Culina v. Giuliani, [1972] SCR 343

Supreme Court of Canada

Culina v. Giuliani, [1972] S.C.R. 343

Date: 1971-10-05

John Culina, as Trustee (Plaintiff) Appellant;

and

Erzi Giuliani (Defendant) Respondent;

and

George John Majic (Defendant).

1971: May 12, 13; 1971: October 5.

Present: Martland, Judson, Ritchie, Hall and Spence JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO.

Trusts and trustees—Agreement for purchase of shares by trustee—Contract frustrated by failure to operate company honestly—Purchaser involved vicariously and through own actions in fraud upon company—Whether plaintiff suing in capacity as trustee entitled to recover on that basis despite fact that there may be claim by defendant against him personally.

The defendant M, a solicitor, and the respondent G became the owners of certain lands and subsequently caused a company to be incorporated (NH Ltd.) to which they conveyed the lands in return for 1,000 common shares. M and G desired to obtain the sum of $40,000 for the purpose of developing the lands. The appellant’s father (A) and another person (B) provided this sum and

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gave it to the appellant. The appellant, who was a student-at-law articled to M, thereupon entered into an agreement dated March 13, 1958, with G and M for the purchase of 200 shares in NH Ltd., and in this agreement G and M made several covenants. On the same day and by a document which was drafted by M, the appellant declared that he held the 200 common shares, which he had purchased under the agreement, in trust for the beneficiaries A and B.

The documents were executed contemporaneously; the $40,000 was duly paid by the appellant and was shared by M and G. Thereafter, M and G operated the company dishonestly and as a result of their machinations the shares in NH Ltd. became worthless.

The appellant, who had continued as an articled student and later became a law partner of M and had also continued to take an active part in the operation of NH Ltd., brought an action in his capacity as trustee against G and M. The trial judge held that the defendants had breached the agreement of March 13, 1958, and awarded the appellant $40,000. On an appeal by G, the Court of Appeal allowed the appeal and dismissed the action as against G. The judgment at trial as against M was a default judgment and M did not appeal to the Court of Appeal.

Held: The appeal should be allowed and judgment given in favour of the appellant for the sum of $40,000, subject to the direction that the judgment should be specifically limited to a judgment in favour of the appellant as trustee.

As found by the Court below, the law practice in which the appellant and M were partners was so interwoven with the affairs of the particular company that the fraud of M with respect to that company was the fraud vicariously of the appellant. The case had to be decided on the basis that the appellant, in his personal capacity, both vicariously as a partner in the law firm and through his own actions, was involved in the fraud upon the company.

The Court, adopting the result arrived at in Wetmore v. Porter (1883), 92 N.Y.R. 76, was of the opinion that a plaintiff suing in a capacity as a trustee is entitled to recover on that basis despite the fact that there may be a claim by the defendant against him on a personal basis. In the present case, the appellant acted in the purchase of the shares and entering into the agreement of March 13, 1958, as a trustee and did so to the knowledge of M and

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G. Therefore, despite the appellant’s character as a partner of M and so vicariously liable for M’s actions, and despite his various actions in reference to the affairs of the company, it was held that he should be entitled to assert his rights as trustee.

The conduct of M and G made impossible the carrying out of the contract between the appellant and them and therefore the appellant, only as trustee, was entitled to damages.

Gibson v. Winter (1883), 5 B. & Ad. 96; Hinchcliffe v. Baird and Botterell, [1920] 3 W.W.R. 159, distinguished; De Pothonier v. De Mattos (1858), 120 E.R. 581, referred to; Southern Foundries (1926), Ltd. v. Shirlaw, [1940] A.C. 701, applied.

APPEAL from a judgment of the Court of Appeal for Ontario, allowing an appeal from a judgment of Donohue J. Appeal allowed.

H.M. Lang, Q.C., and B.A. Crane, for the plaintiff, appellant.

