Supreme Court of Canada
Lanston Monotype Machine Company v. Northern
Publishing Co., [1922] S.C.R. 482
Date: 1922-03-29
Lanston Monotype
Machine Company (Plaintiff).
Appellant;
and
Northern Publishing
Company (Defendant)
Respondent.
1922: February. 13, 14; 1922: March 29.
Present: Sir Louis
Davies, C.J., and Idington, Duff, Anglin, Brodeur and Mignault JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR
SASKATCHEWAN.
Sale of goods—Conditional
sale—Subsequent purchaser—"Purchaser in good faith"—"Act
respecting lien notes"—R.S. Sask. (1909) c. 14, s. 1.
The appellant company sold to the Phoenix
Publishing Company two machines subject to the condition that the title of the
property would remain with the appellant until full payment of the purchase
price, with the right to re-take possession on default of payment. Later, the
Phoenix Company assigned for valuable consideration to A. B. representing the
respondent company "all (its) rights, title and interest'' in these two
machines. The agreement of sale was not registered; but A. B. was aware of the
above mentioned conditional sale. Default having been made on the payment of
the purchase price, an action was brought by the appellant to recover from the
respondent possession of the two machines.
Held, Brodeur and Mignault JJ. dissenting, that A. B. acquired title to the two
machines subject to satisfying the appellant's "lien" thereon and was
not "a purchaser in good faith" within section 1 of ch. 145 of the
Revised Statutes of Saskatchewan, and that the respondent was therefore not
entitled to rely on the protection of that section.
Judgment of the Court of Appeal ([1921] 2
W.W.R. 971) reversed, Brodeur and
Mignault JJ. dissenting.
[Page 483]
APPEAL from the judgment of the Court of
Appeal for Saskatchewan,
affirming the judgment of Brown C.J. at the trial and dismissing the
appellants' action.
The material facts of the case and the
questions in issue are fully stated in the above head-note and in the judgments
now reported.
Shapley and Huycke for the appellant.
Gregory K.C. and Hodges for the
respondent.
The Chief
Justice.—For the reasons stated by my brother Anglin,
in which I fully concur, I would allow this appeal with costs throughout.
Idington J.—The question raised herein by this appeal is whether or not the
respondent can be held to have been a purchaser of the property in question in
good faith, for valuable consideration as against the appellant.
The answer depends upon the construction to be
given section 2, sub-section (1) of the "Conditional Sales Act" of Saskatchewan, which reads as follows:
2 (1) Whenever on a sale or bailment of
goods of the value of $15 or over it is agreed, provided or conditioned that
the right of property or right of possession in whole or in part shall remain
in the seller or bailor notwithstanding that the actual possession of the goods
passes to the buyer or bailee the seller or bailor shall not be permitted to
set up any such right of property or right of possession as against any
purchaser or mortgagee of or from the buyer or bailee of such goods in good
faith for valuable consideration or as against judgments, executions or
attachments against the purchaser or bailee unless such sale or bailment with
such agreement, proviso or condition is in writing signed by the bailee or his
agent and registered as hereinafter provided. Such writing shall contain such a
description of the goods the subject of the bailment that the same may be
readily and easily known and distinguished.
[Page 484]
The respondent, through its agent who transacted
all the relevant parts of the business of the respondent, had actual notice of
the appellant having agreed to sell the machine in question, and accessories
thereto, to the Phœnix Publishing Company, Limited, subject to appellant's
right to re-take possession on default of payment of the price, or any part
thereof, or other breach of the conditions of intended sale.
That company, subject to such conditions, sold
the rights it had in the machine to one A.B., who, in turn, sold to the
Northern Publishing Company, Limited.
The Phœnix Publishing Company, Limited, having
got into financial difficulties in the course of their business as publishers
of a newspaper and printing business akin thereto, said A.B., acting as
solicitor for others, investigated the financial and other conditions of the
company with the object of buying for his clients the entire business and
assets of said company. In the course of doing so he was given a list of the
machines it was possessed of and of much other property acquired on course of said
business.
In that list of machines there were set forth
the respective liens, against each, and its accessories, including a lien of
$4,500.00 on the machine in question in favour of appellant.
The learned trial judge refers thereto, and to
the resultant bargain, as follows:—
The evidence in this case discloses the
fact that when Mr. A. B. first visited Saskatoon in May and consulted with the
parties representing the Phœnix Publishing Co. that he was given a statement
indicating the liabilities of the Phœnix Publishing Co. and more particularly
indicating the parties who had Hens against the plant or any parts of it,
including the lien of the plaintiff company. It is also clear from the evidence that at that time the purchase price of
$15,000.00 for the plant was named, the price that was subsequently
entered in the formal agreement and paid. So that I think it is a fair
inference to
[Page 485]
make that in fixing the price of $15,000.00
for this plant, the vendors, the Phoenix Publishing Co. or the parties
representing them, took into consideration all the liens which were detailed in
the statement, including the plaintiff's lien. So that to some extent, at
least, the lien was a factor in the deal.
Mr. Justice Lamont, in his judgment in the Court
of Appeal, says:—
"On June 17th, 1918, A. B., acting for the persons who subsequently became incorporated as the defendant company, purchased
certain assets of the Phœnix Publishing Company for $15,000. These assets were
valued at $40,000, but against them there were liens amounting to
$23,355."
