entirely selfless, since the construction of the Northern was bound to increase the value of the Robinson family's holdings in Simcoe County. Brode, Sir John Beverley Robinson,188–89.

25 The cases cited are drawn mainly from the Court of Queen's Bench under Chief Justice Robinson. A heavy reliance on these decisions in inescapable since Queen's Bench was the principal superior court and since Robinson dominated the court and wrote the majority of its decisions during his long career.

26 Posner, Economic Analysis of Law, 67–69.

27 Brode, Sir John Beverley Robinson, 240–41; Horwitz, Morton J., “The Historical Foundations of Modern Contract Law,” Harvard Law Review 87 (1974): 918CrossRefGoogle Scholar.

28 (1856), 14 Upper Canada Court of Queen's Bench [hereafter, Q. B.], 248. See also George v. Glass (1857), 14 Q.B., 514.

29 (1857), 15 Q. B., 33; (1857). 15 Q. B., 210.

30 (1848), 5 Q. B. (O. S.), 704.

31 (1850), 7 Q. B., 244. See also McQueen v. McQueen (1852), 9 Q. B., 538, where Robinson notes “… the wisdom of the rule which does not allow the terms of a written instrument to be contradicted by parol evidence of something else being intended than was expressed.” Also, Mason v. Brunskill (1857), 15 Q. B., 300; Logan v. Stranahan (1854), 12 Q. B., 15.

32 (1853), 10 Q.B., 594. Robinson said, “… it was the duty of the defendants, who had engaged to deliver the flour on board in good condition at their own charge, to take care that it was either not taken from the warehouse sooner than was necessary, or that it should be protected against injury from the weather on its way.” (599); (1856), 14 Q. B., 228.

33 (1854), 11 Q. B., 399. Also, see Johnson v. Crew (1835). 5 Upper Canada Court of King's Bench [hereafter, K.B.] (O.S.), 200; Barton v. Fisher (1846), 3 Q. B., 75; Elliott v. Hewitt (1854), 11 Q. B., 292. These cases involved unexpected events concerning house building and labor generally.

34 (1854), 9 Great Britain, Court of Exchequer, 341.

35 (1856), 16 Q. B., 538; (1860), 18 Q.B., 68. See also Lane v. The Montreal Telegraph Co. (1857), 7 Upper Canada Court of Common Pleas [hereafter, C.P.], 23.

36 Tilt v. Silverthorne (1854), 11 Q. B., 619, was a case involving a contract to deliver flour. In helping formulate his decision, Robinson said, “… being aware, as we are, from what has often been proved before us in relation to contracts in this description of business, that it is the usage of the trade, and the common understanding of the parties, that wheat delivered in large quantities at a mill, as this was, is not expected or intended to be kept apart and ground for the person delivering it. …” (620). See also Reynolds v. Shuter (1847), 3 Q. B., 377, Tumblay v. Meyers (1858), 16 Q. B., 145–46, and Brown and McDonnell v. Browne (1852), 9 Q. B. 312, where Robinson said, “… when we know what the general usage of trade is in regard to any branch of business, we are to look on the parties as intending to contract with reference to it, unless we have proof that they meant to deviate from it” (314).

37 Posner, Economic Analysis of Law, 39.

38 (1832), 2 K. B. (O. S.), 458; (1837), 5 Q. B. (O. S.), 598; (1846). 2 Q. B., 224. “Estoppel” is the principle which precludes a party from alleging or proving that a fact is other than it appears to be from the title deed.

39 Horwitz, Transformation of American Law, 38.

40 (1827), 1 K. B. (O. S.), 431. Robinson was then attorney general and counsel for the defendant on appeal from a trial at Gore District Assizes.

41 See Lauer, T. E., “The Common Law Background of the Riparian Doctrine,” Missouri Law Review 28 (1963): 60Google Scholar; (1847), 3 Q. B., 300.

42 (1854), 3 C. P., 305; (1856), 13 Q. B., 376.

43 An Act … To Provide for the Construction of Aprons, Statutes of Canada 1849, c. 87; (1854), 4 C. P., 95.

44 (1852), 8 Q. B., 593.

45 Cross, M. S., “The Lumber Community of Upper Canada, 1815–1867,” Ontario History 62 (1970): 226–32Google Scholar.

46 (1839), 5 Q. B. (O. S.), 686; (1851), 12 Q. B., 75.

47 (1854), 11 Q. B., 271; (1858), 16 Q.B., 551. Robinson said, “… nothing is shewn in the declaration to have been done except what the law allowed, namely, the making the railway, for which there is no right of action, but only a right of compensation to be settled by arbitration” (555).

48 (1854), 11 Q. B., 128.

49 The main problem here was amount of compensation. In Great Western Railroad Company v. Baby (1854), 12 Q. B., 106, Robinson made suggestions about the proper form of award: “… the sum awarded is given for the value of the lands and tenements or private privileges proposed to be purchased, or for the amount of damages which the claimant is entitled to receive in consequence of the intended railroad in and upon his lands (as the case may be); … if the estimate has been influenced by anything which the Company has engaged to do in order to lessen the inconvenience, it should be plainly expressed that the company have undertaken to do it; and the particular thing should be defined as to leave no uncertainty, and no room for future litigation as to what is to be done or allowed by the company, and at what particular point in their work, and in what manner it is to be done”(121).

50 If the doctrine of negligence is to be applied consistently with principles of economic efficiency, the cost of steps necessary to prevent “accidents” is compared with the loss that the precautions would have averted (that is, the loss caused by an accident multiplied by the probability of the accident's occurrence), and the lesser of the two costs is incurred. See Posner, Economic Analysis of Law, 122–23; (1856), 13 Q. B., 598.

51 (1856), 14 Q. B., 102; (1856), 14 Q. B., 173. See also Vanhorn v. The Grand Trunk Railway (1859), 18 Q. B., 356. Vanhorn sued the railway for negligently building a bridge over a stream on his land, so that it caused flooding. Vanhorn succeeded in his action, according to Robinson, “for an alleged injury not foreseen, and first experienced long after the railway was completed and an injury attributed solely to the unskillful and negligent manner of constructing a culvert” (360).

52 (1855), 12 Q. B., 408; (1858), 15 Q. B., 498.

53 (1858), 15 Q. B., 503. To back up his statement, Robinson cited several American cases. Also see Wilcocks v. Tinning and Hornby (1851), 7 Q. B., 372.

54 Dean v. McCarty (1846), 2 Q. B., 448, was a case involving owners of land who, while burning brush on their own land, caused a neighbor's fence to be burned. Robinson felt that in Upper Canada, where such fires were useful and necessary to clear the land, owners were responsible for injury to their neighbors only where negligent. O'Keefe v. Taylor (1850), 2 Upper Canada Court of Chancery, 95; (1851) 2 Ch., 305.

55 (1850), 6 Q. B., 382.

56 Brode, Sir John Beverley Robinson, 238.