Eastern Trust Co. v. Royal Bank of Canada, [1950] CTC 216

PARKER, J.:—Charles E. Lewis Ltd. (hereinafter called the "Company’’), a Company carrying on a large manufacturing business in the Town of Truro, executed and delivered to the Royal Bank of Canada (hereinafter called the ‘‘Bank’’) a document endorsed as a "‘General Assignment of Debts, Etc.,” (hereinafter called the ‘‘ Assignment”).

The Assignment is dated November 9, 1947, and is in the printed form supplied by the Bank. Paragraphs 1 and 5 of that Assignment are as follows:

"" (1) For VALUABLE CONSIDERATION, receipt whereof is hereby acknowledged, the undersigned hereby grants, assigns, transfers and makes over unto THE Royal BANK or CANADA (here inafter called the 4 Bank’) all book accounts and book debts and generally all accounts, debts, dues and demands of every nature and kind howsoever arising or secured and now due, owing or accruing or growing due, or which may hereafter so long as this agreement remains in force become due, owing or accruing or growing due, to the undersigned, and any and all claims which the undersigned now has or may hereafter have under any policy of insurance of whatsoever nature, (the whole hereinafter called the ‘debts’), and the undersigned further assigns and transfers to the Bank all deeds, documents, writings, papers, books of account and other books relating to or being records of the debts or by which the debts are or may hereafter be secured, evidenced, acknowledged or made payable.

“(5) All moneys received by the undersigned from the collection of the debts or any of them shall be received in trust for the Bank.’’

In respect to the years 1945, 1946 and 1947, the Company paid to the Receiver-General of Canada, income and excess profits taxes in the sum of $21,353.32. This amount was paid in instalments based on anticipated profits as estimated by the Company. Because of lack of profits in the year 1947 and substantial losses in the years 1945 and 1948, the total amount paid was $12,988.56 in excess of the amount assessed as payable by the Company, and the Receiver-General has advised that a refund of that amount will be made.

On September 16, 1948, the Eastern Trust Co. was by an order of a Judge of this Court appointed Receiver and Manager (hereinafter called the "Receiver’’) on behalf of all the holders of bonds secured by a deed of trust and mortgage dated January 2, 1947, made by the Company to the Eastern Trust Co. as trustee.

It is not disputed that the Company had full authority to execute and deliver the said Assignment notwithstanding that the assets thus assigned were covered by the floating charge contained in the said trust deed and mortgage.

Pursuant to authority given to the Receiver by an order issued in the receivership action and by the consent of the parties hereto, this Court is asked to decide :

"Whether the said sum of $12,988.56 is payable to the Royal Bank of Canada, or, whether it is payable to The Eastern Trust Company as Receiver and Manager and is its property for the purposes of the receivership, free from any claims of The Royal Bank of Canada by reason of the said Assignment. ‘ ‘

To determine the matter submitted it is necessary to ascertain if the words used in the Assignment enumerating the assets thereby assigned, when rightly construed, mean and include whatever right, if any, the Company (were no Receiver appointed) had to the sum of money in question. By s. 53 of the Income War Tax Act, R.S.C. 1927, c. 97, it is provided that after a taxpayer’s returns have been received by the Minister of National Revenue, that they ‘‘shall with all due dispatch be checked and examined,,’ and by ss. (2) of that section, it is further provided that: ‘‘In all cases where such examination discloses that an overpayment has been made by a taxpayer the Minister shall make a refund of the amount so overpaid by such taxpayer, except in cases where any instalment or instalments are either due or falling due by such taxpayer, when the amount of the overpayment shall be applied on such instalment or instalments and notice of such action shall be given such taxpayer accompanied by the payment of the balance, if any, of the amount overpaid.”

It is to be noted that the obligation imposed on the Minister by this subsection is that he ‘‘shall make a refund of the amount so overpaid’’, except as therein provided. In this case it is not necessary to consider the exception, because as already stated, the Receiver-General is now prepared to make a refund of the amount overpaid.

What then is the meaning of the word "‘refund’’ as used in the section? The primary meaning of the word is ‘‘to pour back,’’ but it is in my opinion equivalent to ‘‘repayment’’: Shorter Oxford Dictionary, 3rd ed.; Webster’s International Dictionary, 1925 ed.; Bouvier’s Law Dictionary, 1926 ed. If this be so, then I think it must follow that once the amount overpaid was established, the Company had a right to make a “demand” within the meaning of that word as used in the Assignment, to have the sum in question paid to it.

Whether the amount of overpaid taxes ever became one of the “book accounts’’ or ‘‘book debts’’ within the meaning of those terms as used in the Assignment is, in view of the conclusion to which I have come, unnecessary for me to decide.

