Supreme Court of Canada
Archibald v. McNerhanie, (1899) 29 S.C.R. 564
Date: 1899-06-05
H. W. Archibald (Defendant) Appellant;
and
James Mcnerhanie (Plaintiff) Respondent.
1899: March 14; 1899: June 05.
Present: Sir Henry Strong C.J., and Taschereau, Gwynne, Sedgewick, and Girouard JJ.
ON APPEAL FROM THE SUPREME COURT OF BRITISH COLUMBIA.
Contract—Partnership—Dealing in land—Statute of frauds—British Columbia Mineral Act.
Sections 50 and 51 of the Mineral Act of 1896 (B.C.), which prohibit any person dealing in a mineral claim who does not hold a free miner's certificate, does not prevent a partner in a claim recovering his share of the proceeds of a sale thereof by his copartner though be held no certificate when he brought his action having allowed the one he had up to the time of sale to lapse.
A partnership may be formed by a parol agreement notwithstanding it is to deal in land, the Statute of Frauds not applying to such a case.
Judgment of the Supreme Court of British Columbia (6 B. C. Rep. 260) affirmed, Gwynne and Sedgewick JJ. dissenting.
APPEAL from the decision of the Supreme Court of British Columbia reversing the judgment at the trial in favour of the defendant.
The action was brought to recover from defendant the plaintiff's share of the proceeds of the sale by defendant of the mineral claim which the parties
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owned in partnership. The facts are not in dispute and the appeal involves only the decision of two questions of law, namely:
1. Does the Mineral Act of 1896 prevent the plaintiff from recovering where he did not hold a free miner's certificate when he brought his action?
2. Does the Statute of Frauds apply to the case of a partnership formed by parol agreement for dealing in lands?
The provision of the Mineral Act relied on by defendant is the following:
"Subject to the proviso hereinafter stated, no person or joint stock company shall be recognized as having any right or interest in or to any mineral claim, or any minerals therein, or in or to any water right, mining, ditch, drain, tunnel, or flume, unless he or it shall have a free miner's certificate unexpired." The proviso does not affect this case.
The trial judge non-suited the plaintiff for want of a certificate under the Act. His judgment was reversed by the full court whereupon the defendant took this appeal.
Christopher Robinson Q.G. for the appellant. As to the want of a certificate under the Mineral Act being a bar to this action, see McCormick v. Grogan. McPherson & Clarke on Mines, p. 695 et seq.
The Statute of Frauds applies to the case of a partnership in lands. Stuart v. Mott; Dale v. Hamilton; Maddison v. Alderson.
As to the objection that the statute cannot be relied on to support a fraud, see Rochefoucauld v. Boustead.
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Moreover this was not a partnership ; Kay v. Johnston ; Lindley on Partnership (6 ed.) p. 52.
S. H. Blake Q.C. and Latchford for the respondent, referred on the question of the Mineral Act to Bainbridge on Mines, (4 ed.) 541 and 545 where co—ownership and partnership are dealt with.
As to the Statute of Frauds, see Browne on Statute of Frauds (6 ed.) p. 261; Am. & Eng. Ency. of Law, vol. 17 p. 99 ; In re Duke of Marlborough ; Davis v. Whitehead; Heard v. Pilley ; Haigh v. Kaye ; Chester v. Dickerson.
THE CHIEF JUSTICE.—In July, 1895, the appellant, the respondent and one Murchie, formed a partnership to deal in mining claims. That this partnership existed was found by the jury, and it is recognised as having been so found by the learned judge, Mr. Justice Irving, before whom the action was tried, as appears from his judgment pronounced on entering the verdict.
After having acquired and sold several claims, in June, 1896, the partnership acquired a claim which was known as the "Blanch Lamont." This claim they allowed to lapse, but afterwards acquired an interest in it again under the denomination of the "Dorothy Morton." This claim was taken out in the name of one Chick, who in consideration of doing the necessary work and recording the claim was to have half of it. Chick thereupon assigned an undivided one-half interest to the appellant for the behoof of the partnership, retaining the other half for himself.
On the 19th July, 1897, Chick and the partnership sold the whole claim for $20,000 and the purchasers at once took possession.
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There do not appear to be any outstanding debts or claims due by or made against the partnership, and the $10,000 was therefore on its being paid to the appellant a net sum in his hands to be divided amongst the three partners each being prima facie entitled to one—third of the amount.
The respondent had a free miner's certificate from the date of the formation of the partnership up to the time of the sale of the claim and afterwards until the 26th of July, but he allowed this certificate to lapse on the 26th of July, 1897, not renewing it till the 8th of August, 1897. The purchase money was not paid to the appellant until after the 26th of July, but soon after that date it was paid, one-half to Chick and the other moiety amounting to $10,000 to the appellant for the behoof of the partnership.
The respondent brought this action for the recovery of $3,325, his share of the purchase money remaining in the appellant's hands.
