Ontario Woodsworth Memorial Foundation v. Grozbord, [1969] SCR 622

Supreme Court of Canada

Ontario Woodsworth Memorial Foundation v. Grozbord, [1969] S.C.R. 622

Date: 1969-04-22

Ontario Woodsworth Memorial Foundation (Plaintiff) Appellant;

and

A.Y. Grozbord, Mont Blanc Holding Company, The Royal Bank of Canada, The Bank of Nova Scotia and E. Lawrence Stone (Defendants) Respondents;

and

E. Lawrence Stone (Third Party at the Instance of the Defendants A.Y. Grozbord and Mont Blanc Holding Company);

and

The Royal Bank of Canada and The Bank of Nova Scotia (Third Parties at the Instance of the Defendant E. Lawrence Stone).

1968: October 2, 3, 4, 7; 1969: April 22.

Present: Cartwright C.J. and Martland, Judson, Ritchie and Spence JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO.

Estoppel—Purchase and sale agreement—Solicitor for payee forging signature of fellow signing officer on endorsement of cheque—Delay by payee in giving notification of forgery to banks and drawer—Action against purchaser, drawer and banks dismissed.

One G, on behalf of MB Co., entered into an agreement of purchase and sale whereby G purchased certain property from the plaintiff foundation for $150,000, to be paid by a cash deposit, a stated amount on closing and the balance by means of a first mortgage. The president of the foundation, one R, was one of two officers who had authority to sign for the plaintiff and he acted as its solicitor throughout the transaction. A solicitor, S, acted for G and MB Co.

On the date for closing, viz. November 6, 1962, S delivered to R a cheque for $125,506.82 which represented the balance payable under an arrangement made between S and R to provide for payment of the whole consideration in cash and a reduction of the purchase price. This cheque was drawn by S on the Royal Bank in favour of the plaintiff. It was certified by the Royal Bank. A deed conveying the plaintiff’s property to MB Co. was delivered and registered.

R on receipt of the cheque signed his own name and forged the signature of his fellow signing officer and then deposited the cheque in his trust account at the Bank of Nova Scotia. The Bank of Nova Scotia sent the cheque for presentation to the Royal Bank. The latter bank received the cheque on November 8, 1962, and paid it the same day.

[Page 623]

On February 27, 1963, the plaintiff acquired knowledge that the signature of the second signing officer on the endorsement of the cheque had been forged by R, but no notice of the forgery was given to either bank or to S until some two and one-half months later. During the intervening time negotiations were carried on between the plaintiff and R in an effort to obtain restitution from him. However, R absconded before either bank was notified of the forgery.

On May 14, 1963, the cheque for $125,506.82 having been endorsed on behalf of the plaintiff by its proper signing officers was presented for payment to the Royal Bank but payment was refused. On the same day, the Royal Bank informed the Bank of Nova Scotia that it looked to it for reimbursement. The Bank of Nova Scotia denied liability to the Royal Bank.

The plaintiff brought action against five defendants, claiming against G and MB Co. specific performance of the agreement of purchase and sale, claiming against S as maker of the cheque and claiming against the two banks damages of $125,506.82 for conversion of the cheque. S commenced third party proceedings against both banks claiming indemnity against any liability he might be under to the plaintiff.

The trial judge dismissed the plaintiff’s action as against the Bank of Nova Scotia on the ground of estoppel. He also dismissed the action as against G and MB Co. He gave judgment for the plaintiff against the Royal Bank and S on the ground that they had suffered no detriment, and so could not rely on the defence of estoppel. He gave judgment for S against both banks in the third party proceedings.

Both banks appealed to the Court of Appeal from the judgment against the Royal Bank and S in the main action and from the judgment against the banks in favour of S in the third party proceedings. The plaintiff cross-appealed from the judgment dismissing its action against the Bank of Nova Scotia and from the dismissal of its action against G and MB Co.

