J.D.F. Builders Ltd. v. Albert Pearl (Management) Ltd., [1975] 2 SCR 846

Supreme Court of Canada

J.D.F. Builders Ltd. v. Albert Pearl (Management) Ltd., [1975] 2 S.C.R. 846

Date: 1974-10-01

J.D.F. Builders Limited (Plaintiff) Appellant and Cross-Respondent;

and

Albert Pearl (Management) Ltd. (Defendants) Respondent and Cross-Appellant;

and

John D. Fienberg Cross-Respondent.

1974: January 25, 28; 1974: October 1.

Present: Laskin C.J. and Martland, Judson, Ritchie and Spence JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO.

Bills of Exchange—Promissory note—Execution—Subscription by controlling shareholder of corporation under stamped name of corporation—Whether controlling shareholder bound as an individual—Consideration—Note covering debt of promisor and debt of another—Liability of promisor.

Albert Pearl (Management) Limited claimed payment on a promissory note, dated March 1, 1967, for $151,982, the original of which was subscribed “J.D.F. Builders Ltd. ‘J.D. Fienberg’”. The letters and words “J.D.F. Builders Ltd.” appeared in ink stamping above the handwritten signature “J.D. Fienberg”. The promissory note had been given to cover indebtedness of J.D.F. Builders Limited and J.D. Fienberg to Pearl totalling $151,982, all of which was long overdue and only partially secured. The writ sought payment of the principal of the note with interest as against both the defendants J.D.F. Builders Limited and John D. Fienberg. The trial judge made findings of fact expressly based on credibility that the defendant had signed the note, despite a complete denial in Fienberg’s defence of any knowledge as to the making of the note, and took the view that the note was the joint note of both defendants. Judgment at trial was for the full amount plus interest against both defendants. The Court of Appeal concluded that Fienberg was not personally liable and affirmed the judgment against J.D.F. Builders Limited but in a reduced amount, concluding that there was no consideration for part of the debt vizt. payments made by Pearl to J.D.F. Holdings Limited for the J.D. Fienberg Children’s Trusts.

Held: The appeal should be dismissed and the cross-appeal should be allowed in part.

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The method of execution of the note, and the evidence of Albert Pearl lead to the conclusion of the Court of Appeal that the note did not evidence the personal debt of Fienberg. The authority of Fienberg to bind the company was clear as execution of this note was in the ordinary course of business of the corporation and the rule in Eisenberg v. Bank of Nova Scotia et al., [1965] S.C.R. 681 applied so the Court of Appeal correctly bound J.D.F. Builders Ltd. liable on the note. The Court of Appeal erred in so far as it reduced the amount thereof for reason of want of consideration. So long as consideration flowed from the promissee of the note it did not matter that the consideration so far as it was in reference to one of the debtors did not flow to the other debtor, in this case the promisor J.D.F. Builders Limited. The relationship between this personal debtor and this company debtor was such as would supply consideration for the portion of the note representing the payments made for the benefit of the Children’s Trusts.

Eisenberg v. Bank of Nova Scotia et al., [1965] S.C.R. 681 applied; Royal British Bank v. Turquand (1856), 6 El. & Bl. 327; Westcott v. Luther, [1933] S.C.R. 251; Bonior v. A. Siery Limited, [1968] N.Z.L.R. 254; Oliver v. Davis et al., [1949] 2 K.B. 727; Hutchison v. The Royal Institution for the Advancement of Learning, [1932] S.C.R. 57; Crears v. Hunter (1887), 19 Q.B.D. 341 referred to.

APPEAL and CROSS-APPEAL from a judgment of the Court of Appeal[1] allowing in part an appeal from a judgment of Donohue J. at trial[2]. Appeal dismissed, cross-appeal allowed in part.

Melville O’Donohue, Q.C., and Alan R. Purser, for the Appellant and Cross-Respondents.

Fred M. Catzman, Q.C., and Marvin A. Catzman, for the Respondent and Cross-Appellant.

The judgment of the Court was delivered by

SPENCE J.—This is an appeal by J.D.F. Builders Limited from the judgment of the Court of Appeal for Ontario pronounced on December 14, 1972, whereby that Court allowed, in part, the appeal from the judgment of Donohue J.

