Supreme Court of Canada
Fraser v. Imperial Bank of Canada, (1912) 47 S.C.R.
313
Date: 1912-11-26
W. H. Fraser (Plaintiff) Appellant;
and
The Imperial Bank
of Canada and Others (Defendants) Respondents.
1912: October 10; 1912: November 26.
Present: Sir Charles Fitzpatrick C.J. and
Divies, Idington, Duff, Anglin and Brodeur JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR
MANITOBA.
Banking — Security for advances — Assignment
— Chose in action — Moneys to arise out of contract—Unearned funds — Equitable
assignment to third party—Notice—Evidence—Priority of
claim—Estoppel—Construction of statute—R.S.M., 1902, c. 40, s. (e), “King’s
Bench Act”—R.S.C., 1906, c. 29, s. 76, “Bank Act.”
An assignment of a future chose in action, to
arise out of a contract, operates as an agreement binding on the conscience
and, when the subject-matter of the assignment comes into existence, creates a
trust. Tailby v. The Official Receiver, (13 App. Cas. 523,)
followed.
Where a bank, in order to secure present or
future advances to a customer, has taken from him an assignment vesting in it
the legal title to a chose in action arising out of a contract and,
subsequently, receives notice of another assignment thereof for valuable
consideration by the customer to a third person, before moneys have been
advanced upon the security held by the bank, the claim of the bank for advances
made after notice is postponed to that of the other incumbrancer. Dearie v.
Hall (3 Russ. 1); Hopkinson v. Rolt (9 H.L. Cas. 514); Bradford Banking Co. v. Briggs (12
App. Cas. 29), and West v. Williams ((1899) 1 Ch. 132), applied.
Where an assignee of a chose in action with
knowledge that the same chose in action has also been assigned to another
person for valuable consideration permits the other assignee to rely upon his
security by acting on the faith of his assignment, without giving him notice of
the former charge, the claim of the latter is entitled to priority over that of
the assignee by whose conduct he has been thus misled. Russell v. Watts (10 App. Cas. 590), and Stronge v. Hawkes (4 DeG. M. &
G. 186), applied.
[Page 314]
Per Fitzpatrick
C.J. dissenting.—The circumstances of the case do not justify the finding that
there was an equitable assignment of the chose in action to the appellant and
there is no sufficient evidence of notice to the bank that there was any
assignment to him; consequently, the assignment to the bank, which was duly
notified to the debtor, gave the claim of the bank priority in respect of the
advances made by it on that security. Mutual Life Assurance Co. v. Langley (32 Ch. D. 460), referred to.
The judgment appealed from (22 Man. R.
58) was reversed, Fitzpatrick C.J. dissenting.
Quœre.—Whether,
in consequence of the provisions of section 39(e)
of “The King’s Bench Act,” R.S.M.,
1902, ch. 40, the rule in Dearie v. Hall (3 Russ. 1)
governs the rights of parties under an assignment taking effect by
virtue of the statute?
Quœre—(As to
the effect of section 76 of “The
Bank Act,” R.S.C, 1906, ch. 29, on
the assignment of moneys not yet earned under a construction contract as
security for present or future advances?
Reporter’s
Note.—Cf. Deeley v. Lloyds Bank ((1912) A.C. 756).
APPEAL from the judgment of the Court of
Appeal for Manitoba,
affirming the judgment of Mathers C.J., at the trial, dismissing the plaintiff’s
action with costs.
In the circumstances stated in the judgments
now reported, the action was brought by the plaintiff, appellant, to recover
moneys which he claimed as due to him for work performed and materials for the
same furnished by him in the construction of a number of buildings for the
Canadian Pacific Railway Company under a contract entered into between one
William Garson, deceased, and the railway company, (alleging that the moneys
arising out of that contract had been assigned to him by Garson,) and for a
declaration that the moneys in question belonged to him and were not affected
by an assignment of the same funds made by Garson to the bank. The action was
against the
[Page 315]
bank and the railway company for the recovery
of $7,830, part of the moneys earned under the contract which had been received
and retained by the bank, and for the balance of $8,433.70 still owing by the
railway company. The company deposited the latter amount in court to be
disposed of in such manner as the judgment might direct. At the trial, the
claim against the railway company was abandoned and the case proceeded against
the bank alone. The plaintiff’s action was dismissed by the learned Chief
Justice of the King’s Bench, and his judgment was affirmed by the judgment now
appealed from.
M. G. Macneil for
the appellant. No special form of words is necessary to constitute an equitable
assignment, and it is clear that the appellant had such an assignment from
Garson. Leake on Contracts (6 Can. ed.) 857; Hughes v. Chambers. A verbal assignment is good
against a subsequent written assignment. Heyd v. Millar; Molsons Bank v. Carscaden; Pollock, Contracts
(8 ed.) 232.
The evidence clearly shews that the bank had
knowledge of the assignment to Fraser, and notice thereof to the railway
company is not necessary. As Garson had previously assigned the moneys to arise
out of the Outlook contract, it cannot be said that he intended to assign or
could assign the same funds to the bank. The reasons in the court below
dealings with the question of non-assignability are quite beside the issue. Burck
v. Taylor,
and Re Turcan, have no application. Notice of assignment is
[Page 316]
necessary only for the protection of the
debtor and, where that, protection is not required, the date of the assignment
prevails. See In re Miller,
per Wetmore C.J., at page 96. This decision was under a statute exactly
similar to the provisions of sec. 39(e) and (ƒ) of the Manitoba “King’s
Bench Act,” R.S.M., 1902, ch. 40. In Newman v. Newman, and Dearie v.
Hall,
there was an element of fraud; consequently, notice affected the priority. The
rule in Dearie v. Hall cannot apply in view of the
provisions of the Manitoba “King’s Bench Act,” referred to. Gorringe v. Irwell
India Rubber Works;
Jones v. Jones;
Rochará v. Fulton;
Scott v. Lord Hastings;
In re Richards;
Ward v. Duncombe,
per Herschell L.C., at page 378, and per Lord Macnaghten, at
pages 391-394;
C. P. Fullerton K.C. for the respondent. We rely upon the reasoning of the judges in
the court below.
There is no evidence of record that there was an equitable assignment by Garson
to Fraser and all that took place between them, as well as the conversations
and correspondence with the officials of the bank at Winnipeg, are consistent
with Fraser being an employee of Garson, or a sub-contractor for the works on
the Outlook branch. Indeed, this is the irresistible conclusion to be drawn
from all the facts and the absence of any proof whatever of express or implied
notice to the bank that there had been an assignment
[Page 317]
of any kind by Garson to Fraser. At the same
time, to the knowledge of both these parties, the bank had given notice of
their assignment to the debtor, the railway company, and obtained its assent
thereto, signified in various ways and, particularly, by the actual payment of
the amounts of all the progressive estimates, up to the time of Garson’s death,
by the company directly to the bank. Even assuming the evidence established an
equitable assignment, the respondent, by giving notice to the railway company
obtained priority. Dearie v. Hall[17];
Loveridge v. Cooper[18];
Foster v. Cockerell[19];
Re Freshfield’s Trust[20];
Montefiore v. Guedalla[21];
4 Halsbury, Laws of England, p. 379; In re Lake[22]; Pollock on Torts (5 ed.), p. 209;
Marchant v. Morton, Down & Co.[23].
M. G. Macneil for
the appellant.
C. P. Fullerton K.C.
for the respondent.
The Chief
Justice (dissenting).—In April, 1910, William Garson had two contracts from the Canadian
Pacific Railway Co.; one to build roundhouses at Calgary, and the other, to
erect six stations on what is called the “Outlook Branch” of that railway. The
appellant’s claim is for the price or value of work done by him in and about
the erection of these six stations. Both contracts provide, amongst other
things, that all the work should be proceeded with
under the personal supervision of Grarson
until completed,
and that the agreements
should not be assigned or the work
sub-contracted without the written assent of the company’s engineer.
A short time after the contracts were made,
Garson had some conversation with the appellant, as the result
[Page 318]
of which, it was agreed between them that the
latter should take over the building of the six stations on the Outlook Branch.
It is admitted on this appeal that the company had no knowledge of that
arrangement.
Subsequently, on the 24th June, 1910, Garson,
for valuable consideration, assigned in writing and under seal to the
respondent bank
all his claim and demand against the C.P.R.
Co. for moneys then due or thereafter to accrue due to him from the said
company.
Of this assignment the railway company was duly
notified. At the time this action was brought the company had paid (of the
moneys earned under the contract) to the respondent, as assignee of Garson, in
all the sum of $14,850 and a balance of $8,433 was still owing. The bank made
advances to Garson on the faith of the assignment to the extent at least of the
amount due under the contract and how much more does not appear. Garson died in
February, 1911.
The railway company, sued originally as joint
defendant with the bank, denied all knowledge of the arrangement between Garson
and the appellant and brought the balance due under the contract into court to
be disposed of as the rights of the parties might appear. The company was not
made a party to the appeal either below or here. The issue, therefore, is
narrowed down to the contest between the appellant and the bank, and the result
depends chiefly upon the legal effect of the arrangement made between Garson
and the appellant under which the latter built the stations in question.
The appellant’s case on the pleadings was
novation; his contention then was that by virtue of his arrangement he took the
place of Garson on the contract,
[Page 319]
with the assent of the company, and that the
moneys were his from the beginning. On the evidence this position could not be
maintained. It was abundantly proved that the railway company only knew Garson
in the transaction and dealt with him alone throughout. The moneys paid Fraser as
the work progressed were paid by Garson’s cheque on the respondent bank in
which both Garson and Fraser kept their accounts.
On this appeal two questions arose for
consideration; 1st. Did the arrangement between Garson and Fraser under which
the latter carried on the work constitute an equitable assignment of the moneys
earned? 2ndly. Did the assignment to the bank, duly signified to the railway
company, give the bank priority? In case the first question is answered in the
affirmative, the second becomes important.
It has been assumed throughout the argument here
that the trial judge found there was an equitable assignment from Garson to Fraser,
as the result of the arrangement made with respect to the stations. I prefer to
quote the language of that learned judge; he says:—
I think it is fairly clear that he (Garson)
intended to have the plaintiff take his place under this contract in so far as
it was possible for that to be done without the knowledge or consent of the
railway company. I think the real arrangement was that the plaintiff should
construct the stations in the place and stead of Garson and that the latter
would turn over to him the progressive payments as and when they were received
from the company. The moneys were Garson’s as between him and the railway
company and what took place (between Garson and the plaintiff at most amounted
to an equitable assignment of these moneys to the plaintiff.
In appeal it was held, by Howell C.J.:—
I think it would be unsafe from the
evidence to find as a fact that there was an equitable assignment of this chose
in action. For
[Page 320]
all that appears in the evidence, the
bargain might have been (and indeed it seems to have been) that the plaintiff
was to do the work for the deceased for the same sum which the latter had
contracted for, and that he would be paid for the same from time to time as the
deceased received the money therefor from the company. This would not be an
assignment of the chose in action.
The first question, was there an equitable
assignment by Garson to Fraser, must, I think, be answered in the negative. The
railway company recognized in Garson no right to part with any portion of his
contract. He was under an obligation to personally supervise the work
contracted for, and no attempt was made to prove that, to the knowledge of the
company, Fraser ever occupied with respect to the work any position other than
that of an employee of its contractor. The arrangement between Garson and Fraser,
said to have been reduced to writing at the time, is not now forthcoming, and
we are obliged to rely upon the appellant’s recollection of what occurred,
Garson having died before these proceedings were instituted. I cannot find in
Fraser’s evidence an intention on the part of Garson to transfer the money
payable under the contract. Fraser’s failure to notify the railway company of
his agreement, Garson’s assignment of the same fund to the bank a few weeks
later, the way in which the parties dealt with the money after it was paid over
to the bank as assignee, all convince me that Garson never intended, when the
agreement was made, to part with his control over the moneys and that Fraser relied
for his payment upon Garson’s general business credit.
