Supreme Court of Canada
Canadian Imperial Bank of Commerce v. Campbell, [1976] 1 S.C.R. 341
Date: 1975-03-07
The Canadian Imperial Bank of Commerce Appellant;
and
Elric Campbell, Trustee in Bankruptcy of the Estate of Joseph A. Smith Respondent.
1975: February 10; 1975: March 7.
Present: Laskin C.J. and Ritchie, Spence, Pigeon and de Grandpré JJ.
ON APPEAL FROM THE SUPREME COURT OF PRINCE EDWARD ISLAND IN BANCO
Creditor and debtor—Assignment—Bankruptcy—General assignment of debts to bank—Construction—Ejusdem generis rule—Bankruptcy Act, R.S.C. 1970, c. B-3, s. 50(5).
By what purported to be a general assignment S assigned to the appellant bank “all debts, accounts, claims, moneys and choses in action which now are or which may at any time hereafter be due or owing to or owned by the undersigned and also all securities, bills, notes and other documents now held or owned or which may be hereafter taken, held or owned by the undersigned…”. On the subsequent sale by S of his stock and machinery, S deposited the balance of the proceeds, after deduction of the auctioneers’ fees and payments on liens affecting the articles sold, with his solicitor who made certain payments on account and deducted his fees. S filed a proposal under the Bankruptcy Act, this was rejected by the creditors and C was elected trustee in bankruptcy. Both the appellant bank and C demanded from the solicitor the balance of the bankrupt’s funds which he had in hand. The solicitor paid the funds into Court and when the bank applied for payment the question was referred for consideration to the Supreme Court in banco which held that the bank’s claim must fail and that the funds fell to the estate for distribution in bankruptcy.
Held: The appeal should be dismissed.
The funds, although held by the solicitor in his trust account for Joseph A. Smith were, in effect, in the possession of S, and therefore not moneys to which the general assignment applied. The word “moneys” which appeared in the general assignment had to be construed ejusdem generis with the words “debts, accounts, and
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claims” which preceded it and the words “choses in action” which followed it.
Kent Steel Products Ltd. et al. v. Arlington Management Consultants Ltd. et al., [1967] S.C.R. 497; Re McKay & Maxwell, Limited (1927), 8 C.B.R. 534; In re Christensen (1961), 2 C.B.R. (N.S.) 324; In re Empire Traction Company, Limited, [1920] 3 W.W.R. 515; Jewel Construction Co. Ltd. v. Bank of Nova Scotia, [1972] 4 W.W.R. 20 distinguished.
APPEAL from a judgment of the Supreme Court of Prince Edward Island in banco on questions of law referred to it by the Vice-Chancellor. Appeal dismissed.
James W. Garrow, for the appellant.
Allan K. Scales, Q.C., for the respondent.
The judgment of the Court was delivered by
SPENCE J.—This is an appeal from the judgment of the Supreme Court of Prince Edward Island In Banco pronounced on February 27, 1973.
On November 26, 1969, Joseph A. Smith gave to the Canadian Imperial Bank of Commerce at Charlottetown, Prince Edward Island, what purported to be a general assignment of accounts, bills, securities, etc. I quote that general assignment in full:
| General Assignment
of Accounts, Bills,
Securities, Etc. |
Address of
Assignee(1) |
Canadian Imperial Bank
of Commerce Charlottetown, P.E.I. |
Assignment executed this 26th day of Nov 19 69
The undersigned (2) Joseph A. Smith
(Full Name)
Of Millview Queens County Prince Edward Island
(Street) (City) (Province)
hereby assign(s) and transfer(s) to CANADIAN IMPERIAL BANK OF COMMERCE, (hereinafter called the “Bank”), as a general and continuing collateral security for payment of all existing and future indebtedness and liability of the undersigned to the Bank,
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wheresoever and howsoever incurred and any ultimate unpaid balance thereof, and as a first and prior claim upon the assigned premises, all debts, accounts, claims, moneys and choses in action which now are or which may at any time hereafter be due or owing to or owned by the undersigned, and also all securities, bills, notes and other documents now held or owned or which may be hereafter taken, held or owned by the undersigned or anyone on behalf of the undersigned in respect of the said debts, accounts, claims, moneys and choses in action or any part thereof, and also all books and papers recording, evidencing or relating to said debts, accounts, claims, moneys and choses in action or any part thereof.
