Syndicat Lyonnais du Klondyke v. McGrade, (1905) 36 SCR 251

Supreme Court of Canada

Syndicat Lyonnais du Klondyke v. McGrade (1905), 36 S.C.R. 251

Date: 1905-05-02

Le Syndicat Lyonnais du Klondyke (Defendants) Appellants;

and

Thomas John McGrade and Others (Plaintiffs) Respondents.

1905: March 21, 22, 23; 1905: May 2.

Present:—Sir Elzéar Taschereau C.J. and Sedgewick, Davies, Nesbitt and Idington JJ.

ON APPEAL FROM THE TERRITORIAL COURT OF THE YUKON TERRITORY.

Constitutional law—Imperial Acts in force in Yukon, Territory—2 & 3 V. c.11 (Imp.)—R. S. C. c. 50—Title to land—"Torrens system"—Transfer by registered owner—Fraud—Litigious rights—Notice of lis pendens—Irregular registration—Indorsements upon certificate of title— Construction of statute—"Land Titles Act, 1894"—Caveat—57 & 58 V. c. 28, s. 126 (D.)—61 V. c. 32, s. 14 (D.) -Pleading—Objections taken on appeal—Yukon Territorial Court rules—Yukon ordinances, 1902, c. 17—Rules 113, 115, 117—Waiver—Estoppel.

The provisions of the Imperial Act, 2 & 3 Vict. ch. 11, in respect to the registration of notices of litispendence and for the protection of bonâ fide purchasers pendente lite are of a purely local character and do not extend their application to the Yukon Territory by the introduction of the English law generally as it existed on the fifteenth of July, 1870, under the eleventh section of "North-West Territories Act," R. S. C. ch. 50.

Under the provisions of "The Land Titles Act, 1894," section 126, a bonâ fide purchaser from the registered owner of land subject to the operation of that statute is not bound or affected by notice of litispendence which has been improperly filed and noted upon the folio of the register containing the certificate of title as an incumbrance or charge upon the land. The exception as to fraud referred to in the 126th section of the Act means actual fraudulent transactions in which the purchaser has participated and does not include constructive or equitable frauds. The Assets Company v. Mere Roihi (21 Times L. R. 311) referred to and approved.

In an action to set aside a conveyance as made in fraud of creditors, the defendant desiring to meet the action by setting up that there was no debt due and, consequently, that no such fraud could exist, must allege these objections in his pleadings. In the present case the defendant, having failed to plead such defence, was allowed to amend on terms, the Chief Justice dissenting.

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APPEAL from the judgment of the Territorial Court of Yukon Territory in banco, reversing the judgment of Dugas J. at the trial, and ordering that the transfer of certain lands should be set aside as being fraudulent and void as against the respondent and all other creditors of one Edward McConnell, and declaring that the title of the appellants was held subject to the creditors' claims.

The plaintiff (McGrade) was holder in due course, after maturity, of two promissory notes made by one Edward McConnell upon which he had brought a former action, on 9th Sept., 1901, and recovered judgment. One of the notes, dated 26th Aug., 1899, had fallen due on 1st July, 1900, and the other was dated 15th Sept., 1899, and payable on demand. The plaintiff also brought the present action, on behalf of all McConnell's creditors, on 2nd Oct., 1901, to set aside a transfer of the lands now in question made by McConnell to his wife on 7th April, 1900, as being void and fraudulent as against creditors. These lands were subject to the operation of the "Land Titles Act, 1894," and on 2nd Oct., 1901, a certificate of lis pendens was issued in the latter action and notice thereof was filed in the office of the Yukon Land Registration District, whereupon the registrar indorsed a memorandum thereof upon the folio of the register constituting the certificate of title as an incumbrance or charge upon the lands. Upon the 21st of June, 1902, the registered owner, Mrs. McConnell, while the action was pending, transferred the lands to the syndicate, appellants, and a new certificate of title was issued to them with a notification thereon that the title was subject to the lis pendens.

The appellants were made parties (defendants) to the second action and an amendment allowed by which the transfer was alleged, and it was further charged that the "Syndicat Lyonnais du Klondyke is not a bonâ

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fide purchaser for value without notice, but took the conveyance from the said Luella Day McConnell with full knowledge and notice of all the facts pleaded herein; "and further relief was claimed for a declaration that the said conveyance should be declared fraudulent and void as against the plaintiffs and that the conveyance to the syndicate be declared to be subject to the claims of the plaintiff and all the other creditors of Edward McConnell; that the said Luella Day McConnell and the syndicate should be declared trustees of the land for McGrade and all the other creditors, and that, for that purpose, all proper directions should be given and accounts taken and for such further relief as the circumstances of the case may require.

On the 31st of March, 1902, the defendant Edward McConnell filed his defence denying any indebtedness to the plaintiffs, alleging that before maturity of the first note his liability thereon was absolutely and unconditionally renounced by the person who was then the holder thereof and that, at the time of the indorsement to him, the plaintiff had notice of such renunciation, and also that the second note had been satisfied and discharged by payment before the action was brought. The defence further alleged "that at the respective dates of said conveyances the plaintiff was not, and that he is not now. a creditor of the said defendant, and that there were not at the said dates any creditors of the said defendant whose claims, if any, had not been satisfied and discharged before this action was commenced; and that any of the present creditors of the said defendant, if there are any, which he denies, became such creditors with full notice that the said conveyances had been made and that the said lots were the property of the other defendant, Luella Day McConnell." He also denied that the conveyances

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were made with the intent and design alleged, and insisted that they were bonâ fide and for valuable consideration.