It is quite true that no particular form of words
is required to operate an equitable assignment, but there must be proof of an
engagement to transfer the right, here the claim to the money, or to provide
for the payment of that money out of a particular debt or
[Page 321]
fund. A mere agreement to hand over work to be
done does not operate an assignment of the money to be earned if the agreement
is silent as to this. There must be evidence of an intention to assign the very
fund which will be created by the execution of the work or to give a charge upon
it. I cannot find any evidence of an intention on Garson’s part to assign the
money to be earned under the contract, although he undoubtedly undertook to pay
Fraser the same price that he was to receive for the work. They are both
presumed to have had present to their minds the conditions of the contract with
the company; Garson remained liable at all times for its complete and exact
fulfilment by Fraser and it does not appear probable that Garson would abandon
all control over the payments made on the progress estimates so long as his
liability under the contract remained. On the other hand it is not to be
lightly assumed that Fraser, if the money as earned was available to him, would
have neglected the very elementary precaution of notifying the railway company
of his assignment, which he now swears was in writing.
I will briefly examine Fraser’s testimony,
having in mind his interest, the form in which his claim was first presented,
and the finding in appeal that his evidence is “conflicting and unsatisfactory.”
In answer to his own counsel Fraser says
he took over the construction of the six
stations from Garson.
Being pressed to tell all that took place
between himself and Garson at the time of the arrangement in question, he says
the latter phoned over to him if he would
take them off his hands, that he would turn them over to him if they were any
good,
[Page 322]
and being pressed repeatedly by his own counsel
for a more favourable reply, he says
that he was to do the work at the same
price as Garson;
finally he says, in answer to the question,
Go on and tell us what was said, what took
place and what was said?
A. Well, we arranged to meet, and it was
either that day or the next day that he came over, and he brought the plans
with him, and the specifications, and I estimated, and I told him that I would
take them over at that price, that is, the price that he had for them, and he
agreed to it, and there was nothing more said about it. So we used to
meet occasionally and speak over it.
What does all this mean if not as found in
appeal that the appellant undertook to do the work for Garson for the price the
latter was to receive for it, without reference to a special fund out of which
he was to be paid?
As I have already said, the case turns entirely
upon the effect of Eraser’s evidence and I cannot find in it sufficient to
justify me in reversing the judgment below. The appellant’s version of the
agreement with Garson, as I understand
it, is at most evidence of a promise by the latter to pay for the work when he
received the funds from the railway company, but not to pay over the moneys
when and as received. There is no evidence of a distinct unequivocal agreement,
such as is necessary to constitute an equitable assignment, that the particular
funds received should be appropriated to the payment of Garson’s liability to Fraser
under the contract. Read in its entirety his evidence points to the conclusion
that Fraser relied upon Garson’s credit; and I am much impressed by the absence of notice to the
company. Such a notice, it is true, was not necessary to complete the
arrangement, but it is, in the circumstances, an ingredient in considering the
effect of the evidence. If he relied upon
[Page 323]
the payments made under the contract he would
have taken steps to protect himself. All the facts of the case point
irresistibly to the conclusion that Fraser must have known the money earned was
paid when and as due to the bank and he never made any inquiry or protest. He
nowhere says that he was to have the benefit of the fund as and when created.
When examined as a witness at the trial he tells us that “nothing was said as
to who was to pay him,” and on discovery he says
that he did not expect the moneys would be
paid to him, but to Garson direct.
I must confess to some doubts on this branch of
the case. The law on the subject as Brett J. said,
is brought to such an exquisite degree of
refinement that it is by no means easy to understand it,
but I certainly do not feel justified in
reversing the unanimous judgment below.
Dealing now briefly with the second branch, I
agree with the learned trial judge, who says: “But if notice was material I
could not find that the bank had notice of what the plaintiff’s claim to those
moneys actually was until after the commencement of this action.” The
assignment to the bank was made to secure past and future advances to Garson
and there is no evidence to justify the assumption that at the time it was made
the bank had knowledge of the previous arrangement between its assignor and Fraser.
The fact from which we are asked to draw the inference of notice is connected
with a conversation that Fraser says he had with two of the bank officials on
the subject of advances he required and during the course of which he pretends
to have given them a list of his contracts, including the one now in question.
He does
[Page 324]
not pretend to say that he intended to give the
bank notice of his assignment, but we are asked to draw from this casual
conversation the inference that the bank knew of the arrangement between Garson
and Fraser and this notwithstanding the positive denial of the two bank
officials who were believed by the trial judge. I cannot go that far and I
respectfully urge that to do so would be to establish a precedent which would
seriously disturb the business of banking so largely dependent upon good faith
and plain straightforward dealing. The bank took the assignment, notified the
company and made the advances as agreed, and to defeat its claim upon such
flimsy evidence as is relied upon here is, I repeat, to create a dangerous
precedent. Why did Fraser not say plainly that he had an assignment instead of
leaving that fact to be inferred, and further, why, with the knowledge of such
an assignment, should the bank have undertaken to make advances to Garson on
the credit of the same fund?
The same observations apply to the subsequent
alleged conversation with Garson during the course of which he is supposed to
have told the bank officials that money received on the progress estimates belonged
to Fraser. If it was Fraser’s why not have paid it to him instead of depositing
it to Garson’s credit to be drawn against for his general liabilities? I quote
Leslie’s version of the incident from which we are asked to draw the inference
of notice:—
Q. Now, when did you first become aware of
the fact that Mr. Garson had transferred the Outlook Branch contracts to
Mr. Fraser?
A. Never knew it.
Q. You never knew it?
A. No.
Q. When did you first become aware of the
fact that Fraser was building these Outlook Branch stations?
A. I don’t know the date. Mr. Garson and Mr.
Fraser came in
[Page 325]
and Mr. Garson said, “I came in, Mr.
Leslie, to let you know I have handed over my stations to Mr. Fraser,” and that
is the only interview or knowledge I have of the matter.
Q. Can you fix the date at all?
A. No.
Q. You say it would be after the
assignment?
A. Yes, it was some time in the summer.
Q. Some time in the summer?
A. Yes.
Q. Apart from that, did you know the
arrangements, or anything about the arrangements between Garson and Fraser?
A. None, nothing whatever.
In any event the rights of the parties cannot be
affected by anything that happened after the assignment was executed and when
advances had actually been made on the faith of it. The law surely is that the
subsequent assignee must know of the prior assignment at the time he takes his
security. Mutual Life Assurance Society v. Langley (1886).
This may be in some of its aspects a very hard
case, but in the general shipwreck the “Tabula” is, in my opinion, with the
bank — “Durum est sed ita lex scripta est.”
I would dismiss with costs.
Davies J.—This was an action brought by the
appellant to recover from the bank and the Canadian Pacific Railway Company
certain moneys claimed by the appellant as the unpaid balance of the contract
price of six railway stations known as the Outlook Branch stations constructed
by the appellant.
The contract for the construction of these
stations had been entered into on the 11th of April, 1910, between one William
Garson and the railway company, and the appellant’s case was that some days
after entering into the contract Carson offered Fraser that if he would take
these stations off his hands he, Garson,
[Page 326]
would turn them over to him. That Fraser after
examining the plans and specifications agreed to take them and to take over his
contract with the Canadian Pacific Railway Co. for their construction, and that
the agreement between them which was verbal only was then settled and
concluded. That Fraser afterwards completed the buildings according to contract
and became entitled to the contract price.
So far as the railway company was concerned
there was practically no contest. They had not received any notice of any
assignment of the contract to Fraser, but had been notified by the bank on the
24th of June, 1910, that Garson had assigned to it
moneys now due or hereafter to accrue due
to the said William Garson from the Canadian Pacific Railway Company,
and had in consequence paid over to the bank the
different instalments as earned under the contract for the construction of the
Outlook stations and some extras amounting in all to the sum of $14,850,
leaving a balance of $8,433.07 still owing. This balance the railway company
brought into court to be paid over as directed by the court.
So far as the railway company is concerned they
practically drop out of the case, and the contest is one between Fraser and the
Imperial Bank as to the moneys paid by the railway company for the construction
of these Outlook stations.
There seems to be two questions on the
determination of which the rights of the contestants rest, first: Whether there
was an equitable assignment from Garson to Fraser of the former’s contract with
the Canadian Pacific Railway Co. for the construction of these stations. If so,
was the notice of such assignment given to the bank before they made the
advances to Garson which the bank’s assignment was intended
[Page 327]
to cover and secure. The trial judge, Chief
Justice Mathers, held, as I understand his judgment, that there was such an
equitable assignment, but that
when the bank took its assignment from
Garson (on the 24th June, 1910) it had no notice of any interest that the
plaintiff had acquired in any Garson contract with the railway company or of
any arrangement that had been made between Garson and the plaintiff with
respect thereto. That as soon as the bank took its assignment it perfected it
by notice to the railway company and thus gained priority over the plaintiff’s
assignment of which no notice was ever given.
For these reasons he dismissed the plaintiff’s
action. So far as advances made by the bank to Garson up to the time of the
assignment to it are concerned these reasons might be good. I cannot see their
application to subsequent advances made by the bank after notice of Fraser’s
assignment.
The Court of Appeal for Manitoba dismissed the
appeal to it on the ground that it
would be unsafe from the evidence to find
as a fact that there was any equitable assignment.
The facts of this case are somewhat unique.
There was, of course, at the time of the alleged equitable assignment from
Garson to Fraser of the former’s contract, no fund in existence to assign,
there was simply Gar-son’s contract rights which were as and when he built the
stations to receive the contract price as stipulated for. There never was any
work done nor materials supplied by Garson under the contract and the work done
and the materials supplied were done and supplied by Fraser. There was not any
assignment from Garson to the bank of any specific moneys to accrue due to the
former under the contract relating to the Outlook stations. It was a general
assignment of
all my claim and demand for moneys due or
hereafter to accrue due to the said William Garson from the Canadian Pacific
Railway Co.
[Page 328]
The consideration for the assignment was $1 and its object and purpose as
explained by the manager of the bank was to secure the bank for any then
existing or future advances made to Garson. So far as advances made by the bank
to Garson at the time it took this assignment and before it had notice of the
equitable assignment to Fraser are concerned, of course, no question arises.
With regard, however, to any subsequent advances made by the bank after such
notice it would be plainly unjust and inequitable to permit the bank to hold
these moneys received from the Canadian Pacific Railway Co. as the price of
construction of the Outlook stations as against the equitable assignee who had
done the work and notified them of his assignment. And so with regard to the
balance due by the Canadian Pacific Railway Co. on the contract and brought
into court the bank would, in the event of its being held to have had notice of
the equitable assignment from Garson to Fraser, only be entitled to claim this
balance to the extent of the advances made prior and up to the receipt of the
notice.
I entertain grave doubts whether the words of
the assignment to the bank, construed in the light of the manager’s evidence as
to its object and purpose, cover moneys earned by the assignee of the contract,
Fraser, after the bank had notice of his assignment. Technically they may be said
to be moneys “accrued due to Garson,” in whose name the contract was made and
remained, but really and equitably they were not, but accrued due to the
assignee who by the expenditure of his time and money had earned them. Assuming
the equitable assignment and the notice to the bank as proved, then the bank
receiving the money legally enough from the Canadian Pacific Railway Co. would
[Page 329]
hold it in trust for its real owner, the
assignee. All it could claim would be the right to have any advances made by
it, before it received notice, repaid out of the moneys it received.
Now, was there an equitable assignment to Fraser
of Garson’s Outlook contract? I agree with the trial judge that there was. No
form of words is necessary to create such an assignment. It is always a
question of fact and of the intention of the parties to be gathered from what
they said and did and from all the surrounding circumstances. Garson died
before the suit began and the only direct evidence of what took place between
Garson and Fraser is that of the latter. Reading it as I have done several
times over and applying it to the admitted facts of this case I cannot doubt
that if believed, and the trial judge who saw Fraser and heard his evidence
believed it, the intention of both parties was that the entire contract and
Garson’s rights under it should, as expressed, be “taken over” by Fraser at the
price Garson had for the stations to be built and that Fraser should supply all
the materials, do all the work and become entitled as between him and Garson to
the contract price. As a matter of fact he did supply all the material and did
all the work and in equity as between Garson and Fraser no doubt could arise as
to his being entitled to the moneys to be paid by the railway company therefor.
