Blundon et al. v. Storm, [1972] SCR 135

Supreme Court of Canada

Blundon et al. v. Storm, [1972] S.C.R. 135

Date: 1971-06-28

Ronald Blundon, Willard Dillon, Joseph Nearing, Robert D. MacDonald and Hyman Goldberg (Plaintiffs) Appellants;

and

Alexander Storm (Defendant) Respondent.

1970: November 26, 27, 30; 1970: December 1; 1971: June 28.

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

ON APPEAL FROM THE SUPREME COURT OF NOVA SCOTIA, APPEAL DIVISION

Partnership—Agreement to search for wreck and reported treasure—One partner secretly obtaining permits and notifying other partners partnership terminated—Treasure found by said partner—Whether other partners guilty of laches—Action for an accounting.

An action by the appellants against the respondent for an accounting—the subject matter of the accounting being silver and gold coins recovered from an old wreck—was dismissed by the Supreme Court of Nova Scotia, Appeal Division. The trial judge had awarded the respondent 75 per cent of the recovery, the remaining 25 per cent being divided among the appellants.

In 1960, some of the appellants and others formed an informal partnership for the purpose of searching for the said wreck and its reported treasure. During the winter of 1960‑61, the five appellants formed an informal partnership and purchased a vessel and other equipment to aid in the search, which was resumed that spring. One of the appellants had a licence issued pursuant to the Treasure Trove Act, R.S.N.S. 1954, c. 299, at that time. During their search, the appellants found certain objects which they believed to be part of the debris from the wreck. In accordance with the provisions of the Canada Shipping Act, the appellants reported their find to the Receiver of Wrecks for the area concerned, who recorded their claim and assured them that their exclusive right to search in the area would be protected.

The respondent applied to the Receiver of Wrecks several weeks later for the right to search in the same area, but was advised he could not do so. Subse-

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quently, having led the appellants to believe that he knew the location of the treasure, the respondent was admitted to the partnership. A formal agreement, dated August 25, 1961, was executed by the parties and provided, inter alia, that each of the five appellants was to receive 16 per cent and the respondent 20 per cent of the treasure if found.

The respondent was the most active partner in the period up until 1965, and the appellants in general showed a decreasing enthusiasm for the search. Early in 1965 the respondent secretly obtained for himself a treasure trove licence and approval under the Canada Shipping Act. On February 8, 1965, he notified the appellants that he was terminating the partnership. He then formed another partnership with two other persons. The appellants asserted their rights and efforts were made by them to recover the licences.

The respondent found the treasure on September 19, 1965, but he kept complete silence about the discovery until April 4, 1966. On April 7, 1966, the appellants commenced their action and obtained an injunction.

Held: The appeal should be allowed.

The Courts below were in error in finding that the appellants were guilty of laches. The view of the evidence taken by the Court of Appeal ignored the secrecy of the conduct of the respondent in acquiring the licences; the assertions of the appellants and their efforts to recover the licences; the respondent’s formation of a new partnership with strangers, and, perhaps, the circumstances that existed when the respondent was admitted to the partnership in 1961.

Whatever the effect of the permits may have been, the respondent held for the benefit of all partners (including himself) in a subsisting partnership. Nothing that the excluded partners did or said could have led him to believe that they acquiesced in his separate search or that they abandoned their rights.

The action was substantially one for an accounting among partners. The trial judge’s division of the proceeds of the discovery was made on a basis that he thought was just and equitable as between the two sides and should be restored.

Lindsay Petroleum Co. v. Hurd (1874), L.R. 5 P.C. 221; Erlanger v. New Sombrero Phosphate Co.

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(1887), 3 App. Cas. 1218, applied; Cowell v. Watts (1850), 2 H. & Tw. 224; Clegg v. Edmondson (1857), 8 De G.M. & G. 787, distinguished.

APPEAL from a judgment of the Supreme Court of Nova Scotia, Appeal Division[1], allowing an appeal from a judgment of Pottier J. Appeal allowed and judgment at trial restored.

D.A. Kerr, Q.C., and B.A. Crane, for the plaintiffs, appellants.

J.H. Dickey, Q.C., for the defendant, respondent.