PROVIDED ALWAYS that until default by the undersigned in payment of all or any part of the indebtedness and liability of the undersigned to the Bank, or until notice by the Bank to the undersigned to cease so doing (which notice shall be deemed to have been given when an envelope containing it addressed to the undersigned at the address given above for the undersigned is deposited, postage prepaid, in the Post Office), the undersigned may continue to collect, get in, and deal with said debts, accounts, claims, moneys and choses in action in the ordinary course of the business of the undersigned, but not otherwise.
After giving the aforesaid notice or should the undersigned make default in the payment of all or any part of the indebtedness and liability of the undersigned to the Bank, the Bank may collect, realize or otherwise deal with the assigned premises in such manner and at such time or times as may seem to it advisable and (in case of such default) without notice to the undersigned, and any moneys received by the undersigned in respect of the assigned premises after such default or notice shall be received as trustee for the Bank and shall be forthwith paid over to the Bank by the undersigned. The amounts collected may be applied on account of such parts of the indebtedness and liability of the undersigned as to the Bank seems best without prejudice to its claims upon the undersigned for any deficiency. The Bank may grant extensions, take and give up securities, accept compositions, grant releases and discharges, and otherwise deal with the debtors of the undersigned and others and with the assigned premises and other securities as the Bank
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may see fit, without prejudice to the liability of the undersigned or the Bank’s right to hold and realize this security.
The Bank shall not be liable or accountable for any failure to collect, realize or obtain payment of the assigned premises or any part thereof and the Bank shall not be bound to institute proceedings for the purpose of collecting, realizing, or obtaining payment of the assigned premises or any part thereof or for the purpose of preserving any rights of the Bank, the undersigned or any other person in respect of the same. The Bank may charge on its own behalf and also pay to others reasonable sums for expenses incurred and for services rendered (expressly including legal advices and services) in or in connection with collecting, realizing and/or obtaining payment of the assigned premises or any part thereof and may add the amount of such sums to the indebtedness of the undersigned.
The undersigned shall from time to time forthwith on the Bank’s request furnish to the Bank in writing all information requested relating to the aforesaid debts, accounts, claims, moneys and choses in action and the aforesaid securities, bills, notes, books, papers and other documents and the Bank shall be entitled from time to time to inspect such securities, bills, notes, books, papers and other documents and make copies thereof and for such purpose the Bank shall have access to all premises occupied by the undersigned.
WITNESS the hand and seal of the undersigned on the day, month and year first set forth above.
Witness: [signature illegible] Joseph A. Smith
The assignment was filed in the office of the Prothonotary in Charlottetown on December 1, 1969, as document No. 4081.
On April 28, 1971, Joseph A. Smith had an auction sale of his stock and machinery. The proceeds from the sale of the stock and equipment totalled $27,774.50. The auctioneer deducted his fees of $833 and then Joseph A. Smith made certain payments on liens of articles which had been sold at the sale and from which the liens had to be cleared in order to give purchasers full title to these articles. The balance of $21,850.30 Joseph A. Smith deposited with his solicitor, Frederick A. Large, Q.C., of Charlottetown. Mr. Large made certain payments on account, deducted his fees and then rendered his account to Joseph A. Smith
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showing that he held for Mr. Smith a credit balance of $14,238.70.
A few days after the sale, to wit, on May 3, 1971, the Manager of the Canadian Imperial Bank of Commerce wrote to Mr. Joseph A. Smith as follows:
May 3, 1971
Mr. Joseph A. Smith
Millview
P.E.I.
Dear Mr. Smith:
Under our floating charge over all accounts receivable by virtue of an assignment given this Bank by you under date of November 26, 1969 and registered in the office of the Prothonotary as Number 4081 on December 1, 1969, you are formally notified of our rights to the total amount owing you by whosoever and whomsoever.