The other defendant, Luella Day McConnell, pleaded separately and by her statement of defence denied that she became a party to the conveyances with the design or intention of aiding or assisting the said Edward McConnell to defeat, delay or hinder the plaintiffs or other creditors in recovering their debts, alleged valuable consideration, absence of notice of any such intention or design on the part of the said Edward McConnell and of any indebtedness of the latter to the plaintiffs or to any other persons, that her title to the said land (a grant from the Crown) did not depend upon but was independent of the conveyances, that, at the time that the conveyances were made, the plaintiff, McGrade was not a creditor of the defendant Edward McConnell and there were no creditors of the said defendant and that there were none at the time the second action was instituted, that her Crown grant and certificate of title were obtained solely by her, paid for by her, and that she derived title to the said land by virtue of the Crown grant and certificate of title.

The plaintiffs joined issue on these defendants' statements of defence

The syndicate by their statement of defence deny that they are not a bonâ fide purchaser for value without notice, and they further deny that they took the conveyance with full knowledge or any knowledge or notice of the facts set out in the statement of claim, and they claim to be bonâ fide purchasers of the land for value, without notice. In the alternative they allege that any lis pendens issued was so issued without authority of law, and that the lis pendens and the registration thereof were unauthorized, void and of no effect as against them, and that they are not charged with notice by reason of notice

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of action, and that the lands purchased by them were not subject to any claims whatsoever of the plaintiffs by reason of said lis pendens or otherwise, and the said statement of claim shews no cause of action against them, because there was no cause of action whereof to charge them with notice or to form any lien upon the lands purchased by them.

At the trial, Mr. Justice Dugas was of the opinion that the promissory notes, having been transferred by simple indorsement after maturity, and subsequent to (the alleged fraudulent transfer, the plaintiff, McGrade, has no right or status to bring the action to set aside the conveyances, or to obtain the relief sought on behalf of himself and creditors.

The learned trial judge, however, held that the evidence established that the transfers from McConnell to his wife were made with the object of defrauding the creditors; also that the law and practice of the Yukon Territory did not authorize the filing of a notice of lis pendens, because lands in the Yukon were entirely within the "Land Titles' Act, 1894" and its amendments which did not so provide but made provision (sec. 99. for the lodging of a caveat; that a purchaser for valuable consideration, but with notice, was subject to have his contract voided, and that, notwithstanding registration of the conveyance to the purchaser, the equitable doctrine of notice would always stand; nevertheless, that notice having reached the syndicate through a defective or irregular document, viz.: the notice of lis pendens filed, it was not an effectual notice and could not bind the parties. He accordingly dismissed the action with costs in favour of the syndicate.

On appeal Mr. Justice Dugas adhered to his judgment at the trial; but Mr. Justice Craig and Mr. Justice MacAulay were of opinion that the plaintiffs

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should succeed. Judgment was given accordingly for the plaintiff with costs, the impeached transfers were declared void as against the creditors, and the title of the syndicate was declared to be subject to the claims of the creditors, with a direction that the lands should be sold to satisfy the claims.

From this latter judgment the present appeal is taken by the syndicate.

Chrysler K. C. for the appellants. It is not claimed that either the patents to Mrs. McConnell should be set aside or that the deed from her and the certificate of title to the syndicate are fradulent against the plaintiffs, but, consenting that these instruments should stand intact, they ask that the title to the syndicate be declared subject to the credi-tors' claims; and that the syndicate may be declared trustees for all the creditors of Edward McConnell. It is not denied that the deed to the syndicate was given for valuable consideration. The claim is that the deed to Mrs. McConnell is voidable or void under the statute respecting fraudulent conveyances and that the judgment setting aside the deed to her should be binding upon the syndicate as purchasers, pendente lite, because they had notice of lis pendens through the medium of the indorsement upon their own certificate of title. It is not alleged that the syndicate had otherwise notice of the claim or that they knew, as a fact, that the deed from McConnell to his wife was made for the purpose of defrauding his creditors nor that they were otherwise parties to the alleged fraudulent dealing between McConnell and his wife. It is conceeded that the purchase by the syndicate was for valuable consideration and in good faith, unless it be bad faith to purchase, pendente lite, in the face of an invalid registration notified upon the certificate of title and without knowledge of the alleged fraud.

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The syndicate relied entirely upon the clear certificate of title held by the registered owner of the land in respect of which they were dealing with her. "Land Titles Act, 1894," sec. 126. Hardcastle on Statutes, (3 ed.) at page 333 suggests that in the case of an Act which grants a new jurisdiction, a new procedure, new remedies, the procedure, forms or remedies there pre-scribed and no others must be followed until altered by subsequent legislation. This principle seems applicable to "The Land Titles Act" and the procedure for filing a "caveat" This procedure cannot be set aside and an irregular document called "Notice of lis pendens" filed, which is not provided for either by "The Land Titles Act" or by "The Judicature Act" in force in the Territories.