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pronounced on September 9, 1971. By the latter, Donohue J. had allowed judgment against both the defendants J.D.F. Builders Limited and John D. Fienberg in the sum of $164,777.59 with interest.

The judgment of the Court of Appeal directed the dismissal without costs of the action as against the defendant John D. Fienberg and reduced the judgment against the defendant J.D.F. Builders Limited to the sum of $151,888.46 plus interest at seven per cent from December 12, 1972. This was the calculation resulting from the allowance of judgment for $84,500 with interest from the date of the promissory note to which reference will be made hereafter.

Albert Pearl (Management) Limited is a private company of which the sole beneficial shareholder is Albert Pearl. J.D.F. Builders Limited is another private company, the shareholders of which are three more private companies and the shareholders, in turn, of those three companies are the defendant John D. Fienberg and John D. Fienberg’s Children’s Trusts. There were other single shareholders of both J.D.F. Builders Limited and the three other private companies but they were all mere nominees of the defendant John D. Fienberg and had no beneficial interest.

Albert Pearl was a chartered accountant carrying on business in the City of Toronto and he acted as auditor for J.D.F. Builders Limited and the three other companies. He was also the trustee of the trusts for the children of the defendant John D. Fienberg.

In the year 1956, Albert Pearl gave up his public accounting practice and began to devote the bulk of his time to the business affairs of John D. Fienberg and his network of companies. He became owner of a considerable major share in the capital of two of those companies Anlouis Investments Limited and Key Investments Limited and became, moreover, the Chief Executive Officer of those companies.

Prior to 1961, J.D.F. Builders Limited, who were in the construction business and particularly the construction of homes, entered into what would amount to a four-way partnership with three other building corporations and in 1961 this partnership was turned into a public

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company known as Consolidated Building Corporation Limited. Its capitalization of one million shares was divided equally among four original partner companies of whom the defendant J.D.F. Builders Limited was one. The value of the shares of Consolidated Building Corporation escalated astoundingly in the period from 1960 through to about 1964.

On December 9, 1960, the plaintiff Albert Pearl (Management) Limited entered into an agreement with one of the Fienberg companies, J.D.F. Holdings Limited, whereby Albert Pearl (Management) Limited agreed to sell and J.D.F. Holdings Limited to purchase the former’s shares in both Anlouis Investments Limited and Key Investments Limited for the total of $132,333 to be paid for $5,333 in cash and the balance in yearly instalments of at least $5,000 without interest. In short, the defendant J.D. Fienberg was buying out Albert Pearl’s interest, which he had put into his company Albert Pearl (Management) Limited, in both Anlouis and Key. Payments were made on this indebtedness and those payments are all set out in the statement produced at trial and marked Exhibit 6. That statement shows a balance due to Albert Pearl (Management) Limited on December 20, 1966, of $4,500.

After the agreement aforesaid for the purchase of Albert Pearl’s interest in Anlouis and Key, Albert Pearl and John D. Fienberg agreed that Albert Pearl should use the moneys which he received for two purposes: Firstly, to purchase Consolidated Building Corporation’s shares both common and preferred and share warrants for and on account of J.D.F. Builders Limited, and, secondly, to make payments into John D. Fienberg’s Children’s Trusts. Albert Pearl testified that Fienberg’s purpose as explained to him, Pearl, was to reduce Fienberg’s estate and increase the estate of his children.

Toward the end of the year 1966, Pearl and his wholly-owned company Albert Pearl (Management) Limited found they were in the position of having expended a very large sum of money in carrying out these two purposes and were most insufficiently secured having in hand merely a certain number of shares of Consolidated Building Corporation, part of those

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purchased from the various brokers for and on account of J.D.F. Builders Limited. Albert Pearl also discovered, in addition to those purchases of Consolidated Building Corporation shares which he had been carrying out upon the instructions of John D. Fienberg, that John D. Fienberg personally and in the names of various other persons, had been carrying on tremendous purchases in the same Building Corporation’s shares all for J.D.F. Builders Limited so that J.D.F. Builders Limited had become indebted to a bank for a very large sum of money and had had to pledge all the shares in the said Consolidated Building which it had acquired from both Albert Pearl (Management) Limited in the fashion aforesaid and from these other transactions.