The judgment of the Court was delivered by

JUDSON J.—This is an appeal from a judgment of the Supreme Court of Nova Scotia, Appeal Division, which dismissed the action of the appellants, Ronald Blundon et al., against the respondent, Alexander Storm, for an accounting—the subject-matter of the accounting being silver and gold coins recovered from an old wreck. The trial judge had awarded Storm 75 per cent of the recovery, the remaining 25 per cent being divided among the appellants.

In 1960, some of the appellants, along with others who are strangers to these proceedings, formed an informal partnership for the purpose of searching for the wreck of the French vessel “Le Chameau”, which had sunk near Cape Breton Point, Cape Breton County, Nova Scotia, in 1725, while proceeding from Louisburg to Quebec. This vessel reportedly had on board a quantity of silver and gold coins, and this was the treasure for which the parties were searching.

During the winter of 1960-61, the five appellants formed an informal partnership and purchased a vessel, M.V. “Orbit”, and other equipment to aid in the search, which was resumed that spring. One of the appellants had a licence issued pursuant to the Treasure Trove Act, R.S.N.S. 1954, c. 299, at that time.

During their search in late spring of 1961, the appellants found an anchor, cannons, cannon

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balls and shot, all of which they believed to be part of the debris from the wreckage of “Le Chameau”. In accordance with the provisions of the Canada Shipping Act, the appellants reported their find to the Receiver of Wrecks for that area, who recorded their claim and assured them that their exclusive right to search in that area (around so-called Le Chameau Rock) would be protected.

The respondent applied to the Receiver of Wrecks several weeks later for the right to search in the same area as the appellant, but was advised he could not do so. Nevertheless, he apparently continued his efforts, resulting in disputes with the appellants, and the respondent was instructed by the Receiver of Wrecks on several occasions to stay away from the area already granted to the appellants.

The respondent had found a silver coin at some point in his search, and he met the appellants in late August 1961 to discuss the possibility of forming a new partnership. Whatever rights the appellants might have held under the licence granted pursuant to the Treasure Trove Act, or whatever rights the Receiver of Wrecks was entitled to grant them, both the appellants and the respondent believed that the appellants had the exclusive right to search in the area of Le Chameau Rock. However, the respondent led them to believe that he knew the location of the treasure, and the coin which he had found appeared to verify this contention. Whether the respondent actually claimed that he knew the exact location or whether, as the trial judge found, he merely gave them this impression, it is clear that the respondent was admitted to the partnership for this reason, and a formal agreement, dated August 25, 1961, was executed. By the terms of this agreement, each of the five appellants was to receive 16 per cent and the respondent 20 per cent of the treasure, if found, and it stated:

1. The Partnership shall commence on the date of this Agreement and shall continue for an indefinite period of time, to wit, until such time as the project

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is completely abandoned, or until such time as all parties agree in writing that the purposes of the partnership have been completed or that the project has been terminated or that the partnership is dissolved.

13. No partner shall, during the continuance of the partnership, either alone or with any other person, either directly or indirectly, be engaged or inter-rested in any other project, activity or business of the same kind as that carried on by this partnership, without the consent in writing of the other partners.

14. No partner shall, during the continuance of the partnership or for two (2) years after its determination, by any means, without the consent in writing of the others of them, divulge to any person not a member of the partnership any group secret, the location or site of any wreck or wrecks, or portion thereof, or contents of any such wreck or wrecks, or the source of information in relation to any of these, or any other special information which may come to his knowledge in the course of or by reason of the partnership.

On August 26, 1961, the six partners proceeded to the area to search for the treasure, and the appellants brought equipment not merely to search but also to bring up the treasure. They obviously expected to recover the coins that day, but only more cannons, cannon balls and shot were found. This was a great disappointment to the appellants who subsequently showed less enthusiasm for the search. As all of the partners were otherwise employed, they had agreed to search whenever they were free to do so, equipment was available, weather was suitable, and the trips could be financed. Relatively few dives were made for the treasure from August 27, 1961, until the winter of 1964-65.