J. Sopinka and S.N. Lederman, for the defendant, respondent.

The judgment of the Court was delivered by

SPENCE J.—This is an appeal from the judgment of the Court of Appeal for Ontario pronounced on November 3, 1969, by which judgment it allowed an appeal from the judgment of Donohue J. at trial. In the latter, Donohue J. had awarded the appellant $40,000 and costs.

It is necessary to state the facts with some particularity.

George John Majic, hereinafter called Majic, was a solicitor practising in the City of Sault Ste. Marie, in the Province of Ontario. Reference will be made hereafter to his various associates in such practice. Erzi Giuliani was active in a number of businesses including the development of residential building lots. Majic and Giuliani became the owners of an acreage near the City of Sault Ste. Marie. The respective investments of the two are not relevant. They caused to be incorporated a company known as Northern Heights (Sault) Limited and conveyed the lands to the company in return for 1,000 common shares, causing 499 shares to be issued to each of them and one share to be issued to each of their wives.

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In the year 1958, the appellant was a student-at-law articled to the defendant Majic. When he was such student, Majic and the respondent Giuliani desired to obtain the sum of $40,000 for the purpose of developing the lands owned by Northern Heights (Sault) Limited, to which I shall refer hereafter as “the company”. The appellant’s father, Joseph Culina, and one Mike Maich provided the sum of $40,000 and gave it to the appellant and then the appellant entered into an agreement dated March 13, 1958, with the respondent Giuliani and the defendant Majic. In this agreement Giuliani and Majic are described as vendors and the appellant is described as purchaser. The agreement is quite brief and I shall quote it in full:

WHEREAS the vendors are the owners of approximately sixty-six (66) acres of property in the Township of Tarentorus, bordering Wilson Street, between Northern Avenue and St. George’s Avenue which said property has been subdivided into 248 lots and said property is now known as the Giuliani Subdivision.

WHEREAS the vendors have transferred the said property to a company incorporated under the Corporation Act of the Province of Ontario, and known as Northern Heights (Sault) Limited which said company has an authorized capitalization of $500,000.00 having issued to them 1000 common shares as follows:

499 common shares, par value $1.00 to Erzi Giuliani

1 common share, par value $1.00 to Ines Giuliani

499 common shares, par value $1.00 to George John Majic

1 common share, par value $1.00 to Rolleen Majic

WITNESSETH that in consideration of the mutual agreements hereinafter contained, it is agreed by and between the parties hereto as follows:

(1) The vendors agree to sell and the purchaser agrees to purchase 20% of the issued 1000 common shares from the vendors for the sum of $40,000.00.

(2) The vendors agree that the sale price of the property from themselves to the Limited Company shall be paid from their portion of interest in the said Company and that any mortgages outstanding against the property shall not be assumed

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by the Company so that the interest of the purchaser in the Company shall not be affected in any way whatsoever.

(3) Any lots sold to date shall be deemed to be sold subsequent to the purchaser having purchased an interest in the said Company.

(4) All development expenses such as roads, sewers, etc., shall be paid by the said Company.

(5) It is agreed between the parties hereto that the number of directors shall be reduced to three; that the respective wives of the vendors shall resign as directors, and that the purchaser shall be appointed a director.

(6) It is further agreed between the parties hereto that no act by the Company shall be valid unless all three directors unanimously agree.

(7) The vendors further agree that if on March 15, 1961, the purchaser has not received $80,000.00 in dividends or if the said 20% interest is not valued at $80,000.00 then the vendors shall transfer to the purchaser sufficient common shares in the said company from themselves to bring the value of the purchaser up to $80,000.00.

On the same day and by a document which was drafted by the defendant Majic, Culina declared that he held the 200 common shares, which he had purchased under the agreement I have recited in full, in trust for the beneficiaries Joseph Culina and Mike Maich.