In the meantime, it would appear that the fall in the value of the Consolidated Building Corporation shares had been just as startling as its rise. Albert Pearl became very concerned and had a series of discussions with John D. Fienberg and in February 1967, during these discussions, he prepared a statement showing the current state of the account between him, on one hand, and J.D.F. Builders Limited and John D. Fienberg, on the other. This statement was produced at trial and marked Exhibit 13. I set out that statement in full:

ROBERT PEARL

ACCOUNT WITH J.D.F. BUILDERS LIMITED.

	Advance	*Interest
Dec. 30, 1960—J.D.F. Children	$          5,000.00	$          2,096.00
Dec. 12, 1961—J.D.F. Children	5,000.00	1,706.00
Dec. 28, 1961—Thomson & McKinnon	20,000.00	7,031.00
Jan. 16, 1962—Thomson & McKinnon	5,000.00	1,740.00
Jun. 1, 1962—Thomson & McKinnon	5,000.00	1,598.00
Jun. 4, 1962—R.H. Scarlett & Co. Ltd.	3,000.00	958.00
Jun. 27, 1962—Thomson & McKinnon	2,500.00	788.00
July 3, 1962—Thomson & McKinnon	2,000.00	617.00
Dec. 11, 1962—J.D.F. Children	5,000.00	1,327.00
Jan. 28, 1963—J.D.F.	1,470.00	380.00
May 14, 1963—Merrill Lynch Pierce Fenner & Smith, Inc.	14,000.00	3,483.00

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	Advance	*Interest
July 24, 1963—Waite, Reid & Co. Ltd.	13,000.00	3,050.00
Aug. 14, 1963—Waite, Reid & Co. Ltd.	14,000.00	3,225.00
Dec. 10, 1963—J.D.F. Children	5,000.00	973.00
Dec. 14, 1964—J.D.F. Children	5,000.00	630.00
Jan. 16, 1965—Waite, Reid & Co. Ltd.	2,000.00	209.00
Dec. 9, 1965—J.D.F. Children	5,000.00	318.00
Jun. 21, 1966—Draper Dobie & Co. Ltd.	2,000.00	207.00
Dec. 20, 1966—J.D.F. Children	5,000.00	9.00
Feb. 12, 1962—Thomson & McKinnon	2,000.00	667.00
	$     120,970.00	$       31,012.00
	31,012.00
TOTAL	$     151,982.00

*Interest at 6% compounded yearly to March 1st, 1967.

It will be noted that it ends with a total figure of $151,982 which was the amount of the promissory note to which reference will be made hereafter.

Exhibit 13 was presented by Albert Pearl to John D. Fienberg. Albert Pearl testified:

A. Well, I discussed with Mr. Fienberg the possibility and the desirability of obtaining a note.

Q. Yes.

A. And to give specific tangibility to the indebtedness that was owing to Albert Pearl.

Albert Pearl testified that John D. Fienberg asked him to leave Exhibit 13 with him so that he could check it and John D. Fienberg undertook to contact him later and state if it was in order to execute the note. He further testified that upon receiving word from John D. Fienberg’s secretary that he had checked and approved Ex. 13 and would execute the note, he himself took the form of promissory note produced at trial as Ex. 1, with a typewriter filled in the blanks as they appeared, and imprinted a stamp which he had in his office reading “J.D.F. Builders Limited” and then placed the note in a folder, attended Fienberg’s office and presented the folder with the note in it to John D. Fienberg. He continued his testimony that some short time later, upon receiving another telephone call from John D. Fienberg’s secretary,

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he reattended the latter’s office and was handed the folder with the note executed as it was presented at trial. That note, Ex. 1, reads as follows:

Front & Yonge Sts. Br.

            39 Yonge St.                 MARCH 1, 1967—$151,982.00

1-372 TORONTO 1, ONT.

On demand WE promise to pay to the order of . . . . . ALBERT PEARL. . . . . . the sum of ONE HUNDRED AND FIFTY-ONE THOUSAND, NINE HUNDRED & EIGHTY-TWO DOLLARS with interest payable monthly at the rate of 7 per cent per annum up to and after maturity and until actual payment at the Bank of Montreal here. Value received.

                                                                                                   J.D.F. Builders Ltd.

                                                                                                         J.D. Fienberg

The letters and words “J.D.F. Builders Ltd.” appear in ink stamping on the original and the signature “J.D. Fienberg” is in handwriting.