A. B., by way of verifying this basis of the
bargain he was trying to make, and did make, searched the office where liens
might be registered and found the appellant had not registered any lien.
It seems to me quite clear that when the bargain
was made between him and the company on the above basis he was not buying the
actual goods of any of those lien holders, free from the several respective
liens thereon, but the interest of the company therein subject thereto, and
that he thoroughly understood the nature and purpose of the following
resolution, and especially the reference therein to liens, passed by the
shareholders of the company:—
Resolved that resolution of the directors
with respect to the sale of the plant, equipment, accessories and franchises of
the Phœnix Publishing Company, Limited, to A. B. be and is hereby confirmed,
provided that the said A. B. make arrangements re liens held on the
plant, including the Hoe press, papers held in trust for the John Martin Paper
Company, as shall be satisfactory to the directors, and such arrangements
regarding wages and rent, as shall be mutually satisfactory to the employees,
the landlord and the directors and that the directors be and are hereby
authorized to conclude the sale of the equipment, plant, accessories and
franchises, etc., of the company, except current accounts for advertising
purposes.
[Page 486]
He was at the meeting "in and out" as
he expresses it, and received a copy of that resolution.
Indeed the respondent company was promoted, and
its incorporation obtained, by him, and he was one of the provisional directors
and later its president, when the deal now in question was carried out.
The special reference to the hen on the Hoe
Press, in said resolution, arose by reason of some of those concerned in the
Phœnix Company having become personally liable.
The following evidence of Mr. Lynd is
illuminating as he was president of the Phœnix Company at the time in question:
Q. Had that been discussed with Mr. A. B.
at that time?
A. As I said, the question of liens was
discussed, but there was no definite understanding arrived at with regard to
the liens.
Q. What arrangements was Mr. A. B. to make
regarding the liens?
Mr. Mackenzie: He said there was none
arrived at.
A. As I understood it at the time, Mr. A.
B. was to make his own arrangements regarding the liens with the exception of
the Hoe press, which he actually agreed to take care of.
Q. What do you mean by "his own
arrangements?"
A. My understanding of it at that time was
if he got the machinery he would pay the liens, or make arrangements to settle
them in some way, and if he didn't, he would try to make some arrangements with
the parties who held them. That was my understanding.
Q. If he kept the machines he would pay the
liens?
A. Or make settlement with the lien
holders.
***
Q. What were the assets of the Phœnix
Publishing Co. at that time?
A. We estimated that the whole thing was
worth, outside of the mailing list, which at that time was not worth very much,
we estimated the plant to be worth $40,000.
Q. And did the Northern Publishing Co.
assume any of the general accounts at all, any of the general liabilities?
A. No, I don't think so. I don't think they
assumed any liabilities.
Q. If the assets were worth $40,000, can
you tell us why the sale was made for $15,000?
A. The question of liens was taken into
consideration, the liens on the plant.
[Page 487]
Q. What liens?
A. As far as the Phœnix Publishing Co. were
concerned they took into consideration all the liens that were on the plant at
arriving at the figures.
***
Q. Mr. A. B. says that the only arrangement
was that the directors were to be relieved from liability.
A. I think it went a little further. I
think the Hoe press was to be taken care of, so that the directors would be
relieved from liability.
Q. And what about the other liens?
A. We made no specific arrangement with him
regarding them, but my understanding was he would decide himself, or the
persons for whom he was acting, would decide whether they would keep the rest
of the plant, because there was some question as to whether they needed it at
that time.
His Lordship: There was nothing as to
relieving your company from liability?
A. No, my lord. We were not relieved in any
way.
Q. Were you as a director, or you, with
other directors, asked to recoup the Northern Publishing Co. for any moneys
paid on these liens?
A. No. Not so far as I was concerned.
***
His Lordship: Would it be correct to put it
this way that as far as the liens were concerned, you had given Mr. A. B. full
notice of the liens so that there was no come-back to your company?
A. He knew about the liens.
His Lordship: But he was to take his
chances—
A. That was my understanding of it. If he
wanted the machinery he would take care of the liens, and make settlement in
some way, and if not, he would try and arrange to send it back. That was my
understanding.
His Lordship: And if he could get the
machinery without having to pay for it so much the better?
A. We didn't discuss that. As a matter of
fact the Lanston Monotype were about the best creditors the Phœnix Co. ever
had, and it was my impression when the Northern Publishing Co. refused to pay
they were not quite keeping faith with us.
In the result that followed all the liens except
that of the appellant were recognized and dealt with in the spirit which this
evidence indicates was expected.
I repeat it seems to me abundantly clear that
the purchase by respondent was made on the basis of $40,000 being about the
fair value of that being sold, and if all the lien holders could be settled
with on a fair basis the purchase price might have been fixed at that sum.
[Page 488]
Evidently some of the properties owned were
possibly in value not quite up to the respective amount of the liens thereof.
Hence that phase of the bargain was left open and when it came to a formal
assignment the consideration was named therein as $15,000.00.
I am quite unable to believe that such sum was
intended to cover the actual value of the plant, or any part thereof, subject to
liens, as if free from liens; but on the contrary that it was the sum named for
the residue of what passed thereby and the possible interest of the Phœnix
Company in all the plant covered by liens.
And if so I fail to see wherein this case can
fall within any of the several cases relied upon which trace back to the case
of Moffatt v. Coulson.
