The Secretary of State v. Neitzke / The Secretary of State v. Wiehmayer, (1921) 62 SCR 262

Supreme Court of Canada

The Secretary of State v. Neitzke / The Secretary of State v. Wiehmayer, (1921) 62 S.C.R. 262

Date: 1921-06-07

The Secretary of State of Canada (Defendant) Appellant;

and

Lucy Hamilton Neitzke (Plaintiff) Respondent.

The Secretary of State of Canada (Defendant) Appellant:

and

Mary Peniston Wiehmayer (Plaintiff) Respondent.

1921: February 7; 1921: June 7.

Present: Sir Louis Davies C.J. and Idington, Duff, Anglin, Brodeur and Mignault JJ.

ON APPEAL FROM THE EXCHEQUER COURT OF CANADA.

Treaty of Peace with Germany—Enemy property—Clearing offices— "Debts payable"—Relinquishment.

The Treaty of Peace (Germany) Order, 1920, provided for the settlement through clearing offices of debts payable before the war and due by a national of one power to a national of the other and debts which became payable during the war to nationals of one power arising out of transactions or contracts with nationals of the other, execution of which was suspended, and by an annex to these provisions each power became responsible for payment of such debts due by its nationals. An order of the Governor General in Council passed in 1920, after reciting that under the Treaty Canada has the right to liquidate certain enemy property vested in the Custodian (appellant) but power is reserved to relinquish any of the same, which power should be exercised in respect to property of British born women who acquired German nationality by marriage only, provided that any such woman could apply to the Exchequer Court for a declaration as to what property

[Page 263]

formerly owned by her could be relinquished without rendering Canada liable to Germany under the treaty. Pursuant to this order the respective respondents applied to the Exchequer Court which declared that all their property could be relinquished as not constituting "debts payable before the war" or "debts which became payable during the war" within the terms of the treaty. On appeal from such declaration.

Held that deposits of money with the National Trust Co. for investment in securities, repayment of which was guaranteed on dates which fell during the war, are debts payable during the war within the meaning of the above provision of the Treaty and could not be relinquished.

Held also, Brodeur J. contra, that deposits in a Savings Bank and moneys invested with a Loan Co. to be withdrawn on notice and from the bank on presentment of the bank book also, are not "debts" it not being established that the right to such notice and presentment was abandoned.

Held, per Davies C. J. and Anglin and Mignault JJ., Brodeur J. contra, that moneys deposited with a trust company with instructions that all sums of capital and interest so received should be held by the company to the credit of the owner until further advice by her which was never given were not "debts payable" as provided by the Treaty.

Held, per Davies C. J. and Duff and Brodeur JJ., Anglin and Mignault JJ. contra, that dividends and interest from investments or securities which became payable during the war were "debts."

Per Duff J. The word "debts" should receive a broad construction and includes moneys held under a legal or equitable obligation to pay at any time on demand.

Per Anglin and Mignault JJ. Interest on moneys placed with the National Trust Co. on guaranteed trust investment receipts is a "debt."

Idington J. did not deal with the specific claims presented but was of opinion that there was so much doubt in respect to them that the court should report to the Governor in Council that no relief could be granted at present to either claimant.

Declaration of the Exchequer Court (20 Ex.C.R. 219) approved in part.

APPEAL from the declaration of the Exchequer Court of Canada[1], that none of the property rights and interests of the respective respondents vested in the appellant as custodian are "debts payable" under the terms of section 296 of the Treaty of Peace with Germany and all may be relinquished.

[Page 264]

The terms of the Treaty and of the Order in Council respecting the respondent's property are sufficiently indicated in the above head-note.

Christopher C. Robinson for the appellant.

R. S. Robertson K.C. for the respondent.

The Chief Justice.—In re Neitzke.

After much consideration of the facts of this appeal from the Exchequer Court, I am of opinion that

1. The deposits with the National Trust Co. are debts within Article 296;

2. The deposit with the Central Canada Loan and Savings Co. is not a debt within the Article; and

3. That the dividends and interest are debts within Article 296.

I concur in the reasoning of Mr. Justice Anglin with respect to the first and second items, but I am unable to agree with him with respect to the item concerning dividends and interest.

In re Wiehmayer.

I concur in the opinion of Mr. Justice Anglin that neither the deposits with the Bank of Toronto nor the Mary Prue Mara trust moneys are debts within the article 296, but I am unable to agree with him as regards the dividends and interest which I hold are debts within Article 296.

Idington J.—In each of these cases an appeal is presented from the judgment therein of Mr. Justice Cassels.