Even assuming that the filing of the lis pendens had some effect as notice, what would the syndicate have learned if they, had looked into the allegations in this suit? Merely that the transfer by McConnell to his wife was alleged to be a fraud upon the creditors; that the said deed was sought to be set aside and Mrs. McConnell declared trustee for the creditors; that, subsequent to the transfer to Mrs. McConnell, a patent had been granted to her by the Crown and that, thereupon, a certificate of title had issued to her under " The Land Titles Act." No attack was made on the patent, nor that it was in any' way connected with the alleged fraudulent transfer or issued to her because or on the strength of said alleged fraudulent transfer, nor was any attack made on the certificate of title issued to her. Mrs. McConnell set up in her answer that her title was not dependent on the transfer to her by her husband, but as the patent and certificate of title were in no way impugned under sections 55, 57 and 126, "Land Titles Act" there was still a clear title in Mrs. McConnell which left her free power of disposi-

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tion as owner and the syndicate was safe in carrying out the purchase.

Even if the lis pendens was called a caveat and treated as if filed as such, it could not affect the title; a caveat that does not comply with the Act is of no avail. McKay v. Nanton ([1]), and cases there cited; McArthur v. Glass ([2]). Registration of a document improperly registered is not notice; Atkins v. Coy ([3]); Roff r. Krecker ([4]). Notice of a prior mortgage unrecorded at the time of registering a second mortgage does not postpone the second mortgage; Edwards v. Edwards ([5]). Mere notice of prior unregistered documents is of no avail as against a registered document, and the holder of a registered title is a purchaser for value not with standing notice of such prior documents. Void documents have no force in law, and, as the lis pendens in this case was void, it could not be notice. Claims for which the statute has not provided the means of filing a caveat cannot be relied upon as against a registered owner who holds without fraud White v. Neaylon ([6]).

The "Land Titles Act" is in force in the Yukon Territory and alone governs all questions regarding title to lands bought under the Act. The provisions of the English statute 2 & 3 Vict. ch. 11, as to filing lis pendens, is not in force in the Yukon Territory, neither are the rules and practice of the courts of law upon this subject as they were repealed by that statute, 2 & 3 Vict. ch. 11, and were not, on the 15th July, 1870, a part of the English law introduced into the Territories. R.S.C. ch. 50, s. 11.

Constructive notice is not sufficient to set aside a registered title. Actual notice amounting to fraud

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must be clearly proved and lis pendens is not notice for that purpose. A registered title stands upon a different footing from an ordinary conveyance. Wyatt v. Barwell ([7]); LeNeve v. LeNeve ([8]); Hine v. Dodd ([9]); Jolland v. Stainbridge ([10]); Chadwick v. Turner ([11]), Russell v. Cushell ([12]); Agra Bank v. Barry ([13]) over-ruling Wormald v. Maitland ([14]). Nothing short of actual notice, such as makes it a fraud on the part of the purchaser to insist on the registry laws, is sufficient to disentitle the party to insist in equity on a legal priority acquired under the statute. Boss v. Hunter ([15]), per Strong J.; City of Toronto v. Jarvis ([16]); New Brunswick Railway Co. v. Kelly ([17]). Notice under the registration Acts and under the "Land Titles Act" are widely different, and the effect of notice is not the same. The principles are entirely different whether under the Statute of Elizabeth or under the "Land Titles Act." The policy of the "Land Titles Act" is that the public office should supply the means of knowing with certainty the information required by any one dealing with land. Gibbs v. Messer ([18]). The principle upon which LeNeve v. LeNeve was decided, as explained by Lord Hardwick in that case, was that the policy of the registry Acts was to prevent the mischief arising from secret conveyances, and that they did not apply to cases in which a person claiming under a registered deed had notice of prior deeds or equities Greaves v. Tofield ([19]). This case depends upon the construction of the "Land Titles Act." There is no provision for lis pendens in the Act. Section 99 provides for a caveat; no caveat

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was filed in this case. The syndicate were bonâ fide purchasers and justified in taking the conveyance from Mrs. McConnell and paying her the price agreed upon. The plaintiff cannot complain because the law provides a simple remedy which he did not choose to follow.

The term "fraud" in the "Land Titles Act" is a fraud of both of the parties. The purchaser is not to be affected by notice, direct or implied or constructive, of any trust or unregistered interest and the knowledge that any trust or unregistered interest is in existence shall not of itself be imputed as fraud wherein the purchaser or other person acquiring title has partici-pated or colluded. There is no. attempt to fasten any wrong-doing upon the) syndicate except that its solicitor advised it that the notice of lis pendens was of no avail and that they need not pay attention to it. They were in perfect good faith and in reliance upon the solicitor, the certificate of title and the fact that no caveat had been filed. The plaintiff did not prove com-plicity amounting to absolute fraud. See In re Johnson ([20]); Pennell v. Reynolds ([21]); Kevan v Crawford ([22]).

The effect of the judgment is to place the syndicate in the position that it would have been in if it had been a party to the action or a caveat had been duly registered before it obtained its certificate of title and, consequently, it is contrary to the whole spirit and intention of the "Land Titles Act," and to its express language. See remarks of Manning J. in Cooke v. Union Bank ([23]); Gregory v. Alger ([24]), at pages 573-574, per Williams J. and at page 575, pet Hood J., also Baker's Creek Consolidated Gold Mining Co. v. Hack ([25]), at page 223, per Owen C.J., quoting Gibbs v. Messer([26]), at page

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 254; Longeway v. Mitchell ([27]); Allan v. McTavish ([28]); Godfrey v. Poole ([29]).

