Supreme Court of Canada
Gillies v. Brown, (1916) 53 S.C.R. 557
Date: 1916-06-24
James F. Gillies (Defendant) Appellant;
and
N.B. Brown (Plaintiff) Respondent.
1916: May 31; 1916: June 24.
Present: Sir Charles Fitzpatrick C.J. and Davies, Idington, Anglin and Brodeur JJ.
ON APPEAL FROM THE APPELLATE DIVISION OF THE SUPREME COURT OF ONTARIO.
Debtor and creditor—Surety—Statute of Frauds—Advances to company—Third party’s promise to repay.
B., a director of a mining company, advanced money for the company’s purposes, which G., the president and largest shareholder, orally agreed to repay.
Held, affirming the decision of the Appellate Division (35 Ont. L.R. 218), which reversed the judgment for the defendant at the trial (34 Ont. L.R. 210), Fitzpatrick, C.J., and Idington J. dissenting, that this was not a promise to pay a debt of the company and void as a contract by virtue of the fourth section of the Statute of Frauds; that G. was a primary debtor for the monies advanced by B. and liable to the latter for their re-payment.
APPEAL from a decision of the Appellate Division of the Supreme Court of Ontario, Brown v. Coleman Development Co., reversing the judgment at the trial in favour of the defendant.
The action in this, case was brought against the appellant and the Coleman Development Co. to recover monies advanced by respondent for the company’s operations, which, he alleges, appellant promised to repay. It was referred to a referee, who found that the promise of repayment was made, and gave judgment against the appellant and for the company. On appeal, Mr. Justice Middleton accepted the findings
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of fact by the referee, but reversed his judgment on the ground that the appellant’s agreement was one to answer for the debt of the company and void under the Statute of Frauds. He gave judgment against the company, and dismissed the action against appellant. The Appellate Division restored the judgment of the referee.
Tilley K.C. and H.S. White for the appellant.
McCullough for the respondent.
THE CHIEF JUSTICE (dissenting).—It has been assumed that this case is concluded by the authority of decided cases, of which Lakeman v. Mountstephen is a leading case. I think that is far from correct. All that was before the House of Lords, in that case, was the question whether there was evidence to go to the jury. Per Lord O’Hagan:—
Our judgment proceeds merely on the ground that there was evidence to go to the jury.
In the present case, whilst fully admitting that there was evidence on which it was possible for the referee to find a primary liability of the appellant, this court has also to consider whether the facts establish such liability.
Although this court is reluctant to disturb findings of fact arrived at in the courts of original jurisdiction, yet this rule calls for a less strict observance where the finding is not of a judge or a jury, but a referee, whose decision may not command so much confidence. In the present case, moreover, the finding of the so-called fact is, in reality, rather an inference from the facts.
I am far from satisfied that the evidence shews an
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original primary liability of the appellant to the respondent, but there is more than this. Lord Selborne, in the case above-mentioned, when laying down that there can be no suretyship unless there be a principal debtor, adds:—
Who, of course, may be constituted in the course of the transaction by matters ex post facto and need not be so at the time.
In my view, the evidence does not support the conclusion arrived at below, and I would allow the appeal with costs.
DAVIES J.—The sole question in this case is whether the contract made between Brown and Gillies for the advances made by the former to the Coleman Development Company was one which involved a personal liability on Gillies’ part, and, if it did, whether it came within the Statute of Frauds and was a promise to pay the debt of the company.
Mr. Tilley’s argument was that the subsequent transactions with the company shewed that the contention as to Brown being a primary debtor was incorrect and, in fact, impossible.
I am unable to accept that contention, and think these subsequent transactions are quite consistent with Gillies’ primary liability for the monies advanced by Brown. I agree with the Second Appellate Division in its conclusion as to the law on the proved facts. The findings of fact of the referee were accepted by Mr. Justice Middleton, who determined, however, against Gillies’ primary liability.
Gillies’ promise to Brown was, in effect: If you advance these monies to pay the accruing liabilities of the company, which I had agreed to do, but find myself at present unable to do, I will return them to you. It matters not that the monies advanced were for the
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advantage of the company. I think both parties fully understood that Gillies was the primary debtor to whom Brown looked for payment, and that the evidence shews this to be so.
It does not seem to me that the Statute of Frauds applies at all to a case such as this. That statute applies only to cases where the promise is made to the creditor or person to whom the debt is owing. A promise to a debtor to pay his debt is not within the statute. Eastwood v. Kenyon, in 1840.