The Court of Appeal agreed with the trial judge that the Bank of Nova Scotia had established a defence of estoppel and dismissed the plaintiff’s cross-appeal. Differing from the trial judge, it held that the Royal Bank and S had also suffered detriment and that the plaintiff was estopped as against them from denying that the cheque was properly endorsed. Accordingly, it allowed the appeals of the Royal Bank and S. The third party proceedings taken by S against the banks were necessarily dismissed as well.

The plaintiff then appealed to this Court, as against all the defendants, from the dismissal of its action and S served notice of appeal to this Court from the dismissal of the third party proceedings if this Court should find him liable to the plaintiff.

Held: The appeals should be dismissed.

The action as against G and MB Co. was rightly dismissed. The plaintiff, in view of the terms of the agreement, was estopped from asserting that the agreement had not been performed. The plaintiff had elected to adopt the transaction after it had full knowledge of all that R had done and as to the manner in which the transaction had been closed.

[Page 624]

As to the claim against the banks and S, the Court agreed with the concurrent findings in the Courts below that these parties were prejudiced by the delay in giving notice of the forgery to them. The defence of estoppel applied to all three parties.

By the doctrine of estoppel a person is precluded from denying the truth of the statement acted on for any purpose which results in a detriment to the representee. The plaintiff’s deliberate silence in withholding notification of the forgery destroyed the Bank of Nova Scotia’s opportunities of meeting the claims for indemnity made upon it by its co-defendants, in large part at least, by going against the forger. The plaintiff, therefore, was estopped from denying as against the Royal Bank and S the genuineness of the forged signature.

APPEAL from a judgment of the Court of Appeal for Ontario[1], allowing an appeal from a judgment of Grant J. and dismissing plaintiff’s action against all defendants and dismissing third party proceedings. Appeals against all defendants and conditional appeal in third party proceedings dismissed.

Douglas K. Laidlaw, Q.C., for the plaintiff, appellant.

R.E. Holland, Q.C., and W.R. McMurtry, for the defendants, respondents, A.Y. Grozbord and Mont Blanc Holding Co.

C.F.H. Carson, Q.C., and J.R. Houston, for the defendants, respondents, The Royal Bank of Canada and The Bank of Nova Scotia.

J.W. Outerbridge, Q.C., for the defendant, respondent, E. Lawrence Stone.

The judgment of the Court was delivered by

THE CHIEF JUSTICE:—This is an appeal from the judgment of the Court of Appeal for Ontario¹ dated July 4, 1966, allowing an appeal from the judgment of Grant J. dated December 16, 1964, and dismissing the plaintiff’s action against all defendants with costs and dismissing the third party proceedings.

The plaintiff is a non-profit corporation incorporated under the laws of the Province of Ontario and was the owner of certain lands and premises in the City of Toronto known as 565 Jarvis St.

Samuel Resnick (hereinafter called “Resnick”), a barrister and solicitor practising in the City of Toronto, was

[Page 625]

president of the plaintiff and was one of the two officers having authority to sign for the plaintiff under its relevant by-laws and resolutions.

The defendant A.Y. Grozbord (hereinafter called “Grozbord”) was the agent or nominee for the defendant Mont Blanc Holding Company (hereinafter called “Mont Blanc”) a partnership consisting of two companies owned or controlled by Grozbord. He entered into the agreement hereinafter referred to on behalf of Mont Blanc.

The defendant E. Lawrence Stone (hereinafter called “Stone”) was solicitor for the defendant Grozbord and Mont Blanc in connection with the transaction of purchase and sale hereinafter referred to and Resnick acted throughout as solicitor for the plaintiff in the said transaction.

The defendant Stone maintained an account at the defendant, the Royal Bank of Canada (hereinafter called “The Royal Bank”), and Resnick maintained a current, two savings and a trust account at the defendant, the Bank of Nova Scotia.

On July 19, 1962, the plaintiff entered into a written agreement of purchase and sale with the defendant Grozbord as trustee to sell 565 Jarvis St. for a price of $150,000 on terms that $2,000 was to be paid down as a deposit, a further $55,000 to be paid on closing subject to adjustments and the balance of the purchase price to be made up by a mortgage to be given back carrying interest at 6 per cent per annum for twelve months from the date of closing.