The plaintiff is not entitled to succeed in this action because the notes were tranferred to him after maturity and after the alleged fraudulent transfers set up in the statement of claim in this cause. See Byles on Bills (ed.) 183. The indorsements to McGrade did not assign any collateral rights which the payees may have had to set aside the conveyance as fraudulent but only the right to sue upon the notes. See Shand v. Du Buisson ([30]); Hopkinson v. Foster ([31]).

Ewart K.C. for the respondent. All the judges in both lower courts having held that the transfers from McConnell to his wife were made in fraud of creditors, the only remaining points in dispute are: 1. Whether McGrade was qualified originally to launch this action on behalf of himself and all other creditors of his debtor, McConnell; and 2. Whether the syndicate, as purchasers from McConnell's wife of the real estate in question, were affected with actual notice of the pendency of this action at the time that they completed the purchase. The evidence upon both questions, and the law applicable to such matters, have been exhaustively treated in the considered judgments of both Craig J. and MacAulay J. The respondent McGrade confidently relies upon them in the present appeal.

McGrade was the holder of the notes for upwards of $18,000, the larger of which was made on the 26th August, 1899. The conveyances by McConnell to his wife were not made until April, 1900. Consequently, the guilty transferor was indebted thereon at the time of the execution of the impeached con-

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veyances. Before the syndicate filed its defence in June, 1903, for $18,349 94, against Edward McConnell on the notes in question, execution had issued thereon and a return of nulla bona had been obtained. McGrade was, therefore, at the time of delivery of his amended statement of claim to the syndicate (29th May, 1903), an execution creditor of McConnell, and was thus a judgment creditor of McConnell both before issue was thus joined and at the date of the trial (6th August, 1903). Even as a simple contract creditor McGrade was competent to bring this action, on behalf of himself and all other creditors of the guilty transferor, under the Statute at 13th Elizabeth. See Twyne's Case ([32]); In re Mouat ([33]); and cases cited by the judges in the court below.

As to actual notice of these proceedings, under 13th Elizabeth, at and prior to the completion of the purchase from Mrs. McConnell, the evidence is clear and uncontradicted that both the syndicate's general agent and solicitor had full and actual notice of the contents of the lis pendens, issued and registered, on the 2nd October, 1901; while the purchase and conveyance were not completed until the following year, 21st June, 1902.

The case is one of express or actual notice and the matter was deliberately considered prior to payment by the syndicate to Mrs. McConnell. These agents of the syndicate do not deny notice of lis pendens, but they risked ignoring it, on an unsound view of its legal effect and of the equitable doctrine of notice applicable to such a case. See Armour on Titles (3 ed.) p. 189;. 7 Eng. Encycl. of Law, p. 486.

This appeal turns rather on the general equitable doctrine of notice (9 Eng. Encycl. p. 189 and cases

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therein cited); LeNeve v. LeNeve ([34]); Agra Bank v. Barry ([35]); Kennedy v. Green ([36]).

The law of England, as it existed on 15th July, 1870, is in force in the Yukon Territory so far as applicable; hence, the imperial statute, 2 & 3 Vict. ch. 11, is in force there, and the notice of lis pendens was properly issued and registered and affects the syndicate as a subsequent purchaser. On the other hand, if that Act be not in force, as argued, then the general English law of lis pendens, as against a purchaser with actual notice thereof, is applicable, namely, the law of lis pendens as it existed in England prior to 2 & 3 Vict ch. 11.

As to the points argued, so far, we cite generally' Best on Evidence (7 ed.) p. 578; Freeman, Judicature Acts, 277; Reese River Mining Co. v. Atwell ([37]); Shelford Real Property Acts, (9 ed.) p. 366 ; Ont. Jud. Act, sec. 97; Holmstead & Langton, p. 135; Blair v. The Assets Co. ([38]); Colonial Bank of Australasia v. Pie ([39]); Baxter v. Middleton ([40]); Parker v. Parker ([41]); Morewood v. South Yorkshire Railway and River Dun Co. ([42])

The Chief Justice (dissenting).—I would allow this appeal in part without costs, by striking out of the judgment the words

and that such lands be sold to satisfy the execution of the appellant issued out of the said Territorial Court of the Yukon Territory against the defendant, Edward McConnell.

See Oliver v. McLaughlin ([43]).

For the reasons given by Mr. Justice Macaulay in the court below, I would confirm the part of the judg-

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ment declaring the deed from McConnell to his wife void and fraudulent as against his creditors and that the syndicate holds title subject to the claims of the said creditors.

I do not see the least room for doubting that the syndicate purchased with full knowledge of the danger they were exposing themselves to.

As to the amendments suggested by my brother Nesbitt, I am not in favour of allowing it. It has not been asked for and I do not see upon what ground the Syndicate should be permitted to "bis vexari " their adversaries.

Sedgewick and Davies JJ. concurred in the judgment dismissing the appeal with costs and allowing the amendment by the appellants upon terms, for the reasons stated by Nesbitt J.