I would dismiss the appeal with costs.
IDINGTON J. (dissenting)—This action brought by respondent Brown, as plaintiff, against appellant Gillies and the Coleman Development Company, was referred to the late Mr. Kappelle as official referee, and, after he had heard the evidence for plaintiff and part of that for the defence and died, the continuation of the reference was transferred to Mr. Cameron as official referee.
His report maintaining respondent’s claim was reversed by Mr. Justice Middleton, and, on appeal, the report of the referee was restored.
The question of law raised is whether or not the contract, if any, between appellant and respondent falls within the Statute of Frauds, section 4.
In order to appreciate properly the facts, which one must have an accurate conception of in such cases in order to apply the law, I read the respondent’s evidence, and found myself, from the peculiarities I found therein, compelled to read and consider the entire evidence in the case.
It is, unfortunately, by reason of the death of the learned referee, one of those cases where we cannot,
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as I conceive, rest satisfied with findings of fact, so far as dependent upon the relative credibility of the parties, by the judge upon whom it has devolved to finish a half-tried case. This is not the first of that kind to come here. He is in little, if any, better position than we when re-hearing trials upon mere depositions. Indeed, he may, in a sense, sometimes be in a worse, in case those coming before him happen to be possessed of a demeanour to impress him favourably.
The appellant was the owner of some mining claims and promoted the incorporation of the defendant company; became, and continued throughout, its president and possessor of $200,000 face value of its stock, as the price of conveying his claims to the company, and, later, acquired a very large number of shares to recoup him for advances to develop the property, and the solicitor who procured the charter was assigned stock in the way of compensation for his services, and became one of the directors.
Others seem to have taken merely the necessary stock to qualify them as directors, and a purchase by respondent from appellant, in the spring of 1906, of 500 shares left the appellant more deeply interested than all the rest combined in the success of the company.
By reason of his falling ill in July, 1906, and being unable for a time to look after the business, the solicitor suggested engaging respondent at ten dollars a day for two days in each week, and to this appellant assented.
He was engaged accordingly, and soon became also the secretary and a director of the company, which position he held during all the time we are concerned to know anything of their affairs.
He presented an account of $192—substantially—
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for services, at a meeting in July, 1906, and took payment in shares at 25c. a share.
On the 29th October, 1906, he presented another account for $800, and accepted payment in shares issued on same basis.
He would seem thus to have become a shareholder of a greater number of shares than any other person besides appellant.
His present claim rests upon an alleged conversation had in December, 1906, and the construction put thereupon.
His evidence is as follows:—
98. Q.—When did you commence advancing monies? A.—Along in December.
99. Q.—Of what year? A.—The fall of 1906.
100. Q.—How did you come to make those advances? A.—Mr. Gillies’ money had run short, and he didn’t want to discontinue the operations and have the company die out. He wanted to keep working, and he told me that if I would advance this money and keep the thing alive, that he had monies coming in and he would return it to me.
101. Q.—When you say “advanced” this money—what money? A.—Money to the workmen or to keep the operations of the company going. There were supplies and wages.
102. Q.—When do you say that arrangement was made? A.—Prior to the payment of this 4th December to William Hill.
103. Q.—Well, did you agree to that? A.—Yes, I agreed to it.
Either this story is true or false. It is unsupported by anything that can properly be called corroboration. It is absolutely denied by the appellant.
A perusal of the entire evidence leaves a most unpleasant impression as to each as a witness. The respondent, notwithstanding what he would have the court believe as to this bargain with appellant in December, 1906, presented, at a meeting 22nd January, 1907, an account for $2,800, admittedly comprising advances of the character he had just bargained so recently to look to appellant for repayment of.
If his story is true, then he had no right to render
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this account to the company, so far as it embraces items for advances. His doing so tends to destroy belief in his story and helps us to credit appellant in his denial.
But what could he expect in way of repayment? He knew the company had no cash. And less than two months had elapsed since, if his story is to be believed in the sense he now asks the court to accept and act upon it, he was to look to appellant alone.
In presenting the account to the company, we hear nothing from him but a demand for stock at 25c. on the dollar, although believed by those at that meeting, including himself, to be worth par or perhaps twice its face value. He did not, when appellant resisted him, there turn round and demand the repayment from him of the money advanced. Why? Can there be a doubt in the mind of any one reading his evidence that he much preferred stock at 25c.?