In 1961, four more unsuccessful trips were made to the site, on which some of the appellants, but not all, accompanied the respondent. Several meetings were held in February 1962 at the respondent’s home to discuss plans for searching in the coming year. The respondent had prepared maps and sketches in which he proposed a grid system with which they might methodically search for the treasure, and these were discussed. This plan was never implemented, however, and al-

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though the evidence is inconclusive on this point, it appears that at most six trips were made during the summer and fall of 1962 on which the respondent was again accompanied by some of the appellants. The respondent had purchased a boat, the “Marilyn B II”, for himself in April 1962, but he had assured the appellants that this vessel was not going to be used to search for the treasure.

Early in 1963, conversations took place regarding the search, but it was then discovered that the “Orbit” had a broken keel and could not be used. The only dives that were made in 1963 involved the respondent and a stranger to the group, Archie Leahy, and these were few in number, occurring in September and October of that year. Leahy, by his own admission, was participating only as a representative of the “Orbit” group. However, these dives were made primarily to locate another wreck, with the searching for “Le Chameau” being an ancillary purpose only.

In June 1963, the respondent purchased a motor for the “Marilyn B II” from the appellant Goldberg and the appellant Dillon assisted him in obtaining a coupling for it. In July 1964, the respondent asked for Dillon’s assistance in getting the motor running. This was achieved after some time, and both parties agree that they discussed the possible use of this vessel in the “Chameau” search. The motor was not installed in the “Marilyn B II” until the spring of 1965.

The appellant Blundon and Leahy made numerous dives in the general area of Le Chameau Rock in the fall of 1964, but these were principally for other purposes again, the recovery of the treasure being ancillary. These dives were allegedly made on behalf of the group and all of the appellants knew of the activity, but no one notified the respondent or requested his assistance because, the appellants say, they knew that he had torn his diving suit that summer and would be unable to assist in the search. The equipment that had been aboard the “Orbit” was transferred to a boat belonging to Blundon for these searches.

On September 10, 1964, Dillon transferred the registration of the “Orbit” from the joint owner-

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ship of himself and three other persons to his name alone. Dillon could not remember having done so, but it is clear from the signed application that the change was effected.

In December 1964, the appellant Dillon and the respondent met and discussed calling a meeting of all the partners to make it clear that each member must become active or he would be removed from the partnership. This meeting was not called. The respondent then obtained for himself a treasure trove licence from the provincial government on February 3, 1965, and notified each of the appellants on February 8 by registered mail that he was terminating the partnership. This notice read:

I hereby notify you that as of February 1, 1965, I, Alex Storm of Louisbourg, terminate my partnership in the “Chameau Agreement” of the 25th of August A.D. 1961.

He formed another partnership with two other persons and commenced searching for the treasure in the spring of 1965.

After sending the notice of February 8, the respondent sent a further letter dated March 27, 1965, which read:

Louisbourg, March 27-1965.

Dear Mr. Dillon,

In addition to my letter to you of Feb. 8th 1965, in which I terminated my partnership in the “Chameau agreement” of the 25th of August A.D. 1961, I would like to inform you that as of the first day of February, A.D. 1965, I am the new, possibly the third, holder of the treasure trove, and have established the diving rights on the 1725 wrecked French frigate “Le Chameau”. Information concerning this matter can be obtained from the receiver of wrecks of district 19, Mr. Alfred David Perry, dept. of Northern Affairs & National Resources, p.o. Box 160, Louisbourg, N.S.

As you may be well aware, being a former holder of this treasure trove, this is an exclusive right, therefore, I cannot allow you, or any other party, to dive for or retrieve any artefacts or treasure trove from the by me claimed area. This area more particularly described as following: On Map 4375, “Guyon Island to Flint Island”, Nova Scotia. One (1) square nautical mile, projected perpendicular on the cove west of Cape

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Breton, thus taking in Porto Nova Isl. Chameau Rock, to the western half of Cape Breton and proceeding from there on to the West to what is known as Woody Point.