We are not left, however, to Fraser’s evidence
alone on this point. We have the conduct and actions afterwards of Garson
before his illness and his conversations and correspondence with and to the
bank’s officials. Mr. Leslie, the manager of the bank, himself says that Garson
and Fraser came in together to see him at one time and that Garson said: —
[Page 330]
i came in, Mr. Leslie, to let you know i
have handed over my stations to Mr. Fraser,
which stations Mr. Leslie understood as the
Outlook stations. If Garson was only subletting to Fraser there would be no
reason in his giving the bank notice of it. He gave notice because he was
assigning and ceasing to have further interest in it. As to when Garson made
this statement Mr. Leslie seems very uncertain and hazy. He seems clear that it was before the $3,000
advance made in November, 1910, but how long before he could not say. It might
be, he thought, a month, could not say whether it was two months, and the
nearest he could get to the time was that it was sometime daring the summer after
the assignment to the bank. Mr. Leslie evidently did not pay much attention to
this statement of Garson’s relative to the turning over of the Outlook stations
to Fraser, because at the time the bank took the assignment from Garson the
only contract that he knew definitely that Garson had with the Canadian Pacific
Railway Co. was for the roundhouse at Calgary. While the words of the
assignment may be, and doubtless are, large enough to embrace these Outlook
stations contract it seems clear alike from Garson’s conduct in assigning it
over to Fraser and from the bank officials’ conduct and attitude towards it
that they themselves did not intend the general words of the Garson assignment to
include in them moneys becoming due on a contract standing in his name it is
true, but which he had turned over to another contractor without investing a
dollar either in labour, materials or otherwise, and which moneys only became
due at all by the labour and expenditure of his assignee. That was doubtless
one of the reasons why the manager of the
[Page 331]
bank paid little attention to the express notice
Garson gave him in Fraser’s presence that he had handed over this contract to Fraser
and was unable to fix the time he received it more accurately than that it was
sometime during the summer after the assignment. I conclude that as between
Garson and Fraser it was not a mere subletting of the Garson contract, but a
complete equitable assignment of it and that when Leslie swears that Garson
told him he had called to tell him that he had handed over his Outlook contract
to Fraser, who was then present, all parties understood that by handing over
the contract he meant assigning it over. But the knowledge brought home to the
bank of the assignment of this contract does not rest here. Fraser swears,
though on this point he is contradicted by Morris, the assistant manager, that
some two weeks or so after taking over from Garson these Outlook stations he
went to the bank, saw the manager and assistant manager and gave the latter a
memo, of the contracts he had, including the six Outlook stations, stating he
wanted some financial assistance. He said he was told to call again, that he
afterwards did so and was told by Mr. Leslie, the manager, that “perhaps when
he got those stations well through” the bank could advance the money. If Fraser’s
evidence on this point is accepted following Garson’s admitted notice to the
manager the question of notice to the bank might be well determined in his
favour. But apart from this evidence I think the dealings Fraser had with the
bank respecting the moneys paid to it by the Canadian Pacific Railway Co. under
the Outlook contract, shew clearly that it had full notice of the assignment of
the contract to Fraser. It is urged that the conduct of the bank officials is
consistent with their belief that
[Page 332]
the work was being clone by Fraser as a
sub-contractor under Garson merely and not as an assignee. I do not think so.
First we have Fraser on August 25th, 1910, going to the bank, as he says, with
reference to the payment of the first estimate on his work. The bank had not
received the money, but Morris, the assistant manager, filled up a ten day note
for $800 which Fraser signed, and received the amount less discount. Fraser swears
that this was an advance on the first estimate of $1,620, which was then
discussed between them, and that it generally took about 30 days to get the
money after the estimate passed. Morris denies that this $800 was advanced on
the $1,620 estimate or had anything to do with it and says that he first
learned Fraser was building the stations or had taken them over from Garson token
this action first started. I am not, however, able to reconcile this denial
and this statement of Morris’s with his actions respecting the cheque for the
$1,620 estimate when received by the bank or with his correspondence referring
to the subsequent estimates on the same contract.
On August 22nd, 1910, Garson drew a cheque in
Fraser’s favour on the bank for $1,620, expressing on the face that it was for “payment
of first estimate Outlook contract, C.P.R.” On the 9th of September the bank
received and credited Garson with the amount of the estimate and marked the
cheque “Accepted, Sept. 9th, 1910, Imperial Bank of Canada.” Fraser indorsed
the cheque and the bank put it to his credit. Morris, the assistant manager,
initialled the cheque himself, and it would seem idle for him now to say that
he first learned Fraser was building the stations or had taken them over
from Garson
[Page 333]
when this action first started. Fraser on the
24th of August drew a cheque for
$700 in favour of his foreman, Simmons, who was erecting the stations, and in
the body of it stated that it was “A/C stations.” He says that he told Morris
that it was for the building of these stations that he was sending the money.
The bank with Morris’s knowledge remitted the money to Simmons at Keeler, where
he was erecting one of the stations, and the cheque itself contains a memo,
indorsed in Morris’s handwriting, “Keeler, Sask.” There were other cheques
given by Fraser for the same purpose and remitted in the same way. On October
6th the bank received the second instalment of $5,400 on these stations
contract. Before that, however, on September 20th, 1910, Garson had written the
bank from Calgary, saying:—
As C. P. August estimate is now overdue I
enclose a cheque in favour of W. H. Fraser with amount blank, which you
will oblige by filling in for the sum returned in the August estimates for
the stations he is building and hand same to him as soon as the cash comes
in.
This blank cheque on its face read: “Aug.
estimates Outlook stations” and when a few days later the blank was filled
in with $1,000, the abbreviation “a/c.” was placed before the words “Aug.
estimates Outlook stations.” Mr. Morris received and, on the 24th, answered
this letter, enclosing this blank cheque, as follows:—
Referring to your letter of the 20th
instant re W. H. Fraser we are advised by Mr. Fraser that his August
estimates amount to about $5,400. We have filled in your cheque in his favour
for one’ thousand dollars ($1,000) in the meantime. Yours truly, M. Morris,
Assistant Manager.
In the face of this correspondence it is clear
that Morris’s memory must have failed him when he stated that he first learned
when this action began that Fraser was building the stations or had taken them
over from Garson.
[Page 334]
Fraser swears that he was advised by Garson of his having sent the bank a blank
cheque for the second estimate and that he went to the bank, saw Morris, who told him the money had not up to that
time been received and asked him to fill in the blank with $1,000. As Morris
himself writes Garson that Fraser then advised him that his August estimates
amounted to about $5,400, it would seem there was no room for doubt that at
that date at any rate the bank had full knowledge not only that Fraser was
building the stations, but that he was building them under an arrangement with
Garson which entitled him to receive the estimates as they were passed and paid
in by the Canadian Pacific Railway Co. On October 8th on another cheque being
received by the bank from Garson in favour of Fraser the balance of their
estimates, namely, $4,400, was paid by the bank to Fraser’s credit and this
cheque again on its face expressed that it was “estimate No. 2, Outlook
stations.”
Later on, in November, Fraser states that he
became aware the third estimate for $7,800 had been passed, but not paid and
that he and Garson went to the bank to see about getting an advance. Fraser got
the advance on a note signed by both Garson and himself on the 21st of
November, payable on demand. Morris again denies that this $3,000 was being
advanced “in anticipation of the estimate.” It is worthy, however, of note that
some days previously, namely, on November 9th, Garson wrote a letter to the
bank on his general business matters, which contained the following sentence:—
It is likely the C.P.R. estimate in Outlook
work will be paid in shortly. It belongs to W. H. Fraser. When it comes
let him draw on me at sight for the amount and transfer it to him,
[Page 335]
and in another paragraph:—
Let me know if you approve of my keeping
the money in your bank here.
To which letter Mr. Morris signing himself “assistant
manager” replies on the 14th November as follows:—
I am in receipt of your letter of
the 9th and note your advices. There is no objection to your retaining
money in Calgary for your Calgary contracts providing that proceeds of your
C.P.R. contract will be sufficient to protect advances in this office.
Not a single word throwing a doubt upon Garson’s
statement that the November estimate on the Outlook work belonged to W. H.
Fraser and was to be transferred to him. Surely if any doubts existed as to the
bank’s knowledge that Fraser was the real contractor for the Outlook stations
and entitled to receive the estimates as they were paid into the bank, this
letter should have set them at rest. This third estimate was for $7,800. $3,000
had been advanced on Garson and Fraser’s note to the bank and $1,000 of the
three forwarded by the bank by express on the same day to Fraser’s foreman,
Simmons, on Fraser’s cheque expressing that its “A/C. Simmons, C.P.R. stations.”
This cheque was initialled by Morris and indorsed by Fraser with the words, “Glenside,
Saskatchewan,” indicating the place where the money was to be spent, that being
one of the places where he was erecting a station. There were also cheques
drawn by Fraser on the bank, one for $1,002.50 on October 18th, 1910, favour of
“Dfts. Moose Jaw and Keeler,” the other for $1,003.25 on October 28th, favour
of “cash,” each of which contained in the margin the words and figure “C.P.R. 6
S.,” which I conclude meant the 6 Outlook stations being built by Fraser and
the amounts of each of which cheques were forwarded by the bank at the places
indicated, the latter cheque being accompanied
[Page 336]
by a requisition from Fraser, “Required a draft
on Broderick in favour of J. H. Simmons. Applicant, W. H. Fraser.” “Broderick”
was the name of one of the stations and Simmons the name of Fraser’s foreman
building them. Sometime after the 21st November, 1910, when the $3,000
were advanced to Garson and Fraser on their note taken “on demand,” the $7,800,
being amount of the third estimate, was received by the bank. The exact date of
its receipt I do not find, but Garson was then ill in the hospital at Calgary
and his account at the bank in an unsatisfactory condition. Fraser made repeated applications to the
bank for this money, which were rejected and ultimately he went to Calgary and,
Garson being sick in the hospital and not able to be seen, obtained from his
foreman or manager a cheque for the amount of $7,800 expressed as “Transfer re
C.P.R. Outlook stations,” and signed “pp. Wm. Garson, John Sweeny,
attorney.” This cheque the bank refused to honour. Garson subsequently died,
and this action was brought in which the Canadian Pacific Railway Co. was
joined, inasmuch as they had not paid the balance of the contract into the
bank. That balance, $8,503, remaining unpaid in respect of the contract for the
Outlook stations the railway company brought into court, claiming no interest
in it other than for costs and leaving it for the disposal of the court between
the contestants Fraser and the bank.
The Canadian Pacific Railway Co. or their
interests, are, therefore, in no wise concerned in the result of this case.
Their stations were admittedly built for them by Fraser. The money contracted
to be paid became due. Whether they had notice or not of the assignment to Fraser
by Garson or whether they did or did
[Page 337]
not waive the clause in the contract prohibiting
its assignment without the written consent of the engineer cannot have anything
to do with the issues as between the bank and Fraser. The money had been paid
in part, $7,800 to the Imperial Bank, who still claim to hold it presumably for
advances due them by Garson, and the $8,503 is in court payable to the bank if
their legal contentions are maintainable, and if there is still that amount due
them for advances to Garson, or payable to Fraser if he was the equitable
assignee of Garson’s Outlook contracts and if the bank had notice of such
assignment before making the advances.
As I have previously stated I do not myself
think there can be any doubt as to what was meant by the parties, Garson and Fraser,
when after the former had asked the latter to take over this contract and Fraser
having first examined the plans and specifications and made his own estimates
told Garson he would take them over at the price he had for them and Garson
agreed to it. By “taking over” the contract the parties meant that Fraser should
stand with respect to it and its obligations and rights in Garson’s shoes. If
there was any doubt as to what “taking over” at his tender price meant, the
subsequent conduct and actions of the parties sets that doubt at rest. Garson
never claimed a cent of the estimate paid on the work by the Canadian Pacific
Railway Co., but, on the contrary until his fatal illness occurred, the
contract standing in his name, gave Fraser cheques, one of them in blank, for
the amount of these estimates as they were paid into the bank and in his letters
to the bank used language which could only have one meaning,
[Page 338]
and that was that the contract was entirely
Fraser’s, who did the work, supplied the material and became entitled to the
moneys earned under it for his own benefit. As to the bank having notice I
think they had full and ample notice in the summer of 1910.
I do not know whether an earlier date than
August is necessary to maintain the plaintiff’s contentions as the bank’s
account with Garson is not in evidence and we do not know the dates when they
made the advances to Garson, but I see
no reason for refusing to accept Fraser’s statement that within two weeks after
his taking over the contract he was seeking financial assistance from the bank
and left the list of the contracts he had, including the one now in question,
with them, and that he then gave them the necessary notice. If there is doubt
with respect to that then, in my judgment, the evidence of their having had
notice in August and the early part of September, when the first estimate was
passed to his credit is sufficient to fix the date and the cumulative evidence
which follows in the correspondence between the bank and Garson and in the
dealings of the bank with Fraser, is overwhelming. I cannot myself see how in
the face of this correspondence and these dealings, so corroborative of what Fraser
has sworn to, the bank could for a moment seek to appropriate the fruits of
Fraser’s labours and expenditure towards the payment of advances made by them
to Garson, which advances it cannot be seriously contended were in any wise
made on the strength of the assigned Outlook contract.