Passing these men for the moment, there was in the person of the solicitor, also a director, another witness. He is one of repute and standing, whose veracity has not been questioned, and his version of what transpired does not agree with that of the respondent. And he denies the adoption of a resolution, whilst he was present, which is found afterwards written up in the minute book by the respondent in the following terms:—
Resolution passed by the Directors of The Coleman Development Company, Limited, on the 22nd day of January, 1907, at 9.30 p.m.
Present:—
James F. Gillies.
N.B. Brown.
John McKay.
Moved, seconded and resolved, that the account of N.B. Brown, amounting to the sum of twenty-eight hundred dollars, be paid by essuing stock at twenty-five cents per share amounting to eleven thousand two hundred paid-up shares, and the same is issued.
Carried
JAMES F. GILLIES, President.
N.B. BROWN, Secy.
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The appellant denies this, but has to admit his signature thereto. And counsel asks us to look at these signatures in the minute book and find, what he contends, that all appellant’s signatures to a series of minutes were written at one time with the same pen and ink.
I did not hear this challenged as fact in argument, and, without posing as an expert, I may say it is to be regretted the point was not developed by expert testimony.
Whatever may be the facts, there is certainly a curious appearance in this alleged resolution, in which I take the liberty above of making the spelling conform with the signed minute instead of that in the printed case.
The sequel to this alleged resolution is also curious.
No stock certificates were issued until the following August, and then as of course by the respondent.
Assuming for the moment this only an accident and the resolution quite regular, if these two parties could manufacture wealth in that manner, why should the appellant not look to the company? Why should he pick out a man likely only, if paying personally, to pay only dollar for dollar, and let go the chance of multiplying wealth by an issue of stock?
The attitude of mind of the respondent Brown towards this company and its stock is illustrated by the following letter:—
Haileybury, Ont.,
March 10, 1907.
Mr. John McKay, Soo.
Dear Sir,—Your favour of the 8th inst. to hand, and, in reply, beg to say that, so far as I am concerned, I have no objection whatever to your selling your stock at $1.75. I would not like to see it put on here for less than 2.00, as a great many of the holders of it here have paid two and up as high as 2.60, the party who would be buying your stock would, in all probability, hold it at 2.00 or better—in that event there could be no harm done the holders here, as they are all
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pretty well satisfied it will yet make them some money. Mr. Gillies has ordered a compressor plant, and when it is installed, which will be in the course of a couple of months, together with the depth we will be then on the big vein, I think the stock should sell at 5.00, they are down on the big vein about 10 to 12 ft. from where they are sinking to where the find was made it is as straight as a gun shot through that swamp the vein where they are sinking is about as wide but has not metal in it of course it is perhaps twenty feet higher than where it was first found. Mr. Gillies is in Toronto, has been sick I believe. I am expecting him back every day; you did not say if you got the bag of ore samples which I sent you.
Yours truly,
N.B. BROWN.
When brought face to face with this letter, he says he did not believe what he asserts therein.
I prefer to believe his letter to his frail memory.
And in that letter, read in light of the minutes of that January meeting, I can easily understand why a man, acting as the respondent did in relation thereto and holding such high hopes of the stock, should prefer looking to the company to recoup his advances by issues of stock at 25c. on the dollar, to charging up his advances dollar for dollar against appellant, whose possible means of repayment may have been dependent on same source.
Better an investment that might multiply ten or twenty times than one that could yield only five per centum per annum.
He has chosen to put his own interpretation upon the meaning of the conversation I have quoted by his own acts.
It seems to me the circumstance of the sending of an account by the plaintiff in the case of Lakeman v. Mountstephen, in 1874, had not by any means the same force as I think should be given here. I need not dwell on the attendant circumstances there. After all, that
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case had been submitted to a jury, and, as Lord Cairns presents the matter, all that was really involved in that case was whether or not there was evidence which should be submitted to a jury, and the jury had found for the plaintiff. I think Mr. Justice Middleton was right in the conclusion he reached, and that his judgment should be restored.
In all these cases the question is really one of fact, and, these once correctly appreciated and comprehended, there is not much difficulty in the law.
There is not much doubt in my mind but that, resting not on the alleged conversation of December, 1906, but upon what transpired between these parties later, the appellant owed the respondent in respect of some of the later advances, but the case has not been so developed as to enable any one to determine the exact truth and found a judgment thereon.
Mrs. Brown’s evidence indicates and perhaps corroborates such a view. Beyond that her evidence cannot be stretched. The notes and cheques referred to by the parties needed some explanation by credible witnesses, who, no doubt, could have been got to render that part of the story intelligible and susceptible of judicial determination.