The documents were executed contemporaneously; the $40,000 was duly paid by the appellant and was shared by the defendant Majic and the respondent. Thereafter, the defendant Majic and the respondent operated the company, as the learned trial judge found, “without even an attempt to do so honestly”. Certainly the defendant Majic diverted a great deal of the company’s money to his own use and a conservative estimate made by the learned trial judge from examination of the rather sketchy evidence given at the trial would show that this misappropriation amounted to at least $291,000.

It would appear that the company was not the only victim of Majic’s misconduct. He was subsequently charged with fraud, convicted and sentenced to imprisonment and was disbarred by the Law Society of Upper Canada.

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The learned trial judge also found that the respondent Giuliani was himself a party to various transactions whereby the funds of the company were depleted.

The appellant continued as an articled law student for some time and then, upon becoming a solicitor, was employed by Majic and paid a salary. In June 1960, to use the appellant’s words as taken from his examination for discovery, he “became associated with the firm of Majic, Pilo, Harry and Culina”. The appellant did not give evidence at the trial but portions of his examination for discovery were read in by counsel for the respondent. Counsel for the appellant also read in at trial considerable portions of the examination for discovery of the defendant Majic and later called the defendant Majic as a witness.

The defendant Majic, in his evidence at trial, further explained the basis on which this firm operated. I quote:

A. Well, as far as our relationship was concerned, when I was with Mr. Murphy we were on a 50-50 basis, then when Mr. Pilo came into the firm then we worked out another arrangement whereby we would determine the expenses each month, then we would determine the amount of fees brought in by each during the month and then we would pay the expenses on a proportionate basis and the difference would belong to each member of that firm.

The appellant, in his examination for discovery, admitted that it was announced that he had become “a member of the association of Majic, Pilo & Harry” and identified an item marked as an exhibit which came from the Sault Daily Star dated June 6, 1960, which read: Majic, Pilo & Harry, Barristers and Solicitors, Wish to announce that John Joseph Culina has been admitted to partnership and that the firm will henceforth be known as Majic, Pilo, Harry & Culina, 112 March St., Sault Ste. Marie, Ontario.”

It was the contention of counsel for the appellant in this regard that in such a situation the appellant Culina could not, in so far as the respondent Giuliani is concerned, be found to be a partner of the defendant Majic and that they were merely solicitors sharing office space and expenses. Certainly, as counsel for the appellant

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admitted, so far as anyone else was concerned, there was an ostensible partnership sufficient to bind any one of the partners as against third parties without knowledge but as between themselves there was not, he submitted, in legal result, a partnership. Counsel for the appellant further submitted that the respondent Giuliani knew the whole situation. The defendant Majic had testified to this fact and the learned trial judge specifically accepts the evidence of the defendant Majic as against the respondent Giuliani and specifically found against the credibility of the respondent Giuliani. Both Donohue J. and the Court of Appeal for Ontario have found as a fact that the appellant was a partner of the defendant Majic and I am of the opinion that the appellant cannot succeed in persuading this Court to reverse such concurrent findings.

In addition to the circumstances described above, there are other very telling pieces of evidence. The so-called firm kept only one trust account and money was paid into the trust account by the various associates and paid out by the various associates all of whom seem to have had check signing authority. Secondly, one Wilmott instituted an action against the defendant Majic and the respondent Giuliani and the latter took third party proceedings against the partnership of Majic, Pilo, Harry and Culina. The said partnership defended the third party proceedings and was successful at trial. In the Court of Appeal, the third party proceedings were successful and judgment went in favour of the respondent Giuliani against the partnership so named, so that as against the defendant Majic’s evidence the respondent Giuliani knew the arrangement and thought that it did not constitute a partnership there is the fact that he claimed against that partnership as such, that it defended as a partnership and that judgment went against it as a partnership. Again, one Longarini issued a writ against the firm of Majic, Pilo, Harry and Culina. In the statement of claim in that action, it was alleged:

The defendants all reside in the City of Sault Ste. Marie and at various material times were carrying on the practice of law in partnership in the said city under the firm name of Majic, Pilo & Harry,

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Majic, Pilo, Harry & Culina, Majic, Pilo & Culina and Majic & Pilo. After Culina resigned, Pilo continued on.