The promissory note, Ex. 1, was not paid and Albert Pearl (Management) Limited, by writ issued May 13, 1968, claimed payment thereof with interest as against both the defendants J.D.F. Builders Limited and John D. Fienberg.

John D. Fienberg’s defence was based upon a denial of his signature as it appeared on Ex. 1 and a complete denial of any knowledge as to the making of the note.

The learned trial judge, upon hearing all of the evidence, made findings of fact expressly based on credibility to the effect that the defendant John D. Fienberg had signed the note and also had signed a document, being a letter to Albert Pearl dated November 6, 1961, to which specific reference shall be made hereafter.

It was the learned trial judge’s view that the promissory note was the joint note of both defendants and he gave judgment for the full amount plus interest against both defendants.

Arnup J.A., in the judgment for the Court of Appeal, said:

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Having regard to the authorities, to the relevant sections of the Bills of Exchange Act, and to the surrounding circumstances I have set out, we are unanimously of the opinion that this promissory note is to be regarded as the note of the corporation.

We have all expressed, in the course of the argument, our grave doubts as to how a single signature could be both the signature on behalf of the corporation and the signature of the individual himself, as a maker of the note, thereby involving him in personal liability. We have reached the conclusion that Mr. Fienberg personally is not a maker of the note and that accordingly the judgment against him cannot stand.

The Court of Appeal affirmed the judgment upon the note against J.D.F. Builders Limited.

J.D.F. Builders Limited appealed to this Court from the judgment of the Court of Appeal for Ontario and submitted that the judgment against that defendant be set aside and the action be dismissed or, in the alternative, that the action be dismissed against it and that judgment be given against the defendant John D. Fienberg for $36,470, the amount of the payments made by the plaintiff Albert Pearl (Management) Limited to the credit of the Fienberg Children’s Trusts.

It may be noted that pleadings and defence were filed by separate solicitors on the part of both defendants and that different counsel represented both defendants at trial but that in the Court of Appeal one counsel who had previously appeared for the defendant J.D.F. Builders Limited appeared for both defendants and in this Court the same counsel again appeared for both defendants.

The plaintiff Albert Pearl (Management) Limited cross-appealed requesting that the judgment at trial be restored or, in the alternative, that it be granted judgment against the defendant John D. Fienberg or, in the further alternative, that it be given judgment against the defendant John D. Fienberg for the full amount of its claim. At the commencement of his argument upon the cross-appeal, counsel for Albert Pearl (Management) Limited announced that he intended only to urge that the judgment be awarded for the full amount against the defendant, here appellant, J.D.F. Builders Limited or, to put it short-

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ly, he was content with the judgment of the Court of Appeal freeing the defendant John D. Fienberg from liability but asked to have judgment against the appellant J.D.F. Builders Limited not for the limited amount granted by the Court of Appeal but at trial for the full amount of the note plus interest. The Court of Appeal for Ontario had reduced the amount of the judgment against the defendant J.D.F. Builders Limited to the amount of the payments by the plaintiff Albert Pearl (Management) Limited for purchase of shares for and on account of the defendant J.D.F. Builders Limited, and had excluded from the judgment the amount of the payments made by the said plaintiff to J.D.F. Holdings Limited for the J.D. Fienberg Children’s Trusts being of the opinion that there was no consideration for that part of the debt evidenced by the promissory note. It will therefore be seen that this Court faces two problems only: Firstly, was the judgment of the Court of Appeal for Ontario correct in holding that the promissory note evidenced a debt of the defendant, here appellant, J.D.F. Builders Limited, and, secondly, if so, is the plaintiff, here respondent, Albert Pearl (Management) Limited entitled to recover the full face value of the note plus interest or only the part represented by consideration flowing from J.D.F. Builders Limited.