By the terms of the said agreement after adjustment the plaintiff was to receive including the deposit the sum of $56,976.82 in cash and a first mortgage of $93,000.

The plaintiff acknowledges having received or having had paid on its behalf or credited in the way of adjustments on the closing of the transaction the total sum of $17,000.

The transaction was originally to be closed on September 28, 1962, and the time for closing was extended three times by agreement between the solicitors to October 30, 1962, November 2, 1962, and finally to November 6, 1962.

Resnick received the $2,000 deposit payable to him on July 19, 1962, and deposited this in his trust account at the Bank of Nova Scotia. He received a further $15,000 cheque payable to the plaintiff which he deposited in his trust

[Page 626]

account on a forged endorsement on November 1, 1962, such monies being received as a condition of the extension of the time for closing.

Some time between November 2 and November 5, 1962, an arrangement which was not reduced to writing was made between Stone and Resnick to provide for payment of the whole consideration in cash and a reduction in the purchase price to $149,000 subject to adjustments. On the date for closing Stone delivered to Resnick a cheque for $125,506.82 which represented the balance payable in cash on this basis. This cheque was drawn by Stone on the Royal Bank and payable to the plaintiff. It was certified by the Royal Bank. A deed conveying the plaintiff’s property to Mont Blanc Holding Company was delivered and registered.

The cheque was deposited by Resnick in his trust account at the Bank of Nova Scotia on November 7, 1962, at which time it bore the following endorsement:

Ontario Woodsworth Memorial Foundation

Per ‘S. Resnick’

Per ‘Marion H. Bryden’

For deposit only

To the credit of

Samuel Resnick

Trust account

The signatures “S. Resnick” and “Marion H. Bryden” were handwritten. It is common ground that the signature of Marion H. Bryden, then the vice-president of the plaintiff, was forged by Resnick.

The Bank of Nova Scotia sent the cheque for presentation to the Royal Bank, on which it was drawn. The Royal Bank received the cheque on November 8, 1962, and paid it the same day.

Neither of the banks had at any time done business with the plaintiff or carried its account or had any knowledge of what persons had authority to endorse cheques on behalf of the plaintiff. The Bank of Nova Scotia deposited the cheque for its customer, Resnick, because it knew and trusted him.

At a meeting of the Board of the plaintiff on November 14, 1962, Resnick reported orally that the transaction had been closed, that he had received the $2,000 deposit and $55,016.41 on closing making a total of $57,016.41, that

[Page 627]

after deducting various expenses there remained a balance of $48,322.31, that he had invested $40,000 of this in a mortgage at 8 per cent for one year and would turn over the balance to the treasurer of the plaintiff.

The treasurer, Mrs. Lazarus, gave evidence that Resnick had no previous express authority from the Board to negotiate the cheque received on closing or to invest any of the proceeds, but nevertheless Resnick’s report was accepted by the Board.

By letter dated November 22, 1962, Resnick reported to Mrs. Lazarus that the transaction had been completed by the plaintiff receiving the $2,000 deposit, taking back a mortgage for $93,000 and receiving the balance of the purchase price of $150,000 in cash subject to adjustments on closing. He enclosed a cheque for $5,247 drawn on his trust account representing the balance of the cash received on closing after taking in account certain adjustments and the $40,000 invested by him.

Mrs. Lazarus stated that she understood that Resnick had received some $57,000 on behalf of the plaintiff and she assumed he had deposited it in a bank account in his name and that this assumption was confirmed when she received the cheque for $5,247.

On February 25, 1963, the plaintiff’s auditor, Mr. Irwin, in the course of a routine accounting investigation, learned from Mont Blanc Holding Company that there was no principal or interest outstanding on any mortgage from it to the plaintiff and in telephone conversations with Grozbord and Stone on February 25 and 26, Irwin learned the manner in which the transaction had been closed and the wording of the endorsement on the cheque for $125,506.82.