At the trial before Mr. Justice Irving and a jury it appeared on the pleadings as they originally stood after the jury had found the facts that there was no real defence to the action, but the learned judge permitted the appellant to amend his statement of defence by setting up the Statute of Frauds and the fact of the lapse of the respondent's free miner's certificate at the date mentioned and the Mineral Act of British Columbia. And upon this latter ground the learned judge nonsuited the respondent, who appealed to the Supreme Court in banc where the first judgment was reversed and a judgment ordered to be entered for the respondent for the amount sued for. No question of fact is in dispute ; the jury found there was a partnership agreement, and the appellant in his factum concedes this and admits that the only questions are the two questions of law as to whether the respondent is
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to be debarred from recovering his share of the money by reason of the statutory defences set up by the amendment. The passage in the factum referred to is the following ; at page 15 the appellant says:
The finding of the jury settles all questions of fact leaving only two defences open to the defendant, both of which are questions of law.
As regards the Mineral Act it ceased to have any application when the claim had been sold and nothing remained but the money arising from the sale made whilst the respondent had his certificate; from that time he had no interest in the claim which had been alienated and converted into a mere money demand by the sale, and the money when it came into the hands of the appellant was therefore impressed with a trust for the respondent to the amount of one-third. To say that the respondent has forfeited his right to this money representing a mining claim in which he had ceased to have any interest, and not even arising directly out of the sale but being money had and received to the use of the respondent by the appellant, would be not only enlarging the words of the statute, but would be placing upon it an arbitrary and unreasonable construction, not warranted either by its language or by a consideration of the object which it had in view. Even if the action had been one to recover the price from the purchasers the Act could not have applied, much less can it apply between the present parties where no mining right is in question. If the respondent had died after the sale and before the payment of the money it might just as well be said that his executors could not have recovered because they had not mining certificates. Could it be said that where a partnership of this kind had been dissolved for years, and the parties had abandoned the pursuit of mining altogether and had left the mining country, that one of the partners on
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discovering that the other partner owed him money upon the footing of the partnership accounts, could be precluded from recovering that money because he had not kept up his free miner's license? Such an application of the statute would be absurd, but yet it would follow that the certificate was in such a case necessary to entitle the party to sue, if we should give effect to the objection in the present case.
As to the Statute of Frauds, that can have no application. It never applies to exclude parol evidence of a partnership for dealing in land. This was determined as far back as the case of Forster v. Hale, for we find Lord Loughborough in that case saying :
That was not the question ; it was whether there was a partnership. The subject being an agreement for land, the question then is whether there was a resulting trust for that partnership by operation of law. The question of partnership must be tried as a fact and as if there was an issue upon it. If by facts and circumstances it is established as a fact that these persons were partners in the colliery in which land was necessary to carry on the trade the lease goes as an incident. The partnership being established by evidence upon which a partnership may be found, the premises necessary for the purposes of that partnership are by operation of the law held for the purposes of that partnership.
In Dale v. Hamilton, Vice Chancellor Wigram expressly decided that a partnership formed for the sole purpose of dealing in land like that in question here might be proved by parol, and although Lord Cottenham on appeal decided on another ground holding that there was written evidence, he expressed no disapproval of this doctrine applied by the Vice Chancellor. In Caddick v. Skidmore, cited for the appellant, no partnership was proved. In Gray v. Smith, Mr. Justice Kekewich recognises the authorities before quoted to have established the law for he says:
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The first point raised upon that was whether it was necessary for such a contract that there should be an acknowledgment in writing signed by the party to be charged within the meaning of the Statute of Frauds? The authorities when looked into seem to establish that you may have an agreement of partnership by parol notwithstanding that the partnership is to deal with land. This was established by the case of Forster v. Hale, and in Dale v. Hamilton, Wigram V.C. went a step further and said that the same rule would hold good where the partnership was to deal exclusively with land, and he proceeded to apply it to such a case.
I take it to be established now that a partnership may always be proved by parol, and if it turns out that the assets consist of lands, or interests in land bought for the purpose of being sold again, such lands will be treated as any other property not coming within the statute. The principle is this ; all assets of a partnership are considered as personalty, and that upon an application of the doctrine of equitable conversion, for ultimately in order to a winding up of the partnership everything must be sold and converted into money. This is applied to other questions besides that of the applicability of the Statute of Frauds, for instance in a partnership for dealing in land the lands acquired are not considered as realty going to the heir of one of the partners but as belonging to the personal representative for whom a court of equity treats the heirs as a trustee. Darby v. Darby ; Wylie v. Wylie.
I find it laid down in a text book published during the present year (Thompson on Equity, p. 603), that this is now the accepted doctrine in England. It is there said :
A partnership may be constituted by a mere parol agreement notwithstanding that the partnership is to deal with land.
I agree entirely in the judgment of the learned Chief Justice of British Columbia, and for the reasons
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before stated I am of opinion that the appeal should be dismissed.
TASCHEREAU J. concurred.
GWYNNE J.—The only claim relied upon by the plaintiff in this action is an agreement in the 5th paragraph of the statement of claim alleged to have been entered into between the plaintiff, the defendant, one Murchie and one P. J. Chick. There is no evidence in the case before us of any such agreement having been entered into. There is in fact no evidence produced in the appeal case, and in the absence of evidence of the agreement relied upon by the plaintiff it appears to me to be impossible to render justice in the premises. The appeal I think should be allowed and the case remitted to a new trial.
SEDGEWICK J.—I am of opinion that this appeal should be allowed and the original judgment restored.
GIROUARD J.—I concur in the judgment of the Chief Justice.
Appeal dismissed with costs.
Solicitors for the appellant: Harris & Bull.
Solicitor for the respondent: D. G. Macdonell.
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