Counsel for the Receiver contended that unless the overpaid taxes constituted a “book account” or ‘‘book debt’’ within the meaning of those words as used in the Assignment or something of the same nature, they were not covered by the Assignment at all, because by the application of the ejusdem generis rule of construction, the words following “book accounts and book debts’’ could only be construed as describing assets of the same nature as “book accounts and book debts.’’ I am unable to see, however, that it is necessary to invoke this rule of construction in order to ascertain the meaning of the words following “book accounts and book debts”. I think it sufficient to apply the simple rule of construction, namely, that all words used must in the absence of anything in the Assignment to indicate a contrary intention, be given their plain ordinary meaning. In Anderson v. Anderson, [1895] 1 Q.B. 749 at p. 755, Rigby, L.J., said: “The doctrine known as that of ejusdem generis has, I think, frequently led to wrong conclusions on the construction of instruments. I do not believe that the principles as generally laid down by great judges were ever in doubt, but over and over again those principles have been misunderstood, so that words in themselves plain have been construed as bearing a meaning which they have not, and which ought not to have been ascribed to them. In modern times I think greater care has been taken in the application of the doctrine; but the doctrine itself as laid down by great judges from time to time has never been varied: it has been one doc- trine throughout. The main principle upon which you must proceed is, to give to all the words their common meaning : you are not justified in taking away from them their common meaning, unless you can find something reasonably plain upon the face of the document itself to shew that they are not used with that meaning, and the mere fact that general words follow specific words is certainly not enough/ ‘

Without attempting to define the limit or scope of these words, I think there is no doubt that the Company (were there no Receiver) could have lawfully ‘‘demanded’’ payment of the sum of money in question and that if it were paid to it, such payment would have constituted a complete discharge of the obligation to make a refund as imposed by s. 53(2) of the Income War Tax Act. In my opinion, the word “demand” as used in the Assignment has a wider legal meaning than “debts” or “accounts”. In 8 American & English Encyclopaedia of Law, 2nd ed., pp. 984-5, it is stated: “In ordinary legal usage the words ‘debt’ and ‘demand’ are of kindred meaning, but the latter word is a term of much more comprehensive signification than the former. The term ‘debt’ imports a sum of money owing upon a contract, express or implied; while the term ‘demand’ embraces rightful claims, whether founded upon a contract, a tort, or a superior right of property.’’

See also 18 Corp. Jur. 480.

Counsel for the Receiver cited two cases: Rose v. Dilke, [1926] 1 D.L.R. 190, 20 S.L.R. 259, and R. v. Cheshire County Court Judge, [1921] 2 K.B. 694, in support of the proposition that the term ‘‘demand’’ when employed in conjunction with the term ‘‘debt’’ or “damages” means something of the ‘‘same nature” as a debt or damage. By the “same nature’’, however, the learned Judges in both those cases were only saying that “demands” referred to money claims as distinct from claims for a declaration of rights. In my opinion, there is nothing to be found in either of them which could be construed as an authority for holding that debts and demands as used in the Assignment, mean the same thing, even though they may be of the same nature, in that they are both money claims.

Counsel for the Receiver also contended that even though the Assignment purported to include the right to demand and receive the money in question, it was ineffective to transfer any interest therein to the Bank because in law a claim against the Crown is not assignable on the ground of public policy, and cited the case of Chipman v. The King, [1934] Ex. C.R. 152, in support of that contention. Angers, J., in that case only says that a claim against the Crown is not assignable excepting by the acquiescence of the Crown. In this case, however, the Crown has intimated that it is prepared to recognize the assignment and to make the refund to the Bank if the Company and the Receiver have no objection. By so doing, the Crown, in my opinion, has acquiesced in the assignment. In any event, the authorities I think only say that the Crown is not compelled to recognize an assignment. In my opinion, the Assignment was valid as between the Company and the Bank even if the Bank could not bring an action against the Crown to compel the refund. In the case of Reg. v. McCurdy (1891), 2 Ex. C.R. 311, cited with approval by Angers, J., in Chipman v. The King, the question arose as to whether a claim against the Crown for compensation for lands expropriated, passed under a voluntary assignment to a trustee for the benefit of creditors. In giving effect to the assignment, Burbidge, J., said [p. 320]:

"‘As between the parties to such equitable assignments they are undoubtedly good, and if in any such cases the money so assigned were paid to the assignor, his assignee would have an action against him for the same; and when, as in the present case, the assignment is for the general benefit of creditors and all the parties are before the court, and the Crown makes no objetion, I see no reason for refusing to give effect to such assignment. ‘ f

If in this case the refund had been made to the Company prior to the appointment of the Receiver, the Company in my opinion would have received it in trust for the Bank as provided in para. 5 of the Assignment. I am unable to see how the Receiver’s right to receive and dispose of the money in question could be any greater or in any way different from that of the Company had the refund been made to the Company prior to the appointment of the Receiver.

In my opinion, therefore, the said sum of $12,988.56 is payable to the Royal Bank of Canada or to the Receiver as the Receiver-General may decide, and that a release signed by the party to which the refund is made would constitute a discharge of the obligation imposed by s. 53 of the Income War Tax Act and that if the refund is made to the Receiver, it will be held by it as trustee for the Bank in accordance with the terms of the Assignment, and that until all indebtedness of the Company to the Bank is discharged, no portion of the said sum is property for the purposes of the receivership.

Judgment accordingly.