Knowledge that the signature of Marion Bryden on the endorsement of the cheque had been forged by Resnick was acquired by the plaintiff on February 27, 1963.

On either March 5 or March 6, 1963, Stone attended on Resnick and obtained his signature as president of the plaintiff to a rectification deed, dated March 5, 1963, correcting an error of description in the deed from the plaintiff to Mont Blanc which had been registered on November 6, 1962. Stone then attended on Mrs. Bryden who, after speaking to Resnick on the telephone, signed the deed as Vice‑president and affixed the seal of the plaintiff. This rectification deed was registered on March 7, 1963.

[Page 628]

No notice of the forgery was given to either bank until on May 9, 1963, the Royal Bank was notified and on May 10, 1963, the Bank of Nova Scotia was notified. Neither bank had any prior knowledge of the forgery. These notifications were given to the banks by telephone by Mr. Holland, solicitor for Grozbord, who had been consulted by Mr. Stone. It appears that on May 3, 1963, Mr. Brewin, the solicitor for the plaintiff, told Stone that there was some question of forgery of a signature in the endorsement of the cheque and that on May 9 at a meeting with Holland and Stone Brewin made it clear that Mrs. Bryden’s signature had been forged.

The plaintiff did not at any time notify the defendant Mont Blanc of the forgery.

I do not find it necessary to set out the details of the negotiations carried on between the plaintiff and Resnick between February 27 and May 9 in an effort to obtain restitution from him as I agree with the concurrent findings in the Courts below that the banks and Stone were prejudiced by the delay in giving notice of the forgery to them.

Early in May, before either bank was notified of the forgery, Resnick and his wife left Canada and took up residence in Israel.

On May 14, 1963, the cheque for $125,506.82 having been endorsed on behalf of the plaintiff by its proper signing officers was presented for payment to the Royal Bank but payment was refused. On the same day, the Royal Bank informed the Bank of Nova Scotia by letter that it looked to it for reimbursement. The Bank of Nova Scotia replied by letter dated May 17, 1963, denying liability to the Royal Bank.

The plaintiff brought action against the five defendants, claiming against Grozbord and Mont Blanc specific performance of the agreement of purchase and sale on the ground that the agreement had not been performed according to its terms and that it had received only part of the purchase price, claiming against Stone as maker of the cheque and claiming against the two banks damages of $125,506.82 for conversion of the cheque.

[Page 629]

The defendants Grozbord and Mont Blanc commenced third party proceedings against Stone but these proceedings were dismissed at the trial and no appeal was taken from that dismissal.

Stone commenced third party proceedings against both banks claiming indemnity against any liability he might be under to the plaintiff.

The learned trial judge dismissed the plaintiff’s action as against the Bank of Nova Scotia on the ground of estoppel. He also dismissed the action as against Grozbord and Mont Blanc. He gave judgment for the plaintiff against the Royal Bank and Stone on the ground that they had suffered no detriment, and so could not rely on the defence of estoppel. He gave judgment for Stone against both banks in the third party proceedings, but without costs.

Both banks appealed to the Court of Appeal for Ontario from the judgment against the Royal Bank and Stone in the main action and from the judgment against the banks in favour of Stone in the third party proceedings. The plaintiff cross-appealed from the judgment dismissing its action against the Bank of Nova Scotia and from the dismissal of its action against Grozbord and Mont Blanc.

The Court of Appeal, in a judgment delivered by Aylesworth J.A., agreed with the learned trial judge that the Bank of Nova Scotia had established a defence of estoppel and dismissed the plaintiff’s cross‑appeal. Differing from the learned trial judge, it held that the Royal Bank and Stone had also suffered detriment and that the plaintiff was estopped as against them from denying that the cheque was properly endorsed. Accordingly, it allowed the appeals of the Royal Bank and Stone. Since the plaintiff’s action against Stone was dismissed by the Court of Appeal, the third party proceedings taken by him against the banks were necessarily dismissed as well.