You are, therefore, required to pay into this Bank all and any moneys collected.
You are also required to furnish us with a list of the names of all persons indebted to you and the amount of the debt.
By virtue of our charge under Section 88 of the Bank Act over all agricultural implements as defined in the Bank Act, we require you to furnish us with complete details of implements sold by auction on April 28, i.e. name of implement, name of buyer and the selling price.
Yours truly,
D.M. Carruthers
Manager
Although this letter refers to s. 88 of the Bank Act, counsel are agreed that that section has no application to the present litigation.
On June 30, 1971, Joseph A. Smith filed a proposal under the Bankruptcy Act. A general meeting of creditors was held on July 15, 1971, and the creditors rejected the proposal which had been filed by Joseph A. Smith. Elric Campbell was elected trustee of the estate of Joseph A. Smith in bankruptcy. On that 15th day of July 1971, Elric Campbell, as trustee in bankruptcy, demanded from Mr. Large the payment of the bankrupt’s funds which he, Mr. Large, had in hand. On the 27th of July, the solicitor for the Canadian Imperi-
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al Bank of Commerce made the same demand upon Mr. Large.
Mr. Large, therefore, paid into the Court of Chancery of Prince Edward Island, on July 29, 1971, the sum of $14,238.70, the credit balance shown on his account with the bankrupt, and later an additional of $450, making a total of $14,688.70. In his affidavit sworn on August 2, 1971, Mr. Large deposed that these moneys had been held by him in trust arising out of the solicitor and client relationship between himself and Joseph A. Smith and that the persons interested in the fund were the following:
The Canadian Imperial Bank of Commerce, Charlottetown,
Austin A. Scales, c/o Island Fertilizers Inc., Charlotte-town, and
Elric Campbell, Trustee in Bankruptcy.
The Canadian Imperial Bank of Commerce, by its petition and notice, both dated September 18, 1972, applied for an order setting down for hearing the application of the Canadian Imperial Bank of Commerce for payment out to it of the money then on deposit in court. Notice of his application was given to the solicitor for Mr. Elric Campbell, the trustee in bankruptcy of Joseph A. Smith.
By his order made on November 1, 1972, the Vice-Chancellor ordered that there be reserved for the consideration of the Supreme Court In Banco, under s. 19(2) of The Judicature Act, the following questions:
(a) Whether the said sum of FOURTEEN THOUSAND, SIX HUNDRED AND EIGHTY‑EIGHT DOLLARS AND SEVENTY CENTS ($14,688.70) and accrued interest thereon, which is now in the Court of Chancery, shall be paid to the Canadian Imperial Bank of Commerce in pursuance of its assignment of book debts made by the said Joseph A. Smith, dated the 26th day of November, A.D. 1969.
(b) Whether the Canadian Imperial Bank of Commerce is a secured creditor of the estate of the said Joseph A. Smith under the Bankruptcy Act by virtue of its assignment of book debts as aforesaid and is entitled to be paid the money and interest thereon which has been paid into the Court of Chancery by Frederick A. Large, either directly to
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it by the Court of Chancery or through the Trustee in Bankruptcy.
Section 49(1) of the Bankruptcy Act, R.S.C. 1970, c. B-3, provides:
49. (1) Upon the filing of a proposal made by an insolvent person or upon the bankruptcy of any debtor, no creditor with a claim provable in bankruptcy shall have any remedy against the debtor or his property or shall commence or continue any action, execution or other proceedings for the recovery of a claim provable in bankruptcy until the trustee has been discharged or until the proposal has been refused, unless with the leave of the court and on such terms as the court may impose.
The appellant could have chosen to proceed by s. 50 but did not do so and took the present proceedings, which are undoubtedly within the words “or other proceedings”, without leave.
Since the order made on the application, i.e., the order of the Vice-Chancellor referring the questions to the Court in Banco, was made by one of the members of the Supreme Court of Prince Edward Island, and since by s. 153(1)(c) the Supreme Court of Prince Edward Island is described as the Court in Bankruptcy for that province, I am ready to find an implied leave to the Canadian, Imperial Bank of Commerce to take the procedure against the trustee.