Nesbitt J. —As pointed out in the judgment of my brother Idington which I have had an opportunity of reading, the defendants, the syndicate, are bound by the rules of pleading in force in the Yukon, rules 113,115 and 117 of the ordinances 1902, by the allegation of the debt, the fraudulent intent between the McConnells and by the amended pleading of the amount of the judgment, and cannot be heard to dispute the facts alleged. It is to be regretted that this is so for the argument of Mr. Chrysler convinced me that had these points been open to him we should have held following Ex parte Mercer; in re Wise ([44]), that no case was made out for relief against the syndicate.

Assuming that we are bound to hold that the deed between the McConnells was a fraud against the plaintiff, we then have this deed attacked in an action commenced before the purchase by the syndicate from

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Mrs. McConnell. This distinguishes the case from Dalglish v. McCarthy ([45]), which I thought upon all fours with this case and which, apart from section 126 of the "Land Titles Act" ([46]) would have clearly brought the case within the doctrine of a purchase pendenle lite. I agree that the 2 & 3 Vict. ch. 11, sec. 7, is not applicable to the Yukon, but this Act is in relief of bonâ fide purchasers and so, but for the section I refer to, the purchaser would be under the old rule of law and bound by the result of the litigation of which he had no notice. I need not refer to cases on this point. What then is the effect of section 126, which is in the following words:

Except in the case of fraud, no person, contracting or dealing with, or taking or proposing to take, a transfer, mortgage, encumbrance or lease from, the owner of any land, for which a certificate of title has been granted, shall be bound or concerned to inquire into or ascertain the circumstances in, or the consideration for which, the owner or any previous owner of the land is or was registered, or to see to the application of the purchase money or of any part thereof, nor shall he be affected by notice direct, implied or constructive, of any trust or unregistered interest in the land, any rule of law or equity to the contrary notwithstanding ; and the knowledge that any trust or unregistered interest is in existence, shall not of itself be imputed as fraud.

I do not think a narrow interpretation should be placed on this; and I do not agree with some of the observations of my brother Idington as to its construction. I do not think the registrar had any right to register a lis pendens, nor do I think the form of certificate issued by him can have the effect of cutting-down the effect of section 126. While there is a discretion vested in the registrar it must be exercised within the limits prescribed by the Act. The whole scope of the New Zealand Act of 1885 (which I have gone over, so far as this point is concerned and which is substantially the same as the Act in question) is fully considered in the case of The Assets Company

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V. Mere Roihi ([47]). This case came to hand since the argument. The Act was passed in aid of the safe and easy transfer of property and to free such transfer from embarrassing questions of notice of trusts and even from knowledge of their existence, and I think the best interests of the commercial community are served by giving the freest and widest interpretation to the latter part of the section. The case seems, however, because of the pending action and actual notice and knowledge of the frauds by which Mrs. McConnell became the registered owner, to fall expressly within the language of the judicial committee in the case quoted (at page 316)—

By fraud in those Acts was meant actual fraud—i.e., dishonesty of some sort; not what was called constructive or equitable fraud, an unfortunate expression and one very apt to mislead, but often used, for want of a better term, to denote transactions having consequences in equity similar to those which flowed from fraud. Further, it appeared to their lordships that the fraud which must be proved in order to invalidate the title of a registered purchaser for value, whether he bought from a prior registered owner or from a person claiming under a title certified under the Native Land Acts, must be brought home to the person whose registered title was impeached or to his agents. Fraud by persons from whom he claimed did not affect him unless knowledge of it was brought home to him or his agents. The mere fact that he might have found out fraud if he had been more vigilant and had made further inquiries which he omitted to make did not of itself prove fraud on his part. But if it be shewn that his suspicions were aroused and that he abstained from making inquiries for fear of learning the truth, the case was very different and fraud might be properly ascribed to him. A person who presented for registration a document which was forged or had been fraudulently or improperly obtained, was not guilty of fraud if he honestly believed it to be a genuine document which could be properly acted upon. In dealing with colonial titles depending on the system of registration which they had adopted, it was most important that the foregoing principles should be borne in mind, for if they were lost sight of that system would be rendered unworkable.

I therefore think that, although in this case, if the suit had not been commenced the syndicate could have relied on section 126 as a full protection, they cannot

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do so where the suit has been begun impeaching the conveyance and the syndicate have full notice of it.

As Bump on Fraudulent Conveyances says: [sec. 17].

If another receives the property with notice of the fraud, he is aiding the debtor to cheat his creditors, and this (he law never tolerates).

The first deed is voidable only and when the title [sec. 492]

has passed into the hands of an innocent holder, even this infirmity is cured and the title becomes sound and indefeasible.

If he does not give a valuable consideration and if he has notice of the fraud, he is in the same position towards the creditors as the fraudulent grantee, for he is, in the contemplation of the law, a participant in the fraud [sec. 493.]

Kerr on Fraud, p. 324:

The right to impeach a transaction on the ground of fraud has no place against third parties who have paid money and acquired a legal title to property without notice of fraud.

May on Fraudulent Conveyances, after stating that until the first deed is

made void by "creditors and others" it is a valid deed and one by virtue of which the legal estate vests in the voluntary grantee, subject to its being divested,

proceeds as follows:

The right of the person defrauded under these statutes to elect to avoid a deed as fraudulent may be lost in either of the following ways:

First, it may be lost by the deed having become for value, by a consideration ex post facto before any steps are taken by that person to impeach it.