[Page 265]

It seems to me that if the final determination of either is to be undertaken it must turn, in the last analysis, upon the interpretation to be given article 296 of the Treaty of Peace between the Allied and Associated Powers and Germany, signed at Versailles June 28th, 1919, and certain subsidiary provisions of said Treaty.

Said article 296, by the introductory clause and four following paragraphs, reads as follows:—

There shall be settled through the intervention of clearing offices to be established by each of the high contracting parties within three months of the notification referred to in paragraph (e) hereafter the following classes of pecuniary obligations:

(1) Debts payable before the war and due by a national of one of the contracting powers, residing within its territory, to a national of an opposing power, residing within its territory;

(2) Debts which became payable during the war to nationals of one contracting power residing within its territory, and arose out of transactions or contracts with the nationals of an opposing power, resident within its territory, of which the total or partial execution was suspended on account of the declaration of war;

(3) Interest which has accrued due before and during the war to a national of one of the contracting powers in respect of securities issued by an opposing power, provided that the payment of interest on such securities to the nationals of that power or to neutrals has not been suspended during the war;

(4) Capital sums which have become payable before and during the war to nationals of one of the contracting powers in respect of securities issued by one of the opposing powers, provided that the payment of such capital sums to nationals of that power or to neutrals has not been suspended during the war.

It is to be observed that neither was the Exchequer Court, nor are we, deciding any cause between the parties to the said Treaty.

It seems to have occurred to the appellant or the Government of Canada that under this provision certain cases of hardship were likely to arise; and by virtue of an order in council the possibility of a relinquishment to members of such class of persons was directed subject, however, to a reference to the Exchequer Court of

[Page 266]

Canada to declare the rights of such persons to so claim, and appellant to assent to the said relinquishment.

The" Exchequer Court declared accordingly that each of the respective respondents in question is entitled to claim from appellant the relinquishment of her share of funds held by him as custodian.

It seems to me clear that the Exchequer Court must be acting in an advisory capacity and its judgment cannot be of any higher value than that may give it.

I am in doubt how such a case can be brought by way of appeal here. It is not from a final judgment within the meaning of either the Supreme Court Act or the Exchequer Court Act. It is probably quite competent for the Crown to submit directly to us such a question as submitted to the Exchequer Court.

And if, passing the doubt I have as to the said right of appeal under such very peculiar circumstances, I applied my mind as I have to the arguments addressed to us, and much else bearing upon the case, I regret to say I still remain, with great respect, in grave doubt as to the correctness of the opinion of the learned trial judge.

I am quite unable to give the word "debt" in said article the narrow meaning in the sense contended for, as if restricted to what our common law courts might classify as such.

If I resort to dictionaries, such as Stroud, and Bouvier, I find it might reasonably be given in such a document as presented a much more extended meaning.

Curiously enough, though sometimes driven by mere doubt to maintain a judgment of the court below which I cannot satisfy myself is clearly wrong, I feel impelled, in a mere advisory judgment such as this, to hold that the appellant is entitled to rest upon such doubt and to claim he is entitled to act thereon if such be the conclusion of the majority of the court.

[Page 267]

In truth, however, the more I consider the meaning of the word "debt" and the relevant words in the article 296 and the annex, the less reason I see for the restricted meaning applied below.

Since writing the foregoing I find much difference of opinion in this court and that coupled with my own doubts as to the correctness of the opinion of Mr. Justice Cassels, leads me to the conclusion that the so-called appeals should be answered by submitting that amid so much doubt and difficulty the appellant cannot on the case presented act in such a way as to give either respondent any relief at present.

In re Weihmayer.

Duff J.—I am disposed to think that the opinion or judgment of Mr. Justice Cassels is not appealable to this court but as the questions submitted to him could be submitted directly to this court by an order in council, it seems to be proper that we should treat the appeal as in the nature of a submission and give such assistance as we can for the determination of the questions involved. I think the word "debts" in Art. 296 ought to receive a broad construction and I think it includes moneys held under a legal or equitable obligation to pay at any time on demand. On the other hand debts payable at a fixed date or at the expiration of notice are not, in the absence of such notice or prior to such date, within the terms of the article; and deposits in respect of which the depositee is entitled to require notice before payment are therefore not debts payable within those terms. In the result, dealing seriatim with the items in respect of which dispute arises:—

(a) The deposit in the Bank of Toronto does not fall within Art. 296.

[Page 268]

(b) As to the cash held by the National Trust Co. for the Mary Prue Mara trust and the proceeds of the mortgages I think that the memorandum of the 14th of October, 1914, although it does not in terms refer to these funds, indicates the terms upon which they were in fact held and that, applying the criterion above indicated, they fall within Art. 296.