The appeal should be allowed with costs in all
courts against the bank. Canadian Pacific Railway Company’s costs to be paid
out of money in court.
[Page 339]
Judgment to be entered for Fraser for $7,830
admitted in the 6th paragraph of the bank’s defence to have been received by
it, with interest at statutory rate, from the date of its receipt, and also for
the moneys paid into court by Canadian Pacific Railway Co., less its costs.
Idington J.—The late Mr. Garson tendered to the Canadian Pacific Railway Co.
by separate tenders put in at the same time, for the construction of its
round-house at Calgary and also six stations on its Outlook Branch, and was
awarded the contracts therefor. The former was a large contract and Garson
seems to have thought there was not enough in the latter to render it worth his
while distracting thereby his attention from the former and other contracts he
had undertaken, and hence offered the appellant to take the latter off his
hands, do the work, supply the material and receive the entire amounts named in
the tender therefor or accruing under the contract. Appellant accepted his
proposal. Garson being alone known to the company had of necessity to sign the
contract. As between him and the company he was the contractor responsible for
the execution of the work. As between him and the appellant the contract being
non-assignable he was bound to appellant to see that he got all moneys accruing
thereunder in respect of work done by appellant.
The learned trial judge held rightly that there
was thus created an equitable assignment of said moneys.
Two months later and after the appellant had
entered upon the work pursuant to this understanding the respondent obtained
from Garson an assignment
[Page 340]
dated 24th June, 1910, of which the operative
part is as follows:—
Know all men by these presents that William
Garson, of the City of Winnipeg, in the Province of Manitoba, for and in
consideration of the sum of one dollar paid to the said William Garson by the
Imperial Bank of Canada (the receipt whereof is hereby acknowledged) doth
hereby sell, assign and transfer unto the said Imperial Bank of Canada all my
claim and demand against the Canadian Pacific Railway Company for moneys now
due or hereafter to accrue due to the said William Garson from the Canadian
Pacific Railway Company.
There follows this a power of attorney to
collect the moneys referred to for the use of the bank absolutely as its own
forever.
It is to be observed that on its face this
assignment is only in consideration of one dollar.
Obviously on the evidence this document does not
tell the Whole of what it was intended for. The bank manager who witnessed its
execution says in his discovery examination
it was given as security for the advances
made from time to time to Garson,
and proceeds as follows:—
Q. Was it for advances already made or for
future advances?
A. It was both.
Q. Did you know at the time of taking that
assignment what contracts he had with the C.P.R.?
A. No.
Q. What moneys were owing to him?
A. Not definitely.
Q. Why do you say “not definitely”?
A. I knew that he had contracts with the
C.P.R., but I knew nothing as to the amount definitely coming to him.
Q. Did you know what kind of contracts he
had?
A. No, not — I knew that he had — nothing
definitely; The only thing I can remember that he had was some contract for
roundhouses or something of that kind.
Q. Do you remember him stating that he had
contracts for stations and roundhouses?
[Page 341]
A. Not definitely; the only thing I can’
remember that he had some contract for roundhouses at Calgary; that is the only
definite contract that I——
Q. He told you that he had tendered?
A. Yes.
Q. And you remember that distinctly, and
you remember definitely about the roundhouse at Calgary?
A. Yes. I am pretty sure that that is
right. But we never made any inquiry as to the nature of his contracts or where
they were.
In his examination-in-chief at the trial to the
question put thus: “Q. Under this assignment from Garson to yourselves — the
bank — was any money advanced by the bank?” he answers, “No, not at the time.”
And later the question was repeated with the added words, “on the strength of
this assignment.” “A. Why, I can’t remember just now. It strengthened Garson’s
credit.” And he continues:—
Q. It was advanced on the strength of
Carson’s credit?
A. Yes.
Q. After this assignment was made were
moneys advanced to Garson?
A. Yes; that is my recollection, at least.
Q. Would all the moneys in question in this
action be sufficient to pay off Garson’s indebtedness to the bank?
Mr. Elliott: I object to the question.
His Lordship: I will allow it.
A. No.
Q. You say no?
A. Yes — I am not positive about that. Yes,
I think I can say no.
Q. You say no?
A. Yes; that is the moneys coming from here
would not be sufficient.
In other parts of his evidence he indicates
inquiries were sometimes made of the Canadian Pacific Railway Co. respecting
the amounts due on specific contracts on faith of which or to subserve the
purposes of which advances had been asked by Garson.
The bank cannot, therefore, claim that it ever
knew of and as result of definite knowledge relied upon this alleged assignment
of the Outlook stations contract as security for either past or future
advances.
[Page 342]
There appears in the letter of September 20,
1910, from Garson to the bank, which I will deal with presently, a report, as
it were, of the progress he was making in his several contracts, and I think it
fairly inferable from that and other evidence that the bank from time to time
relied upon similar reports from Garson as well as answers of the Canadian
Pacific Railway Co.’s officers for information as to the progress of his
contracts when making advances either to help out the execution of such
contracts or make the money earned therein the basis for further advances or
security for past indebtedness.
I cannot find a single instance of such inquiry
or report relative to the Outlook stations contract, save when the facts
relative thereto were, as I am about to shew in detail, so coupled with
respondents’ rights as should have put it on inquiry and have destroyed any
right to claim reliance on the proceeds from said contract for any advances
made to Garson outside of the scope of said contract.
Such is the nature of the claim set up by
respondent to deprive the appellant of his equitable assignment and to despoil
him of his labour, his money and his property spent in reliance thereon.
Having regard to the express non-assignability
of the contract between Garson and the Canadian Pacific Railway Co.; to the
want of definiteness in the form of assignment respondent relies upon; to the
nonexistence, at the date of the assignment, of any debt due or known to the
respondent to be accruing due as arising out of this contract now in question;
to the want of proof of any debt due from the assignor Garson to the respondent
at the said date and remaining due when the assignment could have acquired any
conceivable
[Page 343]
operative effect; and in short to the entire history of legal assignments of choses in
action, including the “King’s Bench Act” of Manitoba, section 39, and the
effect thereof I submit that the said assignment, if anything, cannot be
treated as any higher or stronger than an equitable assignment and that the
rights of respondent and respective rights of the parties hereto must be
determined by the principles of law governing equitable assignments and the
equities between them as will be developed presently.
It is said respondent must succeed by virtue of
notice to the Canadian Pacific Railway Co. within the rule laid down in Dearie
v. Hall,
and a long line of cases of a like kind ever since. But I cannot find such
a case as this in all that long and varied line.
The only notice given the debtor, the Canadian
Pacific Railway Co., was a delivery of the assignment accompanied by a letter
as indefinite as the instrument itself.
The language used by Lord Cairns in Shropshire
Union Railways and Canal Co. v. The Queen, at page 506, and quoted
with approval by Lord Macnaghten in Ward v. Duncombe, at page 391, is so
comprehensive and forceful and expresses so much better than I can exactly what
I feel should not be lost sight of in dealing with so remarkable a claim as respondent
presents herein, that I cannot forbear quoting the entire passage as presented
by Lord Macnaghten. He says:—
The general principle applicable to all
equitable titles is, I think, well expressed by Lord Cairns in Shropshire
Union Railways and Canal Company v. The Queen, at
p. 506: “A pre-existing equitable
[Page 344]
title,” said Lord Cairns, “may be defeated
by a supervening legal title obtained by transfer” — he was there speaking of
an equitable title to shares. Then he goes on: “And I agree with what has been
contended, that it may also be defeated by conduct, by representations, by
misstatements of a character which would operate and enure to forfeit and to
take away the pre-existing equitable title. But I conceive it to be clear and
undoubted law, and law the enforcement of which is required for the safety of
mankind, that in order to take away any pre-existing admitted equitable title,
that which is relied Upon for such a purpose must be shewn and proved by those
upon whom the burden to shew and prove it lies, and that it must amount to
something tangible and distinct, something which can have the grave and strong
effect to accomplish the purpose for which it is said to have been produced.”
How can such a requirement of the law thus
defined be held to have been complied with by the delivery of such an
assignment as this now before us?
The further expressions of Lord Macnaghten
himself on pages 392 to 394 of latter case criticizing the expressions so usual
as to “perfecting” or “completing the title” of an assignee and constituting
the debtor in a contract or the holder of a fund “a trustee” for the assignee
and the duties or rights of a trustee in such a position are worthy of note in
the same connection.
The assignment if purely voluntary could not
acquire, even with notice, priority over an earlier one for valuable
consideration. See Justice v. Wynne (1860), which is the only express
authority on the point, cited in the text-books, but I take the principle of
law involved therein to be undoubted, when regard is had to the doctrine,
speaking generally, that courts of equity will not aid a mere volunteer in any
case to enforce a gift failing in anything essential to its completion. I shall
advert to this principle later when I come to deal with the respondent’s claim
as presented
[Page 345]
on the evidence outside this instrument. I am
only concerned here just now with the bare question of the effect of notice
when resting on such a foundation as presented here.
This assignment on its face is purely voluntary.
How can it be that such notice as that carried should be converted into
something higher than it seemed by its terms to express? If it had purported to
be by way of security as now claimed, then this might have been of less
consequence, but it appears from its contents as if an absolute gift. The
alleged basis of the principle upon which notice is given such effect as it has
is said by Lord Lyndhurst in Foster v. Cockerell, at page 475, to have been
founded on the reason
that if a contrary doctrine was allowed to
prevail, it would enable a cestui que trust to commit a fraud, by
enabling him to assign his interest, first to one and then to a second
incumbrancer, and perhaps, indeed, to a great many more; and these later
incumbrancers would have no opportunity of ascertaining, by any communication
with the trustees, whether or not there had been a prior assignment of the
interest, on the security of which they were relying for provision of their
claims.
And he adds later on:—
In a case of this sort it is necessary that
a party claiming advantage from a title, should do everything that is requisite
to complete that title before he sets up a claim in respect of it.
Such being the purpose of the rule as to notice,
how can it operate when the reason for its application ceases, and it is sought
to so extend its application as to enable the assignee in a kind of case
without precedent, to rake in not only the whole or part of an ascertained
fund, but of one to be created by the prior assignee’s own labour and material?
When and how does this fraud then appear? And when and how can we find in this
notice a doing of everything requisite to complete title?
[Page 346]
Giving the doctrine full force and effect one
would imagine that a thing so very important should be true and not as false as
the notice relied upon herein. Again, in every one of the authorities the
respondent sets forth in its factum in this regard the notice given was clear,
specific and related to a well-defined claim or fund existent or to arise from
another source than at the prior assignee’s expense.
In the case of Marchant v. Morton,
Down & Co.
the facts suggested to Mr. Justice Channell a feature that might possibly, on a
slight variation of fact, have raised a question remotely resembling this
relative to sources to feed the fund.
But a somewhat diligent search has failed to
discover for me a single authority of an assignment and notice thereof
substantially failing in these characteristics yet having been upheld.
In this case there is nothing specific, definite
or clear in the notice which is the assignment itself. How could a debtor or
trustee of a fund if such had existed be held bound to trouble himself with
such a notice of a voluntary assignment? And how much less so in a case where
he was not bound to recognize any assignment and had reserved the right to
himself to resist and discard any assignment?
Surely the paymaster, or trustee if you will, in
such a case had a right to discard as notice that which might have entitled
him, if set forth truly and at length, to elect to declare the whole contract,
which is to produce the fund assigned, void and ended forever. Of what value,
moreover, could a notice be, which neither pointed to one contract nor another?
Is it possible to argue this one in question is wide enough
[Page 347]
in its terms to cover all past and possible
future relations between the assignor and the Canadian Pacific Railway Co.
during the entire lifetime of the deceased? I think not.
Let us then examine its terms closely and see if
we can find anything definite.
The singular number is used in describing the
thing assigned. It is not several claims, but Garson’s single claim that is
assigned. We know he had more than one claim, but from the evidence of the
respondent’s manager, who was the witness to this assignment, we find he only
knew of one claim and the appellant is not concerned with that. If we must, as
the language requires, restrict respondent to one claim, then that of which
respondent had some knowledge or notice must be the one, rather than one
absolutely unknown. Surely this ought, if the notice is not definite, to end
the contentions set up. If not good notice then as appellant’s equity is prior
respondent must fail.