Yours very truly,
(sgd) Alex Storm

The appellants held a meeting after receiving the respondent’s notification, and appointed the appellant MacDonald as their spokesman in seeking the assistance of the Receiver of Wrecks, Mr. Perry, but the Receiver confirmed that the respondent had a valid licence from him and under the Treasure Trove Act. The appellant Mac-Donald also had two telephone conversations with the respondent, who reasserted his intentions. At this time, MacDonald told the respondent that he was still bound by the agreement and that the licence was worthless. MacDonald also sought legal advice as to the validity of the partnership agreement. As no satisfaction had been obtained on the visit to Mr. Perry, the appellant Dillon on two occasions visited Captain Darnborough, Receiver of Wrecks for a neighbouring area, to dispute the salvage rights granted to the respondent, but nothing was gained by these visits.

In May 1965, several of the appellants dived in the area in question, allegedly to test the validity of their claim. Artifacts recovered at that time were turned over to Mr. Perry, the Receiver of Wrecks, in June 1965. The appellant Blundon made at least five more dives at the site during the summer of 1965, and saw the respondent there. In addition, the appellants claim that they proceeded with plans to search for the treasure during late 1965 and early 1966.

The respondent dived on the Chameau site on 21 occasions during the summer of 1965, eventually finding the treasure on September 19. The discovery was kept silent, however, until April 4, 1966, and the appellants commenced this action on April 7 and obtained an injunction which prevented further searching in the area and directed the respondent to deliver the treasure to an officer of the Court.

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The learned trial judge found that while the respondent was undoubtedly the most active partner in the period up until 1965, and the appellants in general showed a decreasing enthusiasm for the search, nevertheless the search had not been “completely abandoned”, as set out in the agreement itself for the termination of the partnership.

Both the lack of a boat and the lack of confidence between the appellants and the respondent combined to prevent a continuing search. Although Nearing and Goldberg were only out with the searching parties once and MacDonald three times, Blundon and Dillon were out a few times each year, except for 1963.

He also held that while the agreement was not registered in accordance with s. 19(1) of the Partnerships’ Registration Act, R.S.N.S. 1954, c. 213, this did not prevent the action being brought as that Act applied only “in respect to any contract made … in connection with any of the purposes or objects of the partnership…” The present action was for an accounting in respect of the partnership agreement itself. But the trial judge then found the appellants guilty of laches from August 25, 1961, until the treasure was found, and awarded the respondent 75 per cent of the treasure. In particular, he held that the appellants should have taken some steps to protect their rights after receiving the respondent’s notice of February 8, 1965.

The Appeal Division agreed that the partnership remained in force after February 1965, but isolated the appellants’ actions from that date onwards and found that as they had taken no action to protect their rights under the agreement, they were guilty of laches and acquiescence and were not entitled to any portion of the treasure. Whether this conclusion is correct is the sole issue in this appeal.

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The chief elements in laches are acquiescence and change in position on the part of the defendant. The doctrine is not susceptible of precise definition but the statements in Lindsay Petroleum Co. v. Hurd[2] and Erlanger v. The New Sombrero Phosphate Co.[3] have had general acceptance. In Lindsay Petroleum (p.239) it is said:

Now the doctrine of laches in Courts of Equity is not an arbitrary or a technical doctrine. Where it would be practically unjust to give a remedy, either because the party has, by his conduct, done that which might fairly be regarded as equivalent to a waiver of it, or where by his conduct and neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of these cases, lapse of time and delay are most material. But in every case, if an argument against relief, which otherwise would be just, is founded upon mere delay, that delay of course not amounting to a bar by any statute of limitations, the validity of that defence must be tried upon principles substantially equitable. Two circumstances, always important in such cases, are, the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy.

In commenting on this statement, Lord Blackburn in Erlanger v. The New Sombrero Phosphate Co., added the following:

I have looked in vain for any authority which gives a more distinct and definite rule than this; and I think, from the nature of the inquiry, it must always be a question of more or less, depending on the degree of diligence which might reasonably be required, and the degree of change which has occurred, whether the balance of justice or injustice is in favour of granting the remedy or withholding it. The determination of such a question must largely depend on the turn of mind of those who have to decide, and must therefore be subject to uncertainty; but that, I think, is inherent in the nature of the inquiry.