(c) Speaking generally, dividends and interest being moneys which somebody was under a legal obligation to pay, were, in my opinion, debts within the meaning of Arts. 296. As regards interest which became payable during the war whether by contract or by statute the legal obligation to pay was one of the legal incidents of the "transaction" or "contract" the execution of which in respect of such incident was suspended on account of the war. The phrase "on account of the war" expresses in my judgment the meaning of the words "on account of the declaration of war." As respects dividends: The word "transaction" in my judgment is broad enough to embrace the acts or proceedings by which Mrs. Wiehmayer's right to the respective dividends in question became constituted and the obligation to pay dividends is under the criterion above indicated a debt within Art. 296.

Some difficulty arises in respect of dividends and interest paid by Mr. McMurray into the Bank of Toronto account. I am disposed to think, not without a great deal of doubt, that as these moneys appear to have been thus dealt with by him with the authority of Mrs. Weihmayer, they must be held to stand in the same category as the other moneys in that account; and in consequence of the term of the deposit which entitled the bank to require notice before payment, they ought not to be considered to have constituted a debt "payable" within the meaning of the article.

[Page 269]

In re Neitzke.

Applying the criterion mentioned in Mrs. Wiehmayer's case it follows: 1st, that the deposits with the National Trust Company are within Art. 296; 2nd, that the deposit with the Central Canada Company does not fall within Art. 296.

As to interest and dividends: Interest and dividends generally are to be considered within the article, but any sum representing such interest and dividends as may have been credited by the Central Canada Company to Mrs. Neitzke's deposit account under the terms mentioned in paragraph 13 of the case, is, I am disposed to think with a great deal of doubt, not to be considered as a debt payable within the article.

Anglin J.—The appeals in these two actions, which raise very similar questions, were argued together. By a special case stated in each the parties seek to have it determined whether certain property of the respondents, German subjects through marriage only, or any part of it is or is not of such a character that the Government of Canada may renounce claim to it without becoming accountable therefor to the Government of Germany. The answer depends primarily, if not entirely, on whether the several items of property in question were at the date of the Treaty of Peace with Germany (10th of January, 1920), "debts (which had been) payable before the war" or "debts which became payable during the war" within Art. 296 of that treaty, or were then not such debts but rather "property rights (or) interests * * * belonging to German nationals" within Art. 297. If they were the former they cannot be so relinquished; the treaty

[Page 270]

forbids it (Art. 296, pars. (a) and (b)); if the latter they may be abandoned to the respondents without accountability to Germany being incurred, the allied powers having merely "reserve (d) the right"—not undertaken responsibility—"to retain and liquidate" such property and give credit for its proceeds.

It seems abundantly clear that the liabilities to the respondents arose out of transactions of which the partial execution was suspended "on account of the declaration of war." These latter words of clause (2) of Art. 296, in my opinion, clearly mean on account of the situation (i.e., the state of war) created by the declaration of war. That situation and the disabilities it entailed existed up to the 10th of January, 1920, "on account of the declaration of war."

The heading of Art. 296 is "Debts," which, if not misleading, can scarcely be termed definite or precise, (37 L.Q.R., p. 59). The article deals not with all pecuniary obligations but only with certain classes of them. In considering what pecuniary obligation it was intended to comprise within the category of debts it must first be observed that there are certain restrictions on the broad meaning of that word, viz.,

that which is owed or due; anything, as money, goods or service, which one person is under obligation to pay or render another; a sum of money or a material thing. Murray's Dict., vbo., Debt,

imposed by the qualifying statements of the article that the debts dealt with are "pecuniary obligations" and that they must either have been "payable before the war" or have "become payable during the war." In the French version the word "payable" is rendered as "exigibles" in par. No. 1 and as "exigibles et dues" in par. No. 2.

[Page 271]

The special mention made in clauses (3) and (4) of capital sums and interest payable "in respect of securities issued by an opposing power" is also significant. Such obligations are classed with "debts" due by the nationals of such power. The legitimate inference would seem to be that capital and interest payable in respect of private securities issued by such nationals, whether persons or corporations, were not meant to be within the purview of the article.