The appellant John Culina admitted in his defence that paragraph in the statement of claim and further alleged in his statement of defence:

The defendant John Culina asserts he was a member of the firm of Majic, Pilo, Harry & Culina and the firm of Majic, Pilo & Culina from the 1st of June, 1960 until the 16th day of September, 1961 and further asserts that any moneys which have been received by either of the said firms from Giovanni Lucente and Marie Lucente during said period was paid by the said firm to the plaintiff herein, namely Beatrice Longarini.

Again a definite admission of a full partnership between the various so-called associates.

I have come to the conclusion, therefore, that the appellant Culina fails in his submission to this Court that in so far as the respondent Giuliani was concerned Culina was not a partner of the defendant Majic and that, on the other hand, his claim against the respondent Giuliani must be considered in the light of his position as such partner.

It would seem that the appellant not only acted as a solicitor in the partnership but that he took an active part in the operation of the company Northern Heights (Sault) Limited and that that course commenced even before he became “associated” in June of 1960. Majic in his evidence at trial recounted that the company had what he described as “an income tax problem” and that he had agreed with the income tax authorities to pledge with the department two agreements for purchase which purchasers had made with the company and that the respondent Giuliani refused to execute such assignments. The respondent Giuliani suggested that Majic should have the appellant execute the assignments and upon Majic pointing out that the appellant was only a director, the respondent replied “well, make him President”, and that as a result a special meeting of shareholders was called on March 18, 1960, the resignation of the respondent as a director was accepted and Mrs. Claribel Biggings was elected a director in his place instead, one share being transferred to her by Majic.

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The appellant Culina acted as chairman of that meeting and it would appear that he was considered the president of the company although no minutes of shareholders or directors evidencing the appellant’s election to such office appear in the material.

Exhibit 6 is a list of conveyances and mortgages made by the company between June 8, 1958, and June 19, 1962. It shows that from June 8, 1958, to February 4, 1960, a very large number of such conveyances and mortgages were executed by the respondent Giuliani and the defendant Majic but that commencing on April 25, 1960, and running through to May 23, 1961, another very large number of conveyances or mortgages were executed by the appellant and by the defendant Majic although five of them seem to have been executed by the defendant Majic alone, and after May 23, 1961, a comparatively small number of documents were executed by the defendant Majic alone.

In his evidence, Majic testified:

Q. What connection did Mr. Culina have while he was president, what was the relationship between you and him in the execution of the company’s business?

A. Well, as far as Culina is concerned I was the one that was looking after the affairs of the company and Mr. Giuliani and myself continually together doing it, you see. Mr. Culina was aware of the fact that we were working and after he became a signing officer I would either say, “Well, John, sign”, or I’d have one of the girls ask John to sign.

The appellant, in his examination for discovery, testified that with regard to the sales which took place the defendant Majic acted as solicitor for the vendor and that he, Culina, did not know where the proceeds went. He testified that most of the time the defendant Majic came to his office and just said “sign this document” and then attended on the closing of the transaction. There was, however, produced at trial, as an exhibit, a conveyance dated May 19, 1961, from the company to Margaret E. Reid and the appellant executed the affidavit of land transfer tax attached to that document.

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I, therefore, am of the opinion, with respect, that when Aylesworth J.A. said, in his reasons in the Court of Appeal:

The law practice in which the plaintiff and Majic were partners was so interwoven with the affairs of the particular company (and it is the company’s affairs that are really the subject-matter of this action) that the fraud of Majic with respect to that company (a client of the law firm) was the fraud vicariously of the plaintiff Culina.

he was justified in so finding.