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The doctrine of laches so stated has been approved and applied in this Court. Examples are Farrell v. Manchester[4], Harris v. Lindeborg[5]; Canada Trust Co. v. Lloyd[6]. In the present case the Court below has held against Blundon and his associates on four grounds. These are:

(a) that they could have insisted on their right to participate in the search for the treasure;

(b) that they could have given Storm an opportunity to continue the search with them;

(c) that they could have sought to require the respondent to perform under the partnership agreement or to have an accounting;

(d) that they could have sought an injunction.

I think courses (a) and (b) were completely impractical. Storm had secured the treasure trove licence and federal approval under the Canada Shipping Act while he was a partner and behind the backs of his partners. He informed them after the event and he advertised publicly in a local newspaper that he had sole rights to the area. The appellants interviewed the officials who had issued the new permits to Storm in place of those formerly held for the partnership. They were unsuccessful in their efforts to get them back. They told Storm that he was still bound by the partnership agreement. Storm had gone into partnership with two new partners. He was in clear breach of the Partnership Act and the partnership agreement. He was in competition with his partners in the very business for which the partnership was formed.

Both Courts have found that the original partnership was still subsisting at the time of the discovery. In this they were clearly right. It was a partnership which had been formed among individuals who could only give part of their time to the business of the partnership. All the individual members were in modest full-time occu-

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pation. Storm put himself in the position in which he found himself as a defendant. He was asserting that he had terminated the partnership, that he had sole rights of salvage, and that the appellants had no rights of salvage. They did not acquiesce in this position. In fact, they made at least four or five dives at the site during the summer of 1965 at a time when the respondent was there. There is nothing in their conduct from which Storm could have acquired any impression of acquiescence and he did not in any way change his position as a result of anything that the plaintiffs said or did.

As to point (c), that the appellants could have sought to require the respondent to perform under the partnership agreement or to have an accounting, I cannot see that any such action would lie. A partner cannot be compelled to perform under the partnership agreement. Performance of the original agreement in this case called for personal services. There could be no order of this kind, and as far as accounting is concerned, there was at this stage no subject-matter for an accounting.

Failure to apply for an injunction was held by both Courts to call for the application of the doctrine of laches. The Appeal Division said “The plaintiffs contend that such an action would have gained them nothing tangible at that time but at least it would have been conclusive to show that no abandonment of right was intended by them.” In my opinion, the other actions taken by the plaintiffs indicate that there was no abandonment or acquiescence. I do not think that they were under any duty to get into expensive litigation with a partner who was defying the partnership. At no time were these people saying to Storm or by their conduct indicating to Storm that they could or would no longer contribute and that he must go on without them. On the contrary, they were telling Storm that he was in breach of the partnership agreement and it was Storm who was asserting that he had the rights and that they had none.

Neither the trial judge nor the Appeal Division came to any conclusion as to the effect of the licence under the Treasure Trove Act or the permission given under Part VIII of the Canada Shipping Act, s. 501, by the Receiver of Wrecks.

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We were not called upon to come to any conclusion. The importance of these permits is that until the admission of Storm to the partnership, the appellants thought that they had exclusive rights of salvage. Thereafter they thought that these rights were held on behalf of the partnership, which included Storm. After Storm’s acquisition of these apparent rights in 1965, they made every effort to get them back but they had no success either with the provincial authority or the federal authority. But one thing is clear and that is that they never at any time accepted or acquiesced in Storm’s assertion that he had the sole rights of salvage.

Storm found the treasure on September 19, 1965. He had been diving for about two and a half months. He kept complete silence about the discovery until April 4, 1966. On April 7, 1966, the appellants commenced their action and obtained an injunction.

The ratio of the Court of Appeal is expressed in the following passage:

Considering the evidence herein, as well as the authorities cited, one is left with the conclusion, as was the trial Judge, that the plaintiffs had no confidence in the defendant’s ability to find the treasure and unfairly left him to do all the work, but came forward to claim a share when the treasure was discovered. There is little doubt that had the defendant’s efforts ended in loss instead of gain, nothing further would have been heard of them. This, together with the fact that nothing was done by them to effectively assert their rights under the partnership agreement, leads one to the finding that the plaintiffs, by their own laches, are prevented from obtaining the relief which they claim.