The Treaty does not declare by what law its terms are to be construed. Having regard to its international character, however, it should perhaps not be too readily assumed that merely because English municipal law differentiates between a debt and the obligation of a trustee to account that distinction should obtain in construing the word "debts" used in Art. 296. Yet when the nature of the relations of the cestui que trust and the trustee to trust property are carefully considered the distinction would not seem to depend upon considerations peculiar to English law but rather to be of universal application. The cestui que trust is not a mere creditor of his trustee in respect of trust moneys, but has a beneficial proprietary interest in them while in the trustee's hands. They are his moneys, not the trustee's. They are not exigible to satisfy a judgment for the claim of any other person who is a creditor of the trustee as they would be if the latter was merely a debtor for them to his cestui que trust

"Payable" is a word susceptible of more than one shade of meaning; Massy v. Lloyd[2], at pages 267-8, per Westbury L.C. Counsel for the Crown in

[Page 272]

his factum, and again at bar took the position that a debt is "payable" only when it may be sued for without any previous demand or other act of the creditor— but not otherwise.

North J. in In re Tidd[3], at page 156, quotes with approval the following passage from Evans' Commentary on Pothier, Vol. II, page 126:

Where a man deposits money in the hands of another to be kept for his use, the possession of the custodee ought to be deemed the possession of the owner until an application and refusal, or other denial of the right; for, until then, there is nothing adverse, and I conceive that, upon principle, no action should be allowed in this case without a previous demand; consequently, that no limitation should be computed further back than such demand.

The Wiehmayer Case.

Assets of three descriptions are in question in this case:

(1) Moneys of Mrs. Wiehmayer deposited in a savings bank account with the Bank of Toronto.

(2) Mrs. Wiehmayer's share of cash held by a trustee company at the date of her mother's death and of moneys received by it as the proceeds of mortgage securities in its hands—both covered by a trust of which Mrs. Wiehmayer and her sister, a British subject, were beneficiaries subject to a life interest in their mother.

(3) Interest and dividends which became payable to Mrs. Wiehmayer while a state of war subsisted.

(1) As a "deposit * * * established before or after the declaration of war" the money on deposit in the Bank of Toronto seems to be a "cash asset" within clause (h) (1) of Art. 297, as defined by section 11 of the annex to that article, rather than a "debt" within Art. 296. It was payable by the terms of the contract of deposit only on production of the bank book,

[Page 273]

and, if required by the bank, after fifteen days' notice. A demand for payment accompanied by production of the bank book and the fifteen days' notice, if exacted, were conditions precedent to a cause of action to recover it arising. Until these conditions were fulfilled, if a "debt" it was not "payable." I cannot distinguish the case as to these moneys from Atkinson v. Bradford Third Equitable Society[4], and In re Tidd, supra[5].

It is true that the special case states tha

it was not the practice of the bank in dealing with this account or with similar accounts to insist that requests for withdrawals were to be accompanied by the bank book.

There is no admission, however, that the bank had relinquished or abandoned its right to do so or to exact the notice and I am not prepared to draw that inference from the mere existence of the practice stated. There are no other circumstances before us pointing to an equitable right on the part of the respondent to rely on that practice as having established such an abandonment—nothing to indicate that in suing to recover the amount to the credit of her savings account it would be unnecessary for the plaintiff to aver performance of the condition precedent as to presentation of the bank book or inequitable on the part of the bank to set up against her the express stipulations of its contract with her.

Although counsel for the appellant expressly confined his appeal to such items as fall within Art. 296, it has been suggested in the course of the consideration of these cases that for all "cash assets" there is a like obligation to account through the clearing office, imposed by clause (h) of Art. 297 and sub-clause (1) thereof. The argument urged is that "all cash assets in general" are by clause (h) put in the same category

[Page 274]

with "net proceeds of sales of enemy property" which has been retained and liquidated, and that "sub-clause (1), in the case of powers adopting section III (Art. 296) and the annex thereto, imperatively requires that such proceeds and "cash assets" shall alike be credited to the power of which the owner is a national, through the clearing office. But that construction would impose on the allied or associated powers the obligation to "retain" all cash assets within their territories belonging to German nationals, whereas such "cash assets" form part of the "property, rights and interests," which the allied or associated powers by clause (b) merely reserved the right—impliedly refused to assume any obligation—"to retain and liquidate." Clause (b) is, in my opinion, the dominant provision, and clause (h) and sub-clause (1) thereof must be read subject to it. The latter clauses therefore apply in the case of the Allied or associated powers only to "cash assets" in respect of which such powers shall have exercised their reserved right of retention.

As to item No. 1 the appeal in my opinion fails.