The memorandum of release signed by the parties suggests as much, but is far from furnishing proof of an indebtedness by appellant to the extent of $7,000.
It is the combined indebtedness of the company and of appellant that is therein dealt with.
That document, so far from being corroborative of the respondent’s story and claim, seems to me destructive thereof.
The appellant certainly admits by it owing something for himself, but both parties clearly admit the company owed something as well as the appellant.
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And, whatever each owed respondent, he agreed both together should be discharged for the sum of $7,000.
According to the contention now set up by respondent, the company owed him nothing. He had no contractual relations with them involved in the matters thus disposed of.
But it may be said his wages were intended. They were already obliterated.
I think the appeal should be allowed and the judgment of Mr. Justice Middleton restored.
ANGLIN J.—It has been held by an official referee acting as trial judge in this action, by Mr. Justice Middleton on appeal, and again, on a further appeal, by the four judges who constituted the Appellate Division, that the defendant made a promise of some sort to repay the monies advanced by the plaintiff to the Coleman Development Company. That finding is sufficiently supported by evidence, and the appeal against it is hopeless.
The only difference of opinion in the provincial courts was that, while it was the view of the official referee and of the learned judges of the Appellate Division that Gillies’ promise was absolute and that of a primary debtor, Mr. Justice Middleton held that
The promise made by Gillies was, in truth, a promise to answer for the debt of the company. * * * I think the true finding of fact ought to be that the company became debtor,
and he discharged Gillies under the fourth section of the Statute of Frauds.
Gillies absolutely denied any promise whatever. His denial was not accepted. The only version of the oral contract is that of Brown, who says that
He (Gillies) told me that if I would advance this money and keep the thing alive, that he had moneys coming in and that he would return it to me.
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There is no direct evidence of any undertaking of liability by the company, although there is no doubt that the moneys were advanced for its benefit. Upon this evidence I agree with the learned judges of the Appellate Division that a case of direct and primary liability on the part of Gillies is made out.
There were, no doubt, a number of circumstances. as Mr. Justice Middleton points out, which afford somewhat cogent evidence that there was some sort of understanding that Brown would be paid by the company—the facts that accounts were rendered by him to the company covering both wages (for which its liability is admitted) and the advances which he claims Gillies promised to repay, and that the present action was brought against the company as well as Gillies. On the other hand, the plaintiff’s particulars clearly distinguish between the two claims, and, in a document evidencing a settlement of the amount of Brown’s claim at $7,000, Gillies authorized payment of that sum by one Cartwright, who held an option on Gillies’ shares in the company.
Although the evidence in chief given by Brown was heard before another officer since deceased, Gillies’ evidence and Brown’s evidence in rebuttal were heard by the learned referee who gave the judgment, and who thus had an opportunity of observing the demeanour of both parties as witnesses. A careful study of the evidence in the light of the argument has not convinced me that the conclusion reached by the referee and unanimously affirmed on appeal by the Appellate Division, that the defendant became the primary and direct debtor of the plaintiff, is so clearly erroneous that it should be disturbed in this court. While I have little doubt that it was expected that in some way the monies advanced by Brown would be obtained from the company—and, had its affairs pros-
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pered, that would in all probability have happened—I cannot find in the record any evidence which establishes that it ever incurred legal liability to him.
The appeal fails and should be dismissed with costs.
BRODEUR J.—This action had been brought to recover payment of advances made by the respondent, Brown, against the Coleman Development Company and the appellant, Gillies. His action was dismissed with regard to the company, but was maintained against the appellant.
The issue of fact was whether the defendant, Gillies, had agreed to reimburse those advances.
A long enquête has taken place, and it was found that the promise to pay, alleged by the plaintiff, was proved. The defendant now claims that his contract with the plaintiff was a contract of suretyship and not a direct obligation to pay.
I have perused the evidence in that regard, and I am unable to find that the facts disclosed shew that Gillies became the surety of the Coleman Development Company. He simply agreed to pay those advances.
It is true that Brown was in the employ of the mining company and that his salary was paid by the latter by way of issue of stock; but it is true equally that some advances previously made to the mining company by Brown were paid also in the same way. But, when large advances were to be made, it was agreed with the appellant, Gillies, that he would reimburse those advances. It was a personal and direct liability on his part, and he cannot now invoke the Statute of Frauds to prevent him from being liable under that contract.
The appeal should be dismissed with costs.
Appeal dismissed with costs.
Solicitor for the appellant: A.G. Slaght.
Solicitor for the respondent: S.W. McKeown.
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