Secondly, the voluntary grantee may have divested himself of the property by a bonâ fide transfer of it for value to a bonâ fide purchaser for value without notice of the fraud.

See May 325 and also 317.

I have gone into the case thus fully because it raises a most important question as to the proper construction of section 126 of “The Land Titles Act.” As our judgment, however, is based on the ground that owing to the syndicate not having pleaded specifically that no debt existed on the note sued on which plaintiff

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was entitled to recover and that McConnell's deed to his wife was not for the purpose of defrauding the plaintiff and his other creditors, and as the only evidence given by the plaintiff as against the McConnell plea to that effect seems to shew that had the syndicate so pleaded they might have been entitled to judgment in their favour, I would send the case back and allow them, if they so desire, to so amend their pleadings and to raise this point, but, on condition of their first paying all costs incurred since these pleadings were filed within thirty days after taxation thereof and filing their amended pleading within the same time. If they, establish this defence they should succeed; if they fail on such defence then the present judgment to stand.

Idington J.—The appellants purchased from Luella Day McConnell real estate in the Yukon. This she had got from her husband Edward McConnell by conveyance of April, 1900, which the trial judge and the court en banc in the Yukon have both found or respectively found and assumed were fraudulent and void as against creditors. The respondent, McGrade, had become the holder of promissory notes made by the said Edward McConnell and, on the 9th September, 1901, sued him to recover the amounts thereof. Pending that action the respondent, on the 2nd October, 1901, began this action on behalf of himself and all other creditors of said Edward McConnell against Edward McConnell and his wife, to have said deeds of conveyance declared fraudulent and void as against creditors.

By deed of 21st June, 1902, Mrs. McConnell conveyed said real estate to the appellants, the Syndicat Lyonnais du Klondyke, for the alleged consideration of $40,000 and they claim under said deed to be purchasers in good faith for value and without notice, or

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if not, at least by virtue of the provisions of "The Land Titles Act," to have an unassailable title.

On the 29th January, 1903, the respondent McGrade recovered judgment in the said suit against Edward McConnell for the amount of the promissory notes in question and judgment having been entered up he, McGrade, applied in this action and got leave to amend and to add the appellants as defendants herein and did so, alleging amongst other things the recovery of the said judgment against Edward McConnell.

The appellants, as defendants, thereupon pleaded to the amended statement of claim a defence that neither denied the said debt being due nor the said judgment nor the fraud charged in regard to the conveyance from McConnell to his wife. At the trial the McConnells made no defence, but, having by their statement of defence denied liability and the alleged fraud, it became necessary for the plaintiff to put in formal proof of both

Amongst other things filed for this purpose was proof of the judgment that had been so recovered, and some further evidence I need not touch upon here for reasons which will presently appear. Judgment was duly entered herein accordingly by the learned trial judge against the McConnells who have not appealed.

The appellants, as I have said, did not by their statement of defence raise any defence as to the indebtedness of McConnell to the respondent or the fraudulent character of the deeds of conveyance from McConnell to his wife, but contented themselves with the defence which I may paraphrase as being that of bonâ fide purchasers without notice, that the alleged certificate of lis pendens filed in the office of the registrar was not in accordance with the law, and that registration thereof was illegal and of no effect, and that in in any event notice derived from such irregular and

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illegal registration of the certificate of lis pendens was null against appellants under the "Land Titles Act."

Though neither at the trial nor en banc upon appeal therefrom nor in their factum here was there any objection taken by the appellants for want of proof, as against them, in respect of the debt, or the fraudulent character of the deed from McConnell to his wife, it is now taken here orally.

I do not think it is at this stage open to the appellants to take any such objection under such circumstances. I don't think, in view of the requirements of the Yukon Consolidated Ordinances, 1902, ch. 17, rules 113, 115 and 117, requiring defences to be pleaded, that such objections, without pleadings, were ever open to the appellants. It would seem elementary law that upon such legislation the case of each defendant must be tried upon and by the issues he sees fit to set up and is neither to be helped nor hindered by anything his co-defendants may by their pleading have set up.

Rule 113:

Every allegation of fact in any pleading not being a petition or summons if not denied specifically or by necessary implication or stated to be not admitted in the pleading of the opposing party shall be taken to be admitted except as against an infant, lunatic or person of unsound mind not so found judicially.

I assume, therefore, that the judgment appealed from was rightfully entered against the appellants unless by virtue of their own pleading they have made good the defences specially pleaded by them. In their pleading they do not specifically claim the protection for their title of the provisions of the "Land Titles Act." What they do seek to set up is rather pointed at than pleaded. Assuming the protection of the statute to have been properly pleaded, if, and so far as, open to the appellants, I think we can better understand the position

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the appellants are in by referring to the doctrine of lis pendens.

The appellants bought, if they did buy, pendente lite. They did so in a territory where the laws of England relating to civil and criminal matters, as the same existed on the 15th day of July, A.D. 1870, were in force in so far as the same were applicable to the Yukon Territory, and in so far as the same have not been repealed, altered, varied, modified or affected by any Act of the Parliament of the United Kingdom applicable to the Territories, or of the Parliament of Canada or by any Ordinance of the Lieutenant-Governor in Council. (See "North-West Territories Act." R.S.C. ch. 50, sec. 11).