I wish also to draw attention to the very peculiar
language of this assignment.
How did the assignment get its very peculiar
wording? It begins in the third person, but when it describes the claim it
changes and takes the unusual form in the peculiar phrase, “my claim,” etc.
It looks as if Garson had orally or in writing
referred to “my claim” in some instructions he had given to distinguish that to
be assigned from claims merely standing in his name as trustee in effect, as he
did in subsequent letters to respondent, not only in the reference made to the
appellant’s rights, but as he did in that of the 20th of September, 1910, when
he refers to a Minnedosa account and says,
this really belongs to Snyder. i have sent him a cheque accordingly.
[Page 348]
I think this alleged notice of an equitable assignment
held in the courts below as sufficient to give respondent priority fails for
the reasons I have given. And I may add that the same reasoning is destructive
of the assignment itself as covering the contract in question, whatever other
contract it may cover.
I have combatted thus far that line of argument
which prevailed below, but incidentally have noted as relative thereto other
facts and circumstances which in another light are equally fatal to the
respondent’s claim.
A perusal of the entire evidence in this case
has deeply impressed me with the conviction that Garson never intended by this
assignment to pass to respondent, for its own benefit, or deprive appellant of,
what he had undoubtedly promised him, and that he had made this clear to some
one in such manner as to render respondent’s officers indifferent regarding the
stations contract in question.
The respondent’s manager was applied to by
appellant shortly after his agreement with Garson to furnish financial
assistance in case of his
making further arrangements with Garson for other work, but was refused.
Both are agreed appellant was then asked for a
statement of his affairs. Whilst the manager admits he saw such a statement he
denies hearing then of this Outlook stations contract. The appellant distinctly
says he then told him of his arrangement with Garson for that contract.
It may be that the manager attached so little
importance to the contract that he had forgotten it. I see no reason for
disbelieving appellant’s version which seems highly probable. It was part of
the very
[Page 349]
business both agree
was considered and must have concerned them both in the consideration thereof.
At all events the appellant, who was refused on
that occasion, was a short time after given accommodation and later on several
occasions further accommodation and each was, curiously enough, connected with
the estimates for the work done under the very contract now in question. These
estimates were the property of respondent if it ever had a claim; yet its
manager and assistant manager let them be so dealt with by the appellant or by
him through Garson as if they belonged to appellant.
The documents themselves in these transactions
by the very language used therein seem to earmark the first two estimates so
dealt with as appellant’s property; the figures involved therein seem to fit in
with and, as it were, to emphasize these facts, and taken therewith the letter
of the 20th September from Garson to the respondent’s manager clearly
demonstrated appellant’s claim to the eyes of respondent’s officers; and the
letter of the 24th September in reply thereto from the assistant manager to
Garson conclusively proves that demonstration of fact had reached him. It must
be presumed from all these and other facts, to have so reached the
understanding of all concerned on behalf of respondent, that we can safely say
these moneys were being treated to their knowledge by both Garson and appellant
as the money and the property of the latter.
Then the letter of the 9th November from Garson
to the respondent’s manager as to the third estimate after dealing with a
variety of his contracts and the moneys earned thereon expressly states:—
It is likely the C.P.R. estimate on Outlook
work will be paid in shortly. Belongs to W. H. Fraser. When it comes let him
draw on me at sight for the amount and transfer it to him.
[Page 350]
The answer to this last letter fails to
repudiate such a suggestion, and in the first sentence says:—
i am in receipt of your letter of the 9th instant, and note your advices,
but makes no remonstrance in answer to such a
claim. That claim ought by this time, if the pretension now set up by
respondent is well founded, to have been repudiated in no uncertain terms, but
it was not. It was acquiesced in.
Throughout the whole of these dealings the
respondent never, either to appellant or Garson, disclaimed the grounds for
such pretensions as implied therein.
This silence on the part of respondent’s
officers, and this manner on the part of all concerned of treating the claim of
appellant, is consistent with the truth of his statements relative to what had
taken place between him and the manager, and hardly consistent with any other
theory than its truth; save and except a theory of the entire ignorance of the
officers of respondent of any claim it had under the assignment and want of
reliance by the respondent on any claim to, or to charge, the fund in question.
It is absolutely inconsistent with a proper realization by respondent’s
officers of the legal and moral duty resting upon them under the circumstances
which had transpired under their eyes, if their present pretensions herein were
well founded.
I cannot agree with the view of the learned
trial judge that what transpired after the date of the assignment can have no
effect on the light in which it is to be considered.
Respondent’s mode of treating what transpired
after that is cogent evidence corroborative of what
[Page 351]
appellant states had taken place relative to his
rights in the premises and of the notice he claims respondent had.
Besides it could not be permitted to any one
claiming under an equitable title the moneys in question to maintain under such
circumstances such silence relative to such a claim, if it ever had existed,
and then to try to set up such a claim as now set up by respondent as against
him whose labour and money were creating and had at the institution of these
proceedings created the fund now claimed by respondent.
But there is another ground yet which to my mind
should bar the respondent’s claim. It sets up by evidence I have quoted above,
that the assignment was in truth not what it expresses, but was taken by way of
security for advances to be made as well as for past advances.
No past advance is shewn to have existed unpaid
when this suit began, and hence, as already stated, it cannot be held as
security for that. No specific advance ever was made on the faith of this
security. And no further advance was made before appellant’s equity had to the
respondent’s knowledge, clearly intervened.
If this claim relative to later advances is to
be treated, as I think it can well be treated in such case as the like advances
were treated in the case of Hopkinson v. Rolt, as between a first and
second mortgagee then the claim of what respondent had acquired by reason of
its advances on the faith of its bargain and charge must be subject to the
claim of the appellant for his labour and expenses which created the fund in
dispute.
That was a case as (between first and second
mortgages
[Page 352]
in which the first was held good only as to
advances made when it was taken, or before the second was acted upon, but as to
future advances which the first was intended to secure, they were held, so far
as made after the advances on the second mortgage had intervened to be subject
thereto. Assuming that by the assignment and notice to the Canadian Pacific
Railway Co., the respondent had obtained in form a first mortgage to secure
future advances then applying the principle involved in said case it was
incumbent on it to have shewn it had made such future advances in priority to
those of the appellant. This mode of dealing with equitable claims to secure
future advances was followed in the case of the Bradford Banking Company v.
Briggs,
where the facts were as stated in the head-note as follows:—
The articles of association of a company
registered under the Companies Act, 1862, provided that the company should have
“a first and permanent lien and charge, available at law and in equity, upon
every share for all debts due from the holder thereof.” A shareholder deposited
his share certificates with a bank as security for the balance due and to
become due on his current account, and the bank gave the company notice of the
deposit. The certificates stated that the shares were held subject to the
articles of association.
It was held the moneys which became due to the
company after notice of the deposit of share certificates could not take
priority over the equitable claim of the bank for its advances of which the
company got notice.
Holding, as I do, that if the respondent had not
before its alleged assignment, it had at least shortly thereafter notice of the
appellant’s claim, then in any event the appellant obtained priority over it in
respect of any later advances.
[Page 353]
It may be said the case was not so treated below
as to call for a determination of the exact facts that might have to be
investigated if we had to decide on this ground alone.
It was, however, I submit, respondent’s own
course of dealing with the case and contentions at the trial that led to this
situation and hence its own fault.
As I have come to a decided view on the other
grounds taken, I need not enlarge on this latter ground. Though it falls in
line with the main argument taken to shew, in any view, what a hopeless case
respondent in truth had, yet if the case had to turn exactly on this ground
alone an opportunity should be given to shew that in fact the future advances
were made before what I hold to have been notice.
This I say, however, is only in deference to the
finding of fact by the learned trial judge as to anterior notice for my own
impression does not quite coincide therewith. I should imagine it is the case
of the man having only one thing of the kind to remember and so remembering it
as against the man having possibly scores of the same sort to pass upon and
dismiss and not quite so sure to remember.
I would allow the appeal with costs throughout
and award judgment against the respondent for the moneys in question come to
its hands and interest thereon and judgment for the moneys paid into court and
direct the costs of the Canadian Pacific Railway Co. to be fixed as between
solicitor and client, and to be paid by respondent to the company, or if
already deducted to be recouped by the respondent so that appellant get from
the funds or moneys what he would have got but for respondent’s wrongful
interference.
[Page 354]
Since writing foregoing I have agreed to the variation thereof as to costs embodied in
memorandum prepared by my brother Mr. Justice Davies.
Duff J.—This appeal arises out of an action in which the appellant, Fraser,
as plaintiff, and the respondent bank, as defendant, each claimed to be the
owner of two certain sums of money. These sums had been earned under a contract
to which the parties were the Canadian Pacific Railway Company and one Wm.
Garson, by which Garson was to build six stations on the “Outlook” Branch of
the Canadian Pacific Railway. Under an arrangement with Garson the’ stations
were in fact built in the summer and autumn of 1910 by the appellant Fraser entirely
at his own expense and the moneys in question formed part of the price payable
under the contract for this work done by Fraser. Fraser’s claim is based upon
an alleged term of his agreement with Garson by which the moneys paid to Garson
under the contract were (it is said) to be paid by him to Fraser as and when
they should be received by Garson. The bank’s claim rests upon an assignment dated 24th June, 1910, by which
Garson professed to assign to the bank
all his claim and demand against the
railway company then due or thereafter to accrue due to him from the railway
company,
of which assignment the railway company was
immediately notified by the bank and by which Garson also appointed the bank
his attorney to receive such moneys from the railway company. One of the sums
in controversy ($7,830) was paid by the railway company to the bank, the other
($7,020) was paid into court. The trial judge held that:
[Page 355]
The real arrangement was that the plaintiff
should construct the stations in the place and stead of Garson and that the
latter would turn over to him the progressive payments as and when they were
received from the company.
But he held also that the bank having given the
railway company notice of its assignment before having any knowledge or notice
of the arrangement between Garson and Fraser had the better title to the moneys
in question; and allowed the claim of the bank in its entirety. The Court of
Appeal held that the appellant must fail on the ground that he had not
satisfactorily established an assignment from Garson. I have gone over the
evidence repeatedly with care and I am quite satisfied that the appellant has
established his title to these moneys as between himself and Garson and that
the rival claim of the bank is without substance. The case has been beset with
confusion from the beginning of it, but when the facts, either admitted or
established almost indisputably, have been grasped the rights of the parties
fall to be determined by the easy application of one or two well established
principles of law.
It was in April, 1910, that Garson entered into
an agreement with the Canadian Pacific Railway Company by which he was to
construct for them certain roundhouses at Calgary and the six stations already
referred to and to finish them by the 1st September. Shortly afterwards Garson
proposed to Fraser that he should take over the contract so far as it related
to the stations; to this Fraser agreed and a memorandum signed by Garson and Fraser
was indorsed upon a document which Garson had in his possession and which
appears to have contained the terms of an intended formal contract between
Garson and the railway company providing for the construction of both
[Page 356]
these sets of buildings.
This document apparently never went into effect for the reason it seems that
the company’s engineers wished the contract with respect to each set of
buildings to be embodied in a separate instrument. At the trial Fraser was
unable to produce the memorandum signed by Garson and himself, and although he
proved that the document on which it was written was not to be found at any of
Garson’s places of business the learned trial judge refused to allow him to
state the purport of it. It is, I think, immaterial whether or not this ruling
of the trial judge was right. Garson unfortunately died before the action was
begun; but it is clear that Garson and Fraser both acted upon the footing that
these moneys were Fraser’s and that such was the understanding between them;
and that on the faith of that understanding the contract was performed by Fraser
will abundantly appear from the evidence to which I shall have to refer in
discussing the claim of the bank. The appropriate principle of law is stated by
Lord Macnaghten in Tailby v. The Official Receiver, at page 546:—
Long before Holroyd v. Marshall was determined it
was well settled that an assignment of future property for value operates in
equity by way of agreement, binding the conscience of the assignor, and so
binding the property from the moment when the contract becomes capable of being
performed, on the principle that equity considers as done that which ought to
be done, and in accordance with the maxim which Lord Thurlow said he took to be
universal, “that whenever persons agree concerning any particular subject,
that, in a court of equity, as against the party himself, and any claiming
under him, voluntarily or with notice, raises a trust:” Legard v. Hodge.