I cannot accept this view of the evidence. It seems to me to ignore the secrecy of the conduct of Storm in acquiring the licences; the assertions of the plaintiffs and their efforts to recover the licences; Storm’s formation of a new partnership with strangers, and, perhaps, the circumstances that existed when Storm was admitted to the partnership in 1961. He secured his admission to the partnership and a 20 per cent share as contrasted with a 16 per cent share for each of the other

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partners because of the production of the coin and his assertion of certainty that he knew where the treasure was.

The matter, in my opinion, went far beyond a “giving of an impression”. I say this because of his entry in a contemporary diary kept by him and produced very late in the trial which has been referred to throughout as the “Dutch diary”. His entry for July 23, 1961, reads as follows (his own translation): “All the money et cetera must for sure lay for 100% underneath or amongst the cannonballs.” This entry does not appear at all in Storm’s English diary, which he first produced at the trial as a contemporary document and which he was permitted to use throughout the trial to refresh his memory. In fact, the Dutch diary was the contemporary document and he said nothing about it until very late in the trial when it came out on cross‑examination. Then he said:

I kept my diary in Dutch constantly day by day and this is a straight translation from the Dutch… You can get a Dutchman in here and translate both word for word. This log book that’s right, that’s the same thing I got home, it’s like having two duplicate letters.

At this stage it became obvious that the English diary which the defendant had been using to refresh his memory during the four days he had been on the stand had not been made contemporaneously with the actual events. But he was still asserting that the English diary was a word-for-word translation.

When Storm produced the Dutch diary it soon became evident that the English diary was not even a word-for-word translation but a document which he had produced for the purpose of the trial. The English diary does not contain the entry in the Dutch diary for July 23, 1961, to the effect that he was 100 per cent sure where the treasure was. There are many other discrepancies between the two diaries—all to the advantage of Storm in support of his evidence.

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The entry in the Dutch diary for July 23, 1961, is very significant in this case. It explains how he secured admission to the partnership with a participation of 20 per cent as contrasted with 16 per cent for each of the other partners and why the expedition of August 26, 1961, had every appearance of being not for the purpose of discovery but of raising the treasure.

Counsel for the appellants does not question the proposition stated by the Appeal Division that where a partner stands by without protest and lets another do all the work and spend all the money to bring the enterprise to a successful conclusion, he will be denied recovery. But he does question its application to the facts of this case. Briefly, his submission is that this is not a case of “standing by” but of active exclusion by one partner who was asserting that the partnership had been terminated and that he had sole rights under the permits. As to the permits and their effect, he had some degree of support from the federal and provincial officers who issued them. But the legal position is clear. Whatever their effect may have been, he held for the benefit of all partners (including himself) in a subsisting partnership. Nothing that the excluded partners did or said could have led him to believe that they acquiesced in his separate search or that they abandoned their rights. In my opinion, the Appeal Division was in error in founding its judgment on Cowell v. Watts[7] and Clegg v. Edmondson[8]. These and many similar cases of “standing by” have no application to the facts of this case.

Counsel for the appellant sought the following order:

1. That the Courts below erred in finding that the appellants were guilty of laches.

2. That the Appeal Division erred in holding that having made a finding of laches against the appellants, the learned trial judge was precluded from doing what he felt was just as between the parties.

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It is apparent that what counsel is seeking is the restoration of the judgment at trial and he so stated. I have also stated in these reasons that, in my opinion, there was error in finding that the appellants were guilty of laches. The action was substantially one for an accounting among partners. The learned trial judge divided the proceeds of this discovery on a basis that he thought was just and equitable as between the two sides.

I would therefore allow the appeal and restore the division made by the learned trial judge—75 per cent to Storm and 25 per cent to the appellants. I would also restore his order as to costs. The appellants are entitled to their costs, including the costs of the motion to quash, both here and in the Appeal Division.

Appeal allowed and judgment at trial restored, with costs.

Solicitor for the plaintiffs, appellants: Donald A. Kerr, Halifax.

Solicitor for the defendant, respondent: John H. Dickey, Halifax.