Gordon R. McKenzie








LEGAL GROUNDS LIBRARY

FRUSTRATION ON THE MATTAGAMI - By Gordon R. MacKenzie

When the icy waters of the Mattagami River dwindled during the winter of 1920/21, the Northern Canada Power Company found it could not meet its main customer's power demands and supply all its other customers. While it could have allotted their entire supply to Hollinger Consolidated Gold Mines to keep their mine and smelting operation running at full capacity, they decided not to leave their other customers in the dark.

With less power, production at the Hollinger Mine declined. Hollinger lost close to $2 million and sued Northern Canada Power for breach of contract.

In its defence, the power company relied on the law of frustration. A court might let you out of a contract if the subject matter of the contract ceases to exist for reasons beyond your control. The power company could not control the rainfall or resulting water levels and power supply, so, they should not be held to their contract to supply the Hollinger Mine all the power it needed. (Hollinger Consolidated Gold Mines v. Northern Canada Power, 1922).

The court of appeal found the power company liable anyway. It decided that there was enough power to supply the mine, so, the contract was not frustrated. The power they had should have been given to the Hollinger Mine and the other customers, who they were not obliged to serve, should have been cut off.

All this happened before the Power Corporation Act. Now a utility cannot be held responsible for power outages or for sharing its existing power supply with all its customers, spreading the cost of power outages and shortages among all customers.

This article is presented as general information only and is not to be relied on as legal advice. You should contact your lawyer to see how the law applies to your circumstances before any action is taken.





 
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