This arrangement, therefore, constituted Garson
trustee for Fraser of any sums which should be paid to
[Page 357]
him under the contract in question; and the real
point in controversy is whether the bank did or did not by virtue of what
subsequently occurred acquire a superior right to them. Before proceeding to
discuss the facts specially bearing upon the bank’s position it is convenient
to refer to one of the provisions of the contract between Garson and the
railway company which was the subject of some discussion on the argument here
as well as in the courts below. It is as follows:—
(4) This agreement shall not be assigned, nor shall the said work or any
part thereof be sub-contracted without the written consent of the engineer to
every such assignment or sub-contract.
This conditional prohibition against assignment
is susceptible of being read as a prohibition against the assignment of any of
Garson’s contractual rights arising out of this contract, including, for
example, the payment of moneys earned and payable. It is also open to a
construction which would disable Garson from vesting in another (without the
prescribed consent) the right to perform the obligations which Garson had
undertaken and by which such moneys were to be earned, but which would not
disable him even in the absence of such consent from vesting in another the
right to claim such moneys after they had become due in consequence of Garson
by himself or his agents or servants having performed his obligations under the
contract. There is something to be said in favour of the first mentioned
construction, but it is not necessary to decide the question whether it is or
is not the true construction.
I shall assume in favour of the bank that the
other view which is the view most favourable to its claim is the correct one.
The required consent does not appear to have been obtained to the substitution
of Fraser for
[Page 358]
Garson as contractor
and, as between the railway company and Garson, Garson continued to be treated
as the contractor responsible to it, although the evidence of Simmons makes it
clear enough that the officials of the railway on the ground knew the work was
being done by Fraser. Under the terms of the contract there was to be an
approximate estimate of the value of the work done at the end of each calendar
month, the amount of which was to be paid on the 20th of the next ensuing month
less 10% which was retained as security. The railway company was apparently not
notified of Eraser’s title to those moneys (except as to the sum paid into
court) and saving that sum all the moneys payable under the contract were paid
by the railway company to the bank for the credit of Garson’s account under the
authority of the assignment to the bank mentioned above, of which notice had
been given by the bank. The railway company apparently never disputed its
accountability for these moneys either to Garson or to the person who as
against Garson should prove to be best entitled to them.
Fraser then having an arrangement with Garson by
which the moneys earned under the contract (though payable to Garson as between
him and the railway company) were to be subject to a trust in favour of Fraser,
we come to consider the effect upon Fraser’s rights of Garson’s subsequent
dealings with the bank.
In discussing this question, I proceed as if the
bank were not in respect of any of its transactions with Garson under any of
the disabilities affecting a bank deriving its power to carry on business from
the provisions of the “Bank Act,” but had in respect of these matters all the
powers of a natural person who is
[Page 359]
sui juris. I do
this because an examination of what restrictions such a bank may be subject to
by virtue of section 76 of the “Bank Act” in respect of advances upon the
security of a transfer of the borrower’s contingent right to moneys not yet
owing or to moneys owing, but not yet payable under a contract such as that
between the railway company and Garson might lead us into the consideration of
points of some nicety and considerable practical importance upon which we have
not had the benefit of argument; and since in my view of the case it is
unnecessary to pass upon any such points it is, I think, altogether desirable
to refrain from any discussion of them;
It was argued on behalf of the appellant that by
virtue of the Manitoba statute (the “King’s Bench Act,” R.S.M., 1902, ch. 40,
sec. 39, sub-sec. (e)) an assignment of a future chose in action by
itself vests in the assignee a legal title to the subject of the assignment as
soon as it comes into existence and that notice to the debtor is unnecessary to
perfect the title of the assignee; and it was said that as a consequence of
this the rule in Dearie v. Hall
does not govern the rights of the parties under an assignment taking effect by
virtue of the statute. Assuming all this to be true, it can have no application
to the arrangement between Garson and Fraser if the real intention of the
parties was (as it seems to have been) that the moneys should continue as
between the railway company and Garson to be payable to Garson, who was to
receive them as trustee for Fraser. On the other hand, the assignment from
Garson to the bank appears to have been in conformity with the statute and
quite sufficient (in the view of
[Page 360]
the statute just indicated) to vest in the bank
the legal title to the moneys dealt with as soon as they should become payable
and the fact of the bank’s notice to the railway company having been given
before the moneys were earned (which was pressed upon us in argument) would
appear in that view to be beside the question. I shall proceed on the
assumption that the appellant’s title was an equitable title only, and that on
the other hand the bank under its assignment acquired by force of the statute a
legal title to the moneys as soon as they were earned, the real point in issue
being whether the bank has a title to the beneficial interest in them which is
superior to the appellant’s.
The bank’s contention at the trial was that its
assignment Had been taken without notice of Fraser’s rights and that this
circumstance alone gave it priority. The learned trial judge, as I have
mentioned, accepted this — holding that the effect of the assignment to the bank followed by notice of it to
the railway company was to give the bank a right to intercept the ultimate
fruits of the appellant’s exertions in performing Garson’s contract and that an
indefeasible title to appropriate those fruits when realized became forthwith
vested in the bank. Early in the trial the learned judge ruled that nothing
which occurred after its notice to the railway company could prejudicially
affect the position of the bank, and it was by this ruling as a guide that his
judgment against the appellant was finally determined.
This ruling might be capable of support if it
had appeared that the assignment had been taken as security for debts
contracted at the same time or anterior thereto and that these debts to the
amount of the
[Page 361]
moneys in dispute were still unpaid, and if we
leave out of view the effect of the bank’s subsequent conduct in giving rise to
an equitable estoppel. But assuming at the time the assignment was taken the
bank had no notice of the appellant’s rights — then the bank’s priority must
rest on one of two foundations: 1st, the present existence of some debt which
was incurred at the time of or prior to the taking of the assignment and for
which the assignment was to stand as security, or, 2ndly, the present existence
of some debt incurred on the security of the assignment and subsequent to the
taking of it without notice of the appellant’s rights. And, of course, the
limit of the interest in respect of which the bank can in any case maintain its
priority must depend upon the extent to which debts belonging to one or other
of these classes remain still unpaid. This is so rudimentary that the citation
of authorities ought to be superfluous. It may be observed, however, that there
is an interesting application of the principle involved in West v. Williams, at page 143.
In this case the facts in evidence seem to be
sufficient to establish, 1st, that the bank had notice of Fraser’s rights
before any debt was incurred for which the assignment was to stand as security
and which is still unpaid; and, 2ndly, even if any such debt remained unpaid
the conduct of the bank would preclude it from asserting as against Fraser any
title to the moneys in question.
The first point to consider is: When did the
bank receive notice of an understanding between Fraser and Garson by which Fraser
was to build the stations and to be entitled to the proceeds of the contract?
[Page 362]
The learned trial judge found that the bank was
aware of such an arrangement as early as the beginning of September and that
finding alone seems sufficient to entitle the appellant to judgment in his
favour. It seems, however, not open to dispute that they had this knowledge as
early as the month of July; and there are certainly powerful considerations in
support of the view that they had it before the execution of Garson’s
assignment to the bank. Fraser himself says that shortly after making his
arrangement with Garson he applied to Mr. Leslie, the bank’s manager at
Winnipeg, for an advance and gave him a list of his contracts. Leslie admits
that the application was made and that Fraser gave him a statement of his affairs, but declares that nothing was
said of the Outlook contract. There are grave difficulties in the way of
accepting Leslie’s recollection upon the point. Fraser had been a customer of
the bank for some years; he was a man of limited means, and while the Outlook
contract was not the only work he had in view for the ensuing season, it is
obvious from an inspection of his bank account (which is in evidence) that it
must have been by far the most important one. Why, in making an application for
financial assistance largely with a view to enable him to carry out this contract, he should have
omitted all mention of the contract does not appear to be easily explained.
Evidence of notice, however, at a date not later
than July is supplied by the testimony of Leslie himself. Garson had a number
of contracts to execute in the summer of 1910 in or in the vicinity of Calgary;
and some time in July he left Winnipeg for Calgary and remained there until
late in November. It is clear that before Garson left Winnipeg he had a
conversation
[Page 363]
with Leslie in the presence of Fraser, the
substance of which Leslie professes to state. In effect Leslie’s account of the
interview is that Garson with Fraser called at the office of the bank and said
to him, “Mr. Leslie I have come to tell you that I have handed over my stations
to Mr. Fraser.”
Leslie’s evidence on his vivâ voce examination
for discovery touching this conversation is as follows:—
A. He came in. Oh, I don’t know when it
was; some time in the fall, or later on, he came in with Mr. Garson and wanted
some money and we gave him three thousand dollars, hut Garson signed the note.
Q. At that time when the three thousand
dollar note was arranged, you conducted the negotiations with the plaintiff?
A. Yes.
Q. Your assistant took no part in it?
A. Oh, he may have put it through.
Q. But you had the conversation?
A. Yes.
Q. And you say at that time that you had no
knowledge of what the indebtedness of Garson to Eraser was?
A. No, none whatever. About that time Fraser
and Garson were here, and Garson told me that he had handed over the G.P.R.
station work to Fraser.
Q. He told you that?
A. That was the first intimation I knew of the connection, just about the time
that note went through; it may have been a little before, or it must have been
a little before or a little after; it loas about that time.
Q. It was not at the time that this note
went through?
A. No, it isn’t at the time. It may have
been a little before that — it must have been a little before that time.
Q. A little before?
A. Yes.
Q. Did he say ——
A. He just came in and he said: “I wish
to tell you that the C.P.R. station work is to be handled by Fraser.”
At the trial he said:—
Q. When did you first learn that Mr. Fraser
had any business relations with Mr. Garson?
A. Well, I can’t give you the date
definitely, the interview was so short, and there was nothing resulted from it
that would lead me up to the time as to when it did take place.
Q. Do you mean the interview between Mr.
Garson, Mr. Fraser and yourself?
A. Yes.
[Page 364]
Q. Do you know when that took place?
A. No, I don’t know.
Q. Was that the occasion when you
authorized the discounting of the $3,000 note?
A. Well, it might have been about that
time, and it might have been before.
Q. It might have been before the 21st day
of November, 1910?
A. Yes.
Q. Was it an occasion when Mr. Garson
was here in the city?
A. Yes.
Q. Do you know whether Mr. Garson was
here during the summer at all?
A. I could
not say.
Q. Did you see him during the summer?
A. I couldn’t swear definitely.
Q. Could you tell me how long prior to the
21st of November it would be when you had the conversation with Mr. Garson?
A. The time Mr. Garson and Mr. Fraser were
in?
Q. That was the date the note was
discounted, was it?
A. Well, no, I am not sure that it was. I
had a conversation with Mr. Fraser at the time that this note went through, but
I think the other conversation I refer to must have been before that.
Q. Who would that be with?
A. Mr. Garson — and Mr. Fraser toas there.
Q. Mr. Garson and Mr. Fraser were there?
A. Yes.
Q. You say you think that would be before November
21st?
A. I think, probably, about that time.
Q. Can you give me any idea how long before
November 21st? Can you give me any idea how long before that — a month?
A. It may be.
Q. Would it be two months?
A. Well. I couldn’t say; some time
during the summer.
Q. Some time during the summer?
A. Yes.
Q. Was it before or after you had taken
this assignment from Garson of the 21st of June?
A. Oh, I suppose it would be after that.
Q. It would be after that?
A. Yes.
Q. When did you first become aware of the
fact that Fraser was building these Outlook Branch stations?
A. I don’t know the date. Mr. Garson and
Mr. Fraser came in and Mr. Garson said, “I came in, Mr. Leslie, to let you know
I have handed over my stations to Mr. Fraser,” and that is the only interview
or knowledge I have of the matter.
[Page 365]
Q. Can you fix the date at all?
A. No.
Q. You say it would be after the
assignment?
A. Yes, it was some time in the summer.
Q. Some time in the summer?
A. Yes.
The nature of the conversation alone suggests
the improbability of its having occurred in November when the work referred to
had been almost, if not entirely, completed; and there can be no doubt that
Leslie is quite right in his impression that it took place not later than some
time in “the summer.” The conversation must, therefore (since Garson was absent
from Winnipeg from July until November) have taken place as early at least as
July. Morris also says that he knew in August that Fraser was building these
stations and that he must have learned of it from conversation with Garson.