In that case the learned Chief Justice of that
court in his opinion laid down as a test the following:
I think he should be so held for there
seems to me no reason to doubt upon the evidence that he paid in good faith, in
this sense that he paid a fair
consideration for the horse which is in question and did not buy him
collusively in order to assist the mortgagors in placing him.
The words I have italicized in order to call
attention to the gist of what was in the mind of the Chief Justice as a test,
are not fitted to anything analogous thereto in what we find in above quoted
evidence in this case by way of fact to pass upon.
Evidently in that and each of the cases following
it and relied upon there was something in way of a basis of valuable
consideration in that sense so given, whereas herein if respondent is to have
its way it gets a four thousand five hundred dollar machine and its accessories
for nothing but the fair value of the chances of defrauding the appellant by
invoking the
[Page 489]
words of the statute which do not fit the facts
and the law as laid down in the case upon which Ferrie v. Meikle,
seems to have been supposed to be founded.
Even if the mode of thought of that far off day
in administering the common law is applicable, I hold in this case that on the
facts the respondent has failed to establish a case within the meaning thereof
and hence the appeal should be allowed.
Indeed all that the assignment by the Phœnix
Company pretends to convey is the interest of that company in the goods in
question and despite the recital I think, reading the instrument as a whole,
that is all that was intended to be conveyed and hence no foundation for
respondent's pretensions herein.
This case does not at all need a decision upon
the many varying views that may be presented of the above quoted statute for
there is not enough of common honesty at the basis of the pretensions set up on
the facts to bring the claim so made as within the term "good faith."
I, however, lest from the foregoing I should be
thought to be agreeing in the law as presented by the court below, do not
hesitate to say that I cannot agree with the view of the law as expressed in
the decision of the case of Ferrie v. Meikle.
I am of the opinion that in any jurisdiction
where the common law and equity doctrines are to be administered by the same
court, and when in case of conflict the equitable doctrines are to prevail,
that ever since Le Neve v. Le Neve, the doctrine therein and in the numerous decisions since and
founded thereon must be applied in construing a statute such as that in
question herein.
[Page 490]
Apply that to this and the facts herein, and
then the respondent's contention seems hopeless.
I am, however, confining my opinion to the case
of actual notice which is not to be confounded with constructive notice.
The discarding of the former seems so like fraud
as to be beyond good faith but the application of constructive notice does not seem
to me as necessarily so, within the range of the ordinary intelligence of
mankind.
Yet I am not to be taken as in any way
discarding or treating with contempt the doctrine of constructive notice. I
merely desire to indicate that difference between actual and constructive
notice which exists or might exist in applying such a statute as that before
us.
I think this appeal should be allowed with costs
throughout and judgment given as prayed for by the appellant.
Duff J.—By a contract dated the 11th March, 1915, the appellant company
agreed with the Phœnix Publishing Company, Ltd., of Saskatoon
to sell for the sum of $4,120.80 to the
Phœnix Publishing Company, Ltd., * * * two of its casting machines
and certain accessories. The Phœnix Company
agreed to buy the property specified, to pay the purchase price in specified
instalments for which promissory notes were to be given. The contract further
provided that a mortgage should be given to secure the deferred payments and
until a mortgage was given, (an event which never happened), or the purchase
money was fully paid, the title of the property was
[Page 491]
to remain with the appellant company who, in
case of default, was to have the right to take immediate possession. It was
further agreed that the Phœnix Company
shall not assign this contract nor underlet
or subhire the said property without the written consent
of the appellant company. On the 17th of June, 1918, the Phœnix Company executed a deed to which the other party was Mr. A. B.,
by which the company professed to assign "all the right, title and
interest" in and to certain goods and chattels including the property
which was the subject of the previous purchase from the appellant company. This
document contained covenants for the title and covenants for further assurance.
Default was made in respect of the payments of
the purchase money due under the contract between the appellant company and the
Phœnix Company. The respondent company which had received possession of the
goods from the Phœnix Company sets up a title to retain them notwithstanding
the terms of the last mentioned contract by reason of the provisions of sec. 1
of ch. 145 of the R. S. Sask. of 1909 as a purchaser of the property "in
good faith for valuable consideration."
The Court of Appeal held, being constrained as
it thought by a judgment of the full court of Saskatchewan delivered in Ferrie v. Meikle, that
the respondent company was a purchaser in good faith within the meaning of the
statute and consequently that its rights were not affected by the agreement
between the appellant company and the Phœnix Company. The learned judges who
concurred in this judgment would
[Page 492]
have been disposed, as appears from the reasons
of Mr. Justice Lamont, to take the view that when a purchaser relies upon this
provision of the statute it is in every case a question of fact to be decided
upon the circumstances in evidence whether or not the purchaser did in fact act
in good faith and that if he failed to establish honesty in fact then his plea
under the statute must fail. They gave judgment in favour of the respondent
company in deference, however, to the opinion expressed in a previous decision
that in order to exclude a purchaser from the benefit of the statute it must
appear that the sale was a collusive one in the sense that it was simulated
with the object of protecting the possessor of the property from proceedings by
the holder of the lien. I shall give my reasons presently for thinking that the
view upon which I conclude the Court of Appeal would have acted if the question
had been res nova is preferable to that to which it felt itself
constrained to give effect because of the previous decision. Before proceeding
to that question it is convenient to point out that there are excellent reasons
for rejecting the hypothesis that the gentlemen concerned in the transaction in
question were actuated by any dishonest intention— an hypothesis which one is
naturally slow to adopt.
I am disposed to take the view that the parties
never really intended to do anything more than to place the respondent company
in the shoes of the Phœnix Company in relation to its agreement with the
appellant company; in other words that the transfer was subject to the
appellant company's rights. The bill of sale does in truth, as I have said,
contain covenants for title and further assurance; but the learned trial judge
has found as a fact that the arrangement between the parties was that the
Phœnix
[Page 493]
Company was not to be responsible as upon a
warranty of title in the event of the appellant company enforcing its rights.
It is quite true that the learned judge also finds that the respondent company
was to be under no obligation to indemnify the Phœnix Company in respect of the
appellant company's claim. This was probably regarded as a matter of no
consequence; the Phœnix Company being destitute of assets, would be a most
unlikely object of legal pursuit.
I gather that if the question had arisen as
between the parties to the bill of sale the learned trial judge would have rectified
the instrument; but that is of no importance because as between the appellant
company and the respondent company for the purpose of determining any question
arising under the statute touching the respondent company's status as a bona
fide purchaser we are concerned only with the actual agreement, that is to
say, with the intention of the parties and for that purpose we are entitled and
bound to look at all the facts including oral expressions as well as writings.
I am disposed to think that in essence the transaction was a transfer subject
to the appellant company's rights under its agreement; and in that view it is
quite clear that the statute has no application, the respondent company being a
purchaser only of such rights as the Phœnix Company was entitled to transfer
under its agreement with the appellant company, was not a purchaser of the
property within the meaning of the statute. As against the appellant company,
the Phœnix Company has possession and a right to retain possession until disturbed
by the appellant company under the terms of the agreement and the right to
acquire a title upon satisfying the conditions of the agreement. It could no
doubt and did transfer the actual possession of the
[Page 494]
goods but its right of possession under the
agreement(like all other rights under it) it was disabled by the terms of the
agreement itself from transferring. The respondent company could not even
become a bailee consistently with the provisions of the Phœnix Company's
contract. On this hypothesis then the defence invoked by the respondent company
patently fails. The alternative hypothesis is that the respondent company
intended to buy and the Phœnix Company intended to sell upon the terms set
forth in the bill of sale, that is to say that the parties intended that the
respondent company should be placed in possession of the property as owner free
from the claim of the appellant company. In considering that hypothesis the
finding of the trial judge becomes important that the claim of the appellant
company against the Phœnix Company was taken into account in fixing the price.
It is important also to note that the effect of the transaction as a whole
between the Phœnix Company and the appellant company was to denude the Phœnix
Company of its assets. The purpose and intent of the transaction therefore upon
this hypothesis was (notwithstanding the fact that the Phœnix Company had no
title but only a bare possession coupled with a right of possession which it
was not entitled to transfer) for a consideration altogether disproportionate
to the value of the property, to place the respondent company in possession as
owner. The respondent relied upon the statute no doubt and the judicial
interpretation of the statute for protection against the appellant company's
claim. Such conduct on part of the Phœnix Company would be an unlawful act in
the sense that it would be a breach of contract and also in the sense that it
would be a tort; and as the thing was done behind the back of the appellant
company it was, if this hypo-
[Page 495]
thesis furnishes the true interpretation of that
conduct, a flagrant breach of faith and the participation of the respondent
company in these things was essential to effectuate the intention of the
parties. It is quite true that the respondent company's agent declares that he
had never seen the Phœnix Company's agreement with the appellant company. The
fact that he failed to examine the agreement could not lend a more favourable
colour to what occurred.
Can it be said that a litigant having purchased
goods under such circumstances has brought himself within the statutory
description of "purchaser in good faith for valuable consideration"?
If these words are to receive the interpretation which would everywhere be
ascribed to them according to common usage, the answer is of course in the
negative. Is there any good ground then for giving some colour to the meaning
of these very plain words which, in such circumstances, would enable a
purchaser to establish successfully in a court of law that although he
knowingly participated in a dishonest dealing he was still in respect of that
dealing a person who has acted in good faith within the meaning of this
enactment?
I think the earlier decision of the Court of
Saskatchewan cannot be sustained. It rests upon a Manitoba decision, Roff v.
Krecker,
placing a construction upon a certain provision of a Chattel Mortgage Act in
force in Manitoba which in turn rested upon two decisions, one a decision of
the Upper Canada Court of Queen's Bench, Moffatt v. Colson, the
other a decision, or I should rather say some language of Lord Justice James in
Vane v. Vane.
With great respect I am unable to agree that either the
[Page 496]
Upper Canada decision or
the language of Lord Justice James has any relevancy whatever to the question
now before us which concerns the meaning of certain words in a
"Conditional Sales Act" in force in Saskatchewan. The courts in both
cases and indeed the same may be said of the Manitoba decision as well, were
concerned with the construction of language found in contexts entirely
different and the two earlier pronouncements upon which the Manitoba court
proceeded are explicitly based upon considerations quite foreign to the
interpretation of those words in the context in which they now appear. The
judgment of Robinson C.J. in Moffatt v. Colson shews
that the purchaser was in fact acting in good faith in the sense that he paid
full value for the property he bought; that he had no actual knowledge of the
chattel mortgage which the mortgagee was seeking to enforce against him, but
only a vague intimation from a third person that the stock he was buying was
mortgaged stock; and in fact the description in the mortgage was quite
insufficient to indentify the stock purchased as part of the property comprised
in it and it was held in these circumstances that the mortagee must fail. The
only relevant observation is the observation of the learned Chief Justice that
the transaction was a transaction in good faith in the sense that it was not entered
into collusively with the object of protecting the mortgagor but that it was a
purchase for fair consideration. Virtually in that case it was found that there
was in fact no dishonesty on the part of the purchaser. In Vane v. Vane the
question which Lord Justice James was considering at p. 399 in the observations
relied upon in the Manitoba decision was the meaning of the phrase bona fide
in this collocation:
[Page 497]
bona fide purchaser
for valuable consideration who at the time of the purchase did not know and had
no reason to believe that such a fraud had been committed,
and his observations have reference solely to
that question. They can afford no guidance to the construction of the words we
are now called upon to construe.
It may very well be argued that both the
Manitoba decisions and the Upper Canada decision can be adduced in support of a
contention that for the purpose of applying the phrase purchaser in good faith
when found in a modern statute one is not to govern one's self by the rules established
in the Court of Chancery in relation to notice and the effect of notice. I do
not in the least dissent from that; indeed, I think it is most important in
construing modern statutes where questions arise as to the application of such
expressions, to remember that good faith is a matter of fact and the existence
or non-existence of it must be decided as a question of fact. It should be
observed further that the Manitoba decision was a decision upon not a
conditional sales Act but upon a statute dealing with a different subject; and
it is always dangerous, as Sir George Jessel in Hack v. London
Provident Building Society
pointed out, to construe the words of one statute by reference to the
interpretation which has been placed upon words bearing a general similarity to
them in another statute dealing with a different subject matter. It would, I
think, be an insupportable presumption that the legislature of Saskatchewan in enacting the "Conditional Sales Act" was taking into account the
judicial deliverances we have just been discussing.
[Page 498]
One further point remains. In 1897 a change took
place in the phraseology of the "Conditional Sales Act" of the North West Territories. I think this change is not without significance, I think it lends
point to the observation made above with regard to the equitable doctrine of
notice. The legislature has substituted the condition of the existence of good
faith for the condition of want of notice, but I am unable to see that this
alteration throws any light upon the question we are now called upon to decide.
The appeal should be allowed.
Anglin J.—With profound respect for the learned trial judge and the Court
of Appeal for Saskatchewan, I am disposed to think that when the true nature of
the transaction which took place between the Phœnix Publishing Company and A.
B., representing the Northern Publishing Co., is appreciated, the latter
company is not entitled to the protection of s. 1 of c. 145 of the Revised
Statutes of Saskatchewan, 1909, as "a purchaser in good faith for valuable
consideration" of the goods in question in this action, against the
assertion of a "right of property" therein made by the plaintiff
company. The plaintiff's "right of property" is for convenience
spoken of in the record as its lien.
That A. B. bought from the Phœnix Publishing
Company as a trustee for the persons who were then incorporating the Northern
Publishing Company and with the intent of acquiring the property for that
company admits of no doubt. The Northern Publishing Company can have no higher
right to the protection of the statute invoked than was acquired by A. B.
The learned trial judge found that, while A. B.
gave no undertaking to pay off liens on the Phoenix Company's plant (other than
that on the Hoe Press)
[Page 499]
he took the plant subject to the chance whether
the liens, including that of the plaintiff,
(of the claims for which he was fully
apprised) would or could be asserted in respect of it and without any
right to be protected against them by the Phœnix Company. But in my opinion the
evidence goes much farther. From the testimony
of Mr. Lynn, the President of the Phœnix Company, who is accredited by the
learned trial judge, I extract these passages:
Q. Was there any arrangement made between
the Phœnix Publishing Co. regarding liens on the plant?
A. No. I would not say there was any
arrangement made with him, but the question of liens was discussed.
Q. Yes?
A. I know this, that it was mentioned at
that time that if Mr. A. B.—if they—if Mr. A. B. didn't want to take the
machinery he would not have to pay for it, and there was no real arrangement
made only in regard to the Hoe Press. The liens were mentioned all right.
Q. There was a minute of the shareholders.
Just read that.
A. I might say prior to this that the directors
had already met and gone over it with Mr. A. B., and we called a meeting of the
shareholders for the purpose of having our action before the shareholders
insisting that this provision should be put in there.
Q. What provision?
A. Provided that the said A. B. make
arrangements re liens held on the plant, including the Hoe Press, papers
held in trust for the John Martin Paper Company, as shall be satisfactory to
the directors.
Q. Had that been discussed with Mr. A. B.
at that time?
A. As I said, the question of liens was
discussed, but there was no definite understanding arrived at with regard to
the liens.
Q. What arrangement was Mr. A. B. to make
regarding the liens?
Mr. Mackenzie: He said there was none
arrived at.
A. As I understood it at the time, Mr. A.
B. was to make his own arrangements regarding the liens with the exception of
the Hoe Press, which he actually agreed to take care of.
Q. What do you mean by "his own
arrangements?"
A. My understanding of it at that time was
if he got the machinery he would pay the liens or make arrangements to settle
them in some way, and if he didn't, he would try to make some arrangements with
the parties who held them. That was my understanding.
Q. If he kept the machines he would pay the
liens?
A. Or make settlement with the lien
holders.
***
[Page 500]
Q. If the assets were worth $40,000, can
you tell us why the sale was made for $15,000?
A. The question of liens was taken into
consideration, the liens on the plant
Q. What liens?
A. As far as the Phœnix Publishing Company
were concerned, they took into consideration all the liens that were on the
plant in arriving at the figures.
***
Q. And what about the other liens?
A. We made no specific arrangement with him
regarding them, but my understanding was he would decide himself, or the
persons for whom he was acting would decide, whether they would keep the rest
of the plant, because there was some question as to whether they needed it at
that time.
His Lordship: There was nothing as to
relieving your company from liability?
A. No, my lord. We were not relieved in any
way.
***
Q. In any event, as far as the liens were
concerned, he was to deal with the lien holders and do the best he could?
A. Well, yes.
Q. And you say there was no arrangement
outside of the written agreement?
A. Between the Phœnix Publishing Co. and
A.B.?
Q. Yes.
A No. No definite arrangement.
Q. No arrangement?
A. No.
His Lordship: Except as to the Hoe machine?
A. Yes. And I may say further, that the
shareholders understood that the lien was assumed. Whether Mr. A. B. was there
or not I do not know. I know the directors got the impression that any
machinery that was kept by the company by him would be taken care of.
Q. That was the expectation?
A. I think it was more than that; That was
the understanding we got of it."
In A.B.'s evidence I find this corroboration:—
"Q. You knew when you entered
into that agreement you had to pay all these liens in order to get the rest of
the plant, didn't you?
A. There was a question if we would need
the rest of it.
Q. Then you would not get it?
A. We would not need it.
Q. And the vendors would get back their
plant, wouldn't they?
A. I presume so.
[Page 501]
Q. You were buying the whole plant,
including the plant subject to liens, for $15,000?
A. We bought everything that was included
in that schedule for $15,000, and I was particularly instructed that we were
not to assume any of those liens, and I had a partial understanding with regard
to the Hoe press.
Q And, notwithstanding that, your company
paid liens to the extent of $15,000?
A. It might have been that another plant
would be necessary.
Q. Did you ever request the Phœnix Company
or did your company request the Phœnix Co. to refund any part of that $15,000?
A. I didn't.
Q. Do you know if your company did? That
is, the defendant company?
A. Not that I know of."
Moreover in the bill of sale itself from the
Phœnix Company to A. B. although the recital and the covenants are consistent
with an absolute sale of the entire plant, the operative words of sale and
transfer are restricted to
all the right, title and interest of the
bargainor in and to all the goods, etc.
Whatever might be the situation in a controversy
between the parties to this bill of sale, I am satisfied that as between the
litigants now before us we should ascertain and be guided by the true nature of
the transaction between the Phoenix Company and A. B. as disclosed by the whole
of the evidence.
While I have little doubt that A. B. when taking
the transfer from the Phœnix Company had the intention of cutting out the
unrecorded claim of the plaintiff by invoking the statute, I incline to think
he failed to put himself in a position to effectuate that purpose.
Had the transaction in fact been an absolute
sale of the goods here in question to A. B. I should have felt called upon to
consider very seriously whether what he did was not such an attempt to use the
[Page 502]
statute to accomplish a fraud on the plaintiff
as this court, which is a court of equity, should strain its resources to
frustrate. But the real bargain between A. B. and the Phoenix Company as to the
plant in possession of the latter covered by liens (other than the Hoe Press as
to which he agreed to protect his vendor) was that he would be at liberty to
take it or not, in whole or in part, as he should find expedient; that in
respect of whatever he took he would pay off, or otherwise arrange with, the
lien-holders; and that what he did not take in that way, as he himself says,
the vendors (i.e., the lien-holders) would get back. That being his position
as to the goods now in question he was in my opinion not a purchaser of them in
good faith for valuable consideration in any sense which would entitle him to
the protection of s. 1 of c. 145 of the Revised Statutes of Saskatchewan.
I would therefore allow this appeal with costs
throughout and direct judgment for the plaintiff for possession of the goods
described in the statement of claim. There should also be judgment for $5 as
nominal damages for wrongful detention thereof unless the plaintiff prefers to
take a reference to ascertain what actual damages it has sustained. Should it
do so, the costs of the reference and further directions should be reserved to
be disposed of by the Supreme Court of Saskatchewan.
Brodeur J. (dissenting).—If it were not for the decisions which have been
quoted, I would have been of the view that the Northern Publishing Company and
A. B. could not prevent the Lanston Monotype Company from taking possession of
the goods in question.
[Page 503]
But the construction put on the statute by the
courts in Ontario, in Manitoba and in England gives to the words "buyer in
good faith for valuable consideration" a meaning which precludes me from
giving to these words the construction which otherwise I would have put on
them. The purchasers knew that the appellant company had a lien on these goods
when they bought them from the Phœnix Company. They had notice that the Phœnix
Company did not own them. However the jurisprudence seems to be well
established that a purchaser in good faith means a real purchaser as
distinguished from a collusive one, that the knowledge of an unregistered lien
would not constitute the purchaser in bad faith. Moffatt v. Coulson; Vane v.
Vane; Roff v. Krecher;
Ferry v. Meikle.
I may add that this construction should not
affect the well settled doctrine and jurisprudence in Quebec concerning art.
2251 of the Civil Code. Dessert v. Robidoux; Les commissaires d'Ecoles de St. Alexis v. Price; Renouf
v. Coté.
For these reasons the appeal should be dismissed
with costs.
Mignault J. (dissenting)—The question here is whether a conditional sale of
certain chattels with retention of ownership, which was not registered as
required by chapter 145 of the Revised Statutes of Saskatchewan, 1909, can be
set up against the respondent, the purchaser of these chattels.
[Page 504]
Only a brief reference to the facts is
necessary. The appellant, in 1911, sold the chattels in question, a monotype
machine and accessories, to one Aiken, publisher of the Phœnix newspaper in Saskatoon. Aiken disposed of these chattels (some of which had been changed by the
appellant) to the Phœnix Publishing Company, Limited, which subsequently, in
March, 1915, entered into a contract of purchase with the appellant, reserving
to the latter the title to the property until the purchase price was fully
paid. This contract of conditional sale was never registered.
In May, 1918, some parties interested in the
Phœnix newspaper sought to purchase the plant and assets of the Phœnix company,
and, at their request, Mr. A. B. went to Saskatoon and negotiated the proposed
sale with the directors of the Phœnix Company. He obtained a statement of the
assets and liabilities of the company, shewing the Hens affecting its property.
There were five Hens, comprising that of the appellant, figured at $4,500. Of
these liens, three were registered, those of R. Hoe and Co., (for which certain
directors of the Phoenix Company were personally liable), of Canadian Linotype
Co. and of Miller and Richard. The lien of Hettle Drennan Co. for $2,800.00 was
apparently not registered, but Mr. A. B. says this firm was in possession and
had to be settled with to get their goods. The appellant's lien, as I have
said, was not registered.
A resolution was adopted by the shareholders of
the Phœnix Company authorizing the directors to sell to Mr. A. B. its plant,
equipment, accessories and franchises,
provided that the said A. B. make
arrangements re Hens held on the plant, including the Hoe Press.
[Page 505]
The sale price was $15,000.00. Later a formal
agreement of sale was signed by the parties, no mention being made therein of
any hens. It appears to have been understood that Mr. A. B. would look after
the claim of R. Hoe and Co. for the Hoe press, and free the directors from any
personal liability. As to the other liens, the learned trial judge found, and I
fully agree with him after carefully reading the testimony, that, while it
seemed to be understood that A. B. and those for whom he purchased were to take
care of the Hoe press lien and to protect the directors against any possible
action that might arise out of it, there was no such understanding as to the
rest of the liens. The learned trial judge added that the purchasers took the
plant and assumed any chance of the possibility of the lien holders asserting
their liens.
This purchase was made by Mr. A. B. on behalf of
the respondent company which was immediately constituted under the Saskatchewan
Company legislation, Mr. A. B. becoming its first president. A formal transfer
of the plant was made to it by Mr. A. B. After taking possession, the
respondent, beside the purchase price, paid approximatively $15,000.00 in
discharging liens on the plant, but the appellant's claim was not settled.
The question now is whether the appellant is
entitled to assert its non-registered lien against the respondent. Section 1 of
chapter 145, of the revised statutes of Saskatchewan, provides as follows:
Whenever on a sale or bailment of goods of
the value of $15 or over it is agreed, provided or conditioned that the right
of property or right of possession in whole or in part shall remain in the
seller or bailor notwithstanding that the actual possession of the goods passes
to the buyer or bailee the seller or bailor shall not be permitted to set up
any such right of property or right of possession as against any purchaser or
mortgagee of or from the buyer or bailee of such goods in good faith for
valuable consideration or as against judgments, executions
[Page 506]
or attachments against the purchaser or bailee
unless such sale or bailment with such agreement, proviso or condition is in
writing signed by the bailee or his agent and registered as hereinafter
provided. Such writing shall contain such a description of the goods the
subject of the bailment that the same may be readily and easily known and
distinguished.
By section 2 of the same statute, it is provided
that the agreement of sale shall be registered in the office of the
registration clerk for chattel mortgages where the buyer or bailee resides
within thirty days from the time of actual delivery of the goods.
Under section 1 the question is whether A. B. or
the respondent company was a purchaser in good faith for valuable
consideration. The learned trial judge, had he not considered himself bound by
the authorities to which I will refer, would have thought not, and this view
was shared by Mr. Justice Lamont in the Court of Appeal. I do not however think
that either the ' learned trial judge or Mr. Justice Lamont considered that Mr.
A. B. had acted fraudulently, and from my reading of the evidence I am quite
clear that no case of fraud was made out, and none was alleged, the statement
of claim merely asserting unlawful detention. The whole point is whether A. B.,
having purchased these goods with notice of the appellant's lien, was a
purchaser in good faith for valuable consideration, and both courts have
considered that nothing in the facts of this case would take the matter out of
the operation of the rule laid down in the cases to which I will refer. There
is no doubt that A. B. and the respondent gave a valuable consideration for the
sale, to wit the $15,000.00 which was paid in cash.
As long ago as 1860, the Ontario Court of
Queen's Bench held in Moffat v. Coulson that a
chattel mortgage not containing a sufficient description of
[Page 507]
the goods is void as against subsequent
purchasers in good faith, and that notice of such a mortgage to the purchaser
will not affect his right. This decision is relied on because, in the Upper Canada statute there under consideration (20 Vict., Can., ch. 3), the words
subsequent purchasers or mortgagees in good
faith for valuable consideration
were defined. Chief Justice Robinson said:
The only question is whether this defendant
should be held to be a subsequent purchaser in good faith, within the meaning
of the second section, in which case only would he be entitled to hold against
the mortgage, in consequence of the defective description of the horses. I
think he should be so held, for there seems to be no reason to doubt upon the
evidence that he bought in good faith, in this sense, that he paid a fair
consideration for the horse which is in question, and did not buy him
collusively, in order to assist the mortgagors in placing him out of the
plaintiff's reach. ****** In our
registry laws, the words "purchaser for valuable consideration'' have
never been held by courts of common law to exclude purchasers with notice of
the unregistered conveyance.
In Manitoba, in 1892, the Court of Queen's Bench
held in Roff v. Krecker
that a second chattel mortgage made in good faith, and for valuable
consideration, takes priority over a prior unfiled chattel mortgage, even if
the second mortgagee has actual notice of the prior mortgage. The Manitoba statute 48 Vict., ch. 35, amending a prior statute containing the words
"without actual notice" which were struck out, used the expression
purchasers or mortgagees in good faith for
valuable consideration.
Chief Justice Taylor relied on the English case
of Edwards v. Edwards
decided under the English Bills of Sale Act, 17-18 Vict., ch. 36, the first
section of which provided that every bill of sale should be
[Page 508]
registered within a certain time, otherwise it
should be null and void to all intents and purposes against, among others,
sheriff's officers and other persons seizing any property or effects comprised
in such bill of sale, in execution of any process. Referring to this case, the
learned Chief Justice said:—
The court there held that the fact that an
execution creditor was, at the time his debt was contracted, aware that his
debtor had given a bill of sale did not prevent his availing himself of the
objection that it had not been registered. LeNeve v. LeNeve was
there cited and relied on, but James L.J., said that he thought it would be
dangerous to engraft an equitable exception upon a modern Act of Parliament.
Mellish L.J., agreed with him saying "we ought not to put such
constructions on modern Acts of Parliament"
Further on the learned Chief Justice said:
It seems to me that under the authorities,
the plaintiff being a purchaser in good faith for valuable consideration, his
having had notice of the defendant's prior but unfiled mortgage is not
material, and he is entitled to the protection of the statute.
Dubuc J and Killam J. concurred in this view,
the latter with some reluctance. He was however impressed by the fact that the
words "without actual notice" had been omitted when the statute was
amended in 1885. He expressed the hope that the legislature would restore the statute
to its previous position as respects this question of notice. This however was
not done, as the present Manitoba Bills of Sale and Chattel Mortgage Act,
R.S.M., 1913, ch. 17, shews.
We have therefore in two provinces, Ontario and Manitoba, authoritative decisions laying down that notice of a prior bill of
sale or chattel mortgage does not prevent the subsequent purchaser for a
valuable consideration from being a purchaser in good faith.
[Page 509]
The same construction has been adopted in the province of Saskatchewan. There the court of appeal held in Ferrie
v. Meikle
that a purchaser in good faith and for a valuable consideration of chattels
comprised in an unregistered lien note obtains a good title thereto, even
though he has notice of the existence of the lien note. The court there
followed Moffat v. Coulson and Roff
v. Krecken.
Should we now overrule these decisions which
have settled the law in three provinces of the Dominion? For my part, even were
I of a contrary opinion, I would feel extreme reluctance to overrule long
standing decisions which have emphasized the necessity of registration of
chattel mortgages and liens on personal property. To do so would be to disturb
rights acquired in the belief that these long unquestioned decisions correctly
stated the law.
Moreover we find in Saskatchewan the same
development of the statutory law as in Manitoba. Ordinance No. 8 of the
Northwest Territories in 1889, concerning receipt-notes, hire-receipts and
orders for chattels, rendered the agreement, in the absence of registration, of
no effect against any mortgagee or bona fide purchaser without
notice. These words "without notice" were omitted by Ordinance
No. 39 of 1897, section 1 of which is in the same terms as section 1 of chapter
145 R.S. Sask. (1909), and it does not seem possibleto disregard, in the
construction of the statute as it now reads, the omission of these words in the
new enactment.
On this question of statutory construction I
have come to the conclusion to accept the interpretation placed on the words
purchasers or mortgagees in good faith for
valuable consideration.
[Page 510]
It is very important that the courts should
respond to the efforts made by the legislature to require the registration of
bills of sale, chattel mortgages and lien notes. And, for my part, I cannot
concur in a construction which would give to notice or knowledge of a prior
non-registered lien the same effect, against a purchaser who has on the faith
of the registry bought goods and paid therefor, as the registration required by
the statute.
It is contended that Mr. A. B. bought merely
such rights as the Phœnix Company had in these goods. I think he bought
the goods themselves, and the trial judge so held. It follows that the
respondent is entitled to rely on the protection of the statute.
I would dismiss the appeal with costs.
Appeal allowed with costs.
Solicitors for the appellant: Mackenzie,
Thom, Basiedo & Jackson.
Solicitors for the respondent: McCraney,
MacKenzie & Hutchinson.
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