The plaintiff now appeals to this Court, as against all the defendants, from the dismissal of its action and Stone has served notice of appeal to this Court from the dismissal of his third party proceedings if this Court should find him liable to the plaintiff.

I am satisfied that the Court of Appeal has reached the right conclusion.

[Page 630]

It is stated in the reasons of Aylesworth J.A. that during the course of the argument the Court of Appeal announced its agreement with the learned trial judge on the following points: (i) that Resnick had no authority express, implied or apparent to endorse the cheque for $125,506.82 and deposit it in his trust account and (ii) that such endorsement and deposit were not ratified by the plaintiff. I see no reason to disagree with the first of these propositions but if it were necessary for the decision of this appeal I would find it necessary to examine the second with care and I express no opinion upon it.

So far as the claim against the defendants Grozbord and Mont Blanc is concerned, the Court of Appeal, at the conclusion of the argument, dismissed the plaintiff’s appeal from the dismissal of its action against these two defendants for the reasons given by the learned trial judge. The plaintiff’s claim against these defendants was for specific performance of the agreement of purchase and sale or, in the alternative, damages in the amount of $136,823.50 “being the amount of the purchase price and value of the mortgage to be given back to the plaintiff under the said agreement”. I agree with the conclusion of the Courts below that the plaintiff was estopped from asserting that the agreement had not been performed. I am also of opinion that the agreement was in substance performed by the purchaser. A term of the agreement read as follows:

Any tender of documents or money hereunder may be made upon the Vendor or the Purchaser or any party acting for him and money may be tendered by negotiable cheque certified by a chartered bank or trust company.

I am unable to agree with the view of the learned trial judge that these words did not authorize the purchaser to pay the purchase price by delivering to the solicitor acting for the vendor at the closing of the transaction a certified cheque payable to the vendor.

It was argued for the plaintiff that Resnick had no authority to agree that the whole balance of the purchase price should be paid in cash instead of being satisfied in part by the giving back of a mortgage, but by the terms of the agreement that mortgage was to contain a clause giving the mortgagor the privilege of paying the whole or any part of the principal sum at any time without notice or bonus. If the purchaser wished to pay all cash, as it did, it

[Page 631]

could have complied literally with the terms of the agreement by tendering a duly executed mortgage and at the same time tendering payment in full thereof. The maxim—lex neminem cogit ad vana seu inutilia peragenda—would seem to be applicable. There remains, however, the question of the effect of Resnick having agreed to a reduction of $1,000 in the purchase price. Whether or not he had ostensible authority to do this, as president as well as solicitor of the plaintiff and as its officer who alone had signed the agreement for sale, need not be decided as it is clear that after it had full knowledge of all that Resnick had done and as to the manner in which the transaction had been closed the plaintiff elected to adopt the transaction. This is shown, amongst other things, by the plaintiff executing and delivering the rectification deed of March 5, 1963, and by its treating the cheque for $125,506.82 as its own, presenting it for payment and proceeding to judgment upon it. For these reasons as well as those dealing with estoppel on which the Courts below proceeded I agree that the plaintiff’s action as against Grozbord and Mont Blanc was rightly dismissed.

Turning to the claim against the banks and Stone, I agree with the view of both Courts below that the lengthy delay on the part of the plaintiff in notifying each of these parties of the fact that the endorsement on the cheque for $125,506.82 had been forged materially reduced the chances of each of them of recovering from the forger. The duty of the plaintiff to notify these parties of the forgery arose at the latest on March 4, 1963. The course that the plaintiff took is succinctly stated by the learned trial judge as follows:

...March 4th was the date when all directors of the plaintiff association became aware of such offence on the part of Resnick. They then had direct positive knowledge of forgery and minutes of subsequent meetings of the association reveal that the failure to notify the banks was deliberate and calculated to conceal the forgery until such time as the plaintiff had completed its investigations and decided what it would do. It is significant that no official of the plaintiff ever did notify either bank of the improper endorsement until the cheque was again presented for payment at the Royal Bank on May 14th. The Royal Bank acquired such knowledge from the solicitors for Stone on May 9th and the Bank of Nova Scotia the following day.