It seems probable, indeed, that the conversation
between Garson and Leslie took place shortly after Garson’s arrangement was
made with Fraser. Fraser wishing to obtain financial assistance from the bank,
it is natural to suppose that Garson and Fraser would inform the bank of what
had occurred between them and do so without delay. Then as we shall see it is
clear that Garson never concealed from the bank the fact that he regarded these
moneys as Fraser’s and it seems unlikely that he would give a formal assignment
of moneys coming from the Canadian Pacific Railway Co. without informing Leslie
of Fraser’s interests in the proceeds of the Outlook contract.
Leslie’s evidence upon this point is so vague
and hesitating, so self-contradictory even, as to suggest an entire want of
such recollection on his part as would entitle him positively to affirm that
this conversation
[Page 366]
occurred at a time subsequent to the assignment
rather than anterior to it; and I think
it would not be quite fair to read his language as involving such an
affirmation. For all these reasons I am
far from satisfied that we should not be entitled to disregard the finding of
the learned trial judge that the assignment was taken without notice and give
effect to the great weight of probability which favours the opposite view. We
have, however, the indisputable fact that the conversation occurred at least as
early as July, and that is sufficient for my purpose.
That conversation, accepting Leslie’s account of
it, must, I should have thought,
have apprised Leslie as a business man of the fact that Garson had in a
practical sense no further interest in the contract for the construction of the
stations — at least as between himself and Fraser. I do not suppose the attention of Leslie or Garson or Fraser
would be directed to the point of the technical legal position created by the
arrangement Garson and Fraser had made; but I
should have thought such a statement as that reported by Leslie must
have left him with the idea that Fraser was to execute the contract and was
also to have the benefit of the payments under it.
The interview was no casual talk. From Leslie’s
account of it, it appears that Garson and Fraser called upon him with the
express purpose of informing him of their arrangement; and one at least of
their objects in doing that undoubtedly would be — if the interview took place
after the assignment — to instruct Leslie that moneys due under the Outlook
contract and paid to the bank under the authority of the assignment were to be
treated as Fraser’s. But whatever construction might be placed upon Garson’s
words as reported
[Page 367]
by Leslie when taken by themselves — their
subsequent conduct shews conclusively the view all parties took of Fraser’s
rights. On Garson’s side, his cheques and his letters written to the respondent
bank unmistakeably treat the moneys paid under this contract as Fraser’s
moneys. On the side of the bank, the conduct of Leslie and Morris in respect of
transactions either between the bank and Fraser or between the bank and Garson,
or between Garson and Fraser themselves taking place directly under the
observation of those officers of the bank, during the months of July, August,
October and November, establishes, I think, beyond controversy these facts:
Leslie and Morris knew that Fraser (whose business, to their knowledge, was
that of a contractor) was building the Outlook stations, and that he was
providing the means for doing so out of his own resources quite independently
of Garson; they knew, moreover, that the moneys received by Garson from the
Canadian Pacific Railway Co. on account of Outlook stations were scrupulously
treated by Garson as Fraser’s moneys. Leslie and Morris, moreover, acquiesced
in this treatment of these funds as if in accordance with a course of business
perfectly well understood among all parties concerned. Interpreting the
conversation between Garson and Leslie by the light of these facts, I see no
escape from the conclusion that it conveyed to Leslie’s mind the idea that, in
the sense I have mentioned, Garson’s interest in the contract had passed to Fraser.
Let us look at the evidence a little more
closely. The bank became aware in July that Fraser was drawing on his own resources
for funds to build the Outlook stations. Fraser remained in Winnipeg and
[Page 368]
early in July sent forward his foreman Simmons
to Moose Jaw to begin work on the Outlook Branch. Fraser, as I have mentioned,
had for some years been a customer of the respondent bank and kept his account
in the Winnipeg branch. From time to time during the months of July, August,
October and November remittances were forwarded by or through the bank to
Simmons in order to provide him with money to pay wages and other bills
requiring payment in cash. The first of these remittances was expressed (in
blank bills) to Simmons by Morris on the 30th or 31st July. Morris admits that
he assumed these moneys were to be used in connection with the Outlook
contract. To provide for one of these remittances (on the 25th August) it was
necessary, as appears from the state of Fraser’s bank account, to make
arrangements for an advance from the bank. The advance was made, the bank
taking Fraser’s promissory note at ten days. This note was filled in by Morris
personally; and the cheque for the
amount of the remittance is expressed to be made on “account stations,” and was
initialled by Morris, who also in a memorandum on the back of the cheque noted
the destination of the remittance. Such remittances continued (as I have said)
during the ensuing four months in circumstances shewing conclusively to the
knowledge of Morris that they were being provided by Fraser from his own
capital. There is not a suggestion anywhere in the case that it occurred to
anybody that in making these remittances Fraser was acting in any way on behalf
of Garson.
Then as to the payments under the Outlook
contract. Under the contract “approximate estimates” as they were called, were
made at the end of each
[Page 369]
calendar month and the
amount of each such estimate (less 10% which the company retained as security
for the due completion of the work) became payable on the 20th of the next
ensuing month. The sum ascertained to be payable under the estimate for July
became payable on the 20th of August. This sum was, in fact, paid into the bank
on the 9th September. It does not appear in the record whether the railway
company’s cheque was made payable to the bank or to Garson, but at all events
the amount was by the bank placed to Garson’s credit. Garson’s account with the
Winnipeg branch was at that time overdrawn, but the amount of the estimate
($1,620) was immediately transferred to Eraser’s credit upon the authority of a
cheque drawn by Garson. This cheque was expressed to be in “payment of first
estimate Outlook contract” and was initialled by Morris, Garson being at this
time in Calgary. It does not clearly appear how the cheque reached the bank,
but the bank produced no communication from Garson in the month of August.
Either then the bank had some explanation from Garson which is not now
forthcoming, or Garson’s cheque transferring the estimate to Fraser was
honoured as a matter of course in consequence of information the officers of
the bank already had touching the title to these moneys. But there is a little
more. Garson’s cheque is dated 22nd August. That was two days after the day on
which the July estimate was due (20th August) under the contract with the
railway company, and Garson had been informed as to the amount, for the cheque
is drawn for the exact sum afterwards paid. On the 24th, two days later, Fraser
applied for an advance. He says he asked for the advance on the strength of
this estimate. Leslie,
[Page 370]
in examination for discovery, in effect admitted
the advance was made in the expectation of a payment being made under the
Garson contract. All this points to the existence at this time of a common
understanding among all concerned that these moneys, although nominally Garson’s,
were really the property of Fraser.
The conduct of the parties in respect of the
August estimate is yet more significant. This estimate was, under the terms of
the contract, payable on the 20th September. On that date Garson wrote from
Calgary the following letter:—
Manager, Imperial Bank,
Winnipeg.
Dear Sir,—Yours
of the 17th received O.K. As C. P. August estimate is now overdue, I enclose a
cheque in favour of W. H. Fraser with amount Wank, which you will oblige by
filling in for the sum returned in the August estimate for the stations he is
building and hand same to him as soon as the cash comes in. I also enclose a
cheque in favour of the Guerney Foundry Co., also in blank, on account Kenora
Bank. The balance accruing due to them on this account is $.909.80. Fill the
cheque out for this or any part of it the Kenora special
account will stand and send it to them, the balance of
August will keep for a time. I have Kenora practically finished and quite a lot
coming yet. I understand a payment has come in on Minnedosa account; this
really belongs to Synder. I have sent him a cheque accordingly. I have given a
cheque to Ashdown here for $500 on account. Kindly honour it. Work going well.
Weather fine. Have broken tall records for Calgary in reinforced concrete
construction by putting in 152 cubic yards in a 6-inch floor in one run.
Yours truly,
Wm. Gabson.
And on the 24th September Morris sent him this
reply:—
Dear Sir,—Referring
to your letter of the 20th instant
re W. H. Fraser, we are advised by Mr. Fraser that his August estimates
amount to about $5,400. We have filled in your cheque in his favour for one
thousand dollars ($1,000) in the meantime.
Yours truly,
M. Morris, Assistant Manager.
[Page 371]
The cheque referred to as actually filled in by
Morris is in the following form:—
Calgary, Alta., Sept. 20, 1910.
Imperial Bank of Canada.
Pay W. H. Fraser or order one thousand
dollars ($1,000.00).
A/c.
Aug. Est. Outlook Stations.
Wm.
Garson.
On the 8th October the estimate was received by
the bank and on the same day the balance, after deducting the $1,000 already
transferred, was transferred to Fraser’s account by a cheque of Garson’s marked
“Estimate No. 2, Outlook stations.” In this instance also both on the occasion
of the transfer of the first sum of $1,000 and afterwards of the second sum. of
$4,400, Garson’s account at the Winnipeg branch appears to have been overdrawn.
Comment upon this transaction seems superfluous. Garson’s letter and the action
of the bank upon it shew that both parties regarded the estimate for August, whatever
might be the amount of it, as belonging to Fraser. Morris’s language: “We are
advised by Mr. Fraser that his August estimates amount to $5,400” is no
slip of the pen; it expressed in words the conception of Fraser’s rights which,
as these transactions shew, was acted upon by everybody.
There is still another exchange of letters. On
the 9th of November Garson writes to the bank about the September estimate; and
he uses these words:—
It is likely the C.P.R. estimate on Outlook
work will be paid in shortly. It belongs to W. H. Fraser. When it comes let him
draw on me at sight for the amount and transfer it to him.
Let me know if you approve of my keeping
the money in your bank here. I know it would make your account look better if I sent it to Winnipeg, but it looks
rather awkward to send you the money one day and have you wire it back the
next. As it is, if you
[Page 372]
take the balances of both accounts into
consideration I have had my slate cleaned again on this transaction. And will
probably repeat the clean up again this month.
Yours truly,
Wm. Garson.
P.S.—I have just been advised that the
Strathcona Post Office contract has been awarded to me.
In reply Morris, on the 14th, writes:—
Imperial Bank of
Canada,
Winnipeg, Man.,
14th November, 1910.
Wm. Garson, Esq.,
Dominion Hotel,
Calgary, Alta.
Dear Sir,—I
am in receipt of your letter of the 9th instant, and note your advices.
There is no objection to your retaining
money in Calgary for your Calgary contracts, providing that proceeds of your
C.P.R. contracts will be sufficient to protect advances in this office.
Yours truly,
M. Morris, Assistant Manager.
The sum received by the bank under the estimate
referred to forms part of the moneys in dispute. To appreciate the significance
of these letters it is necessary to recall the fact that the bank had been
receiving moneys from the Canadian Pacific Railway Co. for Garson’s credit in
respect both of the Calgary and Outlook contracts. The latter moneys, as we
have seen, had been appropriated to Fraser; the others had been applied in
satisfaction of the bank’s advances to Garson. Garson’s letter was a reminder
to the bank that the moneys coming under the Outlook contract were Fraser’s;
and this statement is accepted without a word of comment by Morris. The phrase “proceeds
of your C.P.R. contract” obviously refers to the Calgary contract. The
inference seems irresistible. It was understood by everybody that the bank had
no interest in or claim upon the Outlook moneys.
[Page 373]
From all this I conclude that Leslie and Morris,
as well as Fraser and Garson understood, at least from the time of the
interview mentioned by Leslie (which must have occurred, as we have seen, not
later than July), that under that arrangement Fraser was to build the Outlook
stations and was to be entitled to the moneys thereby earned, or in the words
of the learned trial judge, in 22 Man. R., at p. 66: “These payments (under the
Outlook contract) were to be handed over to the plaintiff.”
The bank’s knowledge, however, of Fraser’s
rights would not in itself prejudice its claim to have the moneys assigned
applied in liquidation of any debt incurred before that time (for which the
assignment was to stand as security) which is still unpaid. The exact
particulars regarding the bank’s advances to Garson have not been put in
evidence. There is, however, sufficient, I think, to enable us to say with
confidence that no such debt is now in existence.
It is stated by Leslie that no advance was made
on the security of the assignment at the time it was executed; and that his
intention in taking it was not to make advances on the security of Canadian
Pacific Railway moneys generally, but only from time to time on the security of
some specific sum known to have been earned and to be payable at a definite time.
The following passages from Leslie’s evidence at
the trial make this very clear:—
Q. Under this assignment from Garson to
yourselves — the bank — was any money advanced by the bank ——
Mr. Elliott: I object to that. It is not an
issue here.
Mr. Fullerton (continuing the question): To
Mr. Garson?