Counsel for the appellant at the commencement of the argument in this Court referred to the fact that the appellant had not obtained leave to appeal from the decision of the Supreme Court of Prince Edward Island In Banco and to the decision of this Court in Kent Steel Products et al. v. Arlington Management Consultants Ltd. et al., and was doubtful whether he should not have asked for leave of a judge of this Court in accordance with the Bankruptcy Rules, kent Steel was concerned with the provisions of the Bankruptcy Act when s. 151 of the Act provided:
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The decision of the Court of Appeal upon any appeal is final and conclusive unless special leave to appeal therefrom to the Supreme Court of Canada is obtained from a judge of that court.
The section, in those exact words, appears as s. 164 of the Bankruptcy Act, R.S.C. 1970, c. B-3, but an amendment was wrought by the provisions of c. 44 of the Statutes of Canada 1969-70 which appears as the first supplement to the Revised Statutes of Canada 1970 so that s. 151 now provides:
The decision of the Court of Appeal upon any appeal is final and conclusive unless special leave to appeal therefrom to the Supreme Court of Canada is granted by that court.
It is noted, therefore, that the application for leave to appeal no longer goes to a judge of this Court but to the Court and I am of the opinion that the procedure in reference to such an application for leave to appeal is governed by the Rules of this Court as to the granting of leave.
Both parties were present on the appeal. The respondent Elric Campbell had made no objection prior to the argument of the appeal as to the failure to obtain leave and upon the argument made no objection to leave, if necessary, being granted. I would, therefore, be ready to grant leave nunc pro tunc in order to consider this appeal upon the merits.
The Supreme Court of Prince Edward Island In Banco held that the bank’s claim to entitlement of the moneys on deposit in the court must fail and ordered that the sum of $14,688.70 form part of the assets of the estate of Joseph A. Smith for distribution in bankruptcy. It is this disposition which is the subject of the present appeal.
The document purports to be a general assignment of accounts and by its words Smith assigned and transferred to the, Canadian Imperial Bank of Commerce “all debts, accounts, claims, moneys and choses in action which now are or which may at any time hereafter be due or owing to or owned by the undersigned and also all securities, bills, notes and other documents now held or owned or
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which may be hereafter taken, held or owned by the undersigned…”.
The proceeds of the auction sale of the various articles were paid by the auctioneer to Smith on April 28, 1971.
The so-called general assignment of accounts, by its terms, permitted the bank to give notice to Joseph A. Smith to cease doing business in the ordinary course but permitted Smith to continue to collect, get in, and deal with the said debts, etc., in the ordinary course of business but not otherwise until the receipt of the said notice. The letter which I have quoted from the manager of the bank to Joseph A. Smith was dated May 3, 1971. This was after the said Joseph A. Smith had received the proceeds of the auction sale from the auctioneer and had deposited those proceeds with his solicitor. The evidence does not disclose that immediately before that notice was served any money was due and payable to the bank. Trainor C.J. giving the reasons for judgment of the Supreme Court of Prince Edward Island made a specific finding to the effect:
Again, as to the rights of the Bank based on default, there was no evidence that on the 28th day of April or on the 3rd day of May 1971 Smith was, in fact, in default in his payment due to the Bank.
In so far as the general assignment purports to be an assignment of debts due to Smith or any claims or demands which Smith would have on anyone else, I am in agreement with the Supreme Court of Prince Edward Island In Banco in finding nothing to which the assignment would apply. Various authorities were cited to this Court including In re McKay & Maxwell, Limited, The Canadian Imperial Bank of Commerce v. Trustee, In re Christensen, In re Empire Traction Company, Limited, and the Kent Steel Products case supra as it was in the Court of
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Appeal for Manitoba, 59 W.W.R. 182, and in the Queen’s Bench of Manitoba, 58 W.W.R. 1.