(2) and (3). Because of the relations to them of the trustee and the cestui que trust above stated the trust funds covered by item No. 2 I also think cannot be regarded as "debts" and neither these moneys nor interest or revenues accruing from them, comprised in item No. 3, as I view them, "became payable during the war" to the plaintiff. While there is nothing in the terms of the trust instrument that would have precluded her calling upon her trustee to account to her at her mother's death for her share of the moneys covered by the trust then in its hands and afterwards for the other moneys included in the second item and for interest and revenues arising therefrom when and as they were received by it, a memorandum of instructions

[Page 275]

of the 14th October, 1914, that all sums, either of capital or income, received on the plaintiff's account by her trustee were to be retained by it to her credit until further advice by her, at least serves to negative the existence from that date forward of any arrangement or standing instructions that such moneys were to be remitted or paid over by the trustee on receipt, which might be tantamount to a demand. There was a further act to be done by the creditor in regard to all these moneys before a right of action to recover them from the trustee would have arisen. In my opinion they were not "debts," which "became payable during the war" to the plaintiff.

Neither are dividends "debts" within Art. 296. They are the share or interest of the stockholder' to whom they are payable in the distributable profits of the corporation and are his property quite as much as are the shares in the capital stock he holds. They are "cash assets" as defined by clause 11 of the Annex to Art. 297.

The appeal therefore also fails as to items (2) and (3).

The Neitzke Case.

There are also three distinct items involved in this appeal:

(1) An amount deposited on the 4th of August, 1914, to the credit of the plaintiff in the Central Canada Loan and Savings Company;

(2) Sums represented by two guaranteed trust investment receipts issued by the National Trust Company, Limited, to the plaintiff;

(3) Interest and dividends which became payable between the 4th of August, 1914, and the 11th of January, 1920, on property, rights and interests of the plaintiff.

[Page 276]

(1) Item No. 1 seems to be in the same position as the corresponding item in the Wiehmayer case. The money was placed in a special deposit account bearing interest and was withdrawable only on 30 days' notice if required by the loan and savings company. This would appear to be a "deposit established before or after the declaration of war" within the purview of clause 11 of the annex, and therefore a "cash asset" within Art. 297 (h) (1). No abandonment of the right to exact the 30 days' notice is alleged or shewn.

Interest which accrued due on these moneys as "assets coming from a deposit" (Annex, cl. No. 11), covered by item No. 3, would be subject to the same disposition as the principal.

(2) The substance of the transactions between the plaintiff and the National Trust Company must be considered rather than the name given them by the company—"Guaranteed Trust Investments." When the trust company received each of the two sums from the plaintiff it gave her an absolute undertaking to repay the principal at the end of five years and to pay her interest thereon in the meantime half-yearly at the rate of 4½ per cent per annum. The dates for payment of the principal and interest as well as the rate of the latter were fixed quite independently of the terms of any security in which the moneys might be invested by the company. The only liability to the plaintiff was that of the company. Her sole recourse was against it. No specific security was allotted to her investment or in any manner ear-marked as one on which she should have an exclusive claim. Her only right, apart from that of enforcing payment by the trust company according to the terms of the receipts given her, would be to require the company at all times before repayment of the principal to hold allocated to

[Page 277]

such "trust investments" of the plaintiff and others in like plight an amount of securities of face value equal to the total amount of moneys received by it upon similar terms. Of the sufficiency of such securities, however, the company was the sole judge. In the event of its making default in payment and going into liquidation there would, no doubt, be a mass of its securities on which all customers from whom it had obtained money on terms similar to those arranged with the plaintiff would alike have liens entitling them to share pari passu in their proceeds up to the amount of the company's liability to each of them respectively. But at no time was there any part of that mass of securities held by the company which was hers. Her sole recourse, so long as the company remained solvent, was to look to it for payment of the amount advanced by her with interest thereon at the rate stipulated in the receipt given her, and in the event of insolvency or liquidation to rank for that amount as a secured creditor upon the fund represented by the securities that had been allocated by the company to its "trust investments" of the class to which hers belonged.

In substance these transactions, in my opinion, were not deposits of money by the plaintiff in trust for investment by the company on her account but loans to the company of the amounts handed over by her to it, of which payment was to be collaterally secured by Kens, held in common with other lenders in like plight as above stated, on certain assets of the company set aside for that purpose. The plaintiff was a lender and as such a creditor; the company a borrower and as such a debtor— and the sole debtor—of the plaintiff. Both the principal and the interest are "debts" of the company to the plaintiff which "became payable during the war" and as such, I think, fall within Art. 296 of the Peace Treaty.

[Page 278]

(3) The position of any dividends to which the plaintiff became entitled is the same as that of the dividends in the Wiehmayer case. Interest on investments or securities, other than the money lent to the National Trust Company and that on deposit with the Central Canada Savings Co., which have already been dealt with, would seem to be "cash assets" within the definition of that term in the annex to Art. 297.