I am further of the opinion that this case must be decided on the basis that the appellant, in his personal capacity, both vicariously as a partner in the firm of Majic, Pilo, Harry and Culina and through his own actions, was involved in the fraud upon the company. It was upon this basis that the Court of Appeal for Ontario, relying on Gibson v. Winter[1], refused the plaintiff (here appellant) relief. There Denman C.J. said:

The plaintiff, though he sues as a trustee of another, must, in a Court of Law, be treated in all respects as the party in the cause: if there is a defence against him, there is a defence against the cestui que trust who uses his name; and the plaintiff cannot be permitted to say for the benefit of another that his own act is void, which he cannot say for the benefit of himself.

It is true that authority was cited in Evans v. Edmonds[2], but I have only found it adopted in one case thereafter, that being Hinchcliffe v. Baird and Botterell[3], a decision of the Court of Appeal for Manitoba. There, reasons for judgment were given by Perdue C.J.M. and Fullerton J.A., Cameron and Dennistoun JJ.A. merely concurring in dismissing the appeal. At pp. 169-170, Fullerton J.A. said:

As against the plaintiff personally, as has already been pointed out, the findings of the trial Judge that he had ratified the transfers from his cash grain

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account to his “futures” account is conclusive. Can he then maintain this action as a trustee?

Gibson v. Winter, 5 B. & Ad. 96, 2 N. & M. 737, appears to be directly in point. The headnote to that case reads as follows:

A trustee suing as a plaintiff in a Court of Law, must be treated in all respects as a party to the cause, and any defence against him is a defence in that action against the cestui que trust, who uses his name; and therefore, where a broker, in whose name a policy of insurance under seal was effected, brought covenant, and the defendants pleaded payment to the plaintiff according to the tenor and effect of the policy, and the proof was, that after the loss happened, the assurers paid the amount to the broker by allowing him credit for premiums due from him to them, it was held, that although that was no payment as between the assured and assurers, it was a good payment as between the plaintiff on the record and the defendants; and therefore an answer to the action.

Contrary to the view expressed by counsel for the appellant in this case, I am of the opinion that Fullerton J.A.’s adoption of the principle in Gibson v. Winter was part of his ratio decidendi but I cannot say that it was the judgment of the Court. It was the view of Fullerton J.A. that the principles of equity work no different result but I find that opinion not shared by others. In De Pothonier v. De Mattos[4], Lord Campbell C.J. said at p. 583:

Gibson v. Winter was no doubt a correct decision as the law then stood; we could then look only at the parties on the record, though we had, even then, an equitable jurisdiction, in the exercise of which we could set aside a plea upon grounds which would induce a Court of equity to do so. Here the replications are clearly within the statute: they deny that the nominal plaintiff had any right to release, inasmuch as, at that time, he had no interest, and is, in consequence, not the real plaintiff when the action was brought.

Coleridge and Erle JJ. concurred.

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In Bowstead on Agency, in the 13th ed., at p. 421, the learned author states:

As regards set-offs and defences available against the agent personally, these must obviously be available where the agent sues on his own collateral contract; but when he sues on the contract which he has negotiated for his principal, his right being subordinate to that of his principal and the action being brought for the benefit of his principal, such set-offs and defences should not in principle be available (unless the principal is undisclosed, in which case the contract is primarily that of the agent). There is, however, a general statement of Lord Denman C.J. in Gibson v. Winter to the contrary. But the case could be regarded as a case of undisclosed principal: and it relates to marine insurance, where a broker deals personally with the underwriter. This usage does not bind the principal unless he was aware of it, but it does bind the broker, and the principal apparently sued in the name of the broker.

It should be noted in the present case that the defendant Majic and the respondent Giuliani knew full well the source of the funds which the appellant was using to purchase the shares in the company and indeed the defendant Majic had drafted on the same day the agreement between him and the respondent Giuliani, on the one part, and the appellant, on the other, for the purchase of the shares, and also the document in which the appellant declares his trust.