These are all cases which deal with some sort of a debt to the assignor or where the assignor had a right to make a claim or demand and do not apply to the present case where the assignor had, at the date the notice was served and when he made his assignment in bankruptcy, certain moneys. These moneys, although held by the solicitor in his trust account for Joseph A. Smith, in my view, were just as much in his possession as if they had been in his own pocket.
The reasons for judgment of Trainor C.J. for the Supreme Court of Prince Edward Island In Banco deal only with this element of the appellant’s claim and I agree with the conclusion at which he arrived for that Court that the general assignment did not attach to the moneys.
Counsel for the appellant in this Court stressed the words in the assignment “moneys” and “owing to or owned by the undersigned” as having the effect of transferring the property in all moneys owned by the assignor to the assignee so soon as notice was served in accordance with the terms of the assignment and cited in support of such submission Jewel Construction Co. Ltd. v. Bank of Nova Scotia. That was a decision of Anderson J. in the Supreme Court of British Columbia (in Bankruptcy). The decision deals with a land mortgage properly registered and with a sum of money held by the solicitor for the bankrupt in trust to secure certain mechanics liens. The holders of the said mechanics liens did not proceed to action within the time limited by the statute and therefore the money was not required for that purpose. The major portion of the reasons of Anderson J. is concerned with the land mortgage but at p. 22 he said:
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Mr. Stevenson was kind enough to submit a memorandum containing other relevant authorities and I adopt his submission as follows:
and then set out in quotation marks the counsel’s memorandum including the following paragraph:
With respect to the sum of $1,000.00 held in Court and in Mr. Neen’s trust account, the Arnold, Cohen and Eastern Trust cases referred to above, together with the cases of Re Christensen (1961), 2 C.B.R. (N.S.) 324 (Ont.), and Kent Steel Products Ltd. v. Arlington Management Consultants, 59 W.W.R. 382, 62 D.L.R. (2d) 502, appeal quashed [1967] S.C.R. 497, 61 W.W.R. 119, 10 C.B.R. (N.S.) 92, 62 D.L.R. (2d) 638, deal with various types of funds, and generally hold that the type of wording used in the subject Assignment is broad enough to cover such funds.
The cases cited by counsel to Anderson J. were cases of a debt due to the assignor or an assignor’s right to make a claim or demand upon a third party. I take the view that the word “moneys” which appears in the general assignment must be read ejusdem generis with the words “debts”, “accounts” and “claims” which words precede it and the words “choses in action” which follow it, so that the document was not intended to apply and does not apply to moneys which are in the possession of the assignor, and that the provision in a subsequent paragraph of the general assignment “and any moneys received by the undersigned in respect of the assigned premises after such default or notice shall be received as trustee for the bank and shall be forthwith paid over to the bank by the undersigned” does not apply because the moneys were received by the bankrupt prior to the notice. I, therefore, am unwilling to accept the decision in Jewel Construction Co. Ltd. v. Bank of Nova Scotia, supra.
Section 50, subs. (5) of the Bankruptcy Act, R.S.C. 1970, c. B-3, provides:
50. (5) On a receiving order being made or an assignment being filed with an official receiver, a bankrupt ceases to have any capacity to dispose of or otherwise deal with his property, which shall, subject to this Act and subject to the rights of secured creditors, forthwith pass to and vest in the trustee named in the receiving order or assignment, and in any case of change
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of trustee the property shall pass from trustee to trustee without any conveyance, assignment or transfer.
In my view, that section applies to the moneys which were in the hands of the solicitor for Joseph A. Smith, a bankrupt, and which were paid by the said solicitor into the Supreme Court of Prince Edward Island in Chancery and that therefore the order of the Supreme Court of Prince Edward Island In Banco that the sum of $14,688.70 now in the Court of Chancery forms part of the assets of the estate of Joseph A. Smith for distribution in bankruptcy was correct.
I would dismiss the appeal and affirm the order of the Supreme Court of Prince Edward Island In Banco. The trustee is entitled to his costs of this appeal.
Appeal dismissed with costs.
Solicitors for the appellant: Farmer, Dalzell & Farmer, Charlottetown.
Solicitors for the respondent: Scales, MacMillan & Ghiz, Charlottetown.
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