——

I have assumed that we have jurisdiction to entertain these appeals from the opinion expressed by the learned judge of the Exchequer Court under the jurisdiction conferred upon that court by section 1 (i) of c. 14, 10 Geo. V. In the result the opinion expressed by the learned judge in the Wiehmayer case should in my opinion be confirmed; that expressed in the Neitzke case should also be confirmed except as to the moneys received by the National Trust Company on "guaranteed investment receipts" and interest accrued thereon.

Brodeur J.—As these two appeals have been argued together and as they raise practically the same issues, they might be both decided at the same time.

These actions have been instituted by two women who were of British nationality by birth and who married men of German nationality before the war and went to reside in Germany. They had money invested in Canada and their Canadian properties and rights were, by order of the court, vested in the Minister of Finance under the provisions of the consolidated orders respecting trading with the enemies, 1916.

By the Treaty of Peace order of 1920 all the properties and rights vested in the Minister of Finance were

[Page 279]

transferred to the Secretary of State of Canada, the appellant, as custodian. Now the respondents claim by their action that their property, rights and interest, which they possess in some investments, be returned by the appellant to them and that it be declared that these investments should not be considered as falling under the provisions of Article 296 of the Treaty of Peace with Germany.

The Secretary of State is willing to relinquish these properties and hand them to their former owners provided such relinquishment shall not be contrary to certain provisions of the Treaty which require that the payment of certain debts should be made through a clearing office to Germany itself and not to the original owners thereof.

We have then in that respect to construe the provisions of Article 296 of the Treaty which determines how certain debts due by a national of one contracting power to a national of an opposite power shall be settled. The question submitted in this case is whether the word "debts" of this article 296 would include the investments which the respondents possessed in Canada.

These investments are of three classes:

First, the investments made in the Canadian trust companies and represented by "guaranteed trust investment receipts;" secondly, the deposits in loan and savings companies, or in banks in their savings account; thirdly, interest and dividends which became due or were paid during the war.

There is also in the case of Mrs. Wiehmayer a trust investment under special agreements which will have to be dealt with.

[Page 280]

I.

Guaranteed Trust Investments.

This is an agreement by which sums of money are received by a trust company for investment for the repayment of which this trust company becomes liable. The trust company then invests the money in its own name and no specific mortgage is allocated to the trust investment receipts but the mortgages representing the total amounts invested by the trust company are simply set apart and are held in a special account.

We are not much concerned as to the manner in which the trust company manages or invests the funds which its clients put in its hands for investment. We have in the agreement or receipt an obligation to pay or reimburse the amount which has been put in its hands. There is established then between the investor and the trust company the relation of debtor and creditor and the investor has a right to claim from the company the reimbursement of his money. It becomes an ordinary pecuniary obligation.

What is a pecuniary obligation? It is a personal engagement which gives to the person in whose favour it is contracted the right to claim a sum of money. It is a vinculum juris which obliges a person to give some money to another.

I am of opinion that under the Treaty these trust investments should be paid through the clearing house and that the custodian, the Secretary of State, should not pay these pecuniary obligations to the respondent.

[Page 281]

Deposits in Savings Banks in Loan Companies.

These deposits are generally made with the condition that the money will be paid after certain days' notice or when the bank book is presented. As a matter of practice, however, the amounts so deposited are reimbursed without requiring that notice or the presentation of the book.

It seems to me that any deposit in a bank constitutes a pecuniary debt by the bank from the moment of the deposit; Pott v. Clegg[6]. The respondent relies on the case of Atkinson v. The Bradford Third Equitable Benefit Building Society, (2), where it was decided by the Court of Appeal in England that the condition that the sum should be repayable after the lender had given notice of his intention to withdraw it and that no money would be payable except on presentation of a pass book; that the condition as to the production of the book was a condition precedent and that until it was produced, the Statute of Limitations did not begin to run against the lender. But the Atkinson Case[7], has reference only to the operation of the Statute of Limitations.

The Treaty is in more general words and of more general application than the Statute of Limitations referred to in the Atkinson Case7. According to my view, those deposits constitute debts which under section 296 of the Treaty would have to pass through the clearing house.

I have stated before in discussing the guaranteed trust investments what is the essence of a pecuniary obligation. Nobody can say that there was not an obligation on the part of the banks, of the loan companies or of the others to pay a certain sum of money.

[Page 282]

That money could, in some cases, be claimed before the war and if it was not demanded that is not a reason to say that there was no debt. As to the money which became due during the war, if it was not claimed, that was due to the declaration of war. In each case, these debts constitute the pecuniary obligations mentioned in Art. 296 of the Treaty.

Dividends and Interest.

As to the dividends and interest, they were certainly debts which became payable during the war and they arose out of agreements entered into before the war and the payment of the interest contracted for or the dividends which might have been declared was suspended on account of the declaration of the war.