With respect, I have come to the conclusion that the Court of Appeal was quite correct in its view that that promissory note did not evidence the personal debt of the defendant John D. Fienberg. I make that statement not only by reference to the method of execution of the document, i.e., that the said Fienberg’s signature appeared once only and that directly beneath the stamped signature of the appellant J.D.F. Builders Limited but, having reviewed the evidence of Albert Pearl, I have come to the conclusion that it was his intention and also the intention of the defendant John D. Fienberg that the note should only pledge the credit of the appellant J.D.F. Builders Limited. As Arnup J.A. pointed out in his reasons for judgment, the documents would seem to bear out that opinion. Exhibit 6, the document drawn up about September 1966 to show the receipts from Fienberg on account of the purchase price of Pearl’s

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share in Anlouis and Key, and the payments made both to the various brokers for the purchase of Consolidated shares on account of J.D.F. Holdings Limited and the payments made to the credit of the Children’s Trusts is headed “Albert Pearl (Management) Limited and J.D.F. Holdings Limited”. Exhibit 13, the statement submitted by Albert Pearl to John D. Fienberg upon which the promissory note was based is headed

ALBERT PEARL

        Account with

              J.D.F. BUILDERS LIMITED

In his evidence, Mr. Pearl referred to the presentation of that Exhibit 13 to Mr. Fienberg and after having stated it was to give specific tangibility to the indebtedness that was owing to Albert Pearl identified the promissory note in these words:

This document is a note drawn by J.D.F. Builders Limited to the order of Albert Pearl in the amount of $151,982.00 with interest payable monthly at the rate of 7% per annum up to and after maturity and until actual payment and so on.

to which counsel made the enlightening reply:

Q. I don’t want to undercut my case by saying it was drawn by J.D.F. Builders. Will you instead simply tell his lordship what signature appears on it?

A. The signature appearing here is that of J.D. Fienberg.

Shortly before this, when questioned by his counsel as to the presentation of this account, Ex. 13, Albert Pearl was asked:

Q. Well, was there any question about the payment there and then?

A. There was no possibility of payment at that time because, as I will explain, we were in pretty dire financial circumstances.

(The emphasis is my own but I think it indicative of the fact that Mr. Pearl was looking to an acknowledgment of debt from the corporate entity and not from Mr. Fienberg personally.)

Counsel for the respondent Albert Pearl (Management) Limited takes the position that John D. Fienberg had not only an ostensible authority but a real authority to execute the

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promissory note for and on behalf of the appellant J.D.F. Builders Limited. I refer firstly to ostensible authority. A clearer case of ostensible authority could not be imagined. John D. Fienberg held beneficially all the shares in J.D.F. Builders Limited although those shares were carried in a variety of names including Anlouis Investments Limited and Key Investments Limited. It must be remembered that years before the end any interest which the plaintiff company or its sole owner Albert Pearl held in either of the latter companies had been sold to Fienberg or, perhaps, one should more accurately state, to J.D.F. Holdings Limited, another wholly-owned Fienberg company. John D. Fienberg had the sole corporate management of J.D.F. Builders Limited and indeed all of the companies. It was said in testimony that he had always been president of them all. No one as familiar with the operation of these various companies as Albert Pearl was could ever doubt that what John D. Fienberg said in reference to them or any of them was law and would have to be carried out. This would seem to be almost a textbook case for the application of the indoor management rule exemplified in Royal British Bank v. Turquand[3].

I am of the opinion, however, that one need not turn to that well-established rule as I think on all of the evidence and documents John D. Fienberg had a real authority to bind the corporation by his signature. In addition to the stock holding I have outlined, it must be remembered that J.D.F. Builders Limited was in the business of constructing buildings and that in the carrying out of that business it had entered into a partnership and later taken a quarter of the shares in a corporation carrying on that same business and that the purchase of the shares for and on account of J.D.F. Builders Limited was the purchasing of shares in that Consolidated Building Corporation, so that the transactions were in the ordinary business of J.D.F. Builders Limited.

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It must also be remembered that Albert Pearl acting as accountant and auditor for J.D.F. Builders Limited and all of the other companies during the relevant period, did not have anything to do with the preparation of corporate documents including banking documents. Amongst those corporate documents were the following:

Minutes of a Meeting of the Directors of the Company held August 15, 1961, at which the following resolution was moved and carried:

RESOLUTION

The Chairman then presented to the meeting the resolution wherein this Company gave to John D. Fienberg, President of the Company, full authority to transfer shares of stock in Consolidated Building Corporation Limited, to endorse all stock certificates without the requirement of a seal and to do whatever was required in connection with shares of Consolidated Building Corporation Limited in the interest of this Company without any further resolution from this Company.

ON MOTION, duly moved and seconded and unanimously carried, the Board of Directors approved of the resolution and requested that a copy of same become part of these minutes and precede the first page of the minutes of this meeting.