That part of the law of England that provides for the registration of notice of lis pendens and the restriction of the law as expressed in the maxim of pendente lite nihil innovetur, so that innocent purchasers pendenle lite might be protected, is not in force in the Yukon. The registration provisions in England being of a purely local character were not carried into the Yukon by the general introduction of English law. Counsel wisely abstained from arguing that they were.

It was urged that, notwithstanding the absence of such legal enactment in any way, the general law of England as it existed before such law's for registration and legislation restrictive of the effect of lis pendens or since, and so far as unaffected by it, did not touch the case of a suit such as this, wherein it is sought to have a deed fraudulent as against creditors so declared and set aside. I am unable to distinguish such a case from the many other cases in which the lis pendens relating to real estate or an interest therein has been repeatedly held to bind purchasers acquiring pendente lite from or through the defendant

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of an estate or interest in the real estate brought in question by the lis pendens

2 Coke on Littleton, 102, a. b. gives this illustration:

Upon a judgment in debt the plaintiff shall not have execution but only of that land which the defendant had at the time of the judgment for that the action was brought in respect to the person and not in respect to the land, but if an action of debt be brought against the heirs and he alieneth hanging the writ yet shall the land which he had at the time of the original purchase be charged for that the action was brought against the heirs in respect of the land.

It is illustrated also at p. 344 (b) of Coke on Littleton by the proceedings of quare impedit as against the ordinary in relation to presentation by one not having the right of presentation.

The doctrine has been applied in the cases of foreclosure and redemption as in Winchester v. Paine ([48]) and cases cited there; Martin v. Styles ([49]) in relation to an agreement respecting land ; Garth v. Ward ([50]) as to establishing a will as against an heir and affecting his vendee ; Landon v. Morris ([51]), to make good a representation as to title to land; Walker v. Smalwood ([52]), to enforce a charge of debts upon lands, and in numerous similar cases including that of creditors as against the heir at law.

In Murray v. Ballou ([53]) the late Chancellor Kent reviews the early law and refers to these and other cases illustrating it. See Cases in Equity by Martin, at p. 344 et seq.

The registration Acts, as far as I can see, seem to recognise the cases such as that in hand as peculiarly of the classes that come within the principle of lis pendens binding all purchasers from defendants pendente lite.

The doctrine is reviewed again and so stated by Lord Cranworth in Bellamy v. Sabine ([54]) at p. 158

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et seq. as to remove the impression got from a loose way of referring to it as notice where he says:

It is scarcely correct to speak of lis pendens as affecting a purchaser through the doctrine of notice, for the language of courts often so describes its operation. It affects him not because it amounts to notice but because the law does not allow litigant parties to give to others pending the litigation rights to the property in dispute so as to prejudice the opposite party.

Now, has this doctrine been invaded or modified by "The Land Titles Act?" Or are the provisions of “The Land Titles Act" to be read as subject to this general doctrine of the English law?

The earliest restriction upon the operation of lis pendens is contained in the order of Lord Bacon that

no decree bindeth any that come in bonâ fide by conveyance from the defendant before the bill exhibited and is made no party neither by bill nor order; but where he comes in pendente lite and while the suit is in full prosecution and without any colour of allowance or privity of the court there regularly the decree bindeth.

Registration Acts both in England and in this country have proceeded upon the principle of restricting the operation of lis pendens for the beneficent purpose of protecting innocent grantees, whilst according to a plaintiff in a pending suit ample opportunity for protecting his rights. The "Land Titles Act, 1894," seems to have been designed for the same purpose as registration Acts, merely extending their operation and at the same time facilitating the transfer of real estate. Sec. 55 provides that:

The owner of land for which a certificate of title has been granted, shall hold the same subject (in addition to the incidents implied by virtue of this Act) to such encumbrances, liens, estates or interests, as are notified on the folio of the register which constitute the certificate of title, absolutely free from all other encumbrances, liens, estates or interests whatsoever, except in case of fraud wherein he has participated or colluded, and except the estate or interest of an owner claiming the same land under a prior certificate of title granted under the provisions of this Act.

Sec. 57 provides:

Every certificate of title granted under this Act shall (except in case of fraud, wherein the owner has participated or colluded), so long as the same

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remains in force and uncancelled under this Act, be conclusive evidence in all courts as against Her Majesty and all persons whomsoever that the person named therein is entitled to the land included in the same, for the estate or interest therein specified subject to the exceptions and reservations mentioned in the next preceding section, &c., &c.

Of those "exceptions and reservations mentioned in the next preceding section," there is provided as follows:

(e.) Any decrees, orders or executions against or affecting the interest of the owner of the land, which have been registered and maintained in force against the owner.

Section 59 provides that:

After the certificate of title for any land has been granted no instrument shall be effectual to pass any interest therein or to render the land, liable as security for the payment of money as against any bonâ fide transferee of the land under this Act, unless such instrument is executed in accordance with the provisions of this Act and is duly registered there under ; and the registrar shall have power to decide whether any instrument which is presented to him for registration is substantially in conformity with the proper form in the schedule to this Act or not, and to reject any instrument which he may decide to be unfit for registration.