There is besides in paragraph 22 of the annex to article 296 a formal reference as to interest which shews that capital and interest should be considered as one.

Trust Investment Wiehmayer Case.

By a certain agreement, the National Trust Company held certain mortgages in trust to pay the income to Mary Prou Mara during her life and after her death part to the respondent and part to her sister in equal shares. Upon the death of Mary Prou Mara in June, 1913, the National Trust Company became obliged to divide between the respondent and her sister the capital held by it under this agreement.

The question is whether that sum became a debt payable and should be considered as such under the Treaty.

The trust company was not forced during the war to pay to the respondent her share of the capital, but I fail to see how these sums could not be considered as a debt.

I am of opinion that the judgment a quo should be reversed.

[Page 283]

In re Neitzke.

Mignault J.—The question under this appeal is whether certain rights or claims of the respondent, as being "debts" within the meaning of article 296 of the Treaty of Peace signed at Versailles, on the 28th June, 1919, between the allied and associated powers and Germany, are subject to the provisions of the said article. Article 296 is among the economic clauses of the Treaty and, as far as material to the present inquiry, provides as follows:—

There shall be settled through the intervention of clearing offices to be established by each of the high contracting parties within three months of the notification referred to in paragraph (e) hereafter the following classes of pecuniary obligations:

(1) Debts payable before the war and due by a national of one of the contracting powers, residing within its territory, to a national of an opposing power, residing within its territory;

(2) Debts which became payable during the war to nationals of one contracting power residing within its territory and arose out of transactions or contracts with the nationals of an opposing power, residing within its territory, of which the total or partial execution was suspended on account of the declaration of war.

Paragraphs (3) and (4) are immaterial on this appeal.

This question was submitted to the Exchequer Court by means of a special case under rule 160. The respondent succeeded as to all the items mentioned in the schedule annexed to the case, and the appellant now asks this court to reverse the judgment of the court below as to three of these items, viz.:—

(a) The sums represented by the two guaranteed trust investment receipts issued by National Trust Company, Limited, to the respondent;

(b) The amount on deposit on the 4th of August, 1914, to the credit of the respondent in the Central Canada Loan and Savings Company; and

[Page 284]

(c) The interest and dividends which became payable between the 4th of August, 1914, and the 11th of January, 1920, on the property, rights and interests of the respondent.

The appellant seeks also to have it held that, if these items fall under Article 296, Canada is or may be liable to Germany for or in respect of such of them as are relinquished to the respondent.

The answer to be given depends on the construction of Article 296 of the Peace Treaty, which must be read in connection with the two following articles.

In arriving at this construction, a broad distinction must be made between "debts" referred to in Article 296 of the Treaty of Peace and "property, rights and interests" which are the subject of Articles 297 and 298. The latter expressions are wide enough to comprise any kind of "debts," and the word "debts" lato sensu would include any species of claim whether for money or other property to which one person is entitled as against any other. It is noticeable, however, that the "debts" referred to in Article 296 are stated to be certain classes of "pecuniary obligations," so that nothing which cannot be described as a pecuniary obligation can come within the meaning of the word "debts" as used in Article 296.

"Cash assets" are included among the "property, rights and interests" of Article 297 and are expressly mentioned in paragraph (h) of that article. In the annex to Articles 297 and 298, they are defined, by paragraph 11, as including all deposits or funds established before or after the declaration of war, as well as all assets coming from deposits, revenues, or profits collected by administrators, sequestrators, or others from funds placed on deposit or otherwise, but not to include sums belonging to the allied or associated powers or their component states, provinces, or municipalities.

[Page 285]

I must confess that the reference to "cash assets" in Article 297, and in the annex to Articles 297 and 298, is more confusing than helpful. This is especially so when the different provisions of Article 297 are carefully studied. As the parties presented their case, the question was whether the property in question fell within the provisions of Article 296, paragraphs 1 and 2. Still it is impossible to overlook Article 297, and, as I have said, its reference to cash assets is confusing. Thus paragraph (h), subparagraph (1), seems to require that in general all cash assets of enemies, as regards powers adopting article 296, shall be credited to the power of which the owner is a national, through the clearing office established under the latter article. But the collocation of the expression "cash assets" with the words "the net proceeds of sales of enemy property" sufficiently shows that what was intended was that where, under paragraph (b) of article 297, an allied or associated power has elected to retain and liquidate property, rights and interests (which would include "cash assets") belonging to German nationals, the proceeds of such liquidation and all cash assets, as regards powers adopting article 296, shall be credited to Germany through the clearing house, any credit balance being applicable to the payment of Germany's reparation obligations under article 243. If an allied and associated power has not elected to retain and liquidate the property) rights and interests of German nationals, and Canada has not done so with respect to British born wives of German nationals, the only question is whether the property to be dealt with is or is not a "debt" within the meaning of article 296.