The minutes of that meeting were signed by the President John D. Fienberg and the Secretary.

I have already referred to the minutes of the meeting of the directors on December 1, 1961, which made specific reference to Mr. Pearl and which included this statement:

CONSOLIDATED BUILDING CORPORATION LIMITED STOCK

This company understands and agrees that any purchase or sale made by Albert Pearl, upon the instructions of this company, in regard to any Consolidated Building Corporation Limited stock (common, warrants and preferred) is to be held by the said Albert Pearl in trust for the benefit or at the risk of this

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company, that is J.D.F. Builders Limited.

Less than a month before, on November 6, 1961, J.D.F. Builders Limited, over the signature of Mr. Fienberg, had addressed a letter to Mr. Pearl which read as follows:

Mr. Albert Pearl,

99 Avenue Road,

Toronto 5, Ontario.

Dear Mr. Pearl:

It is hereby agreed and understood that any purchase and/or sale made by you acting upon our instructions, of any Consolidated Building Corporation Limited security (viz: common, warrants and preferred shares) is to be held in trust for and for the risk of J.D.F. Builders Limited.

                                                                                                            Yours truly,

                                                                                                            J.D.F. BUILDERS LIMITED

                                                                                                               J.D. Fienberg

                                                                                                               J.D. Fienberg

On the very day following that which appears on the promissory note, i.e., on March 2, 1967, the minutes of a directors’ meeting of J.D.F. Builders Limited read, in part, as follows:

CONSOLIDATED BUILDING CORPORATION LIMITED STOCK

The following shares were held in trust by Albert Pearl in an account or accounts for the benefit of or at the risk of J.D.F. Builders Limited. This company now authorizes that these shares be transferred to the account of J.D.F. Builders Limited. The shares to be so transferred are as follows:

a) 20,600 Consolidated Building Corporation Limited common shares;

b) 19,029 Consolidated Building Corporation Limited warrants;

c) 500 Consolidated Building Corporation Limited preferred shares.

The meeting unanimously approved the completion of this transfer.

The following memorandum was then read and ordered inserted into the minutes:

“We, the Directors of the above-named company, consent to this meeting being held at the above time

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and place and we do hereby waive notice of the meeting and consent to the transaction of such business as may now come before it, as testified by our signatures hereto.”

It is true that the respondent has been unable to adduce any evidence in relation to a formal resolution of the directors authorizing the execution of the note. I am, however, of the opinion that such execution was, in the ordinary course of business of the corporation. It was a debt in so far as the portion due to purchase of Consolidated Building Corporation stock is concerned of J.D.F. Builders and it was simply an acknowledgment of that debt.

This Court has lately considered the necessity for corporate documentation in these circumstances of wholly-owned corporate entities.

In Eisenberg v. Bank of Nova Scotia et al.[4], I said on behalf of the Court at p. 694:

Therefore, upon a consideration of the above authorities, I have been led to the conclusion that a corporation, when a matter is intra vires of the corporation, cannot be heard to deny a transaction to which all the shareholders have given their assent even when such assent be given in an informal manner or by conduct distinguished from a formal resolution at a duly convened meeting.

I am of the opinion that the Eisenberg case applies exactly to the present circumstances. I would, therefore, agree with the judgment given at trial and affirmed on appeal holding that J.D.F. Builders Limited was bound by the promissory note and that judgment should go against that company.

The Court of Appeal for Ontario, however, as I have said, reduced that judgment so that it covered only the payment by Albert Pearl (Management) Limited for purchases of shares of Consolidated Building Corporation for and on account of the appellant J.D.F. Builders Lim-

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ited. In concluding that the amount of the judgment was so limited, Arnup J.A. said:

As I have indicated, the amount of the promissory note is made up of the two categories of indebtedness, one being the indebtedness of Fienberg personally, and the other that of the corporation. It is argued by the appellant that judgment cannot be given against the corporation for the indebtedness of Fienberg to Pearl because that portion of the promissory note is not supported by consideration moving from Pearl to the corporation as maker of the note. Authority was cited for the proposition that a partial failure of consideration or partial absence of consideration may be a defence pro tanto between the immediate parties to a bill of exchange, and this proposition is not challenged by Mr. Catzman.