There seems to be much more authority in the United States. Scott on Trusts, 3rd ed., vol. IV, at p. 2517, says:

Where the release is given by the trustee in breach of trust and the obligor is not in the position of a bona fide purchaser, either because he gives no value for the release or because he has notice that the trustee is committing a breach of trust in giving him the release, the release at common law was effective as a legal discharge of the obligation, but it would be set aside by a court of equity.

I find the most interesting case in the United States is Wetmore v. Porter[5], a decision of the Court of Appeals of that State. There, Wetmore

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was appointed an executor of an estate and as such held possession of certain bonds. Wetmore and Porter were carrying on a general brokerage business and Wetmore delivered the bonds to Porter, who knew they were trust funds, so that they might be used as collateral security for a loan by a bank to the firm of Porter and Wetmore. Porter failed to redeliver the bonds when called upon by Wetmore and Wetmore sued. Ruger, Chief Judge, upon recital of these facts as having been set out in the complaint, said at p. 80:

...perhaps the only question in the case is, whether the pleader in relating many unncessary facts has stated, not only a cause of action, but also a defense.

And at p. 82, said:

It is an alarming proposition to urge against the legal title which a trustee has to trust funds that his recovery of their possession may be defeated by a wrong-doer, upon the allegation that the lawful guardian of the funds colluded with him in obtaining their possession. This action is sought to be maintained by the plaintiff solely in his representative capacity as executor or trustee under the will of Alpheus Fobes.

The contracts and engagements entered into by him in his individual capacity are extraneous to the power conferred upon him by the will of Alpheus Fobes, and cannot be made the foundation of a defense to such an action. The dual character maintained by an individual who is also engaged in the administration of a trust involving the control and custody of another’s property is not only recognized by numerous decisions in the courts, but has also been the subject of frequent statutory enactments.

Further, at p. 85, he said:

The twin maxims “Ex dolo malo non oritur actio” and “Ex turpi contractu actio non oritur” have no application to the cause of action set up in the complaint. It is not founded upon and does not grow out of the illegal or unauthorized dealings between the plaintiff and defendant, but such dealings are invoked by one of the wrong-doers to defeat a party who is asserting a legal right and who in this action appears in a representative character alone. We see no reason why a trustee who has been guilty even of an intentional fault is not entitled to his locus

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penitentiae and an opportunity to repair the wrong which he may have committed.

I am of the opinion that the result arrived at in the Court of Appeal for the State of New York is one which should be adopted in this Court and that a plaintiff suing in a capacity as a trustee is entitled to recover on that basis despite the fact that there may be a claim by the defendant against him on a personal basis and therefore that Gibson v. Winter, representing as I believe it does common law without regard for equitable remedies, is not applicable.

In the present case, the appellant Culina acted in the purchase of the shares and entering into the agreement of March 13, 1958, as a trustee and did so to the knowledge of both the defendant Majic and the respondent Giuliani. Therefore, despite the appellant’s character as a partner of the defendant Majic and so vicariously liable for the defendant Majic’s actions, and despite his various actions in reference to the affairs of the company as to which he acted as president for a considerable time, albeit it would appear as the mere tool of the defendant Majic, he should be entitled to assert his rights as trustee.

The action is based upon the breaches of contract by the two defendants to the action, the present defendant Majic and the respondent Giuliani. It is submitted by counsel for the respondent Giuliani that these two were not partners but at the best had been co-adventurers who had turned their adventure into a limited corporation and they held shares in that limited company and that therefore the learned trial judge was incorrect when he said:

What then is the position of Giuliani who was associated with Majic in the deal with the plaintiff? I hold that Giuliani was a partner of Majic in the transaction with the plaintiff and that Majic, having misappropriated monies of the company, thereby injuring the plaintiff, he, Giuliani, is liable to the plaintiff.

Sections 2, 3, 12 and 13 of The Partnership Act, R.S.O. 1960, c. 288, are applicable here.