[Page 286]

I can now deal with the amounts claimed by the respondent in order to determine whether they should be considered as being "debts," or, I may say in contradistinction thereto, "cash assets," which term has now been sufficiently explained. And it seems entirely proper to distinguish moneys in hand or moneys recovered and deposited for safe keeping from moneys due under a pecuniary obligation, whether such obligation be created for investment purposes or otherwise. It is in the latter sense that I construe the word "debts."

Article 296 refers to debts payable before the war or during the war. Does this mean debts for which an action would lie without any previous demand? This seems to be the construction which the appellant places on the word "payable," for in his factum he says:

It is further submitted that a debt "became payable" before or during the war within the meaning of these paragraphs if at any time before or (but for the war) during the war it could have been sued for without any previous demand or other act by the creditor.

I cannot agree with this construction, for it seems inconceivable that the negotiators of the Treaty were concerned with the question whether a debt was suable without demand or only after a previous notice to the debtor. What seems entirely likely is that the debts with which they intended to deal were those of which the payment had been prevented by the war, and this payment was prevented in case of all debts between belligerents, irrespective of the question whether or not a previous demand was necessary. In my opinion, all moneys due under a pecuniary obligation of which the war prevented the payment, and which therefore had not, on that account, been recovered, are debts within the meaning of Article 296.

[Page 287]

Applying therefore Article 296 to the items which are the subject of this appeal, my opinion is that:—

A. The sums represented by the two guaranteed trust receipts issued to the respondent by the National Trust Company, Limited, are "debts" within the meaning of Article 296. The moneys received from the respondent under these receipts, to wit, $11,000.00 and $2,000.00, were to be invested by the Trust Company in securities taken in its name, the surplus of interest over five per cent to be retained by the company for its own benefit, and the company guaranteed the payment of the principal money, in the case of the $11,000.00, on the 1st of January, 1917, and, in the case of the $2,000.00, on the 2nd of January, 1919. Both these days fell "during the war." See the construction of these words in the Treaty of Peace (Germany) Order, 1920, section 2, subsection (c). In my opinion, were it necessary to so hold, the capital sums for which these receipts were given were payable and suable without any previous demand, but it will suffice to say that they were debts of which the payment was prevented by the war and therefore they come within Article 296.

B. The amount on deposit on the 4th August, 1914, to the credit of the respondent in the Central Canada Loan and Savings Company was not a debt payable before the war within the meaning of Article 296. This amount was deposited in a savings bank account and the form of the question shews that at the time of the declaration of war no order for its payment had been given by the respondent. It would further come within the expression "cash assets" as used in Article 297. The want of a demand of payment here is important

[Page 288]

only as shewing that at the date of the declaration of war there was merely an existing savings account in favour of the respondent on which, as to the sum then standing to her credit, no cheque had been issued by her.

C. In so far only as this item comprises interest or dividends on item A, I would think it would fall under Article 296 of the Treaty, being an accessory of the capital sums of $11,000.00 and $2,000.00 represented by the National Trust Company's guaranteed trust investment receipts.

The appeal also raises the question whether, if any of the said items do fall within Article 296, Canada is or may be liable to Germany for and in respect of such of them as are relinquished to the respondent.

I would answer in the affirmative. Article 296 renders it compulsory to settle through the intervention of clearing houses the classes of pecuniary obligations mentioned therein. Should Canada relinquish to the respondent any debts which come under the operation of Art. 296, it would undoubtedly incur liability towards Germany for the debts so relinquished.

I would therefore allow the appeal to the extent of declaring that the capital sums of $11,000.00 and $2,000.00 represented by the guaranteed trust investment receipts of the National Trust Company, Limited, as well as all interest or dividends thereon accrued, are "debts" within the meaning of Article 296 of the Treaty.

In re Wiehmayer.

Inasmuch as in the case of The Secretary of State v. Neitzke I have explained what construction should be placed on Articles 296 and 297 of the Treaty of Peace between the allied and associated powers and Germany,

[Page 289]

it will suffice to say that, in my opinion, none of the items which the appellant claims are "debts" within the meaning of Article 296, or should be so considered.

As a consequence the appeal should be dismissed.

Adjudged accordingly.

Solicitor for the appellant: Christopher C. Robinson.

Solicitors for the respondents: Fasken, Robertson, Chadwick & Sedgewick.