Arnup J.A. accepted the argument that so far as the promissory note covered payments made by the respondent Albert Pearl (Management) Limited on the instructions of the cross‑respondent John D. Fienberg to the John D. Fienberg Children’s Trusts, there was no consideration. With respect, I am of the opinion that this was in error. In the first place, under s. 54 of the Bills of Exchange Act, R.S.C. 1970, c. B-5, there is a presumption of consideration and the onus of proving the lack of consideration is upon the drawer of the bill: Westcott v. Luther[5], per Lamont J. at p. 256. Again, by the provisions of s. 53(1)(b) an antecedent debt or liability may constitute valuable consideration and there was in the present case an antecedent liability both as to the portion of the note covering the stock transactions for J.D.F. Builders Limited and payments made upon John D. Fienberg’s instructions for the benefit of the children’s trusts.

Finally, Falconbridge, Banking and Bills of Exchange, (7th. ed. 1969) at p. 605, said:

In Currie v. Misa (1875), L.R. 10 Ex. 153, the Court of Exchequer Chamber said: “A valuable consideration, in the sense of the law, may consist either in some right, interest, profit, or benefit accruing to the one party, or some forbearance, detriment, loss, or

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responsibility, given, suffered, or undertaken by the other.” The second branch of this judicial description of consideration is more important than the first. It does not matter whether the party making the promise receives any apparent benefit; it is sufficient that the promisee undertakes some burden or gives up something which in contemplation of law may be of value, and that the promisor accepts what the promisee undertakes or gives up as the inducement or price for the promise. The consideration must move from the promisee, that is, the promisee must suffer some detriment; but the consideration need not move to the promisor, that is, the apparent benefit, if any, need not be enjoyed by the promisor, and may consist in forbearance or credit given by the promisee to a third person, as is usually so in the case of a guarantee.

So that, so long as consideration flowed from Albert Pearl (Management) it did not matter that the consideration in so far as it was in reference to John D. Fienberg did not flow to J.D.F. Builders Limited.

While an antecedent debt or liability of a third party, in this case John D. Fienberg in vacuo, cannot form valuable consideration unless there is some connection between the receipt of the bill and the debt, such connection may establish consideration: Oliver v. Davis et al.[6], per Evershed M.R. at 735:

This at any rate is plain—that if the antecedent debt or liability of a third party is to be relied upon as supplying “valuable consideration for a bill”, there must at least be some relationship between the receipt of the bill and the antecedent debt or liability.

That case was considered and commented upon by Speight J. in Bonior v. A. Siery Limited[7], where circumstances closely resembling the present one occurred.

Upon the findings of the jury, the facts may be stated as follows.

A. Siery owed one Bonior £1,500. About 80 per cent of that amount had been obtained by

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Siery for the purpose of establishing a transport business. Bonior desired payment, Siery promised payment but failed to make it and then Bonior went to Siery’s place of business and demanded payment with the result that Siery drew a cheque upon the defendant limited company for £1,500 and delivered it to Bonior. The limited company had been formed to take over the cartage business and A. Siery was the sole shareholder of A. Siery Limited. Speight J. discussed, inter alia, Oliver v. Davis[8], and concluded that there was such a connection as would give consideration for the bill. At p. 260, he said:

It is apparent therefore that Siery and Cave treated the company and its assets as being Siery’s and subject to Bank difficulties, he was entitled to apply the assets as he liked, and draw for his own personal use whatever the account would stand, and the accountant would debit the books in whatever way was appropriate.

In my view, that statement would apply exactly to the relationship between John D. Fienberg and J.D.F. Builders Limited in the present case and I am of the opinion that there was such a connection between these two as would supply consideration for the portion of the note representing the payments made by the respondent Albert Pearl (Management) Limited for the benefit of the Children’s Trusts.

The consideration of course was the forbearance of Albert Pearl (Management) Limited. Although the source of the funds which first Albert Pearl and later Albert Pearl (Management) Limited used to purchase the shares of Consolidated Building Corporation for the benefit of J.D.F. Builders Limited and to apply to the credit of the Children’s Trusts was, of course, money received from John D. Fienberg, that money was for instalments on the purchase price of Albert Pearl’s interest in Anlouis Investments Limited and Key Investments Limited. In short, they were all moneys which were owned by Albert Pearl and Albert Pearl (Management) Limited, and the expenditure of those

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moneys for those two purposes created debts by J.D.F. Builders Limited and John D. Fienberg. As I have said, those debts had accumulated from the year 1960 and in March of 1967 totalled the amount of the note, i.e., $151,982, all of which was long overdue and which was but lightly secured. It was realized by both Albert Pearl and John D. Fienberg that payment immediately of the debt in full or even in part could not be considered.