In my view, whether or not a partnership existed between the defendant Majic and the re-

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spondent Giuliani is irrelevant. The two were joint covenantors in the agreement between the appellant as purchaser and these two as vendors. In that agreement, which I have quoted, they made several covenants agreeing to sell 20 per cent of 1,000 shares to the purchaser and that the $40,000 which the appellant paid to the vendors should be utilized to pay the sale price of the property and that any agreements outstanding against the property should not be assumed so that the interest of the purchaser in the company should not be affected in any way whatsoever. Particularly, the vendors agreed in para. 7:

The vendors further agree that if on March 15, 1961, the purchaser has not received $80,000.00 in dividends or if the said 20 per cent interest is not valued at $80,000.00 then the vendors shall transfer to the purchaser sufficient common shares in the said Company from themselves to bring the value of the purchaser up to $80,000.00.

The learned trial judge, as I have said, found:

I find that the defendants did not even make an attempt to operate this company honestly. The plaintiff got no kind of a run for the $40,000.00 put up by Joseph Culina and Mike Maich [the cestui que trust].

Counsel for the appellant submits that where there is a frustration of the whole contract by failure to operate the company honestly then action lies for a breach of the contract despite the lack of proof of the breach of any special clause. In Southern Foundries (1926), Ltd. v. Shirlaw[6], Lord Atkin at p. 717 quoted Cockburn C.J. in Stirling v. Maitland[7], at p. 852, and said:

I look on the law to be that, if a party enters into an arrangement which can only take effect by the continuance of a certain existing state of circumstances, there is an implied engagement on his part that he shall do nothing of his own motion to put an end to that state of circumstances, under which alone the arrangement can be operative.

and continued:

That proposition in my opinion is well established law. Personally I should not so much base the law

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on an implied term, as on a positive rule of the law of contract that conduct of either promiser or promisee which can be said to amount to himself “of his own motion” bringing about the impossibility of performance is in itself a breach.

Applying that principle, and I agree that it is a well-established principle, to the present circumstances, the finding of fact made by the learned trial judge and which would seem to be borne out by the evidence, indicates that the conduct of the two defendants, i.e., the defendant Majic and the present respondent Giuliani, made impossible the carrying out of the contract between the appellant and them and therefore the appellant, as I have said, only as trustee, is entitled to damages. Counsel at trial limited those damages to the amount advanced, i.e., $40,000, and the learned trial judge gave judgment for such amount. It is objected that there had to be proof that the shares in the company were, as a result of the machinations of the two vendors, the defendant Majic and the respondent Giuliani, worth nil. I would think that that proposition had been most adequately demonstrated by the evidence at trial.

The defendant Majic had stripped the company of something well over $200,000 and the respondent Giuliani had distributed various assets of the company, particularly the lands, without obtaining consideration for the company and had, in addition, used the funds of the company to support another corporation in which he was interested. The Court may take judicial notice that even on March 16, 1971, the High Court of Justice in Ontario in Belgrand Investments Ltd. v. Northern Heights (Sault) Ltd. et al.[8], was dealing with various aspects of the financing of the development of these lands and it appeared from the judgment in that action that Northern Heights (Sault) Limited had been foreclosed of all interest in the said lands. I am of the opinion that no further proof of damages to the extent of $40,000 only is necessary.

I would, therefore, allow the appeal and give judgment in favour of the plaintiff for the sum of $40,000 with costs throughout. The judgment

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should be specifically limited to a judgment in favour of the plaintiff as trustee in accordance with the declaration of trust, between him as trustee and Joseph Culina and Mike Maich as beneficiaries, executed on March 13, 1958, and filed as an exhibit in this action.

Appeal allowed with costs.

Solicitor for the plaintiff, appellant: Henry M. Lang, Sault Ste. Marie.

Solicitors for the defendant, respondent: Fasken & Calvin, Toronto.