The word “instrument" is interpreted by the second section of the Act to mean

any grant, certificate of title, conveyance, assurance, deed, map, plan, will, probate, or exemplification of will, letters of administration or an exemplification thereof, mortgage or encumbrance or any other document in writing relating to the transfer of or other dealing with land or evidencing title thereto.

It will thus be seen that the certificate is subject to such in cumbrances, liens, estates or interests as are notified on the folio of the register, and that the registrar has power to decide whether any instrument which is presented to him for registration is substantially in conformity with the form in the Act.

It is to be observed that on the facts now under consideration, there was at the time of the sale from Mrs. McConnell to the appellants no decree, order or execution against her or her husband affecting the interest of the owner in the land. The interest that the pre-

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sent respondent had in the land or in relation thereto was a something that is not provided for in express terms by the sections I have quoted, or, I may say, in any other part of the Act. Is it, therefore, to be taken for granted that so valuable a right as plaintiff, or those in a position like him, have in the lands of their debtor which have been fraudulently conveyed, are left without protection especially when we consider that that had, by the doctrine of lis pendens, in the English law for so long such complete protection, and that the scope and purview of this "Land Titles Act " was only to furnish a system of registered titles and interests in land?

It is quite clear from the provision of 61 Vict, ch. 32, s. 14, amending the "Land Titles Act," that execution creditors are to be protected and the right therein given to lodge a caveat is furnished as a means for their protection. It was urged that this method was open to the respondent, but obviously that was not the case here, for he had not recovered judgment, yet had apparently a right on behalf of himself and all other creditors to impeach the convey-ance from McConnell to his wife for months before he was able to recover judgment and issue execution and avail himself of this caveat. It was during that interval that the appellants intervened and made the purchase now in question.

I am inclined to think that there is much to be said for the position that respondent may take in claiming that having regard to the scope and purview of the "Land Titles Act" it was never intended to sweep away creditors' rights such as plaintiff had at the time of the appellants' purchase. Is the "Land Titles Act" there fore not to be read as the "Bills of Sale Acts" respecting chattels in England or here, when providing that all instruments not registered were to be fraudulent and

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void as against creditors, yet were held to be in operation restricted to those conveyances of interests upon which the provisions of the Act were intended to operate and not to be extended to those rights and interests to which the Act did not in express terms extend? (Sec such cases as Ex parte Hubbard, in re Hardwick ([55]); Charlesworth v. Mills ([56]); Hamilton v. Harrison ([57]). It deals with; instruments which are defined, with executions which are defined, and all the rights incidental thereto that were capable of registration. Can it be said to have been intended to take away those rights or interests that were not capable of registration?

I do not think that it is necessary to determine here expressly the point I have suggested, but I think what I have said is worthy of consideration when we come to interpret the words in sec. 55 of the "Land Titles Act, 1894," declaring the certificate to be subject to such incumbrances, &c, as are notified on the folio of the register and the registrar's powers referred to in sec. 59, and having regard to the fact that here there was an instrument constituting a notice entered upon the register and expressly set forth upon the certificate of title upon which the appellants rely for their protection. That certificate had written upon it the follow-ing:

The title of Le Syndicat Lyonnais du Klondyke is subject to a lis pendens issued out of the T. C. Y. Ty. between T. J. McGrade et al., plaintiffs, and L. D. McConnell, defendant, dated 2nd October, 1901, and registered at 11.45 a.m. the 2nd October, 1901, as No. 4637.

How can it be said even if the appellants had properly pleaded the protection of the "Land Titles Act" and the sections therein, claimed by them to be intended to give them an absolute title, that a certificate of this kind

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can give protection against respondent's claim? They claim by virtue of the Act giving vitality to the certificate. To make good that claim they must, I think, rest upon a certificate, if even then they would be entitled to protection, that is clearly within the Act and in no wise beyond its provisions or suggesting upon its face any other title or interest than that they claim. They are claiming obviously against the common law right of the respondents and must bring themselves clearly within the provisions of the law that would exempt them from the operation of the common law. I think they have not succeeded in doing so. Moreover, I think when the facts are borne in mind surrounding their acceptance of the certificate, the express notice thereof, the full consideration thereof, the probable communication with their grantor on the subject, and their determination to risk the interpretation of the statute, despite the rights of others which I take it they well knew of and understood, that the appellants cannot escape from the conclusions arrived at by Mr. Justice Craig in light of the authorities cited in the latter part of his judgment, that they were using the Act of Parliament as an instrument for accomplishing a fraud and there by made themselves parties who have participated in the fraud which their action alone was calculated to render successful, if it was not the main purpose and object of the whole transaction.

I need not repeat the reasons given in the concluding part of Mr. Justice Craig's judgment, but content myself with expressing concurrence therein.

Sec. 126 of the "Land Titles Act" does not in this view furnish any protection to the appellants.

I think the appeal should be dismissed with costs.

Since writing the foregoing my attention is drawn by my brother Nesbitt to the case he refers to; The Assets Co. v. Mere Roihi ([58]); just come to hand, which

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Seems in point and, if I had seen it earlier, I might have been saved some of my labour.

I desire to add that I concur in the leave given appellants to amend on terms.

Appeal dismissed with costs.

Solicitors for the appellants: Bleecker & O'Dell.

Solicitors for the respondents: Clark, Wilson & Stackpoole.