I am of the opinion that Albert Pearl properly described the purpose of the note when he used the words which I have already recited, “to give specific tangibility to the indebtedness that was owing to Albert Pearl”, or to put it otherwise, to fix the amount of the debt in expectation of its final repayment. That was done on March 2, 1967. No claim for payment was made until the writ in this action was issued on May 13, 1968, after a demand for payment on April 25, 1968. There was, therefore, forbearance running from Albert Pearl (Management) Limited to both J.D.F. Builders Limited and John D. Fienberg in so far as the antecedent debts of them both were concerned.

It is interesting to note that according to the account between Albert Pearl and John D. Fienberg for the payment by instalments of Pearl’s shares in Anlouis and Key, there was a balance of $4,500 owing, that is, the final item shown on Ex. 6.

On December 29, 1967, Albert Pearl (Management) Limited wrote to J.D.F. Holdings Limited, “Attention: Mr. J.D. Fienberg” as follows:

An agreement between our two companies, dated Dec. 6, 1960, stipulates a minimum annual payment of $5,000.00 to Albert Pearl (Management) Limited. We have not, to date, received the 1967 payment for the presently outstanding balance of $4,500.00. Payment of this amount is hereby requested.

So there was a demand for payment, that is, no forbearance, as to the $4,500 amount as contrasted with no demand for payment of the value of the amount of the note until that demand recited above.

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This Court in Hutchison v. The Royal Institution for the Advancement of Learning[9], adopted Crears v. Hunter[10], and Newcombe J. at p. 67 quoted from Lopes L.J. at p. 346 of Crears v. Hunter:

In this case the question is whether there was evidence of a consideration for the making of this note by the defendant. The law appears to be that a promise to forbear is a good consideration, but also that actual forbearance at the request, express or implied, of the defendant would be a good consideration.

I have concluded that the conference between Albert Pearl and John D. Fienberg in March 1967 amounted to a request for forbearance on the part of both the antecedent debtors and that upon the giving of the promissory note there was actual forbearance in favour of both antecedent debtors lasting more than one year. It is true that evidence concerning consideration is slim but as counsel for the appellant points out the defence of lack of consideration was not raised in the pleadings and, therefore, one would not expect the matter to have been canvassed extensively in the evidence.

I have, therefore, concluded that there was good consideration for both the portion of the promissory note which represented the stock purchases for J.D.F. Builders Limited and the payments in furtherance of the Children’s Trusts.

Moreover, when the discussions took place between Albert Pearl and John D. Fienberg leading up to the signing of the note the latter was speaking for himself, and also as president of the appellant company. Both of Albert Pearl’s debtors were represented. In the result, he received, in satisfaction of their debts, a note from one debtor, the company, for the full amount of both debts. By accepting the company’s note in satisfaction of the debt of John D. Fienberg, Albert Pearl incurred a detriment. It is

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true that the note was not received as absolute payment of John D. Fienberg’s debt, but it was a conditional payment of that debt. Such debt would only revive if the note was not realized. There was, therefore, consideration for the note moving from Albert Pearl within the requirement of s. 53(1)(a) of the Bills of Exchange Act.

I have come to the conclusion that the appeal should be dismissed with costs and that the cross-appeal should be allowed to permit judgment to go against J.D.F. Builders Limited for the full amount of the note, $151,982, plus interest at seven per cent from March 1, 1967, until payment. The cross-appellant Albert Pearl (Management) Limited should have its costs in all courts against the appellant and cross-respondent J.D.F. Builders Limited.

I would not disturb the order of the Court of Appeal for Ontario as to the costs payable to John D. Fienberg and I would dismiss the cross-appeal in this Court against the said John D. Fienberg without costs.

Appeal dismissed with costs, cross appeal allowed in part with costs, cross appeal against Fienberg dismissed without costs.

Solicitors for the appellant: Gardiner, Roberts, Toronto.

Solicitors for the respondent: Catzman & Wahl, Toronto.