A. No, not at the time.
Mr. Fullerton: I will say this, if we had
not set up all that I had proposed to ask for an amendment to that record, that
on the strength of the assignment we advanced moneys from time to time, and our
position was prejudiced.
[Page 374]
His Lordship: I think I will allow it,
because it seems to me that it ought to be material.
Mr. Elliott: That changes the whole nature
of the case. That changes the whole nature of this case, and it should not be
gone into now on amendment.
His Lordship: I will allow it, subject to
your objection, in the meantime. What is your question again?
Mr. Fullerton: What do you say as to that?
Were any advances made, were any moneys advanced by the bank on the strength of
this assignment?
A. Why, I can’t remember just now, it
strengthened Garson’s credit.
Q. It was advanced on the strength of
Garson’s credit
A. Yes.
Q. After this assignment was made were
moneys advanced to Garson?
A. Yes; that is my recollection at
least.
Q. Would all the moneys in question in this
action be sufficient to pay off Garson’s indebtedness to the bank?
Mr. Elliott: I object to the question.
His Lordship: I will allow it.
A. No.
Q. You say no?
A. Yes — I am not positive about that. Yes,
I think, I can say no. Q. You say no?
A. Yes; that is the moneys coming from here
would not be sufficient.
Q. Let me ask you this question: Did you
take any steps from time to time to ascertain what moneys were coming from the
C.P.R.?
A. Yes.
Q. You did that?
A. Yes.
Q. And did the question of the advances
that you were making from time to time depend to any extent upon your inquiry?
Objected to by Mr. Elliott.
His Lordship: I don’t think you should ask
the question in that way.
Mr. Fullerton: What practice did you follow
with regard to making advances to Mr. Garson?
Mr. Elliott: That is not a material fact
here, as to what his practice or habit was, and I object to that.
His Lordship: I, don’t think so.
Mr. Fullerton: I want to shew that he would
come along for the advances, and they would ask the C.P.R. if an estimate were
passed, and if the estimate were passed they would advance the money on the
strength of that estimate being passed, and that is the question I want to ask.
[Page 375]
Mr. Elliott: That
does not concern us.
His Lordship: I don’t know.
Mr. Fullerton: It depends upon that,
whether on the strength of these estimates being passed money was advanced, and
I want to shew that really when an advance was asked for the C.P.R. would be
asked as to whether there was any estimate passed or to be passed, and on the
strength of the inquiry, or the answer received to it, the advance was made.
His Lordship: You can probably get at it
without putting a leading question to him. He says that he did take steps from time to time to find out if
there were any moneys coming from the C.P.R., and if you ask him why he did
that you may get at it.
Mr. Fullerton: Why did you do that?
Mr. Elliott: I object again to that. His
object and purpose in doing that would not, surely, affect us.
His Lordship: It may.
Mr. Elliott: How?
His Lordship: If it does not, it will not
do you any harm.
Mr. Elliott: I object to it, my Lord.
His Lordship: I will allow the question.
Mr. Fullerton: You made inquiries from the
C.P.R. from time to time as to moneys coming from them to Garson?
A. Yes.
Q. Why did you make those inquiries?
A. Well, to ascertain whether we would be
justified in paying his cheques.
This is the evidence given by Leslie at the
trial.
On his examination for discovery he had made the
following statement:—
Q. I see, Mr. Leslie, you witnessed this
document. Just tell us all the circumstances and your reasons for taking that?
A. This assignment was given to us as
security for the advances made from time to time to Garson.
Q. Was it for advances already made or
for future advances?
A. It toas
both.
Q. Did you know at the time of taking that
assignment what contracts he had with the C.P.R.?
A. No.
Q. What moneys were owing to him?
A. Not definitely.
Q. Why do you say “not definitely”?
A. I knew that he had contracts with the
C.P.R., but I knew nothing as to the amount definitely coming to him.
Q. Did you know what kind of contracts he
had?
[Page 376]
A. No, not — I knew that he had —
nothing definitely. The only thing I can remember that he had was some contract
for roundhouses or something of that kind.
Q. Do you remember him stating that he had
contracts for stations and roundhouses?
A. Not definitely; the only thing I can
remember that he had some contract for roundhouses at Calgary; that is the
only definite contracts that I ——
Q. He told you that he had tendered?
A. Yes.
Q. And you remember that distinctly, and
you remember definitely about the roundhouses at Calgary?
A. Yes, I am pretty sure that that is
right. But we never made any inquiry as to the nature of his contracts or where
they were.
Q. Why?
A. We could find out how much was coming
from the C.P.R. before we would lend him any money.
Q. Did you find out in this case?
A. I must have found out in this case
what he said toas due, and had it corroborated to some extent.
Q. What amount did he say that was due?
A. Oh, I don’t know. We generally figure on
keeping a good margin.
Q. Did you call up the C.P.R. after you got
this?
A. No, I wouldn’t say that I did. I wouldn’t
state positively — at the time.
Q. Was all the conversation with regard to
this assignment made with you?
A. Well, I think it was. I would say, “Here,
if you are dealing with the C.P.R. and moneys are coming from there, we need an
assignment of all the moneys coming from there, in a general way.” Garson
would come in and when he was in need of money would say: “Now there is so much
due me by the company.” We would endeavour to have that verified in some
way or other, and telephone down to the depot, or engineers, and if they said “Yes,”
why we would take that for granted.
Moneys advanced in this way would, in the
ordinary course, be repaid as soon as the bank received the payment in
anticipation of which the advance had been made; and the natural inference from
this course of business seems incompatible with the supposition that any debt
remains unpaid which was incurred as early as July, 1910. The evidence afforded
by Garson’s pass-book and correspondence with the bank
[Page 377]
is also inconsistent with it. So are the
dealings with the July and August estimates already discussed and the
correspondence between Garson and Morris in November. It is almost impossible
to believe, for example, if Leslie regarded the moneys payable under the August
estimate as security for an existing debt owing by Garson that he would have
made an advance to Fraser in anticipation of these moneys being paid to Fraser as
he admitted he did; or that the dealings with the July and August estimates
already discussed could have taken place. And perhaps still more difficult to
believe that Leslie and Morris would have abstained from comment upon Garson’s
statement in his November letter that the overdue estimate under the Outlook
contract was Fraser’s.
The only difficulty I have felt with regard to
this matter of advances is this. I have not been altogether free from misgiving
that the learned trial judge’s ruling to which I have referred may be
accountable for the lack of explicit evidence as to the dates of the bank’s
advances to Garson and I have carefully considered the question whether if the
appeal should turn upon this point the bank ought not to have an opportunity of
supplying such evidence. In a case which has been marked by so much
misconception as to the legal principles governing the rights of the parties
one naturally hesitates to proceed upon any merely technical rule as to the
burden of proof. I am satisfied, however, that we have before us all the
relevant facts that could lend support to the claim of the bank. The facts
touching the matter of advances were all, of course, within Leslie’s knowledge.
On Leslie’s vivâ voce examination for discovery the bank’s solicitor
took the position and adhered to it that the appellant
[Page 378]
was not entitled to any information touching
Garson’s indebtedness to the bank. In the affidavit of discovery Leslie states
that the only book or document in the bank’s possession containing anything
relating to the controversy is the assignment itself. The bank’s position, in a
word, was that Fraser was a stranger having no interest in the moneys in
question and the bank’s relations with Garson had, of course, no bearing upon
the issue thus raised. At the trial Fraser’s counsel objected to evidence
shewing advances by the bank on the ground that the bank by assuming and
maintaining the position above mentioned had defined the issue and limited it
to the single question whether or not Garson had assigned these moneys in
question. With this counsel for the bank appeared to agree and there was some
suggestion about an amendment. The learned trial judge eventually permitted, as
appears from the extract quoted above, an examination of Leslie upon the
subject of advances; hut notwithstanding the fact that such evidence was
permitted to be given, none was offered to shew when the debts were incurred
which the bank claims the right to have paid out of the moneys in question.
Indeed, while Leslie’s evidence was explicit that no advance was made at the
time the assignment was given, there was not a suggestion that any debt remains
unpaid that had been incurred as early as July, 1910 — a suggestion which, as I
have pointed out, is not easily to be reconciled with the inference to be drawn
from Leslie’s account of the course of business.
In point of fact that suggestion was not put
forward, even in argument on behalf of the bank; and from the circumstances I
have mentioned I think we are entitled to conclude that there is, in fact, no
foundation for it.
[Page 379]
But there is another ground upon which the
appellant is entitled to succeed.
Where one man induces another to alter his
position by active misleading, or by silence, where there is by contract, usage
of trade, or otherwise, a duty to speak, or in an equitable case, one may say,
where the circumstances are such as to make it against conscience to be silent,
his, rights must be regulated by what he has himself brought about.
In these words Lord Blackburn (Russell v.
Watts),
at p. 613) states a familiar principle of law; and in Stronge v. Hawkes, at p. 196, a great equity
judge, Turner L. J., gives an illustration of the application of that principle
to a particular class of cases in these words:—
It has long been settled that where a party
having a charge upon an estate, encourages or even permits another to advance
money upon the security of the estate without giving notice of the charge, the
party who has thus been encouraged or permitted to make the advance is entitled
to priority over the party who has thus encouraged or permitted the advance to
be made. The fact of the party having the charge standing by and permitting the
further advance to be made, without giving notice of the charge, is alone
sufficient to support this equity on the part of the subsequent incumbrancer.
The circumstances of this case already mentioned
fairly bring it within both the general doctrine and the particular rule
expounded in these passages. I assume for the purpose of applying this
principle that when Garson and Fraser had their interview with Mr. Leslie and
informed him of their arrangement, Garson was indebted for advances secured by
the assigment which advances are still unpaid. If I am correct in my
interpretation of that interview and of the subsequent conduct of Leslie and
Morris, Leslie as a result of the interview was aware that Fraser had taken the
Outlook contract off Garson’s hands on the
[Page 380]
understanding that the moneys earned were to be
his. He knew that both Garson and Fraser assumed that Garson was entirely free
to make that arrangement. He subsequently became aware that Fraser was
proceeding with the performance of the contract on the faith of that
arrangement. During the months of July, August, September, October and November
while, to Leslie’s knowledge, Fraser was devoting his time and his capital to
the completion of the contract, he and Morris co-operated with Garson and Fraser
in treating the moneys arising from the contract as Fraser’s. It was only after
the contract had been completed by Fraser’s exertions and at his own cost and
Garson was in his last illness that the claim to appropriate the reward of
Fraser’s work under the bank’s assignment was, for the first time, suggested.
It would be something of a reproach upon the law if in such circumstances such
a claim could be allowed to prevail in a court of justice.
To summarize for the sake of clearness these
rather lengthy reasons for disagreeing with the court below. The evidence, and
notably that which discloses the conduct of the parties, conclusively justifies
the finding of the trial judge that there was in April an arrangement between
Garson and Fraser by which Fraser was to assume the building of the stations on
the Outlook Branch in performance of Garson’s contract with the Canadian.
Pacific Railway Co. and that by the same arrangement the moneys paid under that
contract by the railway company to Garson were by him to be paid over to Fraser.
It is, moreover, established that the bank had notice that an arrangement of
this character had been made between Fraser and Garson at least as early as
July. The proper inference
[Page 381]
from the facts in evidence (including the course
of the bank in the conduct of its defence) is that no obligation from Garson to
the bank which came into existence as early as July, and for which the
assignment was to stand as security, is still unsatisfied. It follows that
assuming the assignment of June to have been taken without notice of the
appellant’s rights and to have the effect of vesting in the bank the legal
title to moneys (as soon as such moneys should be earned) which should become
payable to Garson under the Outlook contract — still the bank having had notice
of Fraser’s rights before any debt was incurred for which it is now entitled to
hold the assignment as security, cannot on well-known principles successfully assert
any claim upon those moneys as against Fraser. Moreover, the conduct of the
bank in not only standing by and permitting Fraser to proceed, but in effect
encouraging Fraser to proceed with the work of performing the Outlook contract
on the faith of his arrangement with Garson that he was to have as his own the
proceeds of that contract when realized (without disclosing its own claim to
retain those proceeds until after they had been earned by Fraser’s exertions),
disqualifies the bank on equally well-known principles as against Fraser from
enforcing rights which otherwise might have been permitted to take effect.
Anglin and Brodeur JJ.
concurred with Duff J.
Appeal allowed
with costs.
Solicitor for the appellant: George A. Elliott. Solicitors for the respondents:
Aikins, Fullerton, Foley & McWilliams.
Email this Content