The reason that moved the learned trial judge to give judgment against the Royal Bank and Stone was that although their chances of recovery from Resnick had been

[Page 632]

prejudiced they ran no real risk of financial loss as each was entitled to be indemnified by the Bank of Nova Scotia.

In the Court of Appeal, Aylesworth J.A., after quoting from the reasons of the learned trial judge, continued as follows:

With respect, I take a different view as to the position of both the Royal Bank of Canada and Stone. I also think that the defence of estoppel raised by the Bank of Nova Scotia has a wider application to the plaintiff’s action than accorded it by the learned trial Judge. Dealing first with the Bank of Nova Scotia, it seems to me that the Bank is entitled to say to the plaintiff:—‘Your deliberate silence in withholding notification of the forgery has destroyed this Bank’s opportunities of meeting the claims for indemnity made upon it by its co-defendants, in great part at least, by going against the forger; you are therefore estopped from denying as against the Royal Bank and Stone the genuineness of Mrs. Bryden’s signature forged by Resnick; otherwise this Bank suffers as a result of your silence to precisely the same extent as would be the case if it had been unable to demonstrate any loss whatever of opportunity of recoupment from the forger.’ By the doctrine of estoppel a person is precluded from denying for any purposes of the particular transaction in which the estoppel arises, the truth of the statement acted on. Putting it another way, the truth of the statement acted on surely cannot be denied to any degree or for any purpose which results in a detriment to the representee. It is a distinct detriment to the Bank of Nova Scotia to have been deprived of its opportunities to meet the claims of its co-defendants by recoupment from Resnick.

I agree with all that is said in this passage as applied to the circumstances of this particular case and find it sufficient to support the allowance of the appeals of the Royal Bank and of Stone. Consequently I do not find it necessary to consider the two other grounds upon which Aylesworth J.A. was prepared to allow these appeals, (i) that even if the Royal Bank and Stone were entitled to recover from the Bank of Nova Scotia they have been deprived of their chance of recovering from Resnick, each thus losing one of two strings to his bow, and (ii) that even if entitled to full indemnity from the Bank of Nova Scotia they might well suffer delay and be put to expense in making that recovery.

As I find the reasons given above sufficient to dispose of the appeals it becomes unnecessary to consider the arguments advanced by counsel for some of the respondents based on the decisions in Uxbridge Permanent Benefit Building Society v. Pickard[2], and Lloyd V. Grace, Smith & Co.[3]

[Page 633]

Before parting with the matter I think it only fair to the defendant Stone to say that I have found no support in the record for the criticism of his conduct suggested in the reasons of the learned trial judge and in the joint factum filed in this Court by the respondents the Royal Bank and the Bank of Nova Scotia. He appears to have conducted himself throughout in the manner to be expected of a prudent and competent solicitor acting for the purchaser of a parcel of real estate of substantial value.

I would dismiss the appeals of the plaintiff against all the defendants with costs. As the plaintiff’s action against Stone is dismissed it follows that his conditional appeal in his third party proceedings against the two banks becomes unnecessary and I would dismiss it but without costs. I would vary the judgment of the Court of Appeal to provide that there be no order as to costs in that Court of the appeal by the banks against Stone in the third party proceedings and in all other respects would affirm the judgment of the Court of Appeal.

Appeals dismissed with costs; conditional appeal in third party proceedings dismissed without costs.

Solicitors for the plaintiff, appellant: McCarthy & McCarthy, Toronto.

Solicitors for the defendants, respondents, A.Y. Grozbord and Mont Blanc Holding Co.: Basset, Sullivan, Holland & Lawson, Toronto.

Solicitors for the defendants, respondents, The Royal Bank of Canada and The Bank of Nova Scotia: Tilley, Carson, Findlay & Wedd, Toronto.

Solicitors for the defendant, respondent, E. Lawrence Stone: Thomson, Rogers, Toronto.