SUPREME COURT OF CANADA
McNeil v. Sharpe (1915) 62 S.C.R. 504
Date: 1915-02-02
Jane E. McNeil (DEFENDANT) .Appelant;
and
Frederick W. Sharpe, (Curator of the Estate of Sparrow McNeil) (Plaintiff)
Present:--Fitzpatric Davies, Idington, Duff and Brodeur JJ.
Insolvency—Statute of Elizabeth—Firm's moneys paid for private debt—Bona fides of private creditor—Rights of Quebec curator in Nova Scotia.
A business firm in the Province of Quebec on the eve of insolvency obtained an advance from their bankers of $2,000 to purchase property on behalf of the firm in Nova Scotia. One of the partners forwarded the money to his sister in Nova Scotia requesting her to purchase the property in question in her own name and retain the same in satisfaction of a promise previously given her by him to reimburse her for certain advances made and services rendered.
In an action brought in a Nova Scotia court by the curator of the insolvent firm appointed by a Superior Court in Quebec.
Held, affirming the judgment of the Supreme Court of Nova Scotia, that the curator was entitled to have the transaction set aside and the lands purchased treated as part of the insolvent's estate.
Held, per Duff J. The equitable interest of the insolvent in real estate in Nova Scotia could only be vested in the curator by some process effective under the law of that province. His Lordship did not wish to be deemed to sanction the view that it would vest, virtute officii, in a curator appointed pursuant to an abandonment of property under the provisions of the Quebec Code of Civil Procedure.
APPEAL from a judgment of the Supreme Court of Nova Scotia reversing the judgment of the trial judge and maintaining the respondent's action.
[Page 505]
Sparrow & McNeil were contractors carrying on business in the City of Montreal in the Province of Quebec. On the 13th day of April, 1911, the firm borrowed from their bankers $2,000 to purchase certain gypsum property in the county of Victoria in the Province of Nova Scotia. The partner Francis J. McNeil obtained for his firm the $2,000 and had the conveyance of the lands made to his sister, the appellant. The firm of Sparrow & McNeil made a judicial abandonment of their property and the respondent on the 12th July, 1911, was appointed curator by the Superior Court at Montreal. The present action was brought against Francis T. McNeil and Jane E. McNeil by the curator claiming that the lands so conveyed were paid by the moneys of the insolvent firm, that the defendant had caused the conveyance to be made to the appellant in fraud of the firm and its creditors.
The trial judge discredited the evidence of the defendant Francis T. McNeil, but found that the defendant Jane E. McNeil had acted in good faith throughout and had no knowledge that the $2,000 used in the purchase was the property of the firm; that as between her and her brother there was good consideration for the conveyance being made to her, as she had supported her younger brothers and sisters for many years at an expenditure of $1,500 under an agreement with her brother that he was to buy a farm for her. He also found there was no evidence that the firm of Sparrow & McNeil were insolvent when the bargain was made between brother and sister,—and that accordingly the transaction should stand. The majority of the Supreme Court of Nova Scotia held that the $2,000 was advanced by the bank to buy partnership property and that defendant
[Page 506]
Francis T. McNeil had fraudulently taken the conveyance in the name of his sister and that she as regards the property was a trustee for the curator and the creditors of the insolvent firm.
J.L. Ralston K.O. for appellant. The evidence shows that as between the partners, McNeil had a claim against the partnership assets for $3,500; that the $2,000 borrowed from the bank became partnership funds and that while defendant McNeil, might owe that sum to the partnership, the curator could not claim the property which was purchased with it. That the doctrine of resulting trusts does not apply. Taylor v. Blakelock Taylor v. London & County Banking Company; Halsbury's Laws of England, vol. 13, title Equity, p. 78; Vol. 15 Fraudulent and. Voidable Conveyances, p. 81. Lewin on Trusts, 10th Ed., p. 1045; the statute of Elizabeth does not apply. Clough v. Samuel.
E. L. Newcombe K.C. for respondent. The appellant Jane E. McNeil was disbelieved by a majority of the judges in the court appealed from. The family arrangement relied upon by the trial judge gave rise to no contractual liability and being non-enforceable could not constitute a good and valuable consideration for the transfer of property impeached.
THE CHIEF JUSTICE.-I am of opinion that the appeal should be allowed for the reasons given by Mr. Justice Russell.
[Page 507]
DAVIES J.—During the argument of this appeal felt that the appellant's case was a meritorious one, the trial judge had found strongly in her favour and there was a strong dissent by Russell J. from the judgment of the Supreme Court of Nova Scotia reversing that of the trial judge.
I have not, however, after reading and studying the appellant's evidence which the trial judge fully accepted and believed, been able to convince myself that she had established either a legal or equitable contract between her and her brother capable of being enforced either at law or in equity.
I cannot help expressing my regret at being forced to this conclusion because it results in the loss by the appellant of all the time given and money spent by her in the bringing up and education of her young brothers and sisters. Meritorious as her case may be it fails, nevertheless, for the reasons I have stated and I therefore concur in the dismissal of the appeal.
IDINGTON J.—This action was brought by respondent as curator of an insolvent estate which had been the property of a Montreal firm of contractors and was abandoned there. The law of the domicile of such insolvents must prima facie determine the rights of the creditors in such cases.
There may arise in the pursuit of such rights in another province, which is also prima facie to be looked upon in that regard as a foreign state, many different and difficult questions of law either in relation to the administration of the insolvent's estate found there when creditors in such province may have also taken proceedings, or in many other cases in relation to the real estate of the insolvent in such other province.
[Page 508]
Here we have no such difficulties raised save in the most incidental way for there are no creditors in Nova Scotia where the action was brought who have taken any action and the real estate in question is not alleged to have been so affected by any local law as to render it non-exigible by any creditor or especially any foreign creditor.
In short there does not seem to be raised any legal objection which would throw an impediment in the way of the courts of Nova Scotia acting upon the ordinary well recognized comity of nations and aiding the curator resting for his rights upon Quebec law and the direction of Quebec courts to take such action as he may have been advised to be his duty to take.
Such local laws as exist bearing upon the questions raised are in harmony with the law upon which the curator's title to relief rests. It is only in this sense that the statutes of Elizabeth can be properly referred to or relied upon herein.
It is the debtor's property in the Quebec legal sense of the term that measures the right of the curator here in question.
And even if the lex fori might in a given case give creditors as such a wider and more effective measure of relief than the curator can assert claim to without that given by Quebec law, he could not claim the benefit thereof.
If again there happened to be in the lex fori some provision which furnished a bar to attacking and realizing out of immovable property the claims of the curator, he might fail even though under the law of Quebec such a defence could not be maintained if the immovable property were situate there. No such conflict is apparent in the case we are dealing with.
[Page 509]
It is unnecessary, therefore, to dwell at length upon the authorities maintaining the several propositions I have put forward. They are collected and discussed in such well known works as Westlake's "Private International Law," Foote's "Private International Jurisprudence" and Story's "Conflict of Laws."
It is only necessary for our present purpose to have a clear apprehension of the general principles of law applicable to the rights of the respondent under the facts presented herein.
It is, as I view the facts, the law of Quebec to which we must look in this case. That law is given by a local expert in a brief and summary manner testifying thereto. And though his evidence may fall short of covering the whole ground upon which we must proceed yet we are entitled and indeed bound in this court to recognize judicially the law of each province as we decided in the case of Logan v. Lee following Cooper v. Cooper, referred to therein.
Coming to the facts in evidence as I agree in the main with the analysis thereof in the judgment of Mr. Justice Meagher in the court below, I need not go into details.
The money which paid for the land in question, except possibly $100, to which I will presently refer, was got by the insolvents as a firm and for the express purpose of paying for the land in question. I accept entirely the evidence of Mr. Johnson the agent of the bank from which it was got. And his letters to the Royal Bank providing therefor five days before the deed in question was got and the transaction completed so far away as North Sydney in Nova Scotia, indicate no time was lost.
[Page 510]
The appellant never paid any part of the purchase money, yet in answer to the interrogatories delivered before the trial, answered as follows:—
43.—Did you purchase a piece of land at Island Point, Victoria County, from John McLeod, April 18, 1911; and if so, what did you pay for same, how was it paid, by whom and when?—A. I purchased a piece of land at Island Point from John McLeod, and paid him $2,000 for it; my brother, I think, handed him the money, and I think the date was on or about the 18th of April, 1911.
44.—Was the transaction and negotiation, if any, for purchase carried through by you personally and how long did same take?—A. carried on personal negotiations for purchase of said property, I canno say how long.
45.—How long since your brother Francis J. McNeil has been in Cape Breton so far as you know?—A. April, 1911.
46.—Did you ever see a cheque for $2,000.00 dated April 18, 1911, drawn by W. F. Sparrow on the Molsons Bank, Montreal, in favour of Francis J. McNeil; if so, under what circumstances.—A. No.
When we find that her brother, who was one of the said firm of Sparrow and McNeil in question, managed personally and through his solicitor, and agent, the whole transaction relative to getting the deed executed and paid the money got as above mentioned, I submit that these statements under oath can hardly be properly described as counsel suggested as being merely "uncandid."
It rather shocks one to be asked in face of such a perversion, under oath, of. the truth by the appellant, to treat her as a credible witness when testifying relatively to the same transaction. And still more so when we find she is not ignorant or stupid, but a school teacher of such attainments that at eighteen years of age she was earning a salary of nearly $600 a year, and was not in making such answers driven by the nervous excitement so often incidental to a cross-examination in a public crowded court. When later at the trial she abandons this version and seeks to set up that she had some correspondence by letters
[Page 511]
with her brother, and later some conversation with him in which he or she proposed buying a farm to put the younger members of the family upon and that she was to help out of her earnings to pay for their keep and did so help and in course of doing so paid $1,500 and she rests her claim upon that, I must, in view of her former testimony, be permitted to doubt the whole story so far as having any relation to the transaction now in question. To do her justice she says without any special questions as to it, that she would have done so anyway and I quite believe that.
But when we find that she tells us that the brother destroyed the letters she wrote him and she fails to tell anything of the answers thereto, and that there is no corroboration of her story, except by him, and even taking her statement of earnings up to the time of the transaction and deducting her admitted expenses, the balance could not reach any such sum, how can we rely on it for anything beyond the obvious truth that she would have done so anyway. Besides she got $200 from him on account of help needed for the family. It is not as if she had paid out in this way $2,000 and then been repaid for it by the brother advancing this money to her. In that case her first oath would have had more semblance of justification though quite inaccurate.
Even if she had been the most accurate trustworthy person in all her statements, how could she maintain a contract by this later version upon which she could bring an action?
The whole story furnishes nothing upon which to rest any legal claim to fulfillment of it by this purchase. And when she must have been a minor at the time how much less can she be allowed to put it forward as a binding contract upon which to furnish not a good, but a valuable consideration?
[Page 512]
This story is at best a loose and rather inchoate thing, but her way of looking at her oath forbids us attempting to found thereon something definite and rational by inferring things not expressed.
I do not see my way to accept the story or to found upon it anything which can be called a valuable consideration needed to uphold her right to the land in question.
And we find evidence scattered through the case showing almost as clearly as the learned trial judge has expressed his opinion of him, how utterly wanting in the truth is the brother who has misled the unfortunate plaintiff and I cannot help thinking, is still doing so.
The story of his having paid some months before the sum of $100 deposit and got a receipt for it, ought to have been followed up in a way it was not, but taking it as told, where is the receipt? In whose name was it given? If in the appellant's name no doubt we would have had it produced and pressed on the court as proof of the alleged agreement at a time when insolvency was not so close at hand, or at least so apparent. I think the fair inference is it was in the name of this insolvent brother, if not of the firm. The vendor of the property was not called, nor were the facts and circumstances bearing upon the condition and maintenance of the family gone into as they might have been had the story now put forward been given in answer to the interrogatories. To allow it now to succeed would be putting a premium upon answering untruly such interrogatories which are intended as a means of discovery.
I think the transaction in question was clearly gift or simulated to cover a fraud.
[Page 513]
In view of all the facts and especially the obvious unfitness of this property to serve as the suggested home farm for a family, possibly unfitted for it, and the fact that within three weeks after the deed was executed to appellant, her brother was offering an option for that part of the land, possibly the whole, which could be mined for gypsum, at an extravagant figure and Sparrow signing that option as a witness, I incline to the opinion that the later view represented the actual truth in regard to the matter and appellant but a tool in the hands of an unscrupulous brother.
In the former view the insolvent condition of the firms renders the transaction one entitling respondent to succeed herein.
In either way of looking at the matter the result must be the same
The circumstance that the partner Sparrow sub-scribed as a witness to the option given for the gypsum bed, counts for nothing when we find that he was active in getting if not the man who got the money from the bank.
To concoct theories which would help such men to exploit their creditors is not generally what courts endeavour to accomplish. Yet that seems to me what we are invited to attempt herein on the curious and dubious import of- this incident in a career of fraud which ended in leaving creditors to the amount of forty thousand dollars, and but four or five thousand dollars and perhaps not that to pay them.
The members of the firm were acting in harmony till sometime later. Then we have the desperate financial condition of the firm and in face of that and no legal obligation to her, a gift to appellant of $2,000 for which the bank had to be drawn upon and representations
[Page 514]
made to it which, if the story now set up by appellant and her brother be true, I am not disposed to rate this man McNeil's integrity very high, but. I do not credit him with being such a deliberate rascal as the established facts and a belief in the story now set up would imply.
We have heard of something akin to men plundering a bank to give their friends or relations what they wished them to enjoy. Such a thing is possible.
The option sold three weeks after these men had got the money out of the bank to lay the foundation for such a sale of an option rather indicates another purpose operating in their minds They were insolvents, ruined men, gambling on any chance, needing some one to hold the stakes, the appellant was such merely the stake-holder. The story now set up was not then planned. It was never then supposed to be needed. Hence at first it seemed necessary for both appellant and her brother to deny by implication in their statements, that the money was got from the source it came from and to pretend she paid the price. Later the present story was put forward. When was it invented? Why?
Passing these suggestions which furnish ground for believing it a case of simulation I may say it is not necessary to solve exactly what was the moving cause.
The money of the firm paid for the property and the illustration of a resulting trust put forward by Chief Justice Townsend is very apt as showing how in our English law such a transaction might be looked at. The result according to the common sense of every system of law must inevitably lead to the same conclusion, that is, that this property became the property of the firm unless displaced by something stronger than has been brought forward.
[Page 515]
Stress is laid in appellant's factum upon Sparrow's not contradicting things told by McNeil at the trial. As the former was examined by way of commission and latter at the trial, there does not seem much force in such an argument especially in light of answers by him and the appellant to the interrogatories.
Was the firm insolvent when the deed was made?
The respondent presents an estate of such hopeless insolvency, three months later, which is unexplained by any losses meantime, as to render it easy to answer that the firm was seemingly just as hopelessly insolvent at that time the gift was made, as one sometimes, but seldom, finds. The respondent is therefore entitled on the foregoing view of the facts to succeed.
The appeal should be dismissed with costs.
DUFF J. I agree that the appeal should be dismissed. The property having been purchased with funds which were held to be and I am convinced that the finding was right the property of Sparrow, and McNeil; and being property which in the circumstances either of them was, I think, entitled as against the other to have applied in payment of partnership debts, the appellant could only succeed as against Sparrow by showing that she was a purchaser for value without notice of Sparrow's rights. I think she has not shewn that by satisfactory evidence. The ground on which the appeal was supported by Mr. Ralston therefore fails.
It seems right to observe that the point as to the status of the respondent mentioned during the argument from the Bench is not passed upon. If taken at an earlier stage it could have been met by adding
[Page 516]
Sparrow as a party plaintiff and that no doubt accounts for the fact that it was not taken and in any view of the merits of this objection would be sufficient reason for not giving effect to it now.
It is only necessary to say that Sparrow's equitable interest in real property in Nova Scotia arising from his-right to have the property applied in payment of partnership debts the partnership assets proper being insufficient could only become vested in the respondent by some process which would be effective for that purpose according to the law of Nova Scotia; whether the supplementary abandonment of the 7th Sept., 1911, was sufficient for that purpose need not be discussed. The point is mentioned only to avoid the appearance of sanctioning the view that a curator appointed pursuant to an abandonment of property under the provisions of the Civil Code of Procedure of the Province of Quebec has vested in him virtute officii all the debtor's equitable interests in real property situated in other provinces.
BRODEUR J.-I concur with the Chief Justice.
Appeal dismissed with costs.
Solicitor for the appellant: Gunn.
Solicitors for the respondent: Galles